Sino Agro Food, Inc. (OTC Pink Sheets: SIAF), an emerging integrated, diversified agriculture technology and organic food company with subsidiaries operating in China, has announced the financial results for its fiscal year ended December 31st, 2010.
Revenues increased by $18,896,827 or 87% to $40,551,066 for the year ended December 31, 2010 from $21,725,839 for the year ended December 31, 2009. The increase was primarily due to higher fresh liquid milk prices and higher productivity of cows as they became more mature in the dairy’s operation and the increase of the number of milking cows. In addition, in the Plantation operation, there were higher yield from the HU Plants when majority of them are reaching three years old.
Cost of Goods Sold
Cost of goods sold increased by $8,712,200 or 93% to $18,097,642 for the year ended December 31, 2010 from $9,385,442 for the year ended December 31, 2009. The increase primarily due to increase of sale’s revenue and reduction on direct production cost as our operations are gradually moving into the efficient economical scale of operation.
Depreciation and Amortization
Depreciation and amortization increased by $526,401 or 31% to $2,212,106 for the year ended December 31, 2010 from $1,685,705 for the year ended December 31, 2009. The increase was primarily due to the increase of depreciation of $435,358 for year ended December 31, 2010 from depreciation of $820,193 for the year ended December 31, 2009.
General and Administrative Expenses and Interest Expenses
General and administrative expenses (including depreciation and amortization) increased by $443,904 or 16% to $3,551,166 for the year ended December 31, 2010 from $2,852,084 for the year ended December 31, 2009. The increase was primarily due to increase on the overall general and administration expenses amounting to $3,551,561 during year ended December 31, 2010 from $2,852,084 for the year ended December 31, 2009 and the increase in depreciation & amortization charges of $244,177 for year ended December 31, 2010 from $101,485 for the year ended December 31, 2009.
In this respect, total depreciation and amortization amounted to $2,212,106 for the year ended December 31, 2010, out of which amount, $244,177 was booked under General and administration expenses and $1,967,932 was booked under cost of goods; whereas total depreciation and amortization was at $1,685,705 for the year ended December 31, 2009 and out of which amount, $101,485 was booked under General and Administration expenses and $1,584,220 was booked under cost of goods sold of the subsidiaries.
There was no income tax payable in year ended December 31, 2010 and 2009.
Loss on Extinguishment of Debts
The Company entered into several agreements with third parties to acquire land use rights and proprietary technology and agreed to settle debts by exchange of shares of the Company at an agreed price and time schedule. Loss on extinguishment of debts are the amount of fair value of shares exchange over the amount of debts and that loss has no effect on cash flows, total assets and total liabilities.
In China, winter season is from mid-November to mid-March. The Chinese lunar year holiday falls during this period in February each year. During the Chinese lunar holiday, Chinese workers take a 30-day holiday (although the Government’s official holiday period is for 10 days). The months of March and April are the times for ground preparation and seedling for the new season.
These seasonal factors have certain influences on our overall operations explained as follows:
The Dairy - We are able to produce a stable quantity of fresh liquid milk year round (i.e. non-stop milking on a daily basis during the year ) as our cows are on a rotational system where we maintain a number of “stand-by” cows to ensure consistent fresh liquid milk production. The raw materials for our livestock feed manufacturing sector are harvested and stored during September each year and sales occur primarily from October through December, which creates a large increase in sales revenue during the last quarter of the year.
The Plantation - The Hylocereus Undatus flowers’ harvesting season is from July to the end of October. During this time, the bulk of our freshly harvested flowers are dried and stored. Although the dried flowers are sold year round, the bulk of sales are from November to June each year. In general, we sell the dried flowers at their highest prices from April through June. During 2009, we did not have enough dried flowers to store and sell throughout the entire year and our harvest was sold by the end of December. However, our 2010 harvest was at 31.5 million pieces, which is twice the volume of our 2009 harvest of 16.5 million pieces in 2009. This harvest of 31.5 million is still insufficient flowers to be processed into dried flowers to be stored and sold through to June 2011 to even out our annual sales through the year of 2011.
The Fishery—during 2010 we completed the construction of our first APM Fish Farm in China. We were unable to complete the construction sooner due to the following reasons:
(1) Building costs and imported costs of plants and equipment were at their highest in China during 2008 and the early months of 2009.
(2) It was not until after the first six months of 2009 that we finalized our investigations and tests to enable the manufacture of parts and components for our fishery plants and equipment. By waiting, we were able to experience substantial cost savings while obtaining durable quality standard components as compared to the imports.
(3) It was not until recently that we were able to develop a management system that will provide enough security in our farm operation to protect our technology from being pirated.
Our Fishery’s operation only derived incomes from limited professional services during 2008 and 2009 assisting our China Developer Licensees to make certain improvements to their existing aquaculture farms and projects. Whereas, the said incomes might have been covering our fishery’s developing expenses during the interim but it certainly did not provide the group with any worthy earnings. However, our fishery operation is starting to generate higher positive incomes in 2010 earned from services rendered for the development of our first fish farm at Enping City and will eventually generate high earnings from the sales of fish starting in 2nd half of 2011 for our group thereon.
Beef. Our Beef operation at Xining City started to generate sales revenues from the quarter ended September 30, 2010 from the selling of its Bio-organic fertilizer and live-stock feed.
As such, currently all of our four businesses are generating incomes, which are expecting to maintain a strong growth rate starting from the 2nd half of 2011.
Earnings Conference Call Information
The Company has rescheduled its conference call to discuss its 2010 financial results to 11:00 am (Eastern Time) on April 21st, 2011. Mr. Lee Solomon, The Company’s Chairman and Chief Executive Officer, will be on hand for a question and answer session during the conference call.
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ABOUT SINO AGRO FOOD, INC.
Sino Agro Food, Inc. (“SIAF”) (http://www.sinoagrofood.com) and (http://www.siafchina.com) is an integrated, diversified agricultural technology and organic food company focused on developing, producing and distributing agricultural products in the Peoples Republic of China. The Company intends to focus on meeting the increasing demand of China’s rising middle class for gourmet and high-quality food items. Current lines of business include the manufacture and distribution of dairy products, beef products, fish products, bio-organic fertilizer, stock feed and hylocereus undatus plantations.