SHANDONG, China, Oct. 5, 2006 (PRIMEZONE) -- New Dragon Asia Corp. (AMEX:NWD) Heng Jing Lu, Chairman of New Dragon Asia Corporation today issued the following shareholder update.
As we begin the fourth quarter, I would like to provide our shareholders and the investment community with an update as we continue to execute our business plan and work to build on our strong operational performance. We have made great strides toward accomplishing our strategic objectives in the past year, and have reported what we believe to be very strong growth as a result. I would especially like to focus on our achievements in three key strategic areas: acquisitions of undervalued state-owned assets, expansion of the instant noodles business via exports and the strong potential to further leverage our distribution network in China.
Acquisitions: As a direct result of the acquisition of undervalued state-owned assets, New Dragon Asia has expanded of our production capacity and broadened the scope of our product offering. In July 2005, we acquired a soybean powder facility from a state-owned enterprise at net book value. Since then, we have seen significant top and bottom line contributions from our soybean powder business, and expect this trend to likely continue in the coming quarters.
In October 2005, we acquired (again, at net book value) a state-owned distributor which had previously served as our principal exporter. The completion of this acquisition provided us with the full control over our export business. Export sales as a percentage of our total instant noodle sales increased from 7% in 2005 to 9% in the first half of 2006. In addition to several Asian countries, we are now exporting instant noodles to Europe.
In February 2006, we acquired a state-owned noodle manufacturing facility in Chengdu, Sichuan Province at net book value. This acquisition expanded our instant noodle production capacity by 30% and established our presence in western China. It also freed up the production capacity at our Shandong facilities. In April 2006, we acquired the remaining equity interest in our packaging facility at net book value from our joint venture partner (also a state-owned enterprise) and injected additional capital to expand the facility. We strongly believe that each of these acquisitions will have a positive impact on our financial performance in the coming quarters.
We plan to continue to seek strategic partnerships and work to identify possible acquisition targets among formerly state-owned assets in China to help support the growth of our business and expansion of our distribution network. We have a strong balance sheet and ample cash to sustain this strategy.
Exports: Our instant noodle business is gaining momentum as we have expanded sales in key markets in China and other parts of Asia and commenced exports to Europe. We now have customers in Sweden and Greece and continue to seek new sales opportunities in that region. Export sales of instant noodles continue to grow as a percentage of total revenue in this segment, and we expect this to be one of our key growth drivers in the near term. Export sales also have the added benefit of generating higher margins than our traditional domestic sales, contributing to our movement toward a higher margin revenue mix.
Distribution: New Dragon Asia has already built what we believe is one of the strongest and most efficient nationwide distribution networks in China. As an additional source of revenue, we expect to begin leveraging our distribution capabilities for use by foreign enterprises that do not have adequate distribution capabilities in the rural areas of China. Although it is too early to accurately predict its potential contribution to our financial performance, we hope that this will be a meaningful source of revenue in the coming years.
In our financial results announcement for the second quarter of 2006, we stated that we expect revenues for the full year 2006 to be approximately $60 million -- an increase of more than 30% over last year -- and we maintain this guidance. We continue to see growth in all segments of the business in China and abroad as we expand the breadth of our product offering. We are confident that as we continue to successfully execute our growth plans, the economic value we are creating will be reflected in our share price which we believe currently is not reflective of New Dragon Asia's fundamentals due to several non-cash accounting charges taken in the last several fiscal quarters. We look forward to keeping you updated as we build our business, and encourage shareholders and New Dragon Asia followers to attend and participate in our quarterly financial results calls. Thank you for your continued support.
Heng Jing Lu Chairman New Dragon Asia Corporation
About New Dragon Asia Corp.
New Dragon Asia Corp., a Florida corporation (AMEX:NWD) is headquartered in Shandong Province, China and is engaged in the milling, sale and distribution of flour and related products, including instant noodles and soybean-derived products, to retail and commercial customers. As the fourth largest instant noodle manufacturer in China, New Dragon Asia markets its well-established Long Feng brand through a network of more than 200 key distributors and 16 regional offices in 27 Chinese provinces with an aggregate production capacity of approximately 195,000 tons of flour and more than 1.1 billion packages of instant noodles per year. Instant noodles are also exported to a growing number of countries. For more information, visit the Company's website at www.newdragonasia.com.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, its success with acquisitions, anticipated synergies, and overseas expansion. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others, the impact of competitive products and pricing; changes in consumer preferences and tastes or perceptions; effectiveness of advertising or market-spending programs; changes in laws and regulations; fluctuations in costs of production, foreign exchange and interest rates; and other factors as may be discussed in the Company's reports as periodically filed with the Securities and Exchange Commission.
CONTACT: Taylor Rafferty New York Jessica McCormick (212) 889-4350 London Laura Martin +44 (0)20 7614 2900 Tokyo Yuhau Lin +81 (0)3 5444 2730