Asia Bio-Chem Group Corp. Announces Second Quarter 2012 Financial Results

TORONTO, Aug. 10, 2012

Highlights

• Lower starch prices, continued high corn costs combined with lower sales volume caused gross margin to decline to negative 4.0% during the second quarter compared with 12.2% during the same period in 2011.
  
  
• The Company adjusted capacity in response to lower gross margins, which resulted in a 58% capacity utilization during the quarter.
  
  
• Lower gross margin together with higher finance charges and interest during the second quarter resulted in a net loss of $8.2 million (-$0.10 per share) compared with $1.3 million net income ($0.02 per share) during the second quarter of 2011.
  
  
• Despite the difficult market situation, the Company continues to enjoy the strong support of its banking group as well as the local governments in Changtu and Daqing.
  
  
• The company has reduced its total borrowings to $111.8 million at June 30, 2012 from $120.9 million at December 31, 2011 and maintains unrestricted cash balance of $5.8 million at June 30, 2012.
  
  
• Management of the Company is taking steps to achieve economies in raw materials purchases and storage. Further, steps have been taken to alter the Company's commercial relationships with some of its customers to reduce the delinquent receivables outstanding.
  
  
• In view of current economic conditions, the Company continues to defer the construction of its Daqing downstream expansion project.

"2012 continues to be a challenge for our industry as higher corn prices and soft customer demand suppress gross margins," stated Mr. Zhiping Wang, President and CEO of Asia Bio-Chem.  "We expect some declines in corn prices with this year's harvest however, higher import prices as a result of the drought in the US will keep the market tight."

As a result of lower margins, management has reduced capacity through intermittent plant closures.  During the second quarter, total production was 122,734 tonnes which represents a 28.7% reduction from the same quarter in 2011.

During the second quarter, an 8.8% increase in corn cost caused a negative gross margin of 4.0% compared with positive 12.2% during the same period in 2011.

Lower margins coupled with higher costs during the second quarter resulted in earnings before interest, taxes, depreciation and amortization ("EBITDA") to decline to negative $4.7 million compared with positive $4.4 million during the corresponding period in 2011.