AgFeed Industries, Inc., an international agribusiness with operations in the U.S. and China and one of the largest independent hog production and animal nutrient companies in China, announced its results for the third quarter of 2010.
AgFeed reports continued record results in its animal nutrition business segment with revenue and operating income increasing 59% and 37% respectively for the first three quarters of 2010 as compared to the same period in 2009 and achieving new record levels. AgFeed's U.S. hog production system, which commenced through its acquisition of M2P2 late in the third quarter generated results in line with the Company's plans. The performance of AgFeed's Chinese hog farms, acquired during 2007 and 2008, showed revenue declines and an operating loss.
AgFeed's Board of Directors, recognizing the weak performance of the Company's existing Chinese hog production system and the extreme operating conditions that the Company has experienced during 2010 has conducted a full review of its established Chinese hog production system, the farms acquired during 2007 and 2008, in connection with the preparation of its financial statements for the period ending September 30, 2010.
This review has resulted in a number of actions regarding the management and organization of the business and has caused the board to reach the conclusion that while this existing production system can be operated profitably it cannot sustain a high enough level of profitability to support the original acquisition values of these assets and the resulting goodwill. As a result a determination has been made to write down the value of the intangible assets related to this production system by approximately $16.8 million.
In connection with the acquisition of M2P2 AgFeed has changed significantly from a company focused on China to an international company presented with global growth opportunities. AgFeed's board appreciates that these opportunities bring with them high performance standards regarding, improving and growing earnings and cash flow and building long term value for the Company's shareholders.
The Board of Directors has realigned members of the Company's management team in the furtherance of the opportunities presented by the market and in response to its review of operations.
Mr. Edward Pazdro, currently Chief Financial Officer of the Company's animal nutrition business and of its joint venture AgFeed International Protein Technology Corp., has been named acting Chief Financial Officer. The Board of Directors has relieved Ms. Selina Jin, the Company's Chief Financial Officer, of her duties with immediate effect and she will be reassigned.
In recognition of the growth opportunities for AgFeed's animal nutrition business, Mr. Gerry Daignault the Company's Chief Operating Officer has been assigned the additional duties of President and Chief Executive Officer of the animal nutrition business.
The Board of Directors has also installed a new management team for its existing Chinese hog production system. Mr. Yaoliang Tu and Dr. Ming Wei have replaced Mr. Zhengru Xiong, an AgFeed founder, with management responsibilities for this established production system. Mr. Tu and Dr. Wei have been charged with plotting a path to returned and sustainable profitability in this production system. Together these executives bring 43 years of experience to their responsibilities both within AgFeed and with other international hog production companies.
The AgFeed Board continues its commitment to the development of the Company's western-style hog production system in China with its initial production pods under construction in Dahua and Xinyu. Initial stocking of the first farm in the Dahua production pod is expected to take place in late December or early January. Based on the progress in Dahua and Xinyu to date, the Company expects to expand its "AgFeed, Government & Farmer" model to continue to roll out western production pods with other local governments as part of its initiative to lead the modernization of the Chinese hog production industry. The Company's Chairman, Dr. Songyan Li and its Chief Executive Officer, Mr. Junhong Xiong will be leading a dedicated team to focus on government relations and the development of opportunities to work with local governments in the development of the company's western-style hog production pods.