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Sino AG Audit Report / Information 2018
5464_10-k_2019-04-15_02d5cc5a-9503-4905-9e29-fc1e5884675d.pdf
Audit Report / Information
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Fourth Quarter and Full-year Report 2018
- - Revenue of USD 141.7M
- - EPS of USD 0.46
Full year 2018
- Revenue for the period: USD 141.7M (198.2)
- Gross profit for the period: USD 21.6M (19.6)
- Net Income attributable to SIAF for the period: USD 17.3M (27.5)
- Diluted earnings per share: USD 0.46 (-0.53)
October – December 2018
- Revenue for the period: USD 35.2M (31.4)
- Gross profit for the period: USD 3.9M (-7.9)
- Net Income attributable to SIAF for the period: USD 4.7M (-25.6)
- Diluted earnings per share: USD 0.18 (-1.04)
Key figures
| (USD M, except per share data) | Q4 '18 | Q4 '17 | % | 12M '18 12M '17 | % | |
|---|---|---|---|---|---|---|
| Revenue | 35,2 | 31,4 | 12% | 141,7 | 198,2 | -29% |
| Gross profit | 3,9 | -7,9 | -150% | 21,7 | 19,6 | 10% |
| Margin | 11,2% | 15,3% | 9,9% | |||
| Net income | 3,7 | -37,4 | -110% | 15,8 | 10,5 | 50% |
| Margin | 10,6% | 11,2% | 5,3% | |||
| Net income attributable to SIAF | 4,7 | -25,6 | -118% | 17,3 | 27,5 | -37% |
| Earnings per share (USD) - fully diluted | 0,18 | -1,04 | -117% | 0,46 | -0,53 | -187% |
| Book value per share (USD) - fully diluted | 16,8 | 26,1 | -35% | n.a. | n.a. | n.a. |
| Diluted weighted average number of shares (millions) | 37,3 | 24,7 | 51% | 37,3 | 24,7 | 51% |
Revenue (USD M) Gross profit (USD M)
Fourth quarter 2018 highlights
Revenue
All business segments of Sino Agro Food, Inc.(the "Company," or "SIAF") recorded gross profits in 2018, totaling USD 21.7 M, and turning a loss in 2017 of USD .53 per share to a gain of USD .46 in 2018.
Total revenue decreased USD 56.5M, or 28%, to USD 141.7 M for the year ended December 31, 2018 when compared to the year ended December 31, 2017. The Company's slaughterhouse and deboning facility, which had 2017 revenue of USD 49.7 M, was discontinued at the end of 2017. When comparing continuing operations, annual revenue decreased USD 6.8M or 3% from fiscal year 2017 to fiscal year 2018.
Revenue from the sale of goods for continuing operations during FY 2018 decreased USD 1.4M or 1% to USD 130.5M. Revenue from project development during 2018 decreased USD 5.9 M, or 35%, to USD 11.1 M.
FY 2018 gross profits totaled USD 21.7 M compared to USD 19.6M during FY 2017, an increase of 10%, reflecting a 53% increase in gross profit margins from 10.8% in 2017 to 16.5% in 2018.
Overview
After discontinuing the slaughterhouse and deboning business in December 2017, the Company reprioritized remaining business initiatives according to bottom line performance and guided by stricter cost control and capital expense rationale for each. These efforts have resulted in each standalone business stabilizing or improving.
All business segments maintained positive gross profits, averaging 15.4% of revenue. Net income swung from a loss of USD 13.1 M, or USD (0.53) per share, in 2017 to a gain of USD 17.3 M, or USD 0.46 per share, in 2018. This was mainly due to discontinuing the slaughterhouse, lower operating expenses, and higher income from SIAF's Investment Associate, Tri-way, Industries Ltd ("T-W").
Seafood and Meat Trading has had consistent revenue with consistent gross margins over many quarters. The Organic Fertilizer (HSA) and the Cattle Farms (MEIJI) segments are both exhibiting generally growing trends expected to continue as previous capital investments are beginning to generate returns and/or strategic partnerships are adding revenue without new capital investment.
Notwithstanding the benefits of business reprioritization , the Company still faces legacy obligations incurred before the reprioritization; accordingly, equity shares were issued to cover some current and non-current other payables during the year. Prospects for long term and other funding are improving in 2019. If and when funding materializes, more working capital funds will be employed to improve the bottom line of the fishery sector while servicing legacy debts without the past practice of using equity to settle debts. In fact, there was no equity issued for such practice in the fourth quarter and none is anticipated in the foreseeable future.
The Company's aquaculture business was spun out into T-W in October 2016, creating a standalone, "pure play" private corporation based in Hong Kong. Several advantages are
believed to have accrued, including focused operations and the ability to secure funding. The latter proved more difficult in 2018 than anticipated, as the goal posts for requirements seem to have moved several times. However, progress is being made toward the latest goal posts.
SIAF retains a 36.6% interest in T-W and records results as a single line item on its income statement: "share of income from unconsolidated equity investee." Income from T-W increased USD 2.25 M, or 21%, from USD 12.0 M in 2017 to USD 14.25 M in 2018. T-W accounted for 82% of Sino Agro Food's 2018 net income. As such, T-W remains SIAF's top priority.
Key Points
- Revenue in the fourth quarter of 2018 was USD 35.2 M, an increase of 12% from the fourth quarter of 2017.
- Fully diluted EPS of USD .18 in the fourth quarter of 2018 versus a loss in the fourth quarter of 2017.
- Capital expenditure is being restricted to shorter-term, positive profile returns for all businesses to improve cash flow, resulting in all segments booking positive gross profits.
- As of December 31 2018, the Company had net working capital of USD 175 M, versus SD 169 M end of year 2017.
- Stockholders' equity increased in 2018 by USD 16.3.1M to USD 628.7M
| Revenue (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 |
|---|---|---|---|---|---|
| Integrated Cattle Farm (SJAP) | 4,2 | 15,4 | -73% | 19,2 | 77,2 |
| Organic Fertilizer (HSA) | 2,4 | 1,8 | 36% | 9,7 | 7,2 |
| Cattle Farms (MEIJI) | 10,5 | -2,7 | -488% | 29,6 | 20,4 |
| Plantation | 0,5 | 1,1 | -50% | 3,6 | 4,6 |
| Seafood & Meat Trading | 16,5 | 15,0 | 10% | 68,5 | 71,8 |
| Sale of goods total | 34,1 | 30,6 | 11% | 130,5 | 181,2 |
| Aquaculture | 1,1 | 0,8 | 34% | 11,1 | 17,0 |
| Cattle Farms | - | - | n.a. | - | - |
| Seafood & Meat Trading | - | - | n.a. | - | - |
| Project development total | 1,1 | 0,8 | 34% | 11,1 | 17,0 |
| Group total | 35,2 | 31,4 | 12% | 141,7 | 198,2 |
CEO commentary
"2018 was a transitional year, bridging the company from losses and other difficulties in 2017 into a smaller, focused set of businesses. Although challenges remain, SIAF is presently more able to sustain top and bottom line results in 2019.
"All business segments recorded gross profits in 2018, turning a loss in 2017 of USD .53 per share to a gain of USD .46 in 2018. We continue to restructure operations and pursue financing, addressing one side of the balance sheet while negotiating the other side facilitated by progress with operations and hopefully later with funding.
"The focus in 2019 will be supporting the steps needed to capitalize on the considerable potential of T-W and Capital Award.
"T-W's aquaculture farms 1 -3 and seven other contracted open dams produced good results. Because of quite good results of open dam trials in the Yang Jiang District of Guangdong Province, T-W decided in February to migrate the procedures to raise predominantly Mexican White Prawns at the indoor and open dam RAS facilities at Aquafarms 4 and 5 in order to fairly dramatically raise profit margins over 2018 levels. Completed engineering work indicates less than \$2M in capital expense to retrofit open dams, and will commence once T-W procures a dedicated short-term loan.
"Meanwhile, SIAF is working on a number of corporate plans to bring financial benefits to its shareholders, including assisting T-W in converting land and facility assets into acceptable collateral in order to consummate a larger syndicated loan and to promote procuring other funds. During past years, the Company spent a significant amount of its earnings on capital expenditure for developing production assets. Future capital expenditure will be capped within a reasonable sum to maintain positive gross profits as demonstrated in 2018. Depending on the success with these 2019 corporate plans, SIAF will be positioned to generate higher revenues and increasing profits.
"The trading business at Tri-way is also quite scalable, relying on underlying working capital, which can be leveraged by drawing and repaying larger credit lines as product turns over.
"Further, Capital Award is in discussions about significant milestone based long-term contracts in two foreign countries to construct aquaculture facilities. We have nothing to announce at this time, but these bear mention as progress is being made.
"To conclude, although sales are not as high as they were a year ago, we are pleased with the trend toward improved profitability and more sustainable margins. These results validate our strategy to "right size" businesses in the near term while pursuing strategies to grow the business."
| Gross profit (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 |
|---|---|---|---|---|---|
| Integrated Cattle Farm (SJAP) | -0,8 | -8,8 | -91% | 4,3 | 0,9 |
| Organic Fertilizer (HSA) | 0,3 | 0,5 | -43% | 2,8 | 2,2 |
| Cattle Farms (MEIJI) | 2,4 | 0,3 | 828% | 4,8 | 3,8 |
| Plantation | 0,0 | 0,2 | -96% | 0,5 | 1,4 |
| Seafood & Meat Trading | 1,8 | 1,7 | 9% | 7,2 | 8,0 |
| Sale of goods total | 3,8 | -6,1 | -161% | 19,6 | 16,2 |
| Aquaculture | 0,2 | (1,7) | -110% | 2,1 | 3,4 |
| Cattle Farms | - | - | n.a. | - | 0,0 |
| Seafood & Meat Trading | - | - | n.a. | - | 0,0 |
| Project development total | 0,2 | -1,7 | -110% | 2,1 | 3,4 |
| Group total | 3,9 | -7,9 | -150% | 21,7 | 19,6 |
Integrated Cattle Farm (SJAP)
The Integrated Cattle Farm business segment (SJAP) discontinued its value-added processing subsidiary (QZH) December 30, 2017. In addition, the SJAP has downsized its business until such time as market conditions rebound. It has longer term plans to revitalize and develop the HuangYuen City Center into a trading center for the cattle and beef industry, capitalizing on its current and proposed commercially zoned land bank used by local farmers who contribute to the region's sale of four million head of cattle annually. Realistically, these plans depend on improved macroeconomics for the beef industry in China.
Factoring out QZH, SJAP revenue decreased by 31% to USD 19.2 M in 2018. Gross profit decreased by 52% to USD 4.3 M in 2018. This was due to the continued market price for live cattle remaining below growing cost, resulting in a negative gross profit of USD .9 M in the live cattle segment. In turn, cooperative farmers were no longer required to fatten cattle, reducing sales of bulk and concentrated livestock feed. Reduced feed sales were offset by sales to other local users.
Overall gross margins for smaller operations were 22%. Gross margins for livestock feed and fertilizer were 42%. Therefore, any return toward historical pricing norms for live cattle would reverse trends, potentially eliminating live cattle sale losses or creating positive gross profit while also increasing volumes of livestock feed and fertilizer which maintain healthy margins.
Cattle Operation
| Q4 '18 | Q4 '17 | 12M '18 | 12M '17 |
|---|---|---|---|
| 1 589 | 821 | 3 886 | 3 775 |
| 1 589 | 821 | 3 886 | 3 132 |
| 0 | 0 | 0 | 643 |
| 992 | 2 348 | 1 710 | 2 417 |
| -120% | 4 % |
-15% | 7 % |
| - o/w sold internally for valued added processing |
Fertilizer and feed
| SJAP fertilizer and animal feed | Q4 '18 | Q4 '17 | 12M '18 | 12M '17 |
|---|---|---|---|---|
| Organic fertilizer (MT) | 10 095 | 5 930 | 23 204 | 15 705 |
| ASP / MT (USD) | 190 | 181 | 131 | 156 |
| Gross profit margin | 40% | -18% | n.a. | -10% |
| Bulk livestock feed (MT) | 948 | 5 736 | 8 619 | 25 355 |
| ASP / MT (USD) | 180 | 167 | 177 | 176 |
| Gross profit margin | 56% | 53% | n.a. | -33% |
| Concentrated livestock feed (MT) | 2 218 | 6 280 | 18 064 | 27 630 |
| ASP / MT (USD) | 447 | 437 | 445 | 437 |
| Gross profit margin | 44% | 44% | n.a. | -25% |
| Total feed volume (MT) | 3 166 | 12 016 | 41 268 | 43 335 |
The live cattle market remained depressed, which negatively impacted sales of livestock feed. SJAP increased fertilizer sales by incentivizing district farmers to plant new crops, overcoming the loss of traditional sales to local cooperative cattle raisers.
Fertilizer, and bulk and concentrated livestock feed contributed USD 1.4M or 84% of Q2 gross profit.
| (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 | % |
|---|---|---|---|---|---|---|
| Live cattle | 1,6 | 1,9 | -19% | 6,6 | 9,1 | -27% |
| Bulk livestock feed | 0,1 | 1,0 | -87% | 1,5 | 4,5 | -66% |
| Concentrated livestock feed | 1,3 | 2,8 | -53% | 8,0 | 12,1 | -33% |
| Fertilizer | 1,2 | 0,5 | 151% | 3,0 | 2,2 | 36% |
| Revenue | 4,2 | 6,2 | -33% | 19,2 | 27,9 | -31% |
| Live cattle | -1,9 | 0,1 | -2165% | -1,0 | 0,7 | -240% |
| Bulk livestock feed | 0,1 | 0,5 | -86% | 0,8 | 2,4 | -66% |
| Concentrated livestock feed | 0,6 | 1,2 | -53% | 3,6 | 5,3 | -33% |
| Fertilizer | 0,5 | -0,1 | -608% | 0,9 | 0,5 | 74% |
| Gross profit | -0,8 | 1,8 | -145% | 4,3 | 9,0 | -52% |
| Live cattle | -120,0% | 4,7% | -14,7% | 7,7% | ||
| Bulk livestock feed | 55,8% | 53,6% | 54,1% | 54,6% | ||
| Concentrated livestock feed | 44,3% | 43,8% | 44,3% | 43,9% | ||
| Fertilizer | 39,1% | -19,3% | 29,4% | 22,9% | ||
| Gross profit margin | -19,0% | 28,5% | 22,4% | 32,1% |
Organic Fertilizer (HSA)
| Organic Fertilizer (HSA) |
||||||
|---|---|---|---|---|---|---|
| (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 | % |
| Organic fertilizer | 0,8 | 0,7 | 21% | 3,6 | 3,4 | 4 % |
| Organic mixed fertilizer | 1,6 | 1,1 | 46% | 6,1 | 3,7 | 64% |
| Revenue | 2,4 | 1,8 | 36% | 9,7 | 7,2 | 35% |
| Organic fertilizer | 0,3 | 0,1 | 240% | 0,7 | 0,6 | 14% |
| Organic mixed fertilizer | 0,0 | 0,5 | -95% | 2,1 | 1,6 | 32% |
| Gross profit | 0,3 | 0,5 | -43% | 2,8 | 2,2 | 28% |
| Organic fertilizer | 34,1% | 12,1% | 18,1% | 16,5% | ||
| Organic mixed fertilizer | 1,6% | 43,0% | 34,9% | 43,2% | ||
| Gross profit margin | 12,9% | 30,9% | 28,7% | 30,4% |
The Integrated Cattle Farm business segment (SJAP) discontinued its value-added processing subsidiary (QZH) December 30, 2017. In addition, the SJAP has downsized its business until such time as market conditions rebound. It has longer term plans to revitalize and develop the HuangYuen City Center into a trading center for the cattle and beef industry, capitalizing on its current and proposed commercially zoned land bank used by local farmers who contribute to the region's sale of four million head of cattle annually. Realistically, these plans depend on improved macroeconomics for the beef industry in China.
Factoring out QZH, SJAP revenue decreased by 31% to USD 19.2 M in 2018. Gross profit decreased by 52% to USD 4.3 M in 2018. This was due to the continued market price for live cattle remaining below growing cost, resulting in a negative gross profit of USD .9 M in the live cattle segment. In turn, cooperative farmers were no longer required to fatten cattle, reducing sales of bulk and concentrated livestock feed. Reduced feed sales were offset by sales to other local users.
Overall gross margins for smaller operations were 22%. Gross margins for livestock feed and fertilizer were 42%. Therefore, any return toward historical pricing norms for live cattle would reverse trends, potentially eliminating live cattle sale losses or creating positive gross profit while also increasing volumes of livestock feed and fertilizer which maintain healthy margins.
Overall, despite continued depressed market conditions, and reflecting stricter cost controls, SJAP demonstrated financial self-sufficiency.
Cattle Farms (MEIJI)
| (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 | % |
|---|---|---|---|---|---|---|
| Sale of live cattle | 10,5 | -2,7 | -488% | 29,6 | 20,4 | 45% |
| Revenue | 10,5 | -2,7 | -488% | 29,6 | 20,4 | 45% |
| Sale of live cattle | 2,41 | 0,26 | 828% | 4,8 | 3,8 | 27% |
| Gross profit | 2,41 | 0,26 | 828% | 4,8 | 3,8 | 27% |
| Sale of live cattle | 23,0% | -9,6% | 16,2% | 18,5% | ||
| Gross profit margin | 23,0% | -9,6% | 16,2% | 18,5% |
Revenue for 2018 totaled USD 29.6 M, an increase of USD 9.2 M, or 45%. Gross profit in 2018 was USD 4.8 M, a 27% increase.
Locally bred Asian Yellow Cattle command prices of USD 12/Kg, approximately double the live weight price of cattle at SJAP.
Longer term plans call for merging MEIJA and HSA operations, with MEIJI cattle farms providing breeding stations supplying yearlings for HSA to grow into full grown cattle, unless alternatives to achieve improved returns emerge.
| Sales volume per product (MEIJI) | Q4 '18 | Q4 '17 | 12M '18 | 12M '17 |
|---|---|---|---|---|
| Head of beef cattle (#) | 781 | -3 472 | 7 945 | 9 772 |
| ASP per head (USD) | 13 388 | 775 | 3 720 | 2 088 |
| - Gross profit margin | 23,0% | -9,7% | 16,2% | 18,5% |
HU Plantation (JHST)
| (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 | % |
|---|---|---|---|---|---|---|
| Fresh HU-flowers | - | 0,0 | -100% | - | 0,0 | -100% |
| Dried HU-flowers | -0,0 | 0,2 | -101% | 0,2 | 1,2 | -80% |
| Immortal vegetables | 0,4 | - | n.a. | 0,4 | - | n.a. |
| Vegetable products | 0,2 | 0,8 | -79% | 3,0 | 3,4 | -14% |
| Revenue | 0,5 | 1,1 | -50% | 3,6 | 4,6 | -22% |
| Fresh HU-flowers | - | 0,0 | -100% | - | 0,0 | -100% |
| Dried HU-flowers | 0,0 | 0,0 | -99% | 0,0 | 0,0 | -55% |
| Immortal vegetables | 0,1 | - | n.a. | 0,1 | - | n.a. |
| Vegetable products | (0,1) | 0,1 | -158% | 0,4 | 1,3 | -71% |
| Gross profit | 0,0 | 0,2 | -96% | 0,5 | 1,4 | -62% |
| Fresh HU-flowers | n.a. | 10,1% | n.a. | 10,5% | ||
| Dried HU-flowers | -1,1% | 1,6% | 9,3% | 4,2% | ||
| Immortal vegetables | 25,6% | n.a. | 25,6% | n.a. | ||
| Vegetable products | -48,9% | 17,6% | 13,1% | 38,8% | ||
| Gross profit margin | 1,2% | 14,2% | 14,3% | 29,8% |
Revenue at JHST decreased by USD 1.0 M, or 22% from USD 4.6 M in 2017 to USD 3.6M in 2018. The decrease was primarily due poorer quality flowers and consequent lower market prices, resulting from root disease caused by excessive rain in past years. Gross profits totaled USD .17M, also about the same as the previous quarter.
The experimental crop of Passion Fruits harvested during the quarter had good initial reception with reasonable and stable prices. We also contracted with an herbal plant oil processor to grow 50 acres of Pogestemon Patchouli ("PP") for processing into aromatic oils.
Typhoon Mangkut's flooding spoiled part of the cash vegetable crops (about 100 acres) which severely impacted income in Q4 2018, and will delay the development of passion fruit and PP, the aforementioned projects in 2019.
| (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 | % |
|---|---|---|---|---|---|---|
| Seafood | 7,8 | 8,0 | -2% | 35,5 | 30,4 | 17% |
| Beef & mutton | 8,7 | 7,0 | 24% | 33,0 | 41,4 | -20% |
| Revenue | 16,5 | 15,0 | 10% | 68,5 | 71,8 | -5% |
| Seafood | 0,9 | 0,9 | -4% | 3,9 | 3,4 | 16% |
| Beef & mutton | 1,0 | 0,8 | 24% | 3,3 | 4,6 | -29% |
| Gross profit | 1,8 | 1,7 | 9 % |
7,2 | 8,0 | -10% |
| Seafood | 10,9% | 11,1% | 11,0% | 11,1% | ||
| Beef & mutton | 11,1% | 11,1% | 9,9% | 11,1% | ||
| Gross profit margin | 11,0% | 11,1% | 10,5% | 11,1% |
SIAF Corporate (Import / Export)
Revenue from Seafood and Meat trading decreased USD 3.3 M, or 17% from USD 71.8 M in 2017 to USD 68.5 M in 2018. Gross profits decreased by USD .8 M, or 10% from USD 8.0 M in 2017 to USD 7.2 M in 2018. Overall gross margins were 11%.
Revenue and gross profits from seafood trading increased mid-teens percentage while beef trading exhibited the opposite trend.
Growth potential for the trading division is strong, but currently constrained by working capital availability.
| Traded volume per product (SIAF) | Q4 '18 | Q4 '17 | 12M '18 | 12M '17 |
|---|---|---|---|---|
| Mixed seafood (MT) | 376 | 517 | 1 927 | 1 583 |
| ASP / kg (USD) | 2 1 |
1 6 |
1 8 |
1 9 |
| Gross profit margin | 11% | 11% | 17% | 5 % |
| Beef & lamb (MT) | 473 | 336 | 1 706 | 2 885 |
| ASP / kg (USD) | 1 8 |
2 1 |
1 9 |
1 4 |
| Gross profit margin | 11% | 11% | 10% | 11% |
| Total volume traded | 849 | 853 | 3 633 | 4 468 |
Aquaculture Project Development
| (USD M) | Q4 '18 | Q4 '17 | % | 12M '18 | 12M '17 | % |
|---|---|---|---|---|---|---|
| Revenue | 1,1 | 0,8 | 34% | 3,5 | 13,2 | -73% |
| Gross profit | 0,2 | -1,7 | -110% | 0,9 | 4,4 | -80% |
| Gross profit margin | 15,9% | -212,5% | 24,6% | 33,4% |
Revenue from project development totaled USD 11.1 M in 2018, a decrease of 38% from 2017.
While maintaining gross margins, gross profit of USD 2.1 M decreased 33% from 2017, less than the decrease in revenue.
Under current conditions, working capital at T-W is better deployed to generate continuing and constant revenue from sale of goods. This superior use of funds will increase if the positive results from efficiency trial translate to higher sales volume and/or margin improvement in 2019.
Key figures
| USD M (except for share data) | Q4 2018 | Q4 2017 | % | 12M 2018 | 12M 2017 | % |
|---|---|---|---|---|---|---|
| Earnings | ||||||
| Revenue | 35,2 | 31,4 | 12% | 141,7 | 198,2 | -29% |
| Gross profit | 3,9 | -7,9 | -150% | 21,7 | 19,6 | 10% |
| EBITDA | 7,7 | -10,3 | -174% | 16,6 | 5,7 | 192% |
| Net income attributable to SIAF | 4,7 | -25,6 | -118% | 17,3 | 27,5 | -37% |
| Share data | ||||||
| Earnings per share (USD) – basic | 0,18 | -1,04 | -117% | 0,5 | -0,5 | -187% |
| Earnings per share (USD) – fully diluted | 0,18 | -1,04 | -117% | 0,5 | -0,5 | -187% |
| Weighted average number of shares (million) | 37,3 | 24,7 | 51% | 37,3 | 24,7 | 51% |
| Diluted weighted average number of shares (millions) | 37,3 | 24,7 | 51% | 37,3 | 24,7 | 51% |
| Cash flow | ||||||
| Net cash provided by operating activities | 8,5 | -6,0 | -243% | 20,2 | -11 | -288% |
| Net cash used in investing activities | -6,9 | -11,1 | -37% | -13,8 | -32,7 | -58% |
| Net cash provided by (used in) financing activities | -0,1 | 12,9 | -101% | -0,1 | 5,5 | -101% |
| Financial position* | ||||||
| Total assets | 790,6 | 774,9 | 2% | |||
| Total liabilities | 80,0 | 77,4 | 3% | |||
| Total stockholder's equity | 710,6 | 697,6 | 2% | |||
| Net debt | 5,2 | 11,1 | -53% | |||
| Capital employed | 715,8 | 708,7 | 1% | |||
| Ratios | ||||||
| Gross margin (%) | 11,2% | -25,0% | 15,3% | 9,9% | ||
| EBITDA margin (%) | 21,8% | -32,7% | 11,7% | 2,9% | ||
| Return on capital employed (%) | 1,7% | -19,8% | 3,1% | 2,7% | ||
| Total equity ratio (%) | 89,9% | 90,0% |
*Closing balance for relevant period
Consolidated income statement
| Sale of goods 34,1 30,6 130,5 181,2 Consulting and service income from development contracts 1,1 0,8 11,1 17,0 Commission and management fee - - - - Total revenue 35,2 31,4 141,7 198,2 Sale of goods -30,3 -36,7 -111,0 -165,0 Consulting and service income from development contracts -0,9 -2,5 -9,1 -13,6 Cost of goods sold and services -31,3 -39,3 -120,0 -178,5 Sale of goods 3,8 -6,1 19,6 16,2 Consulting and service income from development contracts 0,2 -1,7 2,1 3,4 Commission and management fee - - - - Total gross profit 3,9 -7,9 21,7 19,6 General and administrative expenses -3,8 -4,6 -15,6 -19,8 Net income from operations 0,1 -12,5 6,1 -0,2 Government grant 0,5 2,1 0,6 2,5 Other income -0,0 0,1 0,1 0,1 Change in fair value of derivative liability - 0,2 - Loss on restructuring - -6,2 - Bad debts written off - -14,4 - Impairment on interests in unconsolidated investees - -0,2 - Non-operating expenses -4,6 -10,7 -4,6 Interest expense 0,7 -2,4 -0,6 -4,0 Net income (expenses) before income taxes -3,3 -44,0 1,6 -1,5 Provision for income taxes 0,0 -0,0 - -0,0 Share of income from unconsolidated equity investee 7,1 6,6 14,3 12,0 Net income 3,7 -37,4 15,8 10,5 Net loss from disposal of variable interest entity - QZH - -9,4 - Less: Net (income) loss attributable to the NCI 1,0 21,2 1,5 17,0 Net income attributable to SIAF 4,7 -25,6 17,3 27,5 Foreign currency translation gain (loss) -2,3 4,2 -14,6 12,8 Less: other comprehensive income attributable to the NCI 10,2 -3,6 1,8 -5,6 Comprehensive income attributable to SIAF 12,7 -25,0 4,6 -5,9 Earnings per share attributable to SIAF: from continuing and discontinued operations: Basic (USD per share) 0,46 -1,04 0,46 -0,53 Diluted (USD per share) 0,46 -1,04 0,46 -0,53 Weighted average number of shares outstanding: Basic (in million shares) 37,3 24,7 37,3 24,7 Diluted (in million shares) 37,3 24,7 37,3 24,7 |
(USD M) | Q4 2018 | Q4 2017 | 12M 2018 | 12M 2017 |
|---|---|---|---|---|---|
Consolidated balance sheet
| 31-dec | 30-sep | |
|---|---|---|
| (USD M) | 2018 | 2018 |
| Cash and cash equivalents | 5,0 | 0,4 |
| Inventories | 54,6 | 56,4 |
| Costs and estimated earnings in excess of billings on uncompleted contracts | 0,3 | 0,3 |
| Deposits and prepayments | 52,2 | 56,6 |
| Accounts receivable net of allowance for doubtful accounts | 101,7 | 94,9 |
| Other receivables | 28,3 | 26,2 |
| Total current assets | 242,0 | 234,8 |
| Plant and equipment net of accumulated depreciation | 230,6 | 233,4 |
| Construction in progress | 12,5 | 13,6 |
| Land use rights net of accumulated amortization | 53,8 | 54,2 |
| Total plant and equipment | 297,0 | 301,1 |
| Goodwill | 0,7 | 0,7 |
| Investment in unconsolidated equity investee | 207,1 | 202,8 |
| Proprietary technologies net of accumulated amortization | 8,9 | 9,1 |
| Temporary deposits paid to entities for investments in SFJV companies | 34,9 | 34,9 |
| Total other assets | 251,6 | 247,5 |
| TOTAL ASSETS | 790,6 | 783,4 |
| Accounts payable and accrued expenses | 8,3 | 8,5 |
| Billings in excess of costs and estimated earnings on uncompleted contracts | 5,3 | 5,4 |
| Due to a director | 2,0 | 0,0 |
| Other payables | 42,5 | 38,4 |
| Borrowings - Short term bank debts | 4,6 | 4,5 |
| Negotiable promissory note | 1,0 | |
| Convertible note payable | 3,9 | 3,9 |
| Current liabilities | 66,7 | 61,7 |
| Other payables | 7,8 | 10,8 |
| Borrowings - Long term debts | 5,5 | 5,7 |
| Non-current liabilities | 13,3 | 16,5 |
| TOTAL LIABILITIES | 80,0 | 78,2 |
| Additional paid - in capital | 181,5 | 180,8 |
| Retained earnings | 458,8 | 450,9 |
| Accumulated other comprehensive income | -10,4 | -8,0 |
| Treasury stock | -1,3 | -1,3 |
| Total SIAF stockholders' equity | 628,7 | 622,5 |
| Non - controlling interest | 81,9 | 82,7 |
| TOTAL STOCKHOLDER'S EQUITY | 710,6 | 705,2 |
| TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | 790,6 | 783,4 |
Consolidated statement of cash flows
| (USD M) | Q4 2018 | Q4 2017 | 12M 2018 12M 2017 | |
|---|---|---|---|---|
| Net income for the period | 6,9 | -46,8 | 15,8 | -30,1 |
| Adjustments to reconcile net income from operations to | ||||
| net cash from operations: | ||||
| Share of income from unconsolidated equity investee | -7,1 | -6,6 | -14,3 | -12,0 |
| Depreciation | 5,2 | 1,4 | 13,1 | 8,4 |
| Amortization | 0,7 | 0,2 | 2,3 | 2,2 |
| Inventory written off | -3,1 | - | - | - |
| Common stock issued for services | 0,4 | -2,3 | 2,3 | 1,8 |
| Other amortized cost | - | -2,0 | - | 0,1 |
| Cash flow from operating activities before change in wc | 3,0 | -23,9 | 19,2 | -29,7 |
| Change in inventories | 4,9 | 23,1 | -2,0 | 5,4 |
| Change in costs and estimated earnings in excess | - | - | - | -0,5 |
| of billings on uncompleted contacts | - | - | 1,0 | - |
| Change in deposits and prepaid expenses | 4,2 | -12,9 | 15,4 | -15,3 |
| Change in due to a director | 2,0 | -0,9 | 1,9 | -2,1 |
| Change in accounts payable and accrued expenses | -0,3 | -1,2 | 5,2 | 2,6 |
| Change in other payables | 1,5 | 8,9 | 6,6 | 19,0 |
| Change in accounts receivable | -6,8 | -8,6 | -18,7 | 9,1 |
| Change in tax payable | - | -0,0 | - | -0,0 |
| Change in billings in excess of | -0,0 | - | -0,4 | - |
| Costs and estimated earnings on uncompleted contracts | - | 0,1 | - | 3,1 |
| Change in amount due from unconsolidated equity investee | 2,1 | -38,3 | -0,5 | -38,3 |
| Change in other receivables | -2,1 | 47,5 | -7,6 | 35,9 |
| Change in working capital | 5,6 | 17,9 | 1,0 | 19,0 |
| Cash flow from operating activities | 8,5 | -6,0 | 20,2 | -10,7 |
| Purchases of property and equipment | -7,1 | -8,3 | -7,1 | -22,8 |
| Investment in unconsolidated equity investee | 0,1 | - | - | - |
| Payment for construction in progress | 0,1 | -3,7 | -6,8 | -10,8 |
| Net cash used in investing activities | -6,9 | -11,1 | -13,8 | -32,7 |
| Proceeds from convertible bond payable | - | 4,0 | - | |
| Proceeds from short term debt | 4,5 | 5,9 | 4,5 | 5,9 |
| Repayment of short term bank debt | -4,5 | -1,5 | -4,5 | -3,0 |
| Convertible note payable repaid through director's account | - | 1,5 | - | - |
| Proceeds from negotiable promissory notes | - | 0,9 | - | - |
| Repayment of long term debts | -0,1 | - | -0,1 | - |
| Capital contribution from non-controlling interest | - | 2,1 | - | 2,5 |
| Net cash (used in) provided by financing activities | -0,1 | 12,9 | -0,1 | 5,5 |
| Effects on exchange rate changes on cash | 3,0 | 2,9 | -1,9 | -0,3 |
| Increase in cash and cash equivalents | 4,5 | -1,3 | 4,4 | -38,3 |
| Cash and cash equivalents, beginning of period | 0,4 | 1,9 | 0,6 | 2,6 |
| Cash and cash equivalents, end of period | 5,0 | 0,6 | 5,0 | 0,6 |
5-year summary
| USD million (except for share data) | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| Earnings | |||||
| Revenue | 141,7 | 198,2 | 342,9 | 429,1 | 404,3 |
| Gross profit | 21,7 | 19,6 | 83,9 | 111,2 | 129,3 |
| EBITDA | 16,6 | 5,7 | 102,6 | 97,3 | 119,6 |
| Net income attributable to SIAF | 17,3 | 27,5 | 115,0 | 65,3 | 92,1 |
| Share data | |||||
| Earnings per share (USD) – basic | 0,46 | -0,53 | 5,46 | 3,63 | 5,81 |
| Earnings per share (USD) – fully diluted | 0,46 | -0,53 | 5,00 | 3,59 | 5,56 |
| Weighted average number of shares (million) | 37,3 | 24,7 | 21,0 | 18,0 | 15,8 |
| Diluted weighted average number of shares (millions) | 37,3 | 24,7 | 23,2 | 18,3 | 16,6 |
| Cash flow | |||||
| Net cash provided by operating activities | 20,2 | -10,7 | 92,5 | 44,6 | 22,0 |
| Net cash used in investing activities | -13,8 | -32,7 | -59,2 | -13,8 | -31,5 |
| Net cash provided by (used in) financing activities | -0,1 | 5,5 | -7,7 | -0,1 | 9,9 |
| Financial position* | |||||
| Total assets | 790,6 | 774,9 | 765,7 | 639,5 | 532,7 |
| Total liabilities | 80,0 | 77,4 | 61,7 | 70,6 | 70,5 |
| Total shareholders equity | 710,6 | 697,6 | 703,9 | 568,9 | 462,2 |
| Net debt (cash) | 5,2 | 11,1 | 28,5 | 39,0 | 24,2 |
| Capital employed | 715,8 | 708,7 | 732,4 | 607,9 | 486,4 |
| Ratios | |||||
| Gross margin (%) | 15,3% | 9,9% | 24,5% | 25,9% | 32,0% |
| EBITDA margin (%) | 11,7% | 2,9% | 29,9% | 22,7% | 29,6% |
| Return on capital employed (%) | 3,1% | 2,7% | 13,5% | 12,2% | 23,7% |
| Total equity ratio (%) | 89,9% | 90,0% | 91,9% | 89,0% | 86,8% |
*Closing balance for relevant period
Reconciliation of non-U.S. GAAP measures to U.S. GAAP
In this report we sometimes refer to non-U.S. GAAP measures that we and securities analysts use in measuring Sino Agro Food's performance. We believe that these measures assist investors and management in analyzing trends in the Company's business for the reasons given below. Investors should not consider these non-U.S. GAAP measures as substitutes, but rather as additions, to financial reporting measures prepared in accordance with U.S. GAAP. It should be noted that these measures, as defined, may not be comparable to similarly titled measures used by other companies.
Use of non-U.S. GAAP financial information
Sino Agro Food's ("SIAF") financial information includes information prepared in conformity with U.S. Generally Accepted Accounting Principles (US GAAP) as well as non-U.S. GAAP information. It is management's intent to provide non-U.S. GAAP financial information to enhance understanding of our consolidated financial information as prepared in accordance with U.S. GAAP. This non-U.S. GAAP information should be considered by the reader in addition to, but not instead of, the financial reporting measures prepared in accordance with U.S. GAAP. The non-U.S. GAAP financial information presented may be determined or calculated differently by other companies.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
EBITDA is a non-U.S. GAAP measurement. Management uses EBITDA because it believes that such measurements are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and that these measurements may be used by investors to make informed investment decisions.
| (USD M) | Q4 2018 | Q4 2017 | 12M 2018 | 12M 2017 |
|---|---|---|---|---|
| Net income from operations | 0,1 | -12,5 | 6,1 | -0,2 |
| Depreciation and Amortization | 7,5 | 2,2 | 10,5 | 5,8 |
| EBITDA (Non-U.S. GAAP Measure) | 7,7 | -10,3 | 16,6 | 5,7 |
Return on Capital Employed ("ROCE")
SIAF believes Return on Capital Employed (ROCE) is a good indicator of long-term company and management performance, both absolute and relative to SIAF's primary peer group. ROCE is a measure of the profitability of SIAF's capital employed in its business compared with that of its peers. SIAF calculates ROCE as a ratio, the numerator of which is Net income plus Interest expense, and the denominator of which is average Total stockholder's equity plus total interest bearing liabilities.
| (USD M) | Q4 2018 | Q4 2017 | 12M 2018 | 12M 2017 |
|---|---|---|---|---|
| Numerator | ||||
| Net income | 3,7 | -37,4 | 15,8 | 10,5 |
| Interest Expense | -0,7 | 2,4 | 0,6 | 4,0 |
| ROCE Earnings (Non-U.S. GAAP Measure) | 3,1 | -35,1 | 16,4 | 14,5 |
| Denominator | ||||
| Capital employed* (Non-U.S. GAAP Measure) | 716 | 709 | 716 | 709 |
| ROCE (Non-U.S. GAAP Measure) | 1,7% | -19,8% | 3,1% | 2,7% |
*Closing balance of Total stockholder's equity and Net Debt
Net Debt
Management uses Net Debt, along with other factors, to evaluate SIAF's financial condition. Management believe that Net Debt is an appropriate supplemental measure of financial condition and may be useful to investors because it provides a more complete understanding of our financial condition before the impact of our decisions regarding the appropriate use of cash and liquid investments.
Net Debt include the aggregate interest bearing debt obligations in SIAF's consolidated balance sheet, less the balance sheet line item Cash and cash equivalents.
| 31-dec | 30-sep | ||
|---|---|---|---|
| (USD M) | 2018 | 2018 | |
| Borrowings - Short term bank debts | 4,6 | 4,5 | |
| Negotiable promissory note | 0,0 | 1,0 | |
| Borrowings - Long term debts | 5,5 | 5,7 | |
| Convertible notes payables | 0,0 | 0,0 | |
| Cash and cash equivalents | -5,0 | -0,4 | |
| Net Debt (Non-U.S. GAAP Measure) | 5,2 | 10,7 |
This is Sino Agro Food
SIAF is a specialized investment company focused on protein food. The Company produces, distributes, markets, and sells sustainable seafood and beef to the rapidly growing middle class in China. Activities also include production of organic fertilizer and produce. SIAF is a global leader in developing land based recirculating aquaculture systems ("RAS"), and with its partners is the world's largest producer of sustainable RAS prawns.
Founded in 2006 and headquartered in Guangzhou, the Company had over 550 employees and revenue of USD 343 million in 2016. Operations are located in Guangdong, Qinghai, and Hunan provinces, and in Shanghai. Sino Agro Food is a public company listed on OTCQX U.S. Premier in the United States and on the Oslo Børs' Merkur Market in Norway.
Integrated Cattle (SJAP)
Integrated Cattle Farm refers to the operation of SJAP in manufacturing and sales of Organic Fertilizer, bulk livestock feed, concentrated livestock feed, and the sales of live cattle inclusive of:
(b). Cattle that are not being slaughtered in our own slaughterhouse operated by Qinghai Zhong He Meat Products Co., Limited ("QZH". These are sold live to third party livestock wholesalers. (a). Cattle that are sold to QZH and slaughtered, deboned and packed by QZH. The sales of deboned and packed meats by QZH are sold to various meat distributors, wholesalers and super market chains and our own retail butcher stores
Organic Fertilizer (HSA)
Hunan Shenghua A Power Agriculture Co. Ltd. ("HSA") manufactures and sells organic fertilizer.
Cattle Farms (MEIJI)
Cattle Farm refers to the operations of Cattle Farm (1) under Jiangmen City Hang Mei Cattle Farm Development Co. Ltd ("JHMC"). Cattle are sold live to third party livestock wholesalers who in turn resell them mainly in Guangzhou and Beijing livestock wholesale markets. The financial statements of JHMC are consolidated into MEIJI as one entity along with MEIJI's operation in the consulting and service for development of other Cattle Farms (i.e., Cattle Farm 2) or related projects.
HU Plantation (JHST)
Plantation refers to the operations of Jiangmen City Heng Sheng Tai Agriculture Development Co. Ltd. ("JHST") The HU Plantation business grows, harvests and sells dragon fruit flowers (dried and fresh) and immortal vegetables to wholesale and retail markets JHST's financial statements are consolidated into the financial statements of Macau EIJI Company Ltd. ("MEIJI") as one entity.
SIAF Corporate / Seafood & Meat Trading
SIAF Corporate / Seafood & Meat Trading refers to the business operations of Sino Agro Food, Inc., including import / export business and consulting and service operations provided to projects that are not included in the above categories, and are not limited to corporate affairs.
Aquaculture Project Development
Aquaculture Project Development refers to the operations of Capital Award Inc. (CA) covering its engineering, technology and consulting service management of fishery operations. CA sells Engineering and Technology Services via Consulting and Service Contracts for the development, construction, and supply of plant and equipment, and management of fishery (and prawn or shrimp) farms and related business operations, including the Zhongshan New Prawn Project ("ZSNP").
Definitions and SEC filings
Please refer to our Form 10-K for definitions of terms used in this report. Filings with the SEC of Sino Agro Food's annual report to stockholders, annual report on Form 10-K, quarterly reports on Form 10-Q, proxy statements, management certifications, press releases, current reports on Form 8-K and other documents are available at the SEC's website www.sec.gov and at Sino Agro Food's corporate website.
Accounting policies
Sino Agro Food prepares its financial statements in accordance with the Generally Accepted Accounting Principles (US-GAAP) as adopted by the Financial Accounting Standards Board.
Safe Harbor Statement
This report contains statements that are not historical facts but rather forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that address activities, events or developments that Sino Agro Food, Inc. or its management believes or anticipates may occur in the future. All forward-looking statements, including without limitation, management's examination of historical operating trends and data, as well as estimates of future sales, operating margin, cash flow, effective tax rate or other future operating performance or financial results, are based upon our current expectations, various assumptions and data available from third parties. Our expectations and assumptions are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that such forward-looking statements will materialize or prove to be correct as forwardlooking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements. Because these forward-looking statements involve risks and uncertainties, the outcome could differ materially from those set out in the forward-looking statements for a variety of reasons, including without limitation, changes in global light vehicle production; fluctuation in vehicle production schedules for which the Company is a supplier, changes in general industry and market conditions, changes in and the successful execution of our capacity alignment, restructuring and cost reduction initiatives discussed herein and the market reaction thereto; loss of business from increased competition; higher raw material, fuel and energy costs; changes in consumer and customer preferences for end products; customer losses; changes in regulatory conditions; customer bankruptcies or divestiture of customer brands; unfavorable fluctuations in currencies or interest rates among the various jurisdictions in which we operate; component shortages; market acceptance of our new products; costs or difficulties related to the integration of any new or acquired businesses and technologies; continued uncertainty in pricing negotiations with customers, our ability to be awarded new business; product liability, warranty and recall claims and other litigation and customer reactions thereto; higher expenses for our pension and other postretirement benefits; work stoppages or other labor issues; possible adverse results of pending or future litigation or infringement claims; negative impacts of antitrust investigations or other governmental investigations and associated litigation (including securities litigation) relating to the conduct of our business; tax assessments by governmental authorities and changes in our effective tax rate; dependence on key personnel; legislative or regulatory changes limiting our business; political conditions; dependence on and relationships with customers and suppliers; and other risks and uncertainties identified under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Reports and Quarterly Reports on Forms 10-K and 10-Q and any amendments thereto. The Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events. For any forward-looking statements contained in this or any other document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we assume no obligation to update any such statement.
Additional information
Financial information
Additional financial information and notes to the financial statements is available in the Company's 10-K report, available on the Company's website.
Press and analyst conference
Like last quarter, the Company will provide prepared remarks discussing financial results and replacing an audio call on May 6, 2019. Again, there will be a written Q&A.
Please submit questions by email to [email protected]. These will be organized, answered, and posted, with an accompanying press release. reports are also published on sinoagrofood.com.
The Company
Peter Grossman Investor Relations +1 (775) 901-0344137 [email protected]
Nordic Countries +46 760495885
