DALIAN, China, Nov. 20 /PRNewswire-FirstCall/ -- Energroup Holdings
Corporation (OTC:ENHD) (BULLETIN BOARD: ENHD) , through its direct
and indirect subsidiaries known as "Chuming", a premier processor
and supplier of fresh, frozen and processed food products in
Dalian, China, reported the Company's financial results for the
third quarter ended September 30, 2008. -- Third quarter total
revenues increased 52.8% to $53.7 million -- Third quarter net
income increased 72.5% to $4.3 million, with EPS of $0.20 for the
quarter -- For the first nine months, revenues increased 56.4% to
$140.3 million -- Nine-month net income increased 70.8% to $14.2
million with EPS of $0.67 2008 Third Quarter Financial Results
Total revenues increased 52.8% million, or approximately $18.6
million to $53.7 million for the three months ended September 30,
2008. Revenue increases in all product categories were driven by
the organic growth in the Company's product lines including fresh
pork, frozen pork and processed pork and seafood. The product mix
of revenues derived from the Company's three product families;
fresh (refrigerated) pork, frozen pork and processed food, were
79.8%, 8.6% and 11.6% respectively. Different than previous
reports, the company now groups both its processed pork and
processed seafood sales into one product family, "processed foods",
and will continue with these product categories on a go-forward
basis. Chuming's gains in revenues were driven mostly by increases
in supermarket locations market that market fresh, refrigerated,
Chuming(R)-branded pork products in deli cases. Year to date, the
Company has increased the number of supermarket retail points 90%
to 186 while sales in the channel for the third quarter alone
increased $5.2 million versus the same period in 2007. Chuming's
second key sales channel, Chuming(R)-branded outlet stores, also
recorded double digit increases of 34% in new store openings to 702
locations for the same period. In comparison to the second quarter
of 2008, Chuming sales efforts added a total of 46 more supermarket
locations and 20 new Chuming(R)-branded stores to their customer
network. "We have found supermarkets to be the most profitable and
cost efficient channel to market our products," stated Philips
Zhang, CFO of the Company. "While some additional credit terms were
necessary to maintain our competitive edge, the profits on resale
are the highest in our product categories. Due to the size of the
orders to supermarkets, efficiencies in order processing help us
maintain overhead costs and strong earnings to our bottom line."
Zhang concluded. Cost of goods sold was $47.3 million yielding
gross profits of $6.5 million in the second quarter 2008. These
profits represented an increase of $0.8 million or 12.9% from $5.7
million for the same period in 2007. The increase in gross profit
was mostly due to a growth in sales volume. Gross profit margin was
12.0% compared with 16.3% for the same period in 2007. The decrease
resulted partly from higher costs of inputs, such as live pigs and
packaging material, but more importantly because during the three
months ended September 30, 2008, the Company significantly
increased its sales of fresh pork through sales agents and
distributors, who assumed certain marketing expenses in selling
fresh pork products. This sales channel typically provides the
Company with lower profit margins, but as a trade-off the Company
is able to effectively reduce associated selling expenses. Cost
increased the most for grade-1 and grade-2 pigs, the premium grades
of pigs Chuming uses. The Company only uses the highest grade of
meat to maintain its brand and commitment to quality. Per kilogram
prices in the third quarter of 2008 for live pigs were on average
24.3% higher than the third quarter of 2007. Within each of the
three quarters of 2008, the cost of inputs increased 107% for the
first quarter, 67% for the second quarter and 24% for the third
quarter, compared to the same period in 2007. Although the prices
of live pigs have been volatile in the past years, management
currently projects a 10% per year increase in the average price per
kilogram for live pigs during the next several years and is
implementing price increases to its customer base in an effort to
return to previous profit margin levels. Selling expenses totaled
$878,893 for the three months ended September 30, 2008, as compared
to $1,597,626 for the same period in 2007, a decrease of $718,733
or 45.0%. This decrease was due primarily to a decrease in direct
advertising expenses and the shifting of advertising cost to sales
agents whose commission accounts for such promotional efforts to be
funded by agents themselves. General and administrative expenses
totaled $734,976 for the three months ended September 30, as
compared to $459,975 for the same period in 2007, an increase of
$275,000. This increase is partially attributable to the increased
expenses we incurred after we became a public company, and
partially attributable to an increase in salary expenses. The
Company continues to hire new staff to meet the needs of their
expanding operations. Also, consistent with the recent escalation
in the rate of inflation in China, especially in the earlier part
of 2008, the salaries and the cost of benefits for staff increased
for the third quarter of 2008 as compared to the same period in
2007. These increases in salaries were made in order to maintain
compensation levels that were sufficient to attract and retain
qualified employees. Operating income and operating margins for the
quarter were $4.9 million and increase of 32.2%, versus $3.6
million in same period 2007. Operating margin was 9.0% for the
quarter. Other expense for the quarter was approximately $320,000
for the quarter versus $418,000 for the same period in 2007. The
slight decrease in other expenses in the third quarter of 2008 is
due to a combination of factors. First, the Dalian City government
awarded the Company a one-time subsidy of more than $1 million.
This subsidy is due to efforts by the local government to keep the
price of pork stable in local markets. The company also accrued a
liability of $399,500 in connection with the appointment of the
Company's Chief Financial Officer, Philips Zhang, on September 18,
2008. The appointment occurred later than the target date agreed
under the terms of our December 2007 financing. Net income for the
three months ended September 30, 2008 was $4.3 million as compared
to $2.5 million for the same period in 2007, an increase of $1.8
million or 72.5%. Corresponding net income margins were 8.0% for
the quarter. Based on 21.2 million shares outstanding, earnings
were $0.20 per diluted share for the quarter. Nine-Month Results
During the nine months ended September 30, 2008, Chuming sold $140
million of products compared to sales of $89 million for the same
period of 2007, an increase of 56.4%. Sales of fresh pork accounted
for 77.3% of revenues for the nine-month period, or $108 million,
an increase of 54.3% versus the same period prior year. Frozen pork
and processed foods accounted for $11.0 million and $20.8 million,
respectively, for the same period. Gross profits for the nine-month
period were $20.0 million at 14.5% gross margins on sales.
Operating expenses for the nine months ended September 30, 2008
were $5.3 million compared to $4.5 million for the same period in
2007 and represented 3.8% and 5.1% of revenues respectively.
Operating income for the nine months ended September 30, 2008 was
$14.6 million, an increase of 43.4% compared to $10.2 million for
the previous nine months period. Operating margins were for the
nine-month period was 10.4%. Net income for the nine months ended
September 30, 2008 was $14.2 million as compared to $8.3 million
for the same period in 2007, an increase of $5.9 million or 70.8%.
Earnings per diluted share totaled $0.67 based on 21.2 million
shares for the nine-month period. "The pork market in China
continues to demonstrate a resiliency to both inflationary concerns
and changes in China's GDP forecast." Chairman Huashan Shi opened,
"Pork is the mainstay of protein in the Chinese diet and the
development of both local and international food retail locations
in China are boosting sales of China's top selling meat. We believe
pork pricing has stabilized after strong increases through the
year. We have carefully passed through price increases every month
however still need a quarter or two to fully recuperate slight
reductions in gross margins we experienced in the second and third
quarter. Our capacity expansion this year has proven critical to
meet increased demand and we expect similar results in the fourth
quarter and year end." Shi concluded. Financial Condition Cash and
cash equivalents by the end of the third quarter were $11.7 million
as of September 30th, 2008. The Company had $6.4 million in
long-term debt and $33.7 million in total liabilities. Net cash
from operations was $1.4 million. Accounts receivables were $25.4
million for the period ended September 30th, 2008. Shareholders'
equity totaled $62.7 million. About Chuming We are a Nevada
corporation quoted on the OTC Bulletin Board, with our operations
based in the Liaoning Province in Northeastern China. Chuming is a
leading regional producer and distributor of fresh and prepared
meat products in Northeastern China which has a population of
approximately 108 million. We operate through our subsidiaries,
including Dalian Chuming Slaughter and Packaging Pork Company,
Ltd., Dalian Chuming Processed Foods Company, Ltd., and Dalian
Chuming Sales Company, Ltd., whose primary focus is on the
processing and preparation of pork, the most consumed meat in
China. We are a contract supplier of premium pork products to more
than 3,600 retail locations in China, including Wal-Mart, Metro,
Carrefour, New-Mart, Hymall and its own network of 500+
Chuming-branded franchise stores. Our processing and distribution
facilities maintain ISO 9001 Quality Management System standards
and carry a Hazard Analysis and Critical Control Point (HACCP)
certification. Chuming is the first processing company in China's
meat industry to receive "Green Food" Certification from the
Ministry of Agriculture, meeting strict environmental, food safety
and quality standards from slaughter to shelf. Forward Looking
Statements This press release contains forward-looking information
and statements. Forward-looking statements are statements that are
not historical facts, including targeted net income. These
statements can be identified by the use of forward-looking
terminology such as "believe," "expect," "may," "will," "should,"
"project," "plan," "seek," "intend," or "anticipate" or the
negative thereof or comparable terminology, and statements which
may include discussions of strategy, and statements about industry
trends future performance, operations and products of the entities
referred to above. Our actual results may differ materially
depending on a number of risk factors including, but not limited
to, our ability to timely and accurately complete orders for our
products, our dependence on a limited number of major customers,
political and economic conditions within the PRC, our ability to
expand and grow our distribution channels, general economic
conditions which affect consumer demand for our products, the
effect of terrorist acts, or the threat thereof, on consumer
confidence and spending, acceptance in the marketplace of our new
products and changes in consumer preferences, foreign currency
exchange rate fluctuations, our ability to identify and
successfully execute cost control initiatives, and other risks
outlined above and in the "risk factors" described in our other
public filings. All forward-looking statements are expressly
qualified in their entirety by this Cautionary Statement and the
risks factors detailed in our reports filed with the Securities and
Exchange Commission. We undertake no duty to revise or update any
forward-looking statements to reflect events or circumstances after
the date of this release. Energroup Holdings Corporation
Consolidated Balance Sheets As of September 30, 2008 and December
31, 2007 (Stated in US Dollars) At At September 30, December 31,
ASSETS 2008 2007 Cash $11,672,377 $14,031,851 Restricted Cash
2,234,387 4,250,000 Accounts Receivable 25,429,400 622,433 Other
Receivable 1,888,165 1,068,939 Related Party Receivable 6,244,256
3,964,357 Inventory 6,483,137 2,916,016 Purchase Deposit 1,410,121
267,807 Prepaid Expenses 50,328 46,401 Prepaid Taxes 1,224,020
185,419 Deferred Tax Asset 654,946 613,844 Total current assets
57,291,137 27,966,967 Property, Plant & Equipment, net
25,450,634 24,836,496 Land Use Rights, net 13,500,699 12,855,980
Construction in Progress 1,019,169 927,866 Other Assets 93,154
32,619 TOTAL ASSETS $97,354,793 $66,619,928 LIABILITIES Bank Loans
& Notes $6,418,579 $7,383,095 Accounts Payable 14,276,813
3,779,274 Taxes Payable 2,749,160 1,677,194 Other Payable 3,477,954
1,471,381 Accrued Liabilities 3,894,780 3,347,013 Customer Deposits
2,872,226 24,161 Total current liabilities 33,689,511 17,682,118
TOTAL LIABILITIES $33,689,511 $17,682,118 STOCKHOLDERS' EQUITY
Preferred Stock - $0.001 par value 10,000,000 shares authorized; 0
shares issued & outstanding at September 30, 2008 and December
31, 2007, respectively. -- -- Common Stock $0.001 par value
21,739,130 shares authorized; 21,136,392 shares issued &
outstanding at September 30, 2008 and December 31, 2007,
respectively. $21,136 $21,136 Additional Paid in Capital 15,440,043
15,440,043 Statutory Reserve 1,729,863 751,444 Retained Earnings
42,962,290 29,764,236 Accumulated Other Comprehensive Income
3,511,950 2,960,951 TOTAL STOCKHOLDERS' EQUITY 62,665,282
48,937,810 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $97,354,793
$66,619,928 Energroup Holdings Corporation Consolidated Statements
of Income for the three and nine months ended September 30, 2008
and 2007 (Stated in US Dollars) 3 months 3 months 9 months 9 months
ended ended ended ended September 30, September 30, September 30,
September 30, 2008 2007 2008 2007 Sales $53,725,596 $35,160,526
$140,309,218 $89,718,841 Cost of Sales 47,254,631 29,430,153
120,329,483 74,966,451 Gross Profit 6,470,965 5,730,373 19,979,735
14,752,390 Selling Expenses 878,893 1,597,626 3,463,947 3,397,046
General & Administrative Expenses 734,976 459,975 1,881,138
1,147,488 Operating Income 4,857,096 3,672,772 14,634,650
10,207,856 Other Income 1,036,941 806 1,420,060 7,810 Interest
Income (356,596) -- 279,097 -- Other Expenses (413,264) (40,524)
(514,000) (78,354) Interest Expense (587,118) (378,580) (1,194,197)
(1,089,221) Earnings before Tax 4,537,058 3,254,474 14,625,611
9,048,091 Income Tax 216,770 749,504 449,138 749,504 Net Income
$4,320,288 $2,504,970 $14,176,473 $8,298,587 Earnings Per Share
Basic $0.25 $0.19 $0.82 $0.62 Diluted $0.20 $0.15 $0.67 $0.48
Weighted Average Shares Outstanding Basic 17,272,756 13,409,120
17,272,756 13,409,120 Diluted 21,182,756 17,272,756 21,182,756
17,272,756 Comprehensive Income Net Income $4,320,288 $2,504,970
$14,176,473 $8,298,587 Other Comprehensive Income (911,156) 927,231
550,999 1,174,740 Total Comprehensive Income $3,409,132 $3,432,201
$14,727,472 $9,473,327 Energroup Holdings Corporation Consolidated
Statements of Cash Flows for the three and nine months ended
September 30, 2008 and 2007 (Stated in US Dollars) 3 months 3
months ended ended September 30, September 30, 2008 2007 Cash Flow
from Operating Activities Net Income $4,320,288 $2,504,970
Amortization 74,052 32,949 Depreciation 576,203 450,002
(Increase)/Decrease in Accounts & Other Receivables
(10,487,495) 1,636,735 (Increase)/Decrease in Inventory &
Purchase Deposits (1,987,668) 195,202 (Increase) in Prepaid Taxes
& Expenses (934,281) 28,544 Increase/(Decrease) in Accounts,
Taxes & Other Payables 8,298,021 (8,424,131)
Increase/(Decrease) in Accrued Liabilities 394,292 232,734 Increase
in Customer Deposits 1,177,925 2,216,740 Cash Sourced/(Used) in
Operating Activities 1,431,337 (1,126,255) Cash Flows from
Investing Activities Funds released from/(interest earned in)
Escrow Account (3,720) -- Purchases of Plant & Equipment
(2,042,604) (148,353) Purchase of Land Use Rights (904,031) 2,705
Payments for Deposits (227) -- Cash Sourced/(Used) in Investing
Activities (2,950,582) (145,648) Cash Flows from Financing
Activities Proceeds from Bank Borrowings 15,004,489 1,219,923
Repayment of Bank Loans (14,988,890) (9,140) Cash Sourced/(Used) in
Financing Activities 15,599 1,210,783 Net Increase/(Decrease) in
Cash & Cash Equivalents for the Year (1,503,647) (61,120)
Effect of Currency Translation 1,905,294 38,869 Cash & Cash
Equivalents at Beginning of Year 11,270,730 2,479,685 Cash &
Cash Equivalents at End of Year $11,672,377 $2,457,434 9 months 9
months ended ended September 30, September 30, 2008 2007 Cash Flow
from Operating Activities Net Income $14,176,473 $8,298,587
Amortization 259,312 97,479 Depreciation 1,983,977 1,370,225
(Increase)/Decrease in Accounts & Other Receivables
(27,906,092) (11,484,507) (Increase)/Decrease in Inventory &
Purchase Deposits (4,709,434) 1,136,515 (Increase) in Prepaid Taxes
& Expenses (1,083,731) (50,535) Increase/(Decrease) in
Accounts, Taxes & Other Payables 13,576,079 1,424,545
Increase/(Decrease) in Accrued Liabilities 547,767 546,095 Increase
in Customer Deposits 2,848,064 2,196,553 Cash Sourced/(Used) in
Operating Activities (307,586) 3,534,957 Cash Flows from Investing
Activities Funds released from/(interest earned in) Escrow Account
2,015,613 -- Purchases of Plant & Equipment (2,689,418)
(847,063) Purchase of Land Use Rights (904,031) (3,330,801)
Payments for Deposits (60,535) -- Cash Sourced/(Used) in Investing
Activities (1,638,371) (4,177,864) Cash Flows from Financing
Activities Proceeds from Bank Borrowings 6,418,579 1,219,923
Repayment of Bank Loans (7,383,095) (1,302,803) Cash Sourced/(Used)
in Financing Activities (964,516) (82,880) Net Increase/(Decrease)
in Cash & Cash Equivalents for the Year (2,910,473) (725,787)
Effect of Currency Translation 550,999 107,434 Cash & Cash
Equivalents at Beginning of Year 14,031,851 3,075,787 Cash &
Cash Equivalents at End of Year $11,672,377 $2,457,434 DATASOURCE:
Energroup Holdings Corporation CONTACT: Investor Relations
Contacts: John Mattio of HC International, Inc., 56 June Road,
North Salem, NY 10560, +1-914-669-5340 or and for Energroup
Holdings Corporation
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