American Dairy misses Q3 estimates, raises '07 revenue guidance
American Dairy, Inc. (NYSE: ADY), a producer and distributor of milk powder and soybean products in China, reported third-quarter results below a sole analyst’s estimate, but raised its revenue guidance above analysts’ estimates.
For the three months ended Sept. 30, the San Marino, Calif.-based company recorded net income of $2.3 million, or $0.13 per share, below the $0.15 an analyst polled by Thomson Financial was projecting. The small cap earned $5.5 million, or $0.32 per share, in the same period last year. Excluding non-cash interest expenses of $4.2 million in the third quarter, net income would have been $6.5 million, or approximately $0.37 per diluted share.
Interest expense increased to $4.4 million in the third quarter of 2007 from $212,206 in the third quarter of 2006 mainly due to $4.2 million for the non-cash accrual of redemption premiums on convertible bonds issued in June of 2007.
Revenues were $41.2 million, below the $42.34 million an analyst polled by Thomson Financial was forecasting. The current quarter revenues were up 26% from $32.6 million in the third quarter of 2006.
The company attributed its revenue growth to increased popularity of its Feihe brand in China, stating that its total sales volume increased year-over-year to roughly 8.4 million kilograms, compared with 7.6 million kilograms in the third quarter of 2006.
American Dairy added that it is not specifying per product sales volume at the present time due to “unforeseen accounting delays.”
For the full year of 2007, the company raised its full-year revenue guidance. American Dairy said it expects to generate revenue of at least $160 million in 2007, up from prior guidance of $150 million. The mean estimate of two analysts surveyed by Thomson Financial was for revenues of $157.37 million.
Additionally, the company said it continues to foresee operating income of at least $30 million, a year-over-year increase of 70% and in line with the its third quarter 2007 operating margin of roughly 19%.
The company said it planned to file its quarterly report on Form 10-Q on Monday.
The stock has been heading precipitously lower over the past five trading days. Shares of American Dairy inched up $0.02, or 0.12%, to $16.17 at 11:28 a.m. ET. Shares of American Dairy have been trading in the range of $15.30 to $26 for the past 52 weeks.
“ADY's 3Q07 was filed one day late, and it spooked the market,” wrote Susquehanna Financial analyst Hao Hong in a research note today. “Scratching beneath the surface, we found strong underlying profit growth, after adjusting for the convertible payments and one-offs. Management has raised its guidance for FY07, albeit it still appears conservative.”
Hong, who is maintaining a positive rating on the stock, calculates that American Dairy (ADY) is trading at 12 times its price-to-earnings for 2007 and 8.5 times its price-to-earnings for 2008.
