Origin Agritech Q3 profit slides 86%, CEO resigns
China-based Origin Agritech (NASDAQ:SEED) said that its third-quarter profits fell 86% as the crop seed biotech company divulged plans to restructure its northeast seed distribution.
The Beijing-based company's stock plunged 18.88% to trade at $2.32 Wednesday afternoon on the Nasdaq market.
For the period that ended June 30, the company reported revenues of $37.4 million down from $68.1 million seen one year ago. The crop seed company said a later application of a distributor discount this selling season resulted to later recognition of revenue this year.
Net profits for the quarter were $2.1 million, or 9 cents per fully diluted share. That is down from US$15.5 million, or 67 cents per fully diluted share, for the year-ago period.
The year-earlier quarter included a $2.3 million pre-tax gain from disposal of an equity investment.
Economists, on average, had expected earnings of 75 cents a share on revenue of $75.87 million.
Gross margin, a metric used to assess a company's financial health, fell to 35.1% from 41.3%.
Meanwhile, income from operations for the third-quarter was $5.2 million compared to $22.6 million.
On the cost side, total operating expenses came in at $7.9 million, up from $5.5 million. The rise stems from bonus charges and staff benefits from Changrong awarded in the current quarter which usually occur in the fourth quarter.
The company, which reports earnings in both US dollars and Chinese yuan, lowered its revenue forecast for the year to 530 to 550 million yuan from 600 to 650 million yuan.
Additionally, the technology-focused supplier of crop seeds said that Jilin Changrong, a collaboration with Jinong Hi-tech Co., will withdraw its seed registration and fold current operations into Origin's exisiting northeast distribution and Jinong Hi-tech.
Origin said it will continue to hold 23% of Jinong Hi-tech. Prior to the withdrawal Origin held 53.95% of Jilin Changrong.
In a separate statement, Origin said Chief Executive Liang Yuan has resigned related to personal reasons and is effective immediately. Gengchen Han, Chairman of Origin, replaces Yuan as CEO.
Origin is transitioning from its traditional hybrid seed business to high-entry-barrier biotech Genetically Modified Organism, or GMO.
In late 2009, China approved the use of GMO strains of rice and corn and as early as 2009 Origin secured rights for the first genetically modified corn seed product in the country.
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