Yuhe International, Inc., a leading of day-old chickens raised for broiler production in China has reported its unaudited financial results for the third quarter ended 30 September 2009.

The company says net revenue grew by 37.4 per cent to $13.2 million, compared to $9.6 million in the third quarter of 2008, while gross profit margin increased 1,290 basis points to 39.1 per cent, compared to 26.2 per cent million in the same period.

Operating income grew by 166.1 per cent to $4.3 million, compared to $1.6 million, while net income increased 114.8 per cent to $4.1 million, compared to $1.9 million in the same period last year.

Fully diluted earnings per share (EPS) grew 116.6 per cent to $0.26 per share, compared to $0.12 in the third quarter of 2008.

Zhentao Gao, Chief Executive Officer of Yuhe International, commented: "The third quarter of 2009 was another very successful quarter.

"We achieved record quarterly revenue and net income, owing to our capacity expansion and stable customer relationships. Selling prices began to recover sequentially in the third quarter; the average selling price per day-old broiler increased to 2.85 yuan (CNY) in the third quarter from CNY2.38 in the second quarter. Given our business momentum, we are confident that demand for high-quality day-old broilers will remain strong in the fourth quarter of the year."

Nine-month results

Net revenues increased 90.7 per cent to $34.0 million, from pro forma net revenues of $17.8 million in the nine months ended September 30, 2008. Gross profit grew 153.8 per cent to $12.0 million, as compared to pro forma gross margin of $4.7 million in the same period last year. Gross margin expanded 880 basis points to 35.4 per cent, compared to pro forma gross margin of 26.6 per cent in the comparable period last year. Operating income rose 240.2 per cent to $9.6 million, from $2.8 million in pro forma operating income for the same period of 2008. Reported operating margin increased 1,230 basis points to 28.1 per cent, compared to pro forma operating margin of 15.8 per cent for the comparable period in 2008. Net income increased 208.7 per cent to $9.2 million, compared to pro form net income of $3.0 million in the same period of 2008. Fully diluted earnings per share rose 171.0 per cent to $0.57, from $0.21 for the same period last year.

Yuhe's reported financial statements represent the consolidated results of Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., the company's two operating subsidiaries, from 1 January 2009 to 30 September 2009 and from 1 February 2008 to 30 September 2008. For comparison purposes, the company has provided a pro forma consolidated statement of operations for PRC Yuhe and Taihong from 1 January 2008 to 30 September 2008 to provide comparable presentation to its reported results for the nine months ended 30 September 2009.

Business outlook

Management has updated its previously announced revenue guidance for the full year 2009 from $50 million to $46 million, due to the lower-than-expected selling prices for day-old broilers in the second half of 2009. However, management remains confident that the company will meet net income guidance for the full year 2009 of $13 million, due to lower unit production costs for day-old broilers. The company has also budgeted an additional $10 million that will be spent through the first half of 2010 to add new breeder farms, purchase 300,000 new parent breeders and expand its hatcheries. Yuhe has also ordered 20 sets of hatchers to be installed in the second quarter of 2010, increasing the company's total number of hatchers to 160 sets. For 2010, Yuhe targets sales volume of day-old broilers at 150 million, a 36 per cent increase compared to projected volume of 110 million for 2009.

Mr Gao commented: "Since the Chinese economy has shown positive signs of recovery in recent months, we believe Yuhe will continue to generate strong revenue growth from day-old broilers sales.

"While we are the second largest provider nationwide, our market share is only five per cent in Shandong, which signifies that we have strong potential for growth from organic expansion and industry consolidation. In the next two years, we will continue to focus on our expansion efforts in Shandong, leveraging our mature system, including technical support and after-sales services."

Founded in 1996, Yuhe is the third largest day-old broiler breeder in China. The company's main operations involve breeding, as all broilers are sold within a day of hatching. With headquarters in Weifang, Shandong province, the company has modern facilities and is led by an experienced team, which includes experts in chicken breeding, disease prevention and animal husbandry science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd. and Weifang Taihong Feed Co. Ltd., which largely supplies the company's internal demand for chicken feed. Currently, 90 per cent of the company's sales of day-old broilers are in Shandong province through 28 local agents there. There are 10 other sales agents in adjacent provinces. The company has imported state-of-the-art equipment from the United States, Germany and Japan and has passed ISO9001 certification, allowing it to adhere to international standards of operation.