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Emerald Dairy Inc. Reports Record Earnings For First Quarter 2009

RESTON, Va., May 18 /PRNewswire-Asia-FirstCall/ -- Emerald Dairy, Inc. (OTC Bulletin Board: EMDY), a leading producer and distributor of infant and children's formula, milk powder and soybean products in China, today announced results for the first fiscal quarter ended March 31, 2009.

    Financial Highlights for the First Quarter
    -- Net Income increased to a record quarterly $1.55 million from
       essentially breakeven in the year-ago period;
    -- Gross Profit for the quarter jumped 13.2%, rising to $5,007,877 from
       $4,423,225 in Q1 2008;
    -- Gross Profit Margins expanded to 46.1% from 42.4% in the year-ago
    -- Earnings Per Share grew to a record $0.05 from $0.00 in the year-ago
    -- Sales increased 4% to a record quarter of nearly $10.9 Million;
    -- Total average selling prices increased 11.5% from the year-ago period.

Net Income in the first quarter of 2009 dramatically improved to $1,552,706 from a nascent $2,818 in Q1 2008, reflecting normalized earning power without the impact of one time charges, raising earnings per share to $0.05 from $0.00 in the first quarter of 2008.

Record Gross Profit for the quarter of 2009 jumped 13.2% year-over-year, rising to $5,007,877 (46.1% of sales) from $4,423,225 (42.4% of sales). Contributing to the improvement was the company's lead product, milk powder, whose gross margins rose to 50.0% from 48.6% in the year-ago period.

Total revenues for the first quarter of 2009 rose to $10,856,552 from $10,434,459 for the first quarter of 2008 as the Company kept its production facilities operating 24X7 at maximum capacity. The average selling price per metric ton rose to $5,170 from $4,638 in the first quarter of 2009 versus the first quarter of 2008, an increase of 11.5%.

Cash and cash equivalents increased in the quarter of 2009 by a substantial 11%, or $810,804, to $8,154,392 from $7,343,588 in the first quarter of 2008. Management reiterated that, based upon its short-term liabilities, it believes that its cash and cash equivalents are adequate to satisfy its working capital requirements and sustain its ongoing operations. Emerald Dairy Inc. does expect its cash flows to fluctuate in the future given its plans to raise capital in order to implement its growth strategy.

Shu Kaneko, Chief Financial Officer of Emerald Dairy, said: "We are very pleased with the results we achieved in the first quarter of 2009. The management and employees of Emerald Dairy made significant progress toward the company's stated goals: our reputation for high quality continues to drive product demand even in the face of slower economic growth. We were able to meet the challenge, continuing to report record quarterly sales and earnings and growing our cash position. The continued strong growth opportunities available to us in our target markets supports our plans to triple our production capacity and revenues in the next three years, beginning with the completion of our new processing plant in Hailun City later this year. We are especially pleased with the positive response we are receiving from the investment community to our exciting growth potential."

Rapidly Growing Industry

The Chinese government has recognized that the dairy industry is not only crucial to reforming the structure of agriculture in the country and increasing the income of farmers, it is also essential to improve the diet, health, and overall welfare of the Chinese people. In recent years, milk and dairy products have gradually become an accepted daily necessity in the life of Chinese people. As a result, the dairy market is one of the fasted growing markets in China.

The dairy market today in China is over $13 billion and is expected to grow at a rate of 15% per year for the foreseeable future.

Emerald Dairy Growth Strategy

New Production Facility: For the next three years, Emerald Dairy plans to focus on rapidly expanding its production capacity to keep pace with the growing demand for its high quality products.

In July 2008, the Company commenced construction of a new production facility. The first phase of this project is expected to cost an aggregate of approximately $20.0 million, including land use rights, construction expenses and equipment costs. Upon completion of the first phase, the new facility will have one production line, which will have the capacity to produce an additional 9,000 tons of milk power annually -- doubling the Company's current capacity.

Emerald Dairy anticipates that production at this new facility will commence in the third quarter of fiscal 2009, assuming it obtains the remaining $6.0 million it requires to complete construction and fully equip the first production line. A second production line will likely be added at the new facility, which, when completed, would enable the company to produce an additional 9,000 tons of milk powder per year, giving it a total annual production capacity of 27,000 tons of milk powder by 2011. The cost to add the second production line would be an additional $15.0 million.

Historically Emerald Dairy has relied on investments by its Chief Executive Officer and shareholders, and bank loans, to meet cash and capital expenditures. However, in order to meet production needs promptly, EMDT is reaching out to the capital markets to raise funds through private and public offerings of equity and/or debt. More details are presented in Form 10K for fiscal year 2008, filed with the SEC.

New Organic-label Product Line: Currently, there are no organic label milk powder products in the mainland China market. In February 2008, Emerald Dairy obtained organic label certification from Guangdong Zhongjian Certification Co., Ltd. The Company plans to create an organic label product line in fiscal 2009. Although sales of organic milk powder are initially expected to be minor, management believes that, over the long term, organic milk products will be very popular in China, similar to the growth of the organic milk market in the U.S., and will help increase revenues. Emerald Dairy plans to launch its first organic product line in 2009.

About Emerald Dairy Inc.:

Through its wholly-owned operating subsidiaries, Emerald Dairy Inc. is a producer and distributor of infant and children's formula, milk powder and soybean products in the People's Republic of China. The Company's products are sold under two brand names -- "Xing An Ling," designed for low-end customers, and "Yi Bai," designed for middle and high-end customers. They are distributed throughout 20 provinces in mainland China and sold in over 5,800 retail outlets.

Certain statements in this release and other written or oral statements made by or on behalf of the Company are "forward looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future are forward-looking statements within the meaning of these laws. The forward looking statements are subject to a number of risks and uncertainties including market acceptance of the Company's services and projects and the Company's continued access to capital and other risks and uncertainties. The actual results the Company achieves may differ materially from any forward-looking statements due to such risks and uncertainties. These statements are based on our current expectations and speak only as of the date of such statements.

                       Emerald Dairy Inc. and Subsidiaries
                   Condensed Consolidated Statements of Income
               For the Three Months Ended March 31, 2009 and 2008

                                                      2009           2008

    Sales                                         $10,856,552    $10,434,459

    Cost of Goods Sold                              5,848,675      6,011,234

    Gross Profit                                    5,007,877      4,423,225

    Operating Expenses
      Selling expenses and administrative expenses  3,026,704      4,329,338
      Depreciation and amortization                    43,238         14,861
         Total operating expenses                   3,069,942      4,344,199

    Other Income (Expense)
      Interest income                                     953          5,628
      Interest expense                                (48,352)        (1,256)
         Total other income (expense)                 (47,399)         4,372

    Net Income Before Provision for Income Tax      1,890,536         83,398

    Provision for Income Taxes
      Current                                         337,830         80,580

    Net Income                                     $1,552,706         $2,818

    Basic Earnings Per Share                            $0.05          $0.00

    Basic Weighted Average Shares Outstanding      29,415,137     29,296,832

    Diluted Earnings Per Share                          $0.05          $0.00

    Diluted Weighted Average Shares Outstanding    29,510,851     29,513,646

    The Components of Other Comprehensive Income
      Net Income                                   $1,552,706         $2,818
      Foreign currency translation adjustment         (55,826)       934,595
      Income tax related to other comprehensive
       income                                          18,981       (317,762)

    Comprehensive Income                           $1,515,861       $619,651

    For more information, please contact:

     Stanley Wunderlich
     Consulting for Strategic Growth 1
     Tel:   +1-800-625-2236
     Fax:   +1-646-205-7771

SOURCE Emerald Dairy Inc.
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