China Agri-Business's (CHBU) new direct sales channel continues to grow

China Agri-Business, Inc. (CHBU), a manufacturer and distributor of organic agricultural application products in China, today announced an increase in the number of its "New Agriculture-Generator" direct sales stores, which contributed to the increase in the Company's sales for the second quarter ended June 30, 2010. The Company expects to report sales of $ 4,993,000 for the six months ended June 30, 2010 compared with sales of $ 1,173,447 for the comparable period of 2009, an increase of 325% that was primarily due to the increase in direct sales stores. According to preliminary estimates, the Company's direct sales stores accounted for about 84% of the Company's sales during the first six months of 2010.

The Company opened 101 new direct stores in the second quarter ended June 30, 2010 and another 46 in the month of July. At July 31, 2010, the Company was operating 346 direct-sales stores, including 178 stores in Shaanxi province, 106 in Hunan province, and 62 stores in Sichuan province. The Company expects to reach its previously announced target of 500 direct sales stores by the end of October 2010, rather than by the end of 2010 as previously announced.

The opening of direct sales stores is an important part of the Company's "New Agriculture-Generator" initiative, which the Company started in the fourth quarter of 2008 and is aggressively pursuing. The objective of this initiative is to expand and strengthen China Agri's connection with farmers, promote the Company's products and services, and increase the Company's market share by establishing close, direct, and helpful relationships with farmers. At the Company's direct sales stores, farmers can purchase fertilizer products, including organic fertilizers made by China Agri, have access to the Company's sales staff who are knowledgeable about the products offered, and receive services that include technical support. This will help farmers to increase their crop yields and productivity and, in turn, should encourage them to be loyal long-term customers for China Agri. The Company believes its channel of direct sales stores is an important key to higher sales and the Company's long-term growth.

Mr. Liping Deng, Chief Executive Officer, President, and Director of China Agri-Business, Inc., said, "Our rapid implementation of this continuing initiative has already been helpful in promoting our products and increasing our sales. We believe that our reputation for high quality products, modern management methods, our efficient and fast growing sales network, and the technical support we provide to farmers, has resulted in higher brand recognition of our products, both locally in the provinces where we currently have stores and in other provinces.

"We believe our expanding sales network is enhancing our competitiveness and positioning the Company for further growth. While we are currently focused on the Shaanxi and nearby provinces, we intend to expand gradually into additional regions of China."

A very positive message from management which I believe will benefit the stock price the coming periods. Q2 EPS results could be much more than my expectation of $ 0.03. Sales Q1 were $ 1.540.941 so they improved by 124% to $ 3.452.059. Net income for Q2 could be around $ 1.800.000. If we make a calculation of 15 mln. diluted shares than EPS Q2 could be $ 0.12. But I guess I have to consider also CAPEX so margins could erode. Let's see!!!!!!!!! 

POSITION: LONG