Good evening ladies and gentlemen. This is Tina, I am the operator for this conference call. Welcome everyone to Le Gaga Holdings Limited Earnings Conference Call for the announcement of its financial results for the quarter ended March 31, 2013. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at that time if you would like to ask questions. As a reminder, this conference call is being recorded. A live webcast and replay of this conference call will be available on Le Gaga's website at www.legaga.com.hk. You can also download the results presentation from the company's website.
Now, I would like to transfer the call to the moderator of this teleconference, Mr. Henry Chik of P.R. China.
Thank you, Tina. Good evening ladies and gentlemen. Thank you for participating in Le Gaga Holdings Ltd. earnings call for its quarter end at March 31, 2013. With me today is Mr. Auke Cnossen, Le Gaga's CFO. This conference will be conducted in two sessions. In the first session, Auke will give opening remarks and review the company's results for the quarter, along with an update of the business strategy and guidance. After that in the second session, we will start the Q&A session.
Before we proceed, I would like to remind you that the discussion today will contain forward-looking statements. Forward-looking statements include those, regarding Le Gaga's anticipated future operating results. Le Gaga's businesses a number of inherent risks and uncertainties. As such, actual results may be materially different from the views expressed or anticipated results described today. A number of potential risks and uncertainties are outlined in the company's public filings with the U.S. Securities and Exchange Commission. Le Gaga does not undertake any obligation to update any forward-looking statements, except as required by applicable laws.
On the call today, we would also like to mention that, non-IFRS financial measures will be used during the discussion of the company's performance, reconciliation of those measures to the comparable IFRS information can be found in our earnings release.
Now, I would like to turn the call over to Auke Cnossen. Auke, you may start now?
Thank you, Henry. Good evening everyone, this is Auke Cnossen. Thank you for joining us today for the earnings announcement for the quarter ended March 31, 2013. December to April is the key harvest season for solanaceous products for our company. Prices rose steadily during the months of November, December and January, but overall were much lower than the previous year. As a result, we postponed much of our harvest to later in the season, in anticipation of further rise in market prices.
The key reasons for lower market prices during the winter reason, we believe, were the mild weather in South China, the absence of any extreme weather in other parts of the country, and the overall slowdown of the Chinese economy. Due to heavy rains in South China, prices recovered towards the end of March, and reached a season high in April. Although volumes and product quality were in line with our expectations, the much lower market prices resulted in lower revenue than expected.
Our focus on higher value products remain important, as four of our major expenses, including labor, fertilizer, packaging and transportation are all directly correlated to production volume. We are spending much effort to further develop our greenhouse production system. This includes upgrading existing greenhouses, constructing additional nursery greenhouses and expanding the soil-less production system for peppers and tomatoes into more of our existing greenhouses. Favorable weather allowed us to add over 400 more greenhouses during the quarter. We have also added a substantial area of new arable land during the quarter, in line with our land expansion plans.
Now let me walk you through our financial results. First of all, we should remind you that our presentation will focus on year-on-year comparisons, unless otherwise specified.
Revenue for the quarter was $38 million, and increased 66% year-on-year, as a result of one, an increase in revenue per mu, as a result of more pronounced seasonality of our annual revenue; and two, an increase in our land area, greenhouse area, and open field utilization.
We further concentrated our harvesting activity during the month of December through April, and prices for solanaceous vegetables generally are highest. The more pronounced seasonality of our annual revenue, resulted in an increase in revenue per mu from RMB7,205 for the three months ended March 31, 2012; to RMB9,386 for the three months ended March 31, 2013.
We planted and harvested a substantially larger area of solanaceous vegetables compared to the previous year, due to our increased greenhouse area. Mild weather allowed us to also increase the area and volume of leafy and cruciferous products harvested from open field production.
As of March 31, total arable land was 29,382 mu, an increase of 939 mu, compared to three months ago, and an increase of 4,319 mu from a year ago. Total greenhouse area was 11,042 mu or 736 hectares, a 432 mu increase compared to three months ago. The mix of products sold during the quarter, did not materially change compared to last year.
Our selling prices in the PRC decreased 3% year-on-year to RMB4.58 per kilogram. Although market prices were lower for the quarter ended March 31, 2013, as compared to the same quarter last year, we see higher average selling prices for solanaceous products, but lower selling prices for leafy and cruciferous vegetables.
The higher average selling prices for solanaceous products, was a result of one, a more favorable product mix; two, better product quality, and better harvest timing. The use of more and better packaging materials as well as shipping to markets with better market prices for the increased average selling prices for solanaceous products.
During the period, we recorded an accounting loss of $0.1 million. If the net impact of biological assets, fair value adjustment and non-cash share based compensation were excluded, adjusted profits for the period would have been $14.6 million.
A negative net impact of RMB90 million was recognized arising from biological assets' fair value adjustment for the quarter, compared to a negative net impact of RMB49 million for the same quarter last year. The large negative net impact was due to the completion of the solanaceous production cycle on part of our farm land, and thus the decrease in area planted with high value solanaceous crops in our greenhouses at the end of March, as compared to the end of December. The net impact was larger compared to the same quarter last year, primarily due to more pronounced seasonality.
Adjusted EBITDA for the quarter was $18.7 million, representing an adjusted EBITDA of 49% compared to 56% last year. Adjusted EBITDA as excluded the net impact of biological assets' fair value adjustment, non-cash share based compensation, and impairment losses on property, plants, and equipment and prepayments. Basic and diluted loss for ADS was $0.32 for the quarter.
Now let's take a look at our costs; cost of inventory sold in the quarter increased by 60.9% to $31.8 million. If the biological assets' fair value adjustment were excluded, adjusted cost of inventory sold would have been $12.3 million, or 98.8% from the same period last year. Adjusted cost of inventory sold as a percentage of revenue increased to 32.4% for the quarter, up from 27% for the same quarter last year.
Our cost of goods sold increased year-over-year, primarily as a result of higher direct material costs, due to higher costs per solanaceous seeds; higher labor cost, as wage inflation outpaced the increase in selling prices, higher depreciation to more greenhouse coverage, higher rental expenses, as newly leased lands with higher rents came into production during the quarter, and higher overhead expenses.
Packing expenses in the quarter were RMB20.3 million, a 90.2% increase year-on-year, primarily due to an increase in packing material consumed, as a result of one, the increased production volume of solanaceous products, which require more packaging compared to leafy and cruciferous products. Two, our effort to enhance our brand awareness. Three, better packaging used to enhance the selling price, and lastly, more long distance transportation, which requires more packaging material.
Land preparation costs for the quarter rose 26.2% to RMB14 million, primarily due to an increase in greenhouse coverage, which increased with the unit land preparation cost.
Selling and distribution expenses for the quarter increased by 114% to RMB19.6 million. This increase was due to the increase in sales during the period, as well as more long distance transportation.
Administrative expenses for the quarter decreased by 36.5% to RMB9.5 million, primarily due to lower option expenses. Despite higher revenue, our operating cash flow was lower compared to last year. This was a result of higher trade receivable balance on March 31, as compared to December 31, due to very high sales towards the end of the quarter, while sales in December were low.
During the previous season, we experienced the opposite effect, with a high December trade receivables balance, and a much lower balance in March, resulting in high operating cash flow for the quarter. As at March 31, 2013, we had $57.5 million cash on hand.
As we have been emphasizing, we are increasingly specializing our [field] production of higher greenhouse products, which are generally sold at higher prices during the winter months. We have been moving away from producing a broader mix of lower value vegetables, as we generate revenues more evenly throughout the year.
As a result, our result of operations are subject to increasing seasonal fluctuation, with our sales volume, average selling prices, and margins, generally higher in the winter season. Although our greenhouses, compared to open field farming provide us more control over the cultivation environment and harvests, and allow us to better capture the higher off season prices, the timing of harvests during the off season and those revenues depends on external factors, such as market demand and weather.
As a result of increasing seasonal fluctuations, our interim results may not be indicative of our business and financial performance for the full year, as we manage our operations to maximize annual revenue, and profit per mu.
Looking ahead, we updated our annual guidance for the fiscal year ending June 30, 2013, to reflect the markedly lower than initially expected market prices during the winter season, as well as heavy rains in South China in May, that we expect with lower open field revenue in May and June.
We estimate that our revenue for the fiscal year ending June 30, 2013 will be between RMB570 million and RMB600 million, representing a year-over-year growth rate of approximately 9.8% to 15.5%.
We encourage investors to look at our company on a long term basis, as our operating results have been (inaudible) impacted by the different mix of products.
Consequently, and as we are evaluating our overall performance, we pay most attention to metrics such as revenue per adjusted profits and cash flow.
With that we conclude today's briefing, and I will now transfer the call back to Henry for the Q&A session.
Thank you, Auke. This concludes the prepared remarks for today. We are happy to take your questions now. Tina, we are ready for questions.
We will now begin our question-and-answer session. [Operator Instructions].
While we are waiting for questions, I would like to remind people that we have an earnings presentation posted on our website. This presentation also has some price grabs for key solanaceous products, like peppers and tomatoes. You could also find our contact information on our website, if you have any further questions.
Okay. If there are no more questions, that concludes our call. If you have any further questions, please feel free to contact Auke Cnossen at 852-3162-8585 or email him at firstname.lastname@example.org. Thank you all again for your participation, and have a nice day. Thank you.
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