Yuhe International Inc. Reports Strong First Quarter 2009 Results

WEIFANG, Shandong, China, May 18 /PRNewswire-Asia-FirstCall/ -- Yuhe
International, Inc. (OTC Bulletin Board: YUII) ("Yuhe" or "the Company"), a
leading supplier of day-old chickens raised for meat production, or broilers,
in the People's Republic of China ("PRC"), today announced strong financial
results for the first quarter of its 2009 fiscal year.
Yuhe's reported financial statements represent the consolidated results of
Weifang Yuhe Poultry Co. Ltd. ("PRC Yuhe") and Weifang Taihong Feed Co. Ltd.
("Taihong"), the Company's two operating subsidiaries, from January 1, 2009 to
March 31, 2009. For comparison purposes, the Company has provided a pro forma
consolidated statement of operations for PRC Yuhe and Taihong for the three
months ended March 31, 2008. These pro forma results are presented (in Table 4
below) and discussed because the Company considers them useful for investors
as more indicative of the underlying performance of the business as currently
constituted for the periods presented.
First Quarter 2009 Highlights

-- Revenue for the quarter was $10.9 million, up 320.6% compared to pro
forma revenue in the first quarter of 2008
-- Gross profit for the quarter was $4.1 million, up 961.3% from pro forma
gross profit in the same period last year
-- Operating income was $3.2 million, up from a pro forma operating loss
of $0.1 a year earlier
-- Net income was $2.9 million, or $0.19 per basic and diluted share, up
from a pro forma net loss of $0.1 million, or a loss of $0.01 per basic
and diluted share for the same period in 2008

"We are pleased to start out our 2009 fiscal year with such strong top and
bottom line growth," stated Mr. Zhengtao Gao, chief executive officer of Yuhe
International Inc. "In the first quarter of 2009, the broiler market remained
strong despite the macro economic slowdown in China. With our mature breeder
stock and recently expanded operations, we were able to take full advantage of
favorable market conditions and generate excellent financial results in the
quarter."
First Quarter 2009 Results
Total reported revenue for the first quarter of 2009 equaled $10.9
million,
up 320.6% from $2.6 million in pro forma revenue for the three-month period
ended March 31, 2008. The increase in revenues was driven by the increase in
sales volume to 23.1 million day-old broilers in the first quarter of 2009
from 4.8 million birds in the same period a year earlier. The increase in
sales volume was partially offset by a decrease in selling price to RMB 2.99
per bird in the first quarter of 2009 from RMB 3.27 per bird one year ago. The
increase in sales volume was the result of an expansion in production capacity
as well as an increase in parent breeder volume at the end of 2008.
Gross profit increased 961.3% to $4.1 million in the first quarter of
2009,
compared to $0.4 million in pro forma gross profit in the prior year period.
Gross margin was 37.2% compared to pro forma gross margin of 14.8% during the
same period in 2008. The increase in gross margin was mainly attributable to
the Company reaching a normal level of productivity in 2009 versus a low level
of productivity in the first quarter of 2008.
Selling, general and administrative expenses for the first quarter of 2009
were $0.8 million, up 81.5% compared to pro forma operating expenses of $0.5
million for the first quarter of 2008. Selling expenses were $93,000 compared
to $78,000 in the same period of 2008. The increase in selling expenses was
primarily due to an increase in sales volume. Administrative expenses were
$0.7 million in the three months ended March 31, 2009, up from $0.4 million in
the same period of 2008. The increase in administrative expenses was mainly
attributable to expenses associated with being a public company.
Operating income for the first quarter of 2009 totaled $3.2 million, up
from a pro forma operating loss of $0.1 for the same period in 2008. Operating
margin was 29.6% for the first quarter of 2009.
Net income for the three months ended March 31, 2009 was $2.9 million, or
$0.19 per diluted share, up from a pro forma net loss of $0.1 million, or a
loss of $0.01 per basic and diluted share, for the same period last year. For
the first quarter of 2009 there were 15.7 million fully diluted weighted
shares outstanding versus 10.1 million fully diluted weighted shares
outstanding in the prior year period.
Financial Condition
As of March 31, 2009, the Company had $18.1 million in cash and cash
equivalents, up from $13.4 million at December 31, 2008. Working capital was
$18.7 million and the Company had a current ratio of 2.7 to 1. Shareholders
equity stood at $44.8 million compared to $41.6 million at the end of 2008.
Cash flows from operating activities in the first quarter of 2009 were $4.4
million.
The company plans to utilize its increase in cash for upcoming capital
construction projects.
Business Outlook
For the remainder of 2009, Yuhe will remain focused on its capital
construction plan, adding a third hatchery and two additional breeder farms
with 100,000 sets of parent breeders each. In addition, the Company expects a
new feed plant, currently under construction by Nongbiao Purina, will be
finished during the second quarter of 2009. Once operational, Yuhe will
perform quality analysis tests on Nongbiao Purina's feed. If Nongbiao Purina's
feed meets Yuhe's quality requirements, the production facility will become
Yuhe's sole feed supplier while its current in house feed production facility
will cease operations.
For the fiscal year 2009 Yuhe International Inc. is forecasting $50
million in revenues and $13 million in net income with an anticipated sales
volume of 110 million day old breeders. This exceeds the Company to meet its
make good provision of $41.0 million in revenues and $12.3 million in net
income.
"With a positive start to the new year, we look forward to continued
growth throughout the remainder of 2009. In 2008, we saw uneven growth
throughout the year due to a variety of one time factors. During the third
quarter, many of our downstream customers lowered demand as they were forced
to shut down due to electricity conservation measures and pollution
restrictions put in place by the government due to the Olympics. What's more,
our production was uneven as we ramped up capacity throughout the year. In
2009 we expect to exhibit more consistent results from quarter to quarter now
that many of our expansion projects have been completed and are operational,"
stated Mr. Gao.
"While the recent outbreak of swine flu in North America has heightened
concerns over livestock-borne illness, we foresee no imminent threats to our
operations or the poultry industry in general in China. On the contrary, after
the last outbreak of bird flu several years ago, the government implemented
stringent safety and hygiene measures in the broiler industry. Yuhe not only
meets, but exceeds these standards as we view product quality and safety as
our top priority. As a result, we remain confident about trends in our
operations and in the industry as a whole," Mr. Gao concluded.
Upcoming Events
Yuhe International, Inc. will present at the upcoming China Rising
Investment Conference to be held on May 18, 2009 at the Yale Club in New York.
During the conference, Yuhe's management will be available for one-on-one
meetings.
Conference Call
The Company will host a conference call at 10:00 a.m. eastern time on
Monday, May 18, 2009 to discuss results for the first quarter of fiscal year
2009. To participate in the live conference call, please dial the following
number five to ten minutes prior to the scheduled conference call time: 1-888-
419-5570. International callers should dial +1-617-896-9871. When prompted by
the operator, mention conference pass code 208 590 72. The call will be
available to replay beginning at 12:00 p.m. eastern time for fourteen days
after it occurs. If you would like to listen to the replay, please dial 1-888-
286-8010 or +1-617-801-6888 from outside the US and enter pass code 21975169.
About Yuhe International, Inc.
Founded in 1996, Yuhe is the second largest day-old broiler breeder in
China. The Company's main operations involve breeding, as all broilers are
sold within a day of hatching. With headquarters in Weifang, Shandong
Province,
the Company has modern facilities and is led by an experienced team which
includes experts in chicken breeding, disease prevention and animal husbandry
science. Yuhe has two operational subsidiaries, Weifang Yuhe Poultry Co. Ltd.
and Weifang Taihong Feed Co. Ltd. which largely supplies the Company's
internal demand for chicken feed. Currently, 85% of the Company's sales are in
Shandong province with a customer base of 27 local agents. The Company has
imported state-of-the-art equipment from the United States, Germany and Japan
and has passed ISO9001 certification, allowing it to adhere to international
standards of operation. For more information on the Company and its products,
please visit http://www.yuhepoultry.com .
Cautionary Statement
This press release contains forward-looking statements concerning the
Company's business, products and financial results. The Company's actual
results may differ materially from those anticipated in the forward-looking
statements depending on a number of risk factors including, but not limited
to,
the following: general economic and business conditions, development,
shipment,
market acceptance, additional competition from existing and new competitors,
changes in technology, and various other factors beyond the Company's control.
All forward-looking statements are expressly qualified in their entirety by
this Cautionary Statement and the risk factors detailed in the Company's
reports filed with the Securities and Exchange Commission. The Company
undertakes no duty to revise or update any forward-looking statements to
reflect events or circumstances after the date of this release.
-FINANCIAL TABLES FOLLOW-

Table 1 YUHE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Stated in US
Dollars)

For The Three Months Ended
March 31
2009 2008
Net revenue $ 10,914,390 $ 1,103,551
Cost of revenue (6,852,353) (874,707)
Gross profit 4,062,037 228,844

Operating Expenses
Selling expenses (92,940) (48,540)
General and administrative expenses (743,990) (260,969)

Total operating expenses (836,930) (309,509)

Income (loss) from operations 3,225,107 (80,665)

Non-operating income (expenses)
Bad debts recovery -- 13,145
Interest income 96 158
Other income 15,509 5,900
Interest expenses (325,427) (180,474)
Other expenses (465) (30,545)
Total other income (expenses) (310,287) (191,816)

Net income (loss) before income taxes 2,914,820 (272,481)
Income taxes -- --

Net income (loss) $ 2,914,820 $ (272,481)

Other comprehensive income
Foreign currency translation 48,272 417,921
Comprehensive income $ 2,963,092 $ 145,440

Earnings (Loss) per share
Basic $ 0.19 $ (0.03)
Diluted $ 0.19 $ (0.03)

Weighted average shares outstanding
Basic 15,722,178 10,146,353
Diluted 15,722,178 10,146,353

Table 2 YUHE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS (Stated in US Dollars)
March 31, December 31,
2009 2008
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,091,979 $ 13,412,205
Accounts receivable, net of allowances of
$18,845 and $18,845 904 902
Inventories 7,076,604 6,644,961
Advances to suppliers 4,521,030 4,472,509

Total current assets 29,690,517 24,530,577

Plant and equipment, net 26,751,684 27,112,276
Deposits paid for acquisition of long term
assets 2,219,243 2,280,988
Notes receivable, net and other
receivable, net 103,228 74,720
Unlisted investments held for sale 299,804 299,427
Intangible assets, net 2,897,034 2,909,752
Due from related companies 3,669,798 3,706,589
Deferred expenses 596,287 604,973

Total assets $ 66,227,595 $ 61,519,302
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,661,377 $ 4,606,055
Current portion of long term loans 292,158 1,356,832
Other payables 1,225,619 937,535
Accrued expenses and payroll related
liabilities 2,000,062 2,125,587
Advances from customers 725,807 673,528
Loan from director 292,158 291,792
Other liabilities 286,107 285,132
Due to related companies 491,095 210,633

Total current liabilities 10,974,383 10,487,094

Non-current liabilities
Long-term loans 10,488,489 9,410,289

Total liabilities 21,462,872 19,897,383

Commitments and contingencies -- --

Stockholders' Equity
Common stock at $.001 par value; authorized
500,000,000 shares authorized, 15,722,178
equivalent shares issued and outstanding 15,722 15,722
Additional paid-in capital 30,123,728 29,944,016
Retained earnings 13,437,493 10,522,673
Accumulated other comprehensive income 1,187,780 1,139,508

Total stockholders' equity 44,764,723 41,621,919

Total liabilities and stockholders' equity $ 66,227,595 $ 61,519,302

Table 3 YUHE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars)
For The Three Months Ended
March 31
2009 2008

Net cash provided by (used in) operating
activities $ 4,386,943 $ (2,544,215)

Cash flows from investing activities
Deposit paid and acquisition of property,
plant and equipment (41,133) (248,616)
Advance to notes receivable (335) (11,036,697)
Acquisition of subsidiaries -- (10,567,946)
Proceeds received from related parties
receivables 41,442 --
Advance to related companies -- (208,458)

Net cash used in investing activities (26) (22,061,717)

Cash flows from financing activities
Proceeds from loan payable -- 778,870
Proceeds from related party payable 275,336 1,285,168
Capital contribution by shareholder -- 12,149,750
Proceeds from common stock sale - net of
offering costs -- 12,205,586

Net cash flows provided by financing
activities: 275,336 26,419,374

Effect of foreign currency translation on
cash 17,521 124,985

Net increase in cash 4,679,774 1,938,427

Cash- beginning of period 13,412,205 1,050,168

Cash- end of period $ 18,091,979 $ 2,988,595

Cash paid during the period for:
Interest paid $ 357,632 $ 181,474
Income taxes paid $ -- $ --

Non-cash investing activities:
Transfer of construction in progress to
fixed assets $ 1,831,131 $ --

Table 4 PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

All amounts, All amounts, All amounts,
other than other than other than
percentage, in percentage, in percentage, in
U.S. dollars U.S. dollars U.S. dollars
For the three For the three For the three
months months months
ended ended ended
31-Mar 31-Mar 31-Mar
2009 2008 2008
(Pro forma) (As reported)
Sales revenue 10,914,390 2,594,880 1,103,551
Costs of goods sold 6,852,353 2,212,145 874,707
Gross profit 4,062,037 382,735 228,844
Selling expenses 92,940 77,537 48,540
General and
administrative
expenses 743,990 383,664 260,969
Operating (loss) income 3,225,107 -78,466 -80,665
Bad debts recovery -- 233,038 13,145
Interest income 96 163 158
Other income 15,509 11,504 5,900
Interest expenses 325,427 266,641 180,474
Other expenses 465 30,545 30,545
Income taxes -- -- --
Net income (loss) 2,914,820 -130,947 -272,481

The pro forma financial information above was prepared based on the
unaudited financial results for the Company's Weifang and Taihong subsidiaries
for the three months ended March 31, 2008.
The pro forma financial information has been prepared based upon available
information and assumptions that the Company believes are reasonable. However,
the pro forma financial information is presented for illustrative and
informational purposes only and does not purport to represent the Company's
actual results during the corresponding reporting periods nor is it
necessarily indicative of the Company's future performance.

For more information, please contact:

Yuhe International, Inc.
Mr. Vincent Hu, CFO
Phone: +86-536-7300-667
Email: vincent.hu@yuhepoultry.com
Web: http://www.yuhepoultry.com

CCG Investor Relations Inc.
Mr. Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Mr. Graham Reed, Financial Writer
Phone: +1-646-213-1915
Email: graham.reed@ccgir.com
Web: http://www.ccgirasia.com

SOURCE Yuhe International, Inc.

Mr. Vincent Hu, CFO of Yuhe International, Inc., +86-536-7300- 667, or
vincent.hu@yuhepoultry.com; Or Mr. Crocker Coulson, President of CCG Investor
Relations Inc., +1-646-213-1915 (New York), or crocker.coulson@ccgir.com; Or
Mr. Graham Reed, Financial Writer of CCG Investor Relations Inc.,
+1-646-213-1915, or graham.reed@ccgir.com