Yuhe International, Inc., a leading supplier of day-old chickens raised for meat production, or broilers, in the People's Republic of China, has announced its financial results for the first quarter ended 31 March 2011.

Net revenue increased 128.5 per cent year-over-year to US$26.86 million. Sales volume grew 102.9 per cent to 51.86 million birds. Gross profit increased 90.4 per cent compared to the same quarter last year to $7.43 million, while operating income increased 106 per cent to 6.12 million Net income increased 107.36 per cent year-over-year to $6.07 million, or $0.30 per fully diluted share

Zhentao Gao, chairman and chief executive officer of Yuhe International, Inc. commented: "We are very pleased to report a strong first quarter of fiscal year 2011.

"While the first quarter is traditionally one of our slowest quarters in terms of sales as a result of the Chinese Lunar New Year, our year-over-year quarterly net revenue increased 128.47 per cent, due to our successful market penetration into a wider customer base to absorb our increased production capacity. The first quarter average selling prices of our day-old broilers increased 9.81 per cent year over year in the midst of the current inflationary marketplace. As more of our previously acquired breeder farms have begun contributing to our capacity since early 2011, we expect to continue leveraging on China's strong broiler market and to deliver superb operational and financial results," he said.

First quarter 2011 results

Net revenue for the first quarter of 2011 increased 128.5 per cent to $26.86 million, compared to $11.76 million for the three months ended 31 March 2010. The increase was mainly driven by the year-over-year growth of 102.9 per cent in sales volume of day-old broilers and a year-over-year increase of 9.8 per cent in average selling prices. For the three months ended 31 March 2011, the sales volume of day-old broilers amounted to 51.86 million birds with an average selling price of RMB3.20 per bird, as compared to the sales volume of 25.56 million birds with an average selling price of RMB2.91 per bird in the first quarter of 2010. The increase in sales volume of day-old broilers was a result of capacity expansion, and the increase in average unit selling price was related to the pass-through of the increased corn price in 2010. Sales of day-old broilers accounted for $25.16 million, or 93.7 per cent, of the Company's net revenue for the first quarter of 2011.

Gross profit increased 90.4 per cent year-over-year to $7.43 million, compared to $3.9 million in the same quarter last year. Gross profit margin was 27.65 per cent, compared to 33.17 per cent in the same quarter last year. The decrease in gross margin was mainly related to the longer off season related to the belated Chinese Lunar New Year date in 2011. The Company generally experiences an off season during the 30- to 60-day period prior to each year's Chinese Lunar New Year. The 2011 Chinese Lunar New Year started on 14 February, and most of the off season prior to the Chinese Lunar New Year occurred in January 2011. However, the 2010 Chinese Lunar New Year started on26 January, and most of the off season prior to the Chinese Lunar New Year occurred in December 2009. Therefore, the Company experienced a longer off season in the first quarter of 2011 compared to the first quarter of 2010, which resulted in the lower gross margin in the first quarter of 2011.

Operating income increased 106 per cent to $6.12 million, compared to $2.97 million in the same period of 2010. Operating margin was 22.8 per cent, compared to 25.30 per cent in the same quarter of 2010.

Net income increased 107.36 per cent to $6.07 million from $2.93 million in the same quarter last year. Fully diluted earnings per share were $0.30, compared to $0.18 in the comparable period of 2010. For the first quarter of 2010, there were 20.5 million fully diluted weighted shares outstanding compared to 16.0 million fully diluted weighted shares outstanding in the same period of the prior year.

Recent developments

The Company has officially taken possession of 13 breeder farms from its previous acquisitions conducted in December 2009 and July 2010. Of these, 11 breeder farms were taken over from Weifang Dajiang Corporation, and two breeder farms were taken over from Liaoning Haicheng Songsen Stock Farming and Feed Co., Ltd.

2011 outlook

Given the expected strong day-old broiler market in 2011 and the fact that the capacity ramp-up from the previous acquisitions will continue to contribute to the Company's sales volume of day-old broilers throughout 2011, the management of Yuhe International remains confident in the Company's capability to generate strong operational and financial results in 2011.

The management reiterates its previously issued guidance for 2011 of production volume totalling 250 million day-old broilers and net income of between $33 million and $36 million.