Market Overview

Sino Agro Food, Inc. Reports Q2 2018 Results

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Sino Agro Food, Inc. Reports Q2 2018 Results

Revenue of USD 34.0M; EPS of USD 0.02

PR Newswire

GUANGZHOU, China, Aug. 14, 2018 /PRNewswire/ -- Sino Agro Food, Inc. (OTCQX:SIAF) (OSE: SIAF-ME), a specialized investment company focused on protein food including seafood and cattle announces results for the quarter ending June 30, 2018. 

Financials

Revenue from the sale of goods decreased USD 14.8M, or 31%, to USD 32.9M for the quarter ended June 30, 2018 when compared on a year over year basis ("YoY"). When compared to Q1 2018 ("QoQ"), revenue from the sale of goods during Q2 2018 increased USD 1.5M or 5%. Revenue from project development was USD 1.1M, compared to no revenue during Q2 2017.

First quarter gross profits totaled USD 5.4M for Q2 compared to USD 6.5M during Q2 2017 and USD 6.1M during Q1 2018.

Fully diluted earnings per share were USD .02 in the second quarter, the same as Q2 2017 (YoY) and versus USD .17 QoQ. 

Overview

As stated last quarter, results reflect a reprioritization of businesses according to bottom line performance and guided by stricter cost control and capital expense rationale for each. From a revenue and gross profit perspective, results were in line with Q1.

Continuing in the first half of 2018:

  • Businesses with negative gross margins had been either discontinued or markedly curtailed.
  • Capital expenditure for all businesses was reduced, most notably at SIAF's equity investee Tri-way, which restricts project development to a percentage of cash flow and as justified by individual projects, until outside cash resources become available to continue development of aquafarms 4 and 5.
  • G&A expenses were trimmed USD 1.7M, or 29% from USD 5.8M in Q2 2017 to USD 4.1M in Q2 2018.

These efforts have resulted in each standalone business stabilizing or improving. Integrated Cattle (SJAP) is self-sustaining, showing a small net operating profit in Q2. Seafood and Meat Trading has had consistent revenue with consistent gross margins over many quarters. The Organic Fertilizer (HSA) and the Plantation (JHST) segments are both exhibiting a growth trend expected to accelerate as past capital investments are beginning to generate returns and/or strategic partnerships are adding revenue without new capital investment.

As in the first quarter, because the benefits of business reprioritization had not yet overcome obligations incurred before the reprioritization, shares were issued to cover some current and non-current other payables that typically would have been covered through normal cash-flow levels in the past.

The Company has adopted austerity measures to reduce its dependence on equity funding by approaching it as the exception. The Company expects the benefits of its reprioritization to materialize progressively in the coming quarters and continue to drive improved results.

Other Key Points

  • SIAF's income from its full 36.6% equity investment in Tri-way ("TW") increased from USD 1.3M in Q2 2017 to USD 1.6M in Q2 2018.
  • Capital expenditure is being restricted to shorter-term, positive profile returns for Tri-Way's aquafarms. In part, Tri-way's positive cash flow is being used to fund projects to stimulate growing production.
  • As of June 30 2018, the Company had net working capital of USD 170.6M, a decrease of USD 2.3M YoY.
  • Stockholders' equity increased YoY by USD 13.6M to USD 625.9M.
  • The Company reiterates its dividend policy announced last quarter; that is:

 - For 2018: USD 0.05/share to be declared and payable during Q4 2018, ex-dividend and payment dates to be determined and publicized as soon as arrangements are finalized

 - For 2019: $0.05/share will be declared and paid semiannually, ex-dividend and payment dates to be determined, for a total cash dividend distribution of $0.10 / share for the year. In addition, five percent (5%) of the amount exceeding the Company's annual net income of $20 million in FY2019 to be declared and paid as an additional cash dividend during the subsequent fiscal year (i.e. sometime during FY 2020)

Annual Comparison




 

 

(USD M, except per share and margin data)        

 

Q2 '18

 

Q2 '17

 

%

 

Revenue

 

34.0

 

47.7

 

(29) %

 

Gross Profit

 

5.4

 

6.5

 

(17) %

 

Gross Profit Margin

 

16.0 %

 

13.6 %

 

18 %

 

Earnings Per Diluted Share (FD) (USD)– from continuing and discontinued operations

 

.02

 

.02

 

0 %

 

Sequential Comparison

The Company achieved the following results, comparing the second quarter of 2018 to the first quarter:

 

 

(USD M, except per share and margin data)

 

Q2 '18

 

Q2 '17

 

%

 

Revenue

 

34.0

 

33.7

 

(1) %

 

Gross Profit

 

5.4

 

6.1

 

(11) %

 

Gross Profit Margin

 

16.0%

 

18.1%

 

(11) %

 

Earnings Per Diluted Share (FD) (USD)– from continuing and discontinued operations

 

.02

 

.17

 

(88) %

 

The following table breaks out revenue by business segment, comparing the second quarter of 2018 to the first quarter:

 

 

Revenue (USD M)          

 

Q2 '18

 

Q2 '17

 

%

 

Integrated Cattle Farm (SJAP)

 

5.1

 

6.6

 

(23) %

 

Organic Fertilizer (HSA)

 

2.5

 

2.4

 

4 %

 

Cattle Farms (MEIJI)

 

6.1

 

5.0

 

22 %

 

Plantation (JHST)

 

1.0

 

1.0

 

0 %

 

Seafood & Meat Trading

 

18.2

 

16.4

 

11 %





 

Sale of Goods Total

 

32.9

 

31.4

 

5 %





 

Project Development Total

 

1.1

 

2.5

 

(56) %

 

Group total

 

34.0

 

33.7

 

1 %

 

Integrated Cattle (SJAP)

The Integrated Cattle Farm business segment (SJAP) discontinued its value-added processing subsidiary (QZH) December 30, 2017. Factoring out QZH, SJAP revenue decreased by USD 2.2 M, or 30% from USD 7.3 in Q2 2017 to USD 5.1M in Q2 2018. Gross profits decreased USD 0.7M, or 29% from USD 2.

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