Strong Year Ahead For Rodobo International

CHINA - Rodobo International, Inc. (OTC Bulletin Board: RDBO), a fast growing dairy company in China, has reported excellent financial results for the first quarter, which ended December 31, 2010.
calendar icon 15 February 2011
clock icon 4 minute read

Net sales for the first quarter of 2011 were $25.6 million, an increase of approximately $15.5 million or 153.9 per cent, compared to net sales for first quarter of 2010. This increase was primarily due to the acquisition of Hulunbeier Hailaer Beixue Dairy Factory ("Hulunbeier Hailaer Beixue") on February 5, 2010. The company also increased the selling price of whole milk powder products produced by Hulunbeier Hailaer Beixue after the acquisition.

During the first quarter of 2011, efforts were continued to develop distribution networks and expand the market areas in the nine provinces in which products are currently sold.

During the first quarter of 2011, sales generated from infant formula accounted for 43.7 per cent of total sales, sales generated from middle-aged and elderly formula accounted for 14.1 per cent of the total sales, and sales generated from whole milk powder formula accounted for 42.2 per cent of total sales.

The gross profit for the first quarter of 2011 was $9.8 million, an increase of approximately $4.5 million or 84.8 per cent, compared to the gross profit for the first quarter of 2010. The overall gross profit margin for the first quarter of 2011 decreased to 38.2 per cent from 52.6 per cent for the first quarter of 2010.

The overall gross profit margin was diluted due to the acquisition of lower-margin businesses. Hulunbeier Hailaer Beixue has a gross margin of 8.4 per cent for the first quarter of 2011. Excluding the margin dilution impact of the acquisition, gross profit margin actually improved to 59.1 per cent for the first quarter of 2011 from 52.6 per cent for the first quarter of 2010, which was primarily driven by the gross margin improvement for middle-aged and elderly formula from 46.9 per cent in the first quarter of 2010 to 51.7 per cent in the first quarter 2011. Sales from middle-aged and elderly formula accounted for approximately 24.0 per cent of total sales (excluding sales from Hulunbeier Hailaer Beixue) in the first quarter of 2011 compared to 4.6 per cent a year ago.

Operating expenses for the first quarter of 2011 were $6.1 million, an increase of approximately $2.8 million, or 85.2 per cent, compared to the first quarter of 2010. Operating expenses as a percentage of net sales decreased to 24.0 per cent in the first quarter of 2011 from 32.8 per cent in the first quarter of 2010. The decrease of operating expenses as a percentage of net sales was primarily due to a decrease in operating expenses, mostly due to fewer distribution expenses by Hulunbeier Hailaer Beixue as its whole milk powder products are sold directly to end users' processing plants.

Distribution expenses for the first quarter of 2011 were $5.3 million, an increase of approximately $2.7 million or 104.8 per cent, compared to $2.6 million for the first quarter of 2010, mainly due to an increase of $1.4 million in distribution expense reimbursements as a result of sales increases and market expansion and an increase of $0.6 million in advertising expenses. The increase was also attributed to $0.4 million amortization of customer list that was acquired in connection with the acquisitions made on February 5, 2010.

Net income for the first quarter of 2011 was $4.1 million, an increase of $1.8 million or 80.2 per cent, compared to $2.3 million for the first quarter of 2010. This increase in net income includes a $0.5 million of change in fair value of warrants in the first quarter 2011. Earnings per diluted share were $0.15 for the first quarter of 2011, compared with $0.14 per diluted share for the first quarter of 2010.

Second quarter guidance

Management feels confident to give its guidance for the second quarter of 2011 for revenue to be in the range of $23 - $26 million and net income to be in the range of $3.3 - $3.6 million.

"We started off 2011 with another quarter of record revenue and strong profitability. It is our fifth consecutive top line growth quarter," stated Mr Yanbin Wang, Chairman and Chief Executive Officer.

"We saw continuous strong market demand for Rodobo's high quality and nutritious milk powder products in the first quarter, especially for whole milk powder products. During the quarter, we further developed our existing market by adding more sales outlets and strived to increase sales per outlet. We will continue to consolidate our acquisition, realign our product lines and improve our capacity utilisation in the rest of this year."

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