Yongye Intl (NASDAQ:YONG)

First Quarter 2012 Financial Highlights

• Revenue increased 28.2% to $64.4 million from $50.2 million in the first quarter of 2011
• Gross profit increased 29.7% year-over-year to $35.4 million
• Income from operations was $21.9 million, an increase of 94.1% over income from operations of $11.3 million in the first quarter of 2011
• Net income attributable to Yongye increased 95.8% to $16.4 million, or $0.27 per diluted share, from $8.4 million, or $0.16 per diluted share, in the same period of 2011
• Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $18.3 million, or $0.31 per diluted share, compared to a net income of $13.3 million, or $0.27 per diluted share, in the same period of 2011*
• Operating cash flow was $61.7 million compared to $6.6 million in the same period of 2011

Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International, stated, "We are pleased to announce strong first quarter results with year-over-year increases in revenue and net income of 28.2% and 95.8%, respectively. The strong growth demonstrates the continued strength of our brand and our successful launch of two new products, which contributed 77.3% of our total liquid crop nutrient sales this quarter. These new products highlight our commitment to product diversification and our strong research capabilities; we believe they will further solidify our market leading position. During the first quarter of 2012, we prioritized our resources to focus on the launch of those two new products, as their peak season is in the first quarter. Because the focus of our manufacturing capacity and sales and marketing efforts was shifted to the new products, sales of our regular crop nutrient products decreased compared to the first quarter of last year. In addition, to better manage our accounts receivable, we made a decision to decrease shipment of products to certain distributors who had prolonged payment periods in 2011. We do not foresee a decrease in demand for our regular crop nutrient products, and expect that the decreased sales of these products in the first quarter of 2012 will be made up by the sales increase generated in the second and third quarters, which is the peak season for our regular crop nutrient product. During the first quarter of 2012, we also continued the expansion of our branded store network to 30,886 stores covering over 30 provincial regions in China."

Mr. Wu added, "Moving forward, we will continue working diligently to drive higher penetration in our traditional markets and further develop our retail network in new markets throughout China. With the successful launch of two new products, our improved working capital management and our brand building efforts, we look forward to achieving another successful year in 2012."

Business Outlook

For the full year 2012, the Company reiterates its expected revenue between $495 million and $515 million and adjusted net income between $110 million and $120 million, which excludes the impact of non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities. The Company also expects that its branded retailer network will be expanded to 35,000 by the end of 2012, which represents a 16.3% increase over the 2011 year-end number of 30,086.

BEIJING, April 4, 2012 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (NASDAQ: YONG), ("Yongye" or the "Company") a leading developer, manufacturer, and distributor of crop nutrient products in the People's Republic of China ("PRC"), today provided an update on accounts receivable collection as of the quarter ended March 31, 2012.

During the first quarter of 2012 the Company collected $140 million of $154 million accounts receivable, net of allowance for doubtful accounts at the end of 2011. The Company has taken measures to increase its collection efforts and closely monitor its distributors' financial status, and it expects to collect the remaining accounts receivable balance in the second quarter of 2012.

The Company's regular payment terms allow distributors to pay the total purchase price within six months after the receipt of the Company's products. Recent tightening of local credit markets has increased utilization of the Company's full six month credit term by its distributors, which contributed to the Company's account receivables at the end of 2011. The delay in payments from the distributors was not due to excessive inventories of unsold product held by such distributors, nor was it due to a decrease in demand for Yongye products among distributors and end customers.

Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye, stated, "We are pleased to provide a positive update on our accounts receivable collection. Yongye's continued operating success is a testament to our leading products, innovative sales and marketing, and our strong and secure relationships with our distributors with whom we are very pleased to partner."

BEIJING, March 23, 2012 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (NASDAQ: YONG), ("Yongye" or the "Company") a leading developer, manufacturer, and distributor of crop nutrient products in the People's Republic of China ("PRC"), today announced the launch of two new fulvic acid based crop nutrient products, Zhongbaosheng and Qianggenbao.

The two products are complementary to Yongye's existing Shengmingsu products and help the Company break into the nutrient market for seed and root nutrient products in China. Zhongbaosheng, a liquid product, improves crop seeds' germination, fertilizer utilization, and resilience during the key initial seed development period. Qianggenbao is also a liquid product which promotes root development by improving plant roots' ability to absorb water and fertilizers, and enhances plants' overall resistance against drought, frost, disease and stalk leaning. Both products were developed by the Company's industry leading research and development team, and have been successfully field tested extensively throughout China.

The products are available in 100ml and 300ml containers, and are currently manufactured on the Company's existing production lines at its Jinshan and Wuchuan facilities in Inner Mongolia, China. The new products are distributed alongside Yongye's flagship Shengmingsu products, utilizing the Company's leading distribution network of more than 30,000 Yongye branded retailers across China. The Company has already shipped approximately US$15 million worth of Zhongbaosheng and Qianggenbao to distributors during the first quarter of 2012, and anticipates sales of both new products to account for approximately 5 percent of the total sales revenues in 2012.

Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye, stated, "We are excited to announce the launch of Zhongbaosheng and Qianggenbao. These new products highlight our development capabilities, as well as our commitment to product diversification and industry leading research. We will take advantage of our proven sales and marketing strategies to provide our growing customer base with an effective and complementary product to our highly successful and widely used Shengmingsu product. China's degraded soil conditions and increasing food demand has created significant market for all of our products, and we believe the addition of these two new products further solidifies our market leading position."

Full Year 2011 Financial Highlights

• Revenue increased 82.3% to $390.4 million in 2011 from $214.1 million in 2010
• Gross profit increased 91.4% year-over-year to $228.3 million
• Income from operations increased 76.6% to $105.6 million from $59.8 million in 2010
• Net income attributable to Yongye increased 75.2% to $84.9 million, or $1.55 per diluted share, compared to$48.4 million, or $1.05 per diluted share, in the same period of 2010
• Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $93.0 million, or $1.71 per diluted share, compared to $54.1 million, or $1.17 per diluted share, in the same period of 2010*
• Operating cash outflow was $31.2 million in 2011 compared to an operating cash inflow of $15.9 million in 2010

Fourth Quarter Results

• Revenue increased to $44.9 million from $28.1 million in prior year period
• Net loss for the fourth quarter was $7.2 million versus net loss of $0.3 million in prior year period
• Adjusted diluted EPS for the fourth quarter ($0.07) vs $0.14 in prior year quarter

Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye, stated, "We are proud of the progress we continue to make in growing Yongye's business. The company has worked diligently to drive higher penetration in our traditional markets, including Jiangsu, Heilongjiang, Jilin, Liaoning, Hebei, Inner Mongolia, Henan andGuangdong, which contributed to 50% of our revenue growth for the year. In these existing provincial markets we continue to see more effective management of our distribution channels including better execution of our retail marketing program, increasing adoption from large farms and higher frequency training seminars in various locations throughout the year. We are also having success in further developing our retail network in new markets throughout China, including Yunnan, Jiangxi, Sichuan, Shaanxi and Anhui."

Business Outlook

For the full year 2012, the Company expects revenue of between $495 million and $515 million and adjusted net income between $110 million and $120 million, which excludes the impact of non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebeicustomer list, and a change in the fair value of derivative liabilities. In 2012, the Company expects strong growth of revenue in traditional markets like Henan and Guangdong and in new markets like Shaanxi and Sichuan. The Company also expects to fully launch two new products in 2012. One new product will help crop seeds to sprout and grow, and the other will improve the crop roots' ability to absorb the water and fertilizers and to enhance the crop's resistance against drought, freeze, diseases, and stalk leaning. The Company also expects to expand its branded retailer network to 35,000 by the end of 2012, which represents a 16.3% increase over the 2011 year-end number of 30,086.

BEIJING, Dec. 15, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (Nasdaq: YONG) ("Yongye" or the "Company"), a leading developer, manufacturer, and distributor of crop nutrient products in the People's Republic of China ("PRC"), today responded to misconceptions regarding its business contained in a report posted Tuesday on the website Seeking Alpha by Prescience Investment Group. The author is an admitted short seller and specifically disclaims any warranty of the accuracy of what it published about Yongye. The allegations in the report are false, misinformed, and misleading. Yongye has previously, on several occasions -- in public filings and on publicly accessible conference calls -- addressed all of the issues raised by this report. However, investors can refer to the FAQ section of Yongye's investor relations site (http://www.yongyeintl.com/FAQ.html) in order to view a detailed response to each of the specific assertions in the report.

Yongye is committed to transparency and best practices regarding all matters pertaining to corporate governance and stands by its distribution model, which continues to deliver positive results for the business. Further, the Company is proud to have Morgan Stanley Private Equity Asia (MPSEA) as an active partner that is committed to helping drive Yongye's business forward and ultimately enhance shareholder value for all investors.

Third Quarter 2011 Results

• Revenue in the third quarter of 2011 increased 95.9% to $140.6 million from $71.8 million for the same period of 2010
• Gross profit increased 103.2% year-over-year to $85.6 million 
• Income from operations increased 143.0% to $50.6 million 
• Net income attributable to Yongye increased 122.6% to $39.1 million, or $0.69 per diluted share, compared to $17.6 million, or $0.37 per diluted share, in the same period last year
• Adjusted net income attributable to Yongye, which excludes non-cash expenses related to the amortization of the acquired Hebei customer list and a change in the fair value of derivative liabilities, was $39.7 million, or $0.70 per diluted share, compared to $18.3 million, or $0.39 per diluted share, in the same period last year*
• Operating cash inflow was $7.3 million compared to an operating cash outflow of $0.2 million for the same period of 2010

Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International, stated, "This was a particularly strong quarter for Yongye with year-over-year increases in revenue and net income attributable to Yongye of 95.9% and 122.6%, respectively. Additionally, our gross margins continue to improve, at 60.9% for the quarter. Such strong growth highlights the strength of our brand and the success we are having in existing and new markets with our sales and distribution strategy."

Mr. Wu added, "We continue to work closely with our distributors, and effectively manage our retail network in order to further penetrate existing markets. Our crop nutrient product is also beginning to pick up traction in newly developed provincial markets, as 21.4% of our sales this quarter were derived from new accounts. We are very excited about the future growth prospects of our business, and, to meet the growing demand for our products, we are focused on expanding our production capacity for next year."

Business Outlook

Together with results for the third quarter, the Company also announced that it is increasing both top and bottom line guidance for 2011. Previous guidance included revenues of $335 million to $345 million and adjusted net income of $85 million to $87 million. Revised guidance now includes revenue of $390 million to $400 million and net income, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, of $100 million to $102 million. The Company also expects to expand its branded retailer network to at least 30,000 by the end of 2011, which represents a 24.8% increase over the 2010 year-end number of 24,036.

Offering:

Up to 12,035,048 Shares of Common Stock representing (i) 2,165,843 Shares of Common Stock and (ii) the maximum aggregate number of Shares of our Common Stock receivable upon conversion of (a) 5,681,818 currently outstanding shares of our Convertible Preferred Stock and (b) shares of Convertible Preferred Stock which may be issued as pay-in-kind dividends on such shares of Convertible Preferred Stock in the future and (iii) Shares of Common Stock that MSPEA may receive in the event that we have not achieved an Income Target (as defined below) and have engaged in certain additional issuances of our equity securities that were not approved in writing by holders of a majority of the Convertible Preferred Stock then outstanding (subject to certain exceptions) but for which no adjustment was made to such Income Target.

We will not receive any of the proceeds from the sale of the shares by the selling stockholders.

We increased deposit to suppliers by US$41.9 million during the three month ended June 30, 2011 in anticipation of strong production demand in the third quarter following significant inventory reductions during the second quarter. The deposits were paid primarily to suppliers of lignite coal and chemical components to lock in price and secure availability. After our Wuchuan Facility was completed in the fourth quarter of 2010, we started to source lignite coal and extract humic and fulvic acid in-house in lieu of sourcing humic acid from the market. This new operating process creates a new and significant demand for lignite coal and more demand for chemical components used in the process of converting lignite coal. In addition to our substantial business growth, those factors require us to order significantly more lignite coal and chemical components from our suppliers compared to last year. In light of the higher demands for these raw materials, we needed to increase deposits paid in order to lock in price and guarantee availability in the current inflationary environment in China. All the raw materials for which we prepaid are expected to be delivered to us before the end of September 2011. We will work with our suppliers to manage payment terms as the procurement procedures supporting our new operating processes normalize following the ramp-up stages for the Wuchuan Facility.

In 2010, we entered into an agreement with Wuchuan Shuntong to acquire the permit for the rights to explore, develop and produce lignite coal resources in a certain area of Wuchuan County. The cash consideration of the permit was approximately RMB 240 million or USD $35 million. The permit allows us to complete all necessary administrative procedures and obtain government approvals to acquire the permit for the rights to explore, develop and produce lignite coal resources (“Mineral Rights”). We believe that the Mineral Right will allow us to secure a long term supply of humic acid, which is a major raw material used in the manufacture of fulvic acid liquid products, and which is sourced from lignite coals. We are still in the process of securing necessary government approvals. If we are not able to obtain the government approvals on the Mineral Rights, our vertical integration strategy could fail and if we are not able to obtain the exploration rights related thereto without the payment of any additional material consideration by December 31, 2011, the holders of the convertible preferred stock will be able to redeem all or a portion of the outstanding shares of the convertible preferred stock at a redemption price equal to the original purchase price thereof, plus a premium designed to generate a 30% internal rate of return to such holders, unless we are able to recover the RMB 240 million originally paid for such rights by June 30, 2012. In the event we need to recover the prepayment to Wuchuan Shuntong, litigation may be necessary. Moreover, the supply of lignite coal to us will be dependent upon lignite coal availability in the market. If we are unable to obtain adequate quantities of lignite coal at economically viable prices which meet our specifications, our financial condition and results of operation could be adversely affected.

In addition to a fertilizer registration certificate, we are required to hold a variety of other permits, licenses and certificates to conduct our business in China including relevant construction and environmental permits and certificates in connection with the commencement of operations at Inner Mongolia Yongye Fumin Biotechnology Co., Ltd. ("Yongye Fumin"). We may not possess or receive all the permits, licenses and certificates required for our business or for which application has been made. In addition, there may be circumstances under which the approvals, permits, licenses or certificates granted by the governmental agencies are subject to change without substantial advance notice, and it is possible that we could fail to obtain the approvals, permits, licenses or certificates that are required to expand our business as we intend. If we fail to obtain or to maintain such permits, licenses or certificates or renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products that we would be able to offer. As a result, our business, result of operations and financial condition could be materially and adversely affected.

Please visit www.bedfordreport.com to sign up and download full report.

Yongye International produces and markets two lines of organic nutrient products: a liquid nutrient product which is sprayed on plants and a powder nutrient product which is added to animal feed. Shares of Yongye have been on the upswing following Morgan Stanley’s Asian private equity arm’s $50 million investment in the chemi- cal manufacturer.

"We believe this transaction will not only provide us with the financial resources to expand our operations to meet the growing demand for our Shengmingsu agricultural nutrient products but also will further enhance our corporate governance," Yongye’s Chairman and CEO Zishen Wu said in a statement. Last month the company said that first quarter revenues more than doubled year-on-year due to an expanded distribution network, deeper penetration in existing market and the significantly enhanced market recognition of its products.

On the surface, YONG’s significant surge in revenues appears amazing. The issue is that a people don’t trust the earnings following Absaroka Capital Management’s scathing review of YONG. Yongye instantaneously respond- ed calling the allegations a "faux report". To Yongye’s credit, their rebuttal addressed every allegation set forth by Absaroka.

Yongye believes that Absaroka’s analysts and or the parties that have hired or are affiliated with them have en- gaged in reckless attempts to negatively influence trading in Yongye’s securities for their financial benefit. Given the number of ill-founded assertions in these articles we will confine our comments to those issues that are most egregious.

BEIJING, June 20, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (NASDAQ: YONG), a leading agricultural nutrient company in China ("Yongye International" or the "Company"), today announced that Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International, had completed the purchase of $3.0 million worth of shares of the Company's Common Stock in open market transactions pursuant to a Rule 10b5-1 plan. The weighted average purchase price was US$5.40 per share.  The share purchase demonstrates Chairman and CEO's confidence in the Company and his belief that the shares are currently undervalued.

BEIJING, June 10, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. (NASDAQ: YONG), a leading agricultural nutrient company in China ("Yongye International" or the "Company"), today announced the closing of the previously announced $50 million equity investment by Morgan Stanley Private Equity Asia ("MSPE Asia"). The Company also announced the appointment of Mr. Homer Sun, Managing Director of Morgan Stanley who leads MSPE Asia's China Investments, to the Board of Directors of the Company.

Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International, stated, "We are pleased to announce the closing of this investment and the appointment of Mr. Sun to our board. We look forward to the future strategic cooperation with MSPE Asia as we continue to grow our business. We believe this transaction will not only provide us with the financial resources to expand our operations to meet the growing demand for our Shengmingsu agricultural nutrient products but also will further enhance our corporate governance."

BEIJING, May 31, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc., a leading agricultural nutrient company in China ("Yongye" or the "Company"), today announced that Morgan Stanley Private Equity Asia ("MSPE Asia") has agreed to make a $50 million equity investment (the "Investment") in Yongye.

Yongye intends to use the proceeds from this investment for capacity expansion, repayment of commercial bank debt, working capital, and general corporate purposes.

"We are pleased that MSPE Asia, one of the leading private equity investors in the region, has decided to make a significant investment in our company," commented Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International. "Yongye and MSPE Asia have structured a long-term cooperation based on our mutual belief in the strong prospects for our products and nationwide distribution network. Specifically, we are providing multi-year profit commitments to MSPE Asia which, upon their achievement, results in up to a $15.00 per share conversion price for the convertible preferred stock we are issuing. This investment will assist us in strengthening our balance sheet and positioning us to meet the growing demand for our Shengmingsu agricultural nutrient products."

"After extensive due diligence, we believe Yongye to be an exceptional company that has built significant brand recognition in China's agriculture industry through its integrated marketing campaigns, distribution strategy and the benefits its Shengmingsu-branded products have brought to Chinese farmers," stated Mr. Homer Sun, Managing Director of MSPE Asia. "The Company's core products address an important need for farmers to enhance yield for crops planted on soil that has become degraded by decades of over-fertilization. In addition to product efficacy, we are impressed by the Company's strategy and execution to develop an effective sales network directed at an underpenetrated segment of Chinese demand. We look forward to being long-term shareholders and partners with Yongye and intend to provide our full support to Yongye with respect to operating strategies and the capital markets."

Also:

BEIJING, May 31, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. announced today that Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International, intends to purchase up to $3.0 million worth of shares of the Company's Common Stock in open market transactions.

On May 20th, 2011, the Company issued this rebuttal to the recent analyst allegations.

Absaroka Capital Management, LLC Report on Yongye International, Inc. (NASDAQ: YONG)

Summary: (For the complete report, please visit:  http://absaroka.com/YONG.html)

Yongye International, Inc. (NASDAQ: YONG) has fraudulently misrepresented its business and thus is massively over-valued by the market at this time. 

Absaroka's significant concerns about Yongye include the following material issues:

1.       The $35.0mm cash acquisition of the Wuchuan Lignite Coal Project is not a legitimate transaction and appears to be a scheme to transfer funds out of the Company at the expense of public shareholders

2.       Yongye falsely claims its main fertilizer product, Shengmingsu, was developed by 38 scientists at Stanford University: Absaroka provides a letter from Stanford University certifying it has no connection to Yongye's Shengmingsu fertilizer and Yongye does not have permission to utilize Stanford's name, trademark, or images in its advertising and marketing efforts.

3.       Intertwined relationships with its two largest suppliers appear to allow the Company to fraudulently manipulate earnings:  Wuchuan Sanda was ordered to cease production by the government and Wuchuan Shuntong does not supply nearly the amount of humic acid claimed by Yongye

4.       The $32.3mm Hebei Customer List acquisition has limited industrial logic and appears to be another scheme by Yongye Management to falsely manipulate earnings

5.       Yongye's Shengmingsu is minimally effective for farmers and Yongye's product claims do not correspond with reality

6.       The new bank loans are illogical relative to the supposed cash balance, which raises doubt about the reality of the cash balance on the unaudited 03/31/11 10-Q balance sheet

7.       Excessive management compensation relative to peers is diluting shareholder interests because of continued large share-based compensation grants

8.       The unsatisfactory auditor history raises grave concern about the validity of historical financials and forward-looking guidance

Any of these issues on a stand-alone basis should be enough to convince public shareholders to question the current valuation and pursue the "Wall Street Walk" form of shareholder activism

First Quarter 2010 Highlights

• Revenue increased 101.4% to $50.2 million from the first quarter of 2010
• Gross profit increased 97.0% year-over-year to $27.3 million
• Income from operations increased 101.0% to $11.3 million
• Net income attributable to Yongye increased 91.4% to $8.4 million, or $0.16 per diluted share, compared to $4.4 million, or $0.10 per diluted share, in the first quarter of 2010
• Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $13.3 million, or $0.27 per diluted share, compared to $4.4 million, or $0.10 per diluted share, in the same period last year*
• Cash flow from operations increased to $6.6 million year-over-year from $0.5 million in the first quarter of 2010
• Formed official partnership with Stanford University and China Agricultural University to address rural poverty, education, nutrition and health issues in China and provide technical support to Chinese farmers.

Geoteam® Note: 2011 First quarter analyst EPS estimates were $0.15.

"Due to our expanded distribution network, deeper penetration in our existing market and the significantly enhanced market recognition of our Shengmingsu product, Yongye has achieved another successful quarter with strong top line, bottom line, and operating cash flow growth," stated Mr. Zishen Wu, Chairman and Chief Executive Officer of Yongye International. "During the first quarter of 2011, which is normally a seasonally slow quarter, we continued the expansion of our branded store network to 26,006 stores covering 30 provinces in China. In addition, with the launch of the new Shengmingsu production line, as well as our improved working capital management, we were able to achieve significant growth in our operating cash flow."

Business Outlook

• The Company continues to expect to achieve 2011 revenues of between $315 million and $325 million, representing an increase of 47.1% and 51.8% over 2010's revenue of $214.1 million.
• The Company expects adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, of between $80 million and $82 million, representing an increase of between 47.9% and 51.6% over 2010 adjusted net income attributable to Yongye of $54.1 million.
• The Company expects to expand its independently-owned branded store network to at least 30,000 by the end of 2011, which represents a 24.8% increase over the 2010 year-end figure of 24,036.

Mr. Wu added, "Our Shengmingsu plant nutrient product continues to help improve the productivity of Chinese farmers.  After several years of rapid expansion, Yongye has become a leading nationwide agricultural nutrient product supplier in China. Our increased consumer recognition in the agricultural community in China is an important contributor to our business growth. Our new state-of-the-art production facility, which began normal operations at the end of 2010, will help us fulfill the growing demand for our products. We anticipate we will secure the final government approval in order to complete our lignite coal resource project acquisition by the end of 2011. We look forward to achieving another successful year in 2011 by delivering value to both our customers and shareholders."

Morningstar on YONG (April 15, 2011)

We are putting our fair value estimate for Yongye YONG under review while we reassess our valuation methodology. We acknowledge the market sentiment against Yongye and similar reverse-merger micro-cap Chinese companies has grown markedly negative since our update in March, particularly after a few Chinese companies were becoming prime targets for short-sellers on the ground of potential fraudulent activities in their financial reporting and/or operations. We are evaluating our valuation methodology for Yongye, and are planning to incorporate addition weights on downside probability analysis in our methodology. Although Yongye has become free cash flow positive since 2010, its management's silence on the particular negative market sentiments and the lack of decisive responses (like announcing a stock buyback plan similarly executed by China Gerui CHOP, or initiating a concrete dividend plan after meeting stated earnings criteria) have not helped the market alleviate these concerns. While we plan to adjust our fair value estimate, we think the current share price reflects an ongoing wariness about the risk/reward mix of the company.

by Maj Soueidan

The Yongye Intl (NASDAQ:YONG) story has become one of additional uncertainty since the news last Friday stating that Roth has downgraded the stock from Buy to Neutral.

Earlier that day an investor had asked me the following question:

Maj. Have you changed your opinion on YONG? just curious...

My response:

"I still am net long YONG (stock, calls and puts). But there is no way I can say how I feel for sure until on-the-ground DD begins. A key question here is whether or not the YONG filings I have are the originals or amended? Remember, I do not think there is a joint inspection with SAT on amended filings.

If we can not even rely on SAT, we are just screwed. It means there may be some collusion at the SAT level too."

I actually believe that if YONG lowers guidance instead of reiterating it (as they did), there is an increased probability that YONG is basically a real company presented with everyday challenges. Short-term bad, but maybe ok in the long-term. By reiterating guidance, the fraud perception card could increase if investors choose to heed Roth's numbers

While the Roth downgrade was not explicitly a decision based on fraud, we had no choice but to remove YONG shares from the GeoBargain list until further notice and the implementation of on-the-ground DD, something we have said needed to be ultimately accomplished before rendering a final decision on YONG shares. We had also informed readers that we had purchased puts against our long position.

Here were some of my thoughts expressed in some Geoinvesting premium level message board posts in response to the Roth downgrade:

• I do not know how YONG shares will eventually resist the temptation to go down further.
  
• When Roth had a price target of $15, I can see a reason for those that follow analysts recommendations for hanging on to YONG, even with a hit piece looming. But now with a target of $5.80, the risk/reward is not worth it...not even close.
  
• I am not sure Roth is telling us everything. Is it possible that they were tipped off by some shorts, which prompted an emergency channel check trip?
  
• I think if we look at the ChinaHybrids where Roth has made significant negative sentiment shifts in opinions, we will notice that stocks have performed awfully.
  
• Roth cut the 2011 EPS estimate to $1.20 from $1.65. Now we have a situation where the company is expected to see no adjusted EPS growth in 2011. So YONG goes from a growth/value play to maybe just a value play.
  
• Will the other 4 analysts that cover YONG now downgrade? (although I think Roth had the highest estimate)
  
• The “looming hit piece” will just shake out weak hands.
  
• Auditor ranks do not matter anymore (at least for now).

I think either way YONG is in a tough spot. The company has maintained guidance, meaning investors would need to assume that Roth is clueless. If they reduced guidance, it strengthens Roth's findings. Is Roth really going to make this stuff up? I doubt it.

Now here is the interesting observation. YONG issued strong guidance in mid March 2011, so the casual observation would reveal that YONG had a "good read" on first quarter 2011 results. But Roth also reduced the first quarter estimate. Conditions could not have worsened that fast, so is it possible that YONG is not being totally up front.

If Roth is right, I am worried that YONG could face a cash flow problem resulting in a need to tap the equity market. And what are the odds of favorable terms?

I think what we are seeing in many of these ChinaHybrids is a desire to grow too fast, leading to a misuse of capital and inability to manage growth/EPS. I will take EPS growth over less revenue and outstanding share count growth any day. Many of these "legitimate" firms could have better utilized internal cash to grow capacity at a more modest pace and to buy back stock.

The dilemma that investors are now presented with is who to believe: YONG or Roth? Until we perform on-the-ground DD, we will side with Roth's assessment. This may seem like a quick 180, but the circumstances support our decision for the time being.

Rodman on YONG

Termination of Coverage Effective immediately, we are terminating coverage of Yongye International Inc. (“Yongye”) to allocate resources more efficiently within our coverage universe. Upon termination of coverage, any of our prior financial projections on Yongye should not be considered reliable.

Rating Yongye was last rated Market Outperform with Speculative Risk.

Company Description Headquartered in Beijing, Yongye International is a Chinese manufacturer and distributor of fulvic acid based liquid and powder compound nutrients for plants and animals. The company conducts its main production operations in the city of Hohhot, Inner Mongolia and sells its products under the brand name of “Shengmingsu.” The company was first listed on the OTCBB market in April 2008 and is currently trading on the Nasdaq Global Select Market under the ticker symbol of YONG.

Recent Financials On March 14, 2011, Yongye announced its 4Q10 financial results. Revenue for the quarter was $28.0 million. Gross profit came in at $14.9 million. Non-GAAP net income was $7.4 million, representing diluted EPS of $0.15. At the end of 2010, the company had $42.0 million of cash and restricted cash, against $0.4 million of long-term debt.

On April 11, 2011, Yongye announced it had realized $50.2 million of preliminary revenue for 1Q11. It also indicated that it had 26,006 independently-owned branded stores in its network as of March 31, 2011. For full year 2011, the company continued to expect revenue to be between $315 million and $325 million and non-GAAP net income to be between $80 million and $82 million. It had a year-end target of at least 30,000 independently-owned, branded stores selling its Shengmingsu products.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

BEIJING, April 11, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. today announced preliminary financial results for the first quarter of 2011.

• The Company's revenues for the three months ended March 31, 2011, were $50.2 million, more than double last year's first quarter revenues of $24.9 million.  The significant increase in revenues was driven by higher demand for the Company's products in its traditional markets, and growth in several new markets. In addition, after the acquisition of the Hebei customer list in July 2010, the Company is selling its products at a higher price directly to lower level distributors in Hebei, which is Yongye's largest regional market in China.  As of March 31, 2011, Yongye had 26,006 independently-owned branded stores in its network, compared to 24,036 stores at the end of 2010.  In addition, during the first quarter of 2011, the Company achieved positive cash flow from operations.    

• For full year 2011, the Company continues to expect revenues of between $315 million and $325 million, representing an increase of 47.1% and 51.8% over 2010's revenue of $214.1 million.

• The Company expects adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, of between $80 million and $82 million, representing an increase of between 47.9% and 51.6% over 2010 adjusted net income attributable to Yongye of $54.1 million. The Company has a year-end target of at least 30,000 for the number of independently-owned, branded stores selling Yongye's Shengmingsu products.  

"We are pleased with our first quarter sales and cash flow results," stated Mr. Zishen Wu, Chairman and Chief Executive Officer.  "As many of our investors know, our first and fourth quarters are seasonally our slowest.  Nevertheless, we were able to achieve strong sales growth as a result of continued demand for our Shengmingsu agricultural nutrient products from Chinese farmers in both new and existing provinces.  Also of importance, we achieved positive cash flow from operations as a result of our improved working capital management, while more than doubling our sales year-over-year."  

Mr. Wu concluded, "Our management team and board of directors are committed to enhancing shareholder value and are confident in the long-term health and future financial performance of our business.  Based on current market prices, we believe that our shares are presently undervalued in the marketplace.  Our board of directors is contemplating various alternatives to address this issue and will make an announcement as soon as the board determines the appropriate course of action."

Reasons for significant Roth Downgrade:  

• Sales weakness in the channel
• concerns on its intensive working capital needs
• uncertainty around the coal mine project.

Slashes

• 2011 EPS estimate to $1.20 from $1.65 vs. 2010 EPS of $1.20.
• 2012 EPS estimate to $1.47 from $2.33
• Price target from $15.00 to $5.80
  

This morning's Seeking Alpha article by Ian Bezek outlined various issues contained in YONG’s 2010 10-K.  This is one of many articles that have questioned the legitimacy of YONG’s business. 

YONG is a company we had been quite cautious of in the past. The company had negative cash flow, raised money at valuations levels we deemed inappropriate, and was not fully disclosing information pertaining to its independently-owned Yongye branded stores (which they now have done). We recently initiated our Stage 1 due diligence process on the company, which involves pulling the SAIC filings. To our surprise,  for 2008 and 2009, SAIC matched SAT matched SEC.  Currently, we are attempting to verify that these filings are the originals and not amended reports.  The company has told us that they are the originals.  Interestingly, to our knowledge, YONG hit pieces fail to mention anything about SAIC/SAT  filings matching SEC filings—something we take very seriously and use a starting point in our ChinaHybrid analysis. However, we will be open to the existence of contradictory information. Show us your cards who ever you are. We are willing to work with anyone in the quest for the truth.

YONG has a formidable short position.  Now that it looks like SAIC/SAT/SEC filings may be in order, the bar for identifying foul play has been raised and increases the risk of a net short position. Without the use of PRC filings, hit pieces will have to focus on other issues such normal business risks that are similarly inherent with any company, as well as topics of lax disclosure practices. Overall, we would like to see an improved disclosure policy in the ChinaHybrid space as well.

For now, we will attempt to verify that our  SAIC filings are originals.  We will also begin the extensive on-the-ground due diligence that is now required before making definitive conclusions on companies in the Chinese RTO universe. In the meantime, invest at your own caution and stay tuned for updates.  We are still long YONG with a partially hedged position using Puts. ( We have reduced our hedge at current prices).

GeoInvesting followers may have noticed that we have recently issued negative pieces on a few stocks; and there will more to come in an effort to purify the space.  However, readers need to keep in mind that we are also searching for solid firms that will rise once (if) the ChinaHybrid space regains some of its lost glory."We are cautiously optimistic that YONG can be one of them if on-the-ground DD concurs with our preliminary SAIC/SAT findings."

Rodman and Renshaw on YONG                                                3/15/2011

Strong 4Q10 Earning Results

4Q10 results

Yongye International (“Yongye”, Ticker: YONG, Market Outperform) reported its 4Q10 results that were across-the-board higher than our previous estimates. During this seasonally light quarter, revenue was $28.0 million, up 177.0% YoY and well above our estimate of $18.2 million, set based on the company’s guidance at the end of Q3. An increase in quantity sold in the company’s traditional and new markets and higher sales prices in Hebei province were the major contributors for this increase in revenue. Gross profit reached $14.9 million, up 176.1% YoY and above our estimate of $10.7 million. Non-GAAP net income for the quarter was $7.4 million, also above our estimate of $4.2 million. Diluted non-GAAP EPS for the quarter was $0.15, higher than our expectation of $0.09.

On the margin front, actual gross margin was 53.2%, while flat from a year ago, was well below our estimate of 58.8%. Management cited a $0.7 million non-cash expense item related to the amortization of the acquired Hebei customer list as a reason for the lower gross margin. However, even when we added back this item to the calculation, the resulting gross margin of 55.6% would still be below our estimate. Because of this, we are taking a somewhat more conservative approach in forecasting the company’s gross margin for 2011. Operating expenses, which were a major issue during the previous quarter, were again high. Selling expenses during the quarter were $4.0 million, slightly above out estimate of $3.5 million. G&A excluding stock compensation expenses were $2.7 million, considerably higher than our estimate of $1.6 million. Only the relatively minor R&D expenses of $0.3 million came in below our estimate of $0.4 million. The company did receive $1.3 million of government subsidy during the quarter however, which helped it achieve a non-GAAP net margin of 26.5%.

At the end of 2010, Yongye had $42.0 million of cash and restricted cash as well as $0.4 million of long-term debt.

Full year 2011 guidance issued

Management issued its 2011 financial guidance. The company expects to realize $315-$325 million of revenue and $80-$82 million of non-GAAP net income. It also has a year-end 2011 target of 30,000 independently-owned, branded stores selling its Shengmingsu products.

Maintaining Market Outperform rating and $16 price target

We are by and large satisfied with Yongye’s 4Q10 performance and expect the company will continue to deliver strong earnings for the upcoming quarters. Thus we are maintaining our Market Outperform rating and $16 price target on the shares of Yongye. We now expect the company will report 2011 revenues, gross profit, and diluted non-GAAP EPS of $324.0 million, $185.9 million, and $1.64, respectively. Our $16 price target is based on the shares of Yongye trading at 10x our estimate 2011 EPS, representing a PEG of 0.2.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Fourth Quarter 2010 Highlights

• Sales increased 177.0% to $28.0 million 
• Gross profit increased 176.1% to $14.9 million 
• Operating income increased to $3.5 million from $0.4 million 
• Net income attributable to Yongye was $2.2 million, or $0.05 per diluted share, compared to a net loss of $0.1 million in the same period last year
• Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $7.4 million, or $0.15 per diluted share, compared to $3.0 million, or $0.08 per diluted share, in the same period last year*
• The number of independently-owned, Yongye-branded stores increased to 24,036 from 21,925 stores at the end of the third quarter.

Full Year 2010 Highlights

• Sales increased 118.3% to $214.1 million 
• Gross profit increased 128.9% to $119.3 million 
• Net income attributable to Yongye was $48.4 million, or $1.05 per diluted share, compared to $2.2 million, or $0.07 per diluted share, in the same period last year
• Adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, was $54.1 million, or $1.17 per diluted share, compared to $26.2 million, or $0.84 per diluted share, in the same period last year*
• Operating cash flow was $15.9 million compared to ($2.2) million in 2009

"We are pleased to announce strong financial results for the fourth quarter and full year 2010," stated Mr. Zishen Wu, Chief Executive Officer.  "In addition to our sales, earnings, and EPS growth, we achieved positive cash flow from operations for the fourth quarter and full year 2010 and an improvement in our accounts receivable.  We believe that 2010 represents an important turning point in terms of cash flow generation for Yongye as we were able to achieve both robust revenue growth and positive operating cash flow as a result of our improved working capital management."

Business Outlook

For full year 2011, the Company expects

• revenues of between $315 million and $325 million, representing an increase of 47.1% and 51.8% over 2010's revenue of $214.1 million.
• adjusted net income attributable to Yongye, which excludes non-cash expenses related to share-based compensation for management and independent directors, the amortization of the acquired Hebei customer list, and a change in the fair value of derivative liabilities, of between $80 million and $82 million, representing an increase of between 47.9% and 51.6% over 2010 adjusted net income attributable to Yongye of $65.5 million.

The Company has a year-end target of at least 30,000 for the number of independently-owned, branded stores selling Yongye's Shengmingsu products.

Mr. Wu concluded, "Our lignite coal resource project, for which we expect final government approvals by the end of 2011, and our new state-of-the-art production facility, which has begun normal operations, position us to effectively meet our anticipated increase in future market demand. The strong demand for our products has been driven by the efficacy of our product in helping Chinese farmers improve yield as well as our innovative, integrated marketing approach which educates and trains the Chinese rural community on the appropriate and most effective use of agricultural nutrients like ours. We have established long term cooperative relationships with tier-one media in China, such as Farmer's Daily and CCTV, and Shengmingsu is rapidly becoming a nationwide recognized brand among Chinese farmers. We believe that Yongye has built a solid business foundation in its market and is now the largest liquid agricultural nutrient product provider in China. We look forward to continuing to strengthen our market leadership position in 2011 and beyond."

Yongye issued a response to the Seeking Alpha article allegations. Read here.

YONG achieves positive operating cash flow:

BEIJING, Jan. 5, 2011 /PRNewswire-Asia-FirstCall/ -- Yongye International, Inc. today reported it has achieved positive cash flow from operations for the fourth quarter and full year 2010 and an improvement in its accounts receivable as of year-end 2010.  

For the three months ended December 31, 2010, the Company collected $77.0 million in cash from revenue that was recognized in the fourth quarter of 2010 and previous quarters. As of December 31, 2010, the Company had $25.7 million in accounts receivable, a decline of 66.0% from $75.6 million as of the end of the third quarter of 2010.

Mr. Sam Yu, Chief Financial Officer, stated, "We believe that 2010 represents an important turning point in terms of cash flow generation for Yongye as we were able to achieve both robust revenue growth and positive operating cash flow as a result of our improved working capital management.  

"Our business is seasonal with approximately 70% to 80% of our annual sales occurring in the second and third quarters. We currently provide our key distributors up to six months credit terms and our strong sales growth resulted in an increase in our accounts receivable in the second and third quarters. We normally collect a significant part of our third quarter accounts receivable balance in the fourth quarter, and we did so again this year.  Our improved working capital management and cash collection efforts also contributed to the significant decline in our accounts receivable and positive operating cash flow performance.  

"We expect that our positive operating cash flow performance will continue, including in the year ended December 31, 2011, due to robust market demand for our products and our improved working capital management. We remain optimistic about our business prospects as our Shengmingsu agricultural nutrient product continues to help Chinese farmers increase crop yields, shorten harvest times, and extend the life-cycles of plants as well enhance crop taste, nutrition and appearance."

Rodman & Renshaw on YONG                 1/05/2011

Positive Cash Flow Announcement Implies Above-Expectation 4Q10 Performance 

Yongye International (“Yongye”, Ticker: YONG, Market Outperform) announced this morning that the company achieved positive cash flow from operations for 4Q10 as well as accounts receivable improvement as of year-end 2010. For 4Q10, Yongye collected a total of $77.0 million in cash, and at the end of the year, the company had $25.7 million in accounts receivable, down significantly from the $75.6 million accounts receivable at the end of 3Q10.

We are encouraged by this announcement as we believe it will address some of the ongoing Street mumbling regarding the company’s cash flow. Perhaps more interestingly, the announcement implies that the company realized between $26 to $27 million of revenue for 4Q10, which is significantly higher than Street consensus of $17.9 million as well as our estimate of $18.2 million, which were set based on the company’s guidance at the end of Q3.

We reiterate our Market Outperform rating and $16 price target on the shares of Yongye. Our $16 price target is based on the shares of Yongye trading at 10x our estimate 2011 EPS, representing a PEG of 0.7.

Major risks to our rating and valuation include the company's dependency on a limited number of raw material suppliers, risk of new competitors having greater access to resources, frequent interventions by the government in the fertilizer market, potential adverse weather conditions, as well as political and economical risks related to operating in China.

Notice Regarding Privacy and Confidentiality: 


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Per November 15, 2010 release:

Third Quarter 2010 Highlights

• Sales increased 145.1% to $71.8 million

• Gross profit increased 165.8% to $42.1 million

• Gross margin increased 460 basis points to 58.7%

• Operating income increased 77.1% to $20.8 million

• Net income attributable to Yongye was $17.6 million, or $0.37 per diluted share, compared to a net loss of $7.0 million in the same period last year

• Adjusted net income attributable to Yongye, which excludes the impact of non-cash items related to a change in the fair value of derivative liabilities of $12,077 and amortization of the acquired Hebei customer list of $674,622, was $18.3 million, or $0.39 per diluted share, compared to $8.8 million, or $0.27 per diluted share, in the same period last year.

"During the third quarter we saw continued strong growth in demand for our Shengmingsu products in both our traditional and new provinces," stated Mr. Zishen Wu, Chief Executive Officer. "We added over 3,000 independently owned Yongye-branded stores to our network in the quarter. We made significant investments in our training programs for branded store owners and our distributors to build a more solid foundation for future growth. We are also pleased to report that after the acquisition of the customer list from our previous distributor, our Shengmingsu business in Hebei, our largest province, has been developing very well. Sales from Hebei increased 474% year-over-year in the third quarter and 96% year-over-year during the first nine months of this year. Our post-acquisition gross margin in Hebei was 63%, which surpassed our original pre-acquisition forecast of 60%."

Business Outlook

For full year 2010, the Company expects

• revenues of between $200 million and $205 million, representing an increase of 103.9% and 109.0%, respectively, over last year's revenue of $98.1 million.

• adjusted net income attributable to Yongye, which excludes the impact of certain non-cash expenses such as the change in fair value of derivative liabilities, share-based compensation and amortization of the acquired Hebei customer list, of between $50 million, or $1.07 per diluted share, and $52 million, or $1.12 per diluted share, representing an increase of between 90.8% and 98.4%, respectively, over 2009 adjusted net income attributable to Yongye of $26.2 million, or $0.84 per diluted share.

• The Company increased its year-end target to at least 24,000 for the number of independently owned, Yongye-branded stores selling Yongye's Shengmingsu products, which represents a 163% increase over the 2009 year-end figure of 9,110.

Yongye is in the process of securing governmental approvals to close its previously announced acquisition of the development rights of a lignite coal resource project. The Company's new production facility is currently in trial runs and is expected to launch normal operations by year end.

Mr. Wu concluded, "We are pleased to have already achieved our previously issued full year revenue guidance one quarter early. This reflects the robust demand for our product in the market and the success of our integrated marketing approach. As a result, we have raised our revenue and adjusted net income guidance for the full year. Primarily due to the significant investments in training for branded store owners and other distributors that we made during the third quarter, we do not expect our full year 2010 selling expenses as a percentage of revenues to fall within the range of between 15% and 17% that we had previously indicated. However, we are actively evaluating the effectiveness of our training initiatives and based on our current estimates of optimal spending in this area we are confident that we will be able to keep our selling expenses excluding amortization of acquired customer list at no more than 20% of revenues.

"Overall, we remain confident in our business prospects. We expect sustained sales growth in both our traditional and new provinces. We expect our new state-of-the-art production facility, which we believe is the best of its kind in China, to launch normal operations later this quarter. We also are confident that we will complete the remaining requirements to receive government approvals for the acquisition of our lignite coal resource project. These facilities will help fulfill our anticipated increase in future market demand for our Shengmingsu products. We continue to expect to achieve at least a 50% annual growth rate in revenue in 2011 and 2012."

Rodman & Renshaw on yong

3Q10 results above expectations 

Yongye International (“Yongye”, Ticker: YONG, Market Outperform) reported its 3Q10 quarterly earnings results that were above both our estimates and Street consensus. Sales revenue for the quarter was $71.8 million, up 145.1% YoY and well above Street consensus of $55.3 million and our Street-high estimate of $57.1 million. Gross profit was $42.1 million, up 165.8% YoY and above our estimate of $32.0 million. Non-GAAP net income for the quarter was $18.3 million, slightly below our Street-high estimate of $18.9 million, but higher than the consensus of $17.0 million. Diluted non-GAAP EPS for the quarter was $0.39, in-line with our expectation, but above the $0.35 consensus. 

 On the margin side, gross margin increased 460bps YoY to 58.7%, above our estimate of 56.0%, and was primarily a result of increasing economies of scale and gross margin improvement in Hebei following the company’s distributor acquisition. (For more details of the acquisition, please see our note published on June 22.) Operating margin however, came in at 29.0%, clearly below our 40.8% projection. The lower than expected operating margin was largely due to a whopping $15.6 million selling expenses item that included $6.5 million of advertising expenses related to running ads on China’s national television network and $4.7 million of training expenses for branded store owners, distributors, and staff education, according to the company. As a result, non-GAAP net margin was 25.5%, below our estimate of 33.1%. 

At the end of the quarter, Yongye had $25.0 million of cash and $0.4 million of long-term debt. DSO was 82 days during the quarter. Operating cash burn was 0.2 million. However it was an improvement from a negative operating cash flow of $1.1 million a year ago.

Full year 2010 guidance increased 

Considering that Yongye has achieved its previous full year guidance of $180-$185 million of revenue and $48-$50 million (raised from $42-$45 million) of adjusted net income during the first three quarters, it was no surprise that the company increased its full year 2010 guidance. It now expects revenue for the year will be between $200 million and $205 million; adjusted net income will be within the range of $50 million to $52 million; and diluted EPS will reach between $1.07 and $1.12. Management also increased its year-end target number of independently owned, Yongye-branded stores to 24,000 from the previous guidance of 23,000. In addition, the company continues to expect to achieve at least a 50% annual revenue growth in 2011 and 2012.

3Q10 results above expectations 

Yongye International (“Yongye”, Ticker: YONG, Market Outperform) reported its 3Q10 quarterly earnings results that were above both our estimates and Street consensus. Sales revenue for the quarter was $71.8 million, up 145.1% YoY and well above Street consensus of $55.3 million and our Street-high estimate of $57.1 million. Gross profit was $42.1 million, up 165.8% YoY and above our estimate of $32.0 million. Non-GAAP net income for the quarter was $18.3 million, slightly below our Street-high estimate of $18.9 million, but higher than the consensus of $17.0 million. Diluted non-GAAP EPS for the quarter was $0.39, in-line with our expectation, but above the $0.35 consensus.

On the margin side, gross margin increased 460bps YoY to 58.7%, above our estimate of 56.0%, and was primarily a result of increasing economies of scale and gross margin improvement in Hebei following the company’s distributor acquisition. (For more details of the acquisition, please see our note published on June 22.) Operating margin however, came in at 29.0%, clearly below our 40.8% projection. The lower than expected operating margin was largely due to a whopping $15.6 million selling expenses item that included $6.5 million of advertising expenses related to running ads on China’s national television network and $4.7 million of training expenses for branded store owners, distributors, and staff education, according to the company. As a result, non-GAAP net margin was 25.5%, below our estimate of 33.1%.

At the end of the quarter, Yongye had $25.0 million of cash and $0.4 million of long-term debt. DSO was 82 days during the quarter. Operating cash burn was 0.2 million. However it was an improvement from a negative operating cash flow of $1.1 million a year ago.

Full year 2010 guidance increased 

Considering that Yongye has achieved its previous full year guidance of $180-$185 million of revenue and $48-$50 million (raised from $42-$45 million) of adjusted net income during the first three quarters, it was no surprise that the company increased its full year 2010 guidance. It now expects revenue for the year will be between $200 million and $205 million; adjusted net income will be within the range of $50 million to $52 million; and diluted EPS will reach between $1.07 and $1.12. Management also increased its year-end target number of independently owned, Yongye-branded stores to 24,000 from the previous guidance of 23,000. In addition, the company continues to expect to achieve at least a 50% annual revenue growth in 2011 and 2012.

Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Yongye International,  announced that the Company's operating subsidiary, Yongye Nongfeng Biotechnology ("Yongye Nongfeng"), entered into two new revolving credit facilities totaling RMB 400 million (approximately $59 million).

GeoTeam® Note: We feel that capital infusion via debt can help establish credibility for a company, as lenders have likely scrutized financial statments.

Second Quarter 2010 Results:

• Revenue for the three months ended June 30, 2010, was $89.4 million compared to $46.3 million for the same period in 2009, an increase of 93.2%. The increase in revenue was due to higher sales penetration in existing markets and the rapid expansion of the Company's distribution network. As of June 30, 2010, Yongye had 18,700 independently-owned branded stores in its network, compared to 13,880 stores at the end of the first quarter and 9,110 stores at the end of 2009.
  
• Net income attributable to Yongye was $24.2 million, or $0.54 per diluted share, compared to net income attributable to Yongye of $6.0 million, or $0.20 per diluted share, in the second quarter of 2009. The Company recorded a non- cash change in fair value of derivative liabilities of $156,936 in the second quarter of 2010. Excluding the impact of this non-cash item, adjusted net income attributable to Yongye was $24.1 million, or $0.54 per diluted share,  or $0.37 per diluted share in the same period last year. 

"We achieved strong sales, earnings, and EPS growth in the second quarter," stated Mr. Zishen Wu, Chief Executive Officer of Yongye International. "The majority of our revenue came from continued growth in sales in our existing markets as our loyal consumers, the rural Chinese farmers, continued to return to our branded stores to purchase our Shengmingsu products as they continued to receive value from increased crop yields and shortened harvest times. A significant part of our sales in the second quarter came from new geographic markets which are outside our core provinces in northern China where we are traditionally strong and where our business originated. We believe our record results were also driven by our more aggressive advertising and promotion efforts during the quarter as reflected in our increased selling expenses. In addition, we were successful in adding a large number of new stores to our network."

Business Outlook:

As previously announced, from 2010 to 2012, Yongye expects to achieve at least a 50% annual growth rate in revenue and, for full year 2010, expects:

• Annual revenues of between$180 million and $185 million, representing an increase of between 83% and 89% over last year's revenue of $98.1 million.

Yongye updated guidance on adjusted net income attributable to Yongye. For full year 2010, the Company expects:

• Adjusted net income attributable to Yongye, which excludes the impact of certain non-cash expenses such as the change in fair value of warrants and share-based compensation, of between $48 million and $50 million, representing an increase of between 83.2% and 90.8% over 2009 adjusted net income attributable to Yongye of $26.2 million.

Mr. Wu added, "We expect continued strong sales growth in our business through the balance of the year and beyond as reflected in our recently updated guidance and branded store target. We have positioned our business to be able to satisfy the strong growth we expect. We recently announced a 50% capacity increase in our existing production facility and we are opening our new production facility later this month. We also expect strong growth in our bottom line and EPS. The recently closed acquisition of the Shengmingsu distribution network in Hebei, our most important province, as well as our announced deal to acquire the lignite coal resource project are both part of our vertical integration strategy, which we expect to have a positive impact on our gross margin performance. We believe we have sufficient cash resources to finance the remaining phases of the two vertical integration initiatives mentioned above. We are very pleased with the 44% year-over-year increase we achieved in our adjusted diluted EPS this quarter and are committed to continuing to maximize shareholder value not just through increased sales and net income, but also through further increases in our per share earnings performance."

Yongye International, Inc.  announced preliminary revenue results for the second quarter ended June 30, 2010, and updated its sales guidance.

• Yongye expects to report preliminary unaudited revenue for the second quarter of 2010 of approximately $89 million, a 93.5% increase from $46 million for the same period last year.
• For the first half of 2010, approximately 39% of sales came from Guangdong, Henan, Hubei and other provinces in central and southern China that are outside of the five traditionally strong provinces in northern China where the Company's business originated and where the bulk of revenues have historically been generated.

Yongye also updated its revenue outlook for 2010

• Full year 2010 revenue of between $180 million and $185 million, compared with the previously provided guidance of between $160 million and $165 million.
• The Company plans to provide updated net income guidance when it reports its second quarter financial results in full next month.

"Our strong second quarter sales and increased revenue guidance reflect the robust demand for our Shengmingsu agricultural nutrient products among rural Chinese farmers," stated Mr. Zishen Wu, Chief Executive Officer. "We are seeing strong sales growth in our traditional provinces as well from the newer Yongye branded stores in central and southern China. This growing demand is a testament to the effectiveness of our product in helping farmers increase crop yields and shorten harvest times, thereby providing them with a compelling return on investment. It also reflects the success of our integrated advertising and promotion campaigns at the national, provincial and village level which ensures that rural farmers continue to respond positively our branding message that Shengmingsu gives them the best value proposition for their plant and animal nutrient needs.

Yongye International, Inc  announced that the Company has successfully increased the annual production capacity of its existing plant nutrient production line from 10,000 tons to 15,000 tons. Yongye's current production facilities are located in Hohhot, Inner Mongolia.

"We are very pleased to have achieved such a significant production capacity expansion without major financial investment, through our continuous improvement efforts," stated Mr. Zishen Wu, Chief Executive Officer of Yongye International, Inc. "We expect that the enhanced production line and 20,000 tons per annum plant nutrient product production line, which is currently under construction, together will provide solid support for Yongye's sales growth in the next several years."

"Additionally, we are seeing higher than expected sales growth in the second quarter of 2010 and will report some preliminary numbers in a few weeks. Hebei is currently our most important provincial market and continues to have significant room to grow. We have full confidence that this customer list acquisition will be successfully executed," Mr. Wu added.

July 2, 2010 (PR Newswire)

Yongye announced that the number of independently-owned, Yongye branded stores selling the Company's Shengmingsu products increased 52% over the first three months of 2010 to approximately 13,880 stores from 9,110 stores as of December 31, 2009.

"We believe the continued fast growth of our branded store network is a testament to the strength of our Shengmingsu brand, the uniqueness of our sales and marketing model, and the strong local support of our distribution partners," said Mr. Zishen Wu, CEO of Yongye International, Inc. "During the first quarter, we experienced significant growth in the number of new stores joining the Yongye branded store network in provinces outside our traditional markets as well as in our existing markets. This swift penetration of new markets reflects the growing influence of the Shengmingsu brand across China and the success of the Company's marketing campaign outside its traditional top four provinces. The expansion of our network positions Yongye for sustained rapid growth in the years to come."

On October 2, 2009  Yongye International announces 2010-2012 Strategic Plan:

Following the Company's rapid business expansion in 2008 and thus far in 2009, Yongye expects to achieve at least 50% growth in revenue during each of the next three years through a strategy focused on geographic expansion into new markets, increased penetration in existing markets, additional marketing and brand-building efforts, and expanded production capacity. The Company also intends to improve its cost structure and gain greater control of its supply and distribution through vertical integration so as to enhance its profit margins.

Source: PR Newswire (October 2, 2009)

^a Company forecasts reflect the Company's current and preliminary view and are subject to change.

^b The company did not provide EPS guidance. The GeoTeam® used a share count As of August 18, 2009 of 32,781,065 to derive an implied EPS number.

The above forecasts reflect the Company's current and preliminary view and are therefore subject to change. Please refer to the Company's Safe Harbor Statement (usually in press releases) for the factors that could cause actual results to differ materially from those contained in any forward-looking statement.

On February 18, 2009 Yongye Biotech International filed an investor presentation report.

Source: SEC Form 8K (February 18, 2009)

GeoGuidance Report:

 "China's government recently announced that land reform will take place through which farmers will be allowed to sell or trade their land rights. We expect this reform to lead to larger and better managed farms, which should increase demand for our products," said Mr. Wu. "China's government also recently announced a major economic stimulus program that includes rural development. Details of what will take place are not yet available, but should have the effect of raising rural incomes and increasing demand for higher quality food products."

We look forward to utilizing our new increased production capacity to meet growing demand for our products. We plan to continue growing by deepening the penetration of our distribution and sales network, and eventually broadening our geographic market coverage. We also plan to increase our ability to provide technical assistance to our customers and help them achieve the best possible results through use of our products," stated Mr. Wu.

 "As part of the private placement financing that took place in April 2008, we entered into a 'make good' agreement that set a target of a minimum of $10.3 million in net income for fiscal year 2008. I am pleased to report that we have exceeded our make good target as of the third quarter of 2008. We expect to achieve 2009 make good targets of $44 million in revenue and $15.2 million in net income."

Source: PR Newswire (November 13, 2008)