May 18, 2015
Executives
David Rudnick - IR Yongke Xue - CEO Xin Ma - CFO
Analysts
Operator
Welcome to the Skypeople Fruit Juice First Quarter 2015 Earnings Conference Call. [Operator Instructions].
It is now my pleasure to introduce your host Mr. David Rudnick of Precept Investor Relations.
Please go ahead, sir.
David Rudnick
Thank you. Good morning ladies and gentlemen and good evening to those of you joining us from China.
I’m David Rudnick of Precept Investor Relations. I would like to welcome all of you to SkyPeople Fruit Juice Inc.’
s first quarter 2015 earnings conference call. The company has filed its Form 10-Q with the SEC on Friday, May 15 and issued its earnings press release on that date as well.
Joining us from the company today are Mr. Yongke Xue, SkyPeople's, Chief Executive Officer, Mr.
Xin Ma, the company’s Chief Financial Officer. [Indiscernible] will provide translation for Mr.
Xue in his opening remarks as well as for the Q&A session. Before we start, I would like to remind our listeners that on this call, management’s prepared remarks contain forward-looking statements which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions.
Therefore the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, due to various risks including but not limited to such factors as unanticipated changes in product demand or market acceptance of the company’s products, the company’s ability to meet its financial guidance, competition in the marketing and sales of its products, the successful development of projects and its R&D pipeline and other information detailed from time-to-time in it's filings and future filings with the SEC.
Accordingly, although the company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. In addition, any projections as the company’s future performance represent management’s estimates as of today, May 18, 2014.
SkyPeople assumes no obligation to update these projections in the future as market conditions change. With that it is my pleasure to turn the call over to SkyPeople’s Chief Executive Officer, Mr.
Yongke Xue who will provide some opening remarks in Chinese. Mr.
Xue?
Yongke Xue
First of all I would like to thank all of you for joining this conference call today. We’re pleased to report a rapid increase in both revenue and net profit for the first quarter of 2015 from a year ago quarter as we were able to effectively manage the raw material cost of certain key product strategies.
But with our operational performance with the result of our diversification strategy which could help us overcome the seasonal factors of our business. [Technical Difficulty] manufactured project to manufacture key related products.
It's coming to an important production stage. We will be in core production by the end of June we believe that this project allow us -- this project will grow the company substantially and yet enable us to compete more effectively to satisfy larger order while diversifying our income stream.
We’re confident that we have the potential of our development projects and are enthusiastic at filing them beginning to start operation.
Xin Ma
I will now review the financial results for the first quarter of 2015 [indiscernible] income. Revenue for the first quarter of 2013 was $16.6 million, an increase of 41% as compared to $11.8 million for the same period of 2014.
This increase was primarily an increase in the sale of the fruits and vegetables. [Indiscernible] group and key related products we have offset by acreage itself from apple related product segment.
Revenues from the concentrated pear juice segment was 111% for the first quarter of 2015. Attributable to a 132% increase in sales volume, the previous downgraded segment comprised 50% of total revenue for the first quarter of 2015.
The segment continues to grow substantially and now represents a significant portion of the company's revenue. And now for our sales, by product segments.
Sales from apple related products were approximately $25,000 for the first quarter of 2015, a net 1% decrease from the sales of $274,000 for the same period one year ago. For the first quarter of 2015 the company sold approximately 22 tons of apple related products, a 90% decrease from the 211 tons of apple related products sold for the same period of 2014 with the market [indiscernible].
The sales of apple related products lowered a year ago. Sales from kiwi-related were $1.9 for the first quarter of 2015, a 3% increase from the same period a year ago was primarily a result of an increase in selling prices we should partially offset by the decrease in the amount of product sold.
For the first quarter of 2015, the company sold 1349 tons of kiwi-related products and 11% decrease from the 1513 tons of kiwi-related products sold in the same period of 2014. Sales of concentrated pear juice were $7 million for the first quarter of 2015 at 111% increase from the sale of $2.2 million for the same period of 2014 this was primarily a result of the increase in the amount of product sold offset by increase in selling price.
For the first quarter of 2015, the company sold 152% more compared to the previous year [ph] [indiscernible] in the same period of 2014. Sales from our fruit juice beverages segment were 10 million from a current period and 54% increase from the sales of $7.4 million for the same period of 2014.
The increase in revenue was primarily due to gains in market share attributable to our continuous efforts of extending sales channels. Revenue from fresh fruit and vegetables and olive products [ph] for now for current period.
The amount of sales from those two segments are expected to be unstable and there is potentially from quarter to quarter. Gross profit was $7.2 million for the first quarter of 2015.
An increase of 95% from $3.7 million for the same period a year ago. The consolidated gross profit margin was 23% for the first quarter this year as compared to 31% for the same period a year ago.
Operating expenses was $4.0 million for the first quarter of 2015 was 24% of sales as compared to $2.1 million for 17% of sales for the same period as 2014. General and administrative expenses increased 150% to $3 million for the first quarter of 2015 from $1.2 million for the same period of 2014.
[Indiscernible] for doubtful debts of $1.5 million recorded in the current period. In April of 2015, the company recruited new member in the sales team to replace certain sales employee.
As a result, the collection of accounts receivable was slower than expected. The Company has provided an allowance covering 50% of the accounts receivable which were outstanding for 120 or more days, reflecting management's estimate of ultimate collectability of such accounts receivable.
The Company is strengthening its accounts receivable collection process to ensure it maximizes collection on all outstanding accounts receivables. Selling expenses increased 22% to $1.1 million for the first quarter of 2015 from $0.9 million for the same period of 2014 mainly due to an increase in payroll and related expenses as a result of an increase in the Company's headcount to handle the increased sales volume.
Income from operations for the first quarter of 2015 was $3.1 million, an increase of 94% from $1.6 million for the same period of 2014. Net income for the first quarter of 2015 was 1.7 million, an increase of 164% as compared to net income of $0.6 million in the first quarter of 2014.
Our earnings per share were $0.06 in the current period as compared to $0.02 for the same period of 2014. Now turning to the company's current financial position.
As of March 31, 2013 the company had $45.7 million in cash, cash equivalents and restricted cash, and increase from $31.7 million as of fiscal year-end of 2014. The company's restricted cash of $6.5 million consist of cash equivalents used as collateral to secure short term notes payable.
The company's working capital was $36.7 million as of the end of first quarter 2015 as compared to working capital of $34.8 million as of fiscal year-end 2014. As of March 31, 2015 the company had total debt of $93 million which includes $8.1 million of bank notes payable which is $6.3 million in short term bank loan, $8 million in long term loans from a related party and a 17.6 million in total capital lease obligations.
Stockholders' equity attributable to SkyPeople Fruit Juice was $182.2 million as of the end of the first quarter of 2015 as compared to $181.4 million as of fiscal year end 2014. During the first quarter of 2015, the Company's operating activities generated a net cash inflow of $8.1 million as compared to a net cash inflow of $14.9 million from operating activities for the same period of 2014.
Net cash used in investing activities were $2.1 million for the first quarter of 2015, including $2 million in additions to property, plant and equipment as compared to net cash used in investing activities of $3.9 million for the same period of 2014. Cash flow provided by financing activities totaled $8.1 million for the first quarter of 2015 as compared to $1.2 million of net cash used in financing activities for the same period of 2015.
We believe that projected cash flows from operations, anticipated cash receipts, cash on hand, and trade credit will provide the necessary capital to meet the Company's projected operating cash requirements for at least the next twelve months, which does not take into account any potential expenditures related to the potential expansion of our current production capacity. And now turning to our -- we are a fruit and vegetable industry chain and processing zone in Suizhong County, Liaoning Province, China pursuant to its Letter of Intent with the People's Government of Suizhong County.
The Suizhong project may include the construction and operation of fruit juice production lines, among product storage and processing facilities. The estimated capital expenditure for the project is expected to be $4.6 million.
The Company has made partial payment to acquire the land use right from the local government, purchase equipment and build facilities. The Company is in the process of building facilities and [indiscernible].
The Company is also developing an orange processing and distribution center pursuant to its investment/service agreement with the Yidu Municipal People's Government in Hubei Province of China. Pursuant to the agreement, the Company will be responsible for an investment amount of approximately $48 million.
The Yidu local government is in the process of demolition of buildings on the project land. The Company is actively working with various bodies of the local government to make preparations for the start of the project.
We’re developing a kiwi processing and trading center [indiscernible] pursuant to the agreement with the local government we have. The company will be responsible for construction and financing with an investment amount of approximately $72 million.
As of the date of this report, the Company is in the process of building facilities and purchasing equipment. It is expected that trial production stage will start by the end of June.
Our new project are important strategy initiatives to capitalize upon market opportunities presented by urbanization, growing national income in China and growing customer provisions for our fruit juice products. It also enable us to leverage our management and operation activities and utilize our existing marketing and distribution challenges to create cost efficiencies.
At this point I would now like to open up the call to any questions there might be for the management team. Operator, let's please begin the Q&A session.
Operator
[Operator Instructions]. Our first question today is coming from [indiscernible] CG Capital Markets.
Please proceed with your question.
Unidentified Analyst
I’ve a questions regarding your fruit juice, you’re preparing for some large expansion switch will exceed your cash availability right now. Have you made arrangements for borrowing necessary funds?
Yongke Xue
I think you asked a very good question there, to invest in all three major [indiscernible] projects will require the company to invest quite a lot money in the next few years and actually notice the company's cash figures maybe in the requirement of the capital investment projects investment requirements because we’re still using our money to maintain the daily operation of the business. So the company does have latest finance from local banks here in China to help the company to meet the capital investments so that we can finish the projects as we plan to and not to be worried about the cash requirements during the period of construction.
Unidentified Analyst
May I ask a second question, the expansion of your juice sales did not reach Beijing, basically absent in Beijing. Is there a reason why you’re not in Beijing than are in other cities?
Although your sales of juice have increased 41% in the first quarter you’re basically absent from Beijing, is there a reason why you did not sell in Beijing but did sell in city south of Beijing? Is it a matter of competition or any other reason?
Yongke Xue
Beijing and Shanghai are two very important markets to the company for the product and we do emphasize our product pipeline in both Beijing and Shanghai and as I said in our previous -- we are undergoing a change of product packaging from [Technical Difficulty] to the new one. So during this short period of time there may be some absence of our products.
Our products are [Technical Difficulty] here in Beijing market, the super market that we mentioned are -- that opens up a very high cost for [Technical Difficulty]. So we are going to evaluate it -- the cost effectiveness of the market than another.
[Technical Difficulty] by building new investment projects to manufacture more [indiscernible]. And if you want I can give you a list of stores [Technical Difficulty].
Unidentified Analyst
I’ve one last question if I may. Few years ago, the President [ph] at that time said that he would not want to enter the orange juice market because that’s a different type of market with the presence of large companies and didn’t want to compete against that.
Now you’re spending a lot of money to do exactly that which is enter the orange juice market. May I ask why the change of heart?
Yongke Xue
I can see that you’ve been our shareholder and have been attending our conference call for a large set of part, the part that [indiscernible] is like our orange juice manufacturing facility in Suizhong City of Liaoning Province mainly focused on produce concentrated orange juice so as to retain -- and at the moment China every year imports a lot of -- a huge amount of concentrated orange juice from other countries and it is our plan to retain some of the important products with our own concentrated orange juice. And we can produce through accelerated order in [indiscernible] but our current plan is to replace the import of concentrated orange juice with our own products.
So that was basically the reason why the company changed it's plan during the current year. If you more questions Mr.
Muller [ph] you can contact me at our email.
Operator
[Operator Instructions]. We have no further questions.
I will turn the floor back over to management for any further closing comments.
David Rudnick
Yes on behalf of the entire SkyPeople Fruit Juice management team we would like to thank all of your interest and participation on this call. This concludes the SkyPeople Fruit Juices, Inc first quarter 2015 earnings conference call.
Thank you all very much. Have a good day.
Bye, bye.
Yongke Xue
Thank you.
Operator
You may disconnect your lines at this time. Have a wonderful day.