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Yongye International (YONG) - Q2 2009 Earnings Call Transcript

|Includes:Yongye International Inc (YONG)

Full transcript here.

Conference call date: August 21st, 2009 at 10:00 a.m. Eastern Time.

Operator (Monicka):
Yongye International 2nd Quarter, 2009 Earnings Conference Call. My name is Monicka and I will be your Operator for today. At this time all participants are in listen-only mode. We will have a question and answer session towards the end of the conference call. If at any time during the call you need assistance please press 'star' '0' and an Operator will be happy to assist you. As a reminder this conference call is being recorded for replay purposes. At this time I would now like to turn the call over the Crocker Coulson. Please proceed sir.

Crocker Coulson:
Thank you. Good morning ladies and gentlemen and I'd like to welcome you to Yongye International's 2nd quarter fiscal 2009 earnings conference call. I'm Crocker Coulson, president of CCG Investor Relations and with us today on the call, a Mr. Larry Gilmore, Yongye's VP of Corporate Strategy, and also Mr. Sam Yu, Yongye's CFO. Before we get going, I'd like to remind our listeners that management's prepared remarks in this call contain forward looking statements that are subject to risks and uncertainties. And management may make some additional forward looking statements in response to your questions. Therefore the company claims the protect of the Safe Harbor of forward looking statements contained in the private securities litigation reform act of 1995. Actual results may differ from those discussed today due to such risks as fluctuations in customer demand, the management of rapid growth, intensity of competition from other providers of plants and animal nutrient products, general economic conditions, geo-political events and regulatory changes, and other information that is detailed from time to time in the company's filings with the SEC. Although the company believes that the expectations contained in these statements are reasonable, they can provide no assurance that they will prove to be correct. Any projections as to the company's future performance represent management's estimates as of today, August 21st, 2009, and Yongye assumes no obligation to update these projections in the future as market conditions change. Having now gone through those formalities, it’s now my pleasure to turn this call over to Larry Gilmore who's going to provide a review of the company's operational achievements in the 2nd Quarter of 2009. Larry?

Larry Gilmore:
Thank you Crocker. Thank you everyone for joining us for a review of Yongye's operational and financial results for the 2nd quarter of fiscal year 2009. We are delighted to have achieved triple digit growth in revenues and strong growth in profitability during the second quarter, reflecting the power of our unique sales and marketing model and the growing brand-recognition for our products.

Revenues increased 163% to 46.3 million yoy. Gross profit increased 153% to 24.3 million yoy. Operating income increased 90.8% to 16 million yoy. Net income grew 53% to 11.3 million yoy. In addition to achieving these record quarter results, we also successfully completed many strategic initiatives during the second quarter and first few weeks of the 3rd quarter, which have elevated our brand awareness and strengthened our marketing strategies and expanded our research and development capabilities. In the second quarter we significantly stepped up our advertising activities to build stronger awareness of our brand and the benefits of Shengmingsu among the rural population in China, support our distributors’ local marketing efforts, and encouraged independent store owners to join the network of Yongye's branded stores. During the second quarter we increased our branded store network by 40% from 3500 from the end of the 1st quarter to 5000 at the end of the 2nd quarter. We strongly believe that this stark growth truly reflects the power of our channel partners training and development programs as well as our careful coordination with our distributors to flood target market areas with world-class advertising.

Under marketing strategy. In order to understand the speed in which we've been able to scale up our distribution network, I think it is important for investors to understand we have a sales and marketing model that is unique to our industry and we believe it is well suited to penetrating the rural market in china. I believe that many of you are aware that the Chinese gov't is very focused on supporting the incomes of local farmers and that the rural areas represent an increasingly important market in China. The consistent application of our Shengmingsu nutrient is able to have a meaningful impact on farmer's standards of living by increasing their crops' yield and thereby enhancing production levels on the shrinking base of arable land supporting China's enormous population. Our products not only increase crop yields but also shorten their harvest time, enhance their taste, nutritional value and their appearance. For example Shengmingsu increases the crop yields of carrots and celery by up to 25% and for potatoes increases yields up to 17% and enables early blooming by 7-10 days. As a result we have been able to demonstrate that in many cases farmers who make an investment -inaudible- and 3 applications of Shengmingsu are able to enhance the returns from the crop on 1 mu of land by 1200 or even 2200 RMB. Resulting in a very powerful return on investment.

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Stocks: YONG