Tianli Agritech Reports Second Quarter 2011 Results

WUHAN, China, August 16, 2011 /PRNewswire-Asia/ -- Tianli Agritech, Inc. (NASDAQ: OINK), a leading producer of breeder and market hogs headquartered in Wuhan City, China, today announced its financial results for the quarter ended June 30, 2011.

Second Quarter Highlights:

• Revenue increased 41% year-over-year to $7.7 million due to higher selling prices and volumes.
• Breeder hog revenue increased by 24% in the quarter, representing 37% of total revenue.
• Net income increased 17% to a record $2.5 million.

Sales by Products

Tianli's Chairwoman and CEO, Ms. Hanying Li, stated, "We benefited from steady increases in market hog pricing during the quarter as shortages continue to plague many markets, while demand for breeder hogs accelerated as customers are looking to expand their own market hog raising capacity. Our diversification allows us to service both markets simultaneously, providing us with the flexibility that few operators in our geographic areas have. Our diversified model also helps to diminish revenue and margin fluctuations, which can occur on a quarter by quarter basis. We expect further sales growth for both breeders and market hogs as our new farms come online."

Revenue for the second quarter of 2011 increased $2.3 million, or 41%, to $7.7 million from the prior year. The Company sold a total of 27,589 hogs compared to 25,815 hogs sold in the comparable 2010 period. Sales of breeder hogs increased 24% to $2.8 million, with approximately 28% more breeder hogs sold, as the average price per hog decreased slightly due to a greater mix of lower margin crossbred breeders sold during the second quarter of 2011.

Market hog sales increased 53% to $4.8 million. The number of market hogs was relatively flat at 18,577 while the average price per hog increased 55% year-over-year to $260.00 due to high market demand.

Gross profit in the second quarter of 2011 was $3.2 million, a 35% increase over the same period last year. Gross margin was approximately 42% and 44% for the second quarter of 2011 and 2010, respectively, as increased cost of feed.

Selling, general and administrative expenses were $0.6 million in the second quarter of 2011, an increase of approximately $0.3 million. Approximately $0.2 million of the increase was related to higher public company expenses not present in the year ago period. Expenses were impacted by a $0.1 million increase in bad debt allowance which reflected a more conservative procedure on the Company's accounts receivable aging report.

Net income for the three months ended June 30, 2011 was approximately $2.5 million, up 17% from $2.1 million last year. Earnings per fully diluted share were $0.24 compared to $0.26 last year due to a 25% increase in the shares outstanding associated with the Company's IPO and 2.0 million shares placed with investors in July of 2010.

First Half 2011 Results

Net sales increased 37% to $13.6 million during the six months ended June 30, 2011. Tianli sold 50,609 hogs at an average sales price of $268 per hog, an increase of 7% and 27%, respectively. Breeder hog sales increased 44% to $5.2 million, accounting for 39% of total sales in the first half of 2011. Market hog sales were $8.3 million, up 33% from $6.3 million in the first half of 2010.

Gross profit increased $1.5 million to $5.7 million. Gross margin percentages were 42% and 43% for the first six months of 2011 and 2010, respectively.

Selling, general and administrative expenses were $1.4 million compared to $0.4 million in the prior year. The Company incurred $0.1 million of non-cash stock compensation expenses and $0.1 million of bad debt provisions in the first six months of 2011. Operating income was $4.3 million and $3.8 million in the first six months of 2011 and 2010, respectively.

Business Updates

Tianli sells breeder hogs, which are used by other hog farms for their hog production, and market hogs, which are sent to pork processing facilities for preparation of fresh, refrigerated or frozen pork products for sale to consumers. Tianli has concentrated on the breeder hog market and is focused on continually improving the genetics and nutrition associated with raising its hogs. The gross margin for breeder hogs is higher than that of market hogs due to generally higher prices, as well as the lower feed and other costs as breeder hogs are generally sold at a younger age than market hogs. Tianli utilizes its proprietary bio feed premix, which the Company believes enables increased feed absorption, decreases mortality rates and provides savings on veterinary and medicine costs.

Over the past year, Tianli has used capital raised in its IPO in addition to internal cash flow to fund the acquisition of two new farms, expanding its production capabilities. Farm #10 and #11 were acquired in December 2010 and May 2011 respectively. Farm's #10 will contribute to sales of hogs at the end of 2011, and Farm #11 is expected to more significantly contribute to sales of hogs in 2012.

In addition to the sales of breeder and market hogs, Tianli entered into an agreement, subject to negotiation of certain terms, with An Puluo Foods which allows Tianli to manage fresh pork retail counters in Greater Wuhan in supermarkets such as Wal-Mart, Zon100 and RT-Mart. Through the cooperation with An Puluo, Tianli can bring current products and future products including black hog meat, to the retail market more quickly through An Puluo's current retail channel.

On June 22, 2011, the company established a wholly-owned subsidiary Hubei Tianzhili Breeder Hog Co., Ltd. ("Tianzhili") in Enshi Region, where Tianli launched its black hog project. Since inception, the Company has signed agreements with three local cooperatives in the Enshi Autonomous Prefecture in Hubei Province whereby the Company, the relevant governmental agencies, and the cooperatives will assist farmers to breed and raise Enshi black hogs. Thus Tianli will provide highly desired, premium black hogs to the market which should not only result in higher revenues and profits, but also contribute to Tianli's brand recognition.

"We are excited about the growth outlook for our industry and our company," continued Ms. Hanying Li, Chairwoman and CEO of Tianli Agritech. "Our expanding network of farms will continue to support our core business operations of selling breeders and market hogs. More importantly, our cooperation with AnPuluo Farms and their retail sales points will provide us an established platform from which we can greatly increase our profits through sales of premium black hog meat. We envision our black hog project being a key growth driver of our business in the coming years and a means to provide additional returns to our global shareholder base."

Financial Position

As of June 30, 2011, the Company had $6.2 million in cash, compared to $8.0 million as of December 31, 2010. The Company generated $4.1 million of cash from operations in the first six months of 2011. Working capital as of June 30, 2011 was $10.7 million, including $7.3 million of inventories and $1.4 million of other receivables.

Tianli invested approximately $8.7 million in capital expenditures and breeding stock during the first six months of 2011 to facilitate its continued growth.

Earnings Conference Call

To attend the Tianli second quarter 2011 conference call, please use either the dial-in or webcast information below.

Ms. Hanying Li, Chairwoman and CEO, Mr. Bihong Zhang, CFO and Mr. Simon Guo, Tianli's VP, will host the conference call. To attend the call, please use the information below for either dial-in access or webcast access. When prompted on dial-in, ask for "Tianli Agritech Second Quarter 2011 Conference Call".

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through August 24, 2011. To listen, please call +1-877-344-7529 within the United States or +1-412-317-0088 if calling internationally. Utilize the pass code 10003233 for the replay.

This call is being webcast by MZ Technologies and can be accessed by clicking on the following link: http://webcast.mz-ir.com/publico.aspx?codplataforma=3093.

About Tianli Agritech, Inc.

Tianli Agritech, Inc. is in the business of breeding, raising and selling hogs in the People's Republic of China. The Company is focused on growing high quality hogs for sale for breeding and meat purposes. The Company conducts genetic, breeding and nutrition research to steadily improve its production capabilities.

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.