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Tianli Reports Sales for Q1 Increased 32 Per Cent

16 May 2012

CHINA - Tianli Agritech, Inc., a leading producer of breeder and market hogs, and retailer of pork products, headquartered in Wuhan City, China, announced that sales for the first quarter of 2012 increased 32 per cent, with breeder hog sales declining 17 per cent and market hog sales increasing by 34 per cent.

The Company sold 27,095 hogs in total compared to 23,020 hogs in the comparable period in 2011.

Market pricing for both retail and breeder hogs year over year was relatively flat.

In addition to the increase in sales as a result of the overall growth in hog sales, sales also increased as a result of the inclusion of retail sales which began in the third quarter of 2011 and constituted 14 per cent of revenue in the first quarter of 2012.

Breeder hog revenues in the three months ended 31 March 2012 fell 17 per cent over the comparable 2011 period and comprised 26 per cent of revenues for the quarter.

The decline in breeder hog sales is attributed to higher feed costs which caused farmers to forego purchases of breeders.

The Company sold 6,766 breeder hogs in the first quarter of 2012, down 14 per cent from the same period last year.

Conversely, sales of market hogs were up approximately 34 per cent over the prior year due to higher volume and increased demand for retail pork products.

Tianli also recorded $1.1 million of revenues from its retail business which began in the third quarter of 2011.

The cooperative arrangement with An Puluo is currently distributing pork products under the Tianli-An Puluo brand in over 50 major retail outlets in Great Wuhan, including Wal-mart, Zon 100and RT Mart.

Gross profit was $1.7 million in the first quarter of 2012, a 29 per cent decrease from the same period last year.

Gross margin was 22.3 per cent in the first quarter of 2012 compared to 41.7 per cent in the first quarter of 2011 as a result of significantly higher feed costs and lower pork prices.

The decrease in the gross margin of Tianli's hog segment was partially offset by the margins obtained by it's retail business, which was approximately 40 per cent in the first quarter of 2012.

Selling, general and administrative (SG&A) expenses were $1.1 million in the first quarter of 2012, an increase of approximately $0.3 million from $0.8 million in the first quarter of 2011.

The biggest contributor to the year-over-year increase in SG&A expenses was the retail business. Operating margins were 8.5 per cent and 28.0 per cent in the first quarter of 2012 and 2011, respectively.

Net income for the three months ended 31 March 2012 was approximately $0.7 million, down 62 per cent from the same period last year. Earnings per fully diluted share were $0.07 compared to $0.18 last year.

Tianli's Chairwoman and CEO, Hanying Li, said: "We continue to see strong demand across each of our businesses.

"In the first quarter of 2012 we sold 34 per cent more market hogs while our breeder hog sales were negatively impacted by a weak market and the contamination that occurred in December 2011, which resulted in a loss of approximately 500 breeder hogs.

"I am extremely pleased with the progress of our black hog programme, which will become a big contributor to our sales later this year. We anticipate further growth by expanding the number of farms that participate in our program with local cooperatives to raise Enshi black hogs."

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