Yanglin Soybean, Inc. Reports Second Quarter FY08 Results

Revenues for the second quarter of 2008 rose 125% to $76.27 million, as compared to $33.90 million for the three months ended June 30, 2007.

09/09/08 Yanglin Soybean, Inc., a leading producer and processor of high-quality non-genetically modified (non-GM) soybean products in China, announced unaudited financial results for the second quarter ended June 30, 2008.

Financial Results Overview

Revenues for the second quarter of 2008 rose 125% to $76.27 million, as compared to $33.90 million for the three months ended June 30, 2007. Revenues for soybean meal, soybean oil and salad oil all experienced triple-digit year-over-year growth; 115.2%, 134.7% and 152.3%, respectively, aided in part by the significant increases in the average selling prices of soybean products and as well as by the growth in sales volume.

"We are very pleased to have achieved our record revenue growth as strong demand for our soybean products helped us deliver another quarter of solid results," said Mr. Shulin Liu, Yanglin's Chief Executive Officer. "In addition to achieving record revenues, gross profit continued to increase even though the cost of our raw materials has increased. We continue to build significant momentum for the future, as we will introduce several new high-value-adding soybean products in the latter part of this year and next year to complement our existing products."

In the second quarter of 2008, sales of soybean meal, soybean oil and salad oil were $42.99 million, $24.57 million, and $8.71 million, accounting for 56.4%, 32.2% and 11.4% of total revenues, respectively.

Gross profit for the second quarter of 2008 was $4.42 million, as compared to $2.30 million for the same quarter last year, reflecting a 92.3% year-over-year increase. Gross profit, as a percent of revenue, was 5.8% for the second quarter of 2008. This compares to gross profit of 10.5% for the first quarter of 2008 and 6.8% for the year-ago quarter. Gross profit for the second quarter of 2008 was impacted by higher costs of raw materials, as the run-up in soybean prices drove overall gross margins lower. Soybean is the most important raw material in our production, as it accounts for over 90% of our total cost. Gross margin for soybean meals, our biggest revenue contributor, increased from 5.0% same quarter in 2007 to 6.5% in the second quarter of 2008. Gross margin for soybean oil went from 9.2% second quarter in 2007 to 4.5% same quarter this year. Gross margin of salad oil also lowered from 9.9% second quarter in 2007.to 5.9% same quarter in 2008. The reason of lower gross margins of soybean oil and salad oil was mainly the significantly rising soybean prices in the first half of 2008, and the prices of these two products didn't grow in line with that of soybean price. The Company is proactively looking to commence commodity-hedging strategies in an effort to stabilize the price of the raw material.

Total operating expenses for the three months ended June 30, 2008 were $616,674, an increase of 83% from $337,452 in the same period of the prior year. G&A expenses for the second quarter were $ 552,129, an increase of 93% from $285,998 in the same period of the prior year. The ongoing implementation of our Sarbanes-Oxley Act compliance project with Ernst & Young as our consultant caused a material increase in the general and administrative expense. We expect to finish this project by the end of this year. Besides, G&A expenses also increased as the result of our efforts to optimize our organizational structure and improve management institutions. Selling and marketing expenses increased 25% on a year over year basis. This was mainly due to the increase in sales-related shipping and handling expenses, which usually is related to sales volume directly.

Income from operations for the second quarter of 2008 amounted to $3.80 million, an increase of 94% compared with an operating income of $1.96 million in the same period in 2007. Operating margin was 5.0% for the second quarter of 2008 as compared to 9.3% for the first quarter of 2008 and 5.8% for the year-ago quarter.

Interest expenses for the second quarter of 2008 amounted to $264,980, compared with $108,905 for the three months ended June 30, 2007. The increase was primarily attributable to additional short-term bank borrowings on higher interest rate.

Net income for the second quarter of 2008 totaled $3.56 million, or $0.10 per diluted share. This compared to net income of $1.86 million, or $0.09 per diluted share in the same period one year ago. The disparity between the growth of the amount of net income and that of diluted EPS is because of the large increase in the weighted average number of common stock for the purpose of calculating EPS on fully diluted basis, which was caused by the issue of a large number of preferred stocks and warrants in the financing closed in October 2007.

The Company continues to enjoy a tax holiday for the remainder of 2008, as we have been recognized as a key leading enterprise in the agriculture industry by the Chinese government. After 2008, a review process is required to determine the extension of our tax exempt status. The current corporate income tax rate in China is 25%.

Balance Sheet

The Company's balance sheet at June 30, 2008 included cash and cash equivalents of $10.53 million, compared with $9.21 million at December 31, 2007. The Company has net working capital of $28.75 million versus $20.24 million at December 31, 2007. Total shareholders' equity increased to $85.42 million as compared to $70.73 million on December 31, 2007.

Business Outlook

The Company expects total revenues for the year ending December 31, 2008 to be in the range of US$230 million to US$240 million and net income in the range of US$13 million to US$14 million. These targets are based on the Company's current views on the operating and market conditions, which are subject to change.