FY 2011 Interim reportircenter.handelsblatt.com/download/companies/asianbamboo/Quarte… · In Q2...

Asian Bamboo

FY 2011Interim reportApril to June

Q2

Integrated growth

In Q2 we began booking revenue and profits from the bamboo fibre processing project. We are pleased that the project is off to a good start and from here on we will focus on further refining the product, developing new distribution channels and increasing the production capacity, which will lead to lower unit costs. Ideally, we will form a partnership with a multinational corporation and we have begun discussions with European based companies in the industry.

1Asian Bamboo AG Q2 interim report 2011

Introduction03 Asian Bamboo at a glance04 CEO’s statement07 Asian Bamboo share price08 Macro-economic outlook

Interim groupmanagement report10 Our plantations11 The bamboo fibre processing project12 Revenue analysis14 Financial position14 Cash flow15 Investments15 Employees15 Risk management15 Outlook

Interim consolidated financialstatements and notes17 Consolidated statement of income and expenses17 Consolidated statement of comprehensive income18 Consolidated balance sheet19 Consolidated statement of changes in equity20 Consolidated statement of cash flow21 Notes to the interim consolidated financial statements23 Responsibility statement24 Financial calendar FY 2011

Contents


Asian Bamboo at a glance

Introduction

Income statement adjusted for sales of paper in Q2 and Q1-Q2 2010In kEUR unless otherwise stated Q2 2011 Q2 2010 * Change Q1-Q2 2011 Q1-Q2 2010 * Change

Revenue† 22,771 21,757 5% 49,249 38,699 27%

Cost of sales‡ (9,280 ) (12,538 ) -26% (24,845 ) (24,434 ) 2%

Gain/(loss) arising from changes in the fair

value less costs to sell of biological assets (2,407 ) 1,523 (1,435 ) 5,261

Gross profit including fair value changes 11,084 10,742 3% 22,969 19,526 18%

Gross profit margin 49% 49% 47% 50%

Other operating income 1 4 -75% 4 89 -96%

Distribution expenses (261 ) (229 ) 14% (311 ) (257 ) 21%

Administrative expenses (1,955 ) (1,637 ) 19% (4,166 ) (4,369 ) -5%

Other operating expenses (20 ) (8 ) 150% (20 ) (19 ) 5%

Share of loss of associate (86 ) (97 )

Finance net 221 431 -49% 166 312 -47%

Income tax (52 ) (82 ) -37% (110 ) (82 ) 34%

Net profit 8,932 9,221 -3% 18,435 15,201 21%

Net profit margin 39% 42% 37% 39%

Net profit per share (EUR)§ 0.58 0.66 -12% 1.21 1.09 10%

* 2010 comparable numbers are adjusted in accordance with IAS 8† 2010 numbers are adjusted for paper sales of kEUR 2,701 in Q1-Q2 and kEUR 426 in Q2‡ 2010 numbers are adjusted for costs associated with paper sales of kEUR 2,561 in Q1-Q2 and kEUR 408 in Q2§ Computed on the basis of 15,281,100 shares for Q2 and Q1-Q2 2011 and 13,996,211 shares for Q2 and Q1-Q2 2010

Cash flowIn kEUR unless otherwise stated Q1-Q2 2011 Q1-Q2 2010 * Change

Operating cash flow before working capital changes 27,463 20,615 33%

Net cash generated from operating activities 17,600 22,247 -21%

Cash flow used in investing activities (27,901 ) (32,498 ) -14%

Cash flow from financing activities (5,845 ) 51,976

Cash and cash equivalents at the end of the period 41,368 73,820 -44%

* 2010 comparable numbers are adjusted in accordance with IAS 8

Balance sheet and other selected dataIn kEUR unless otherwise stated 30 Jun 2011 31 Dec 2010 Change

Biological assets 97,031 99,788 -3%

Lease prepayments 191,247 164,940 16%

Cash and cash equivalents 41,368 56,658 -27%

Other assets 40,470 25,320 60%

Total assets 370,116 346,706 7%

Total equity 289,564 282,421 3%

Liabilities 80,552 64,285 25%

Total liabilities and equity 370,116 346,706 7%

Size of mature plantations (ha) 42,652 35,051 22%

Size of immature plantations (ha) 11,859 12,760 -7%

Total size of plantations (ha) 54,511 47,811 14%

Employees 1,198 770 56%


CEO’s statement

Introduction

‘Since we listed in November 2007, we have generated significant revenue and earnings growth every year and we are well on track to achieve another set of strong results in FY 2011.’

Lin ZuojunCEO and Founder


Introduction

Dear shareholders,

I am pleased to report a solid first half of the year, with revenue and net profit growing roughly in line with our plans. Since we listed in November 2007, we have generated significant revenue and earnings growth every year and we are well on track to achieve another set of strong results in FY 2011. The Q1-Q2 financial highlights were as follows (percentage numbers are year-on-year comparisons and Q1-Q2 2010 numbers exclude paper sales*):

• Revenue increased 27% to EUR 49.2 million (Q1-Q2 2010: EUR 38.7 million)

• Net profit increased 21% to EUR 18.4 million (Q1-Q2 2010 Restated: EUR 15.2 million), equivalent to a net profit margin of 37% (Q1-Q2 2010 Restated: 39%)

• Excluding non-cash option expenses of EUR 1.3 million†, the net profit increased 30% to EUR 19.8 million

• Cash and cash equivalents were EUR 41.4 million (31 December 2010: EUR 56.7 million)

We are also pleased to have launched during Q2 our bamboo fibre processing project, which we expect will generate significant additional revenue and net profit streams and further solidify our position as the leading company in the Chinese bamboo industry. In connection with the launch, Mr. Cai Zhongming, Deputy Mayor of Shaowu City, where many of our plantations are located and where the bamboo fibre is being produced, made the following comments: “I fully recognise Asian Bamboo’s significant contribution to the development of Shaowu’s local forestry industry, increasing farmers’ incomes and creating employment opportunities. The municipal government of Shaowu will continue to provide a favourable and attractive investment environment for Asian Bamboo.”

* In Q1-Q2 2010 the Company recorded revenue and cost of sales of paper of around EUR 2.7 million and EUR 2.6 million, respectively. As this business was subsequently moved to an associated company (Haoming), the Company did not have any such revenue and cost of sales in Q1-Q2 2011. Therefore, year-on-year comparisons are more meaningful if these items are excluded.

† Calculated according to the Black-Scholes option formula.

The impact of biological asset accounting on our Q1-Q2 resultsWe book the fair value less estimated costs to sell (“fair value”) of bamboo trees and bamboo shoots as cost of sales in the income statement when the harvested bamboo trees and bamboo shoots are sold. Using the fair value as the cost of sales of the bamboo shoots and bamboo trees sold means that:

• Cost of sales are inflated as compared to using the cost method

• The net profit margin for bamboo shoots is lower than the net profit margin for bamboo trees as the ratio between the fair value and price is higher for bamboo shoots than for bamboo trees

• Under normal circumstances, the net profit margin in Q1-Q2 is lower than the net profit margin for the full year as we predominantly sell bamboo shoots in Q1-Q2

• The net profit is only a meaningful number if the gains in the fair value of biological assets are included. However, the gain in the fair value of biological assets for the year can only be accurately calculated in Q4 when all the bamboo shoots and bamboo trees on the plantations are included in the calculation

“I fully recognise Asian Bamboo’s significant contribution to the development of Shaowu’s local forestry industry, increasing farmers’ incomes and creating employment opportunities. The municipal government of Shaowu will continue to provide a favourable and attractive investment environment for Asian Bamboo.”

Mr. Cai Zhongming, Deputy Mayor of Shaowu City


Introduction

Corporate governanceIn the second quarter, corporate governance issues rose to the forefront of investors’ minds. Ever since we listed we have taken our responsibilities as a listed company very seriously and we have complied with all German rules and regulations, going far beyond the legal requirements when it comes to disclosure. We are a conservatively managed company, with strong cash flows and a debt to equity ratio of only 0.04. As a German company, we have an independent Supervisory Board and we use advisers which are leaders in their respective fields, such as Deloitte (www.deloitte.com) as our auditor, CMS (www.cms-hs.com) as our German legal adviser, King & Wood (www.kingandwood.com) as our Chinese legal adviser and Jones Lang Lasalle Sallmanns (www.jllsallmanns.com, “Sallmanns”) as the independent valuer of our biological assets. King & Wood prepares a yearly legal due diligence report, which includes a review of all contracts entered into during the year, which in FY 2010 included 22 forest right certificates and 640 cutting licences. During the biological assessment period, representatives of Sallmanns and Deloitte went to 2,500 random locations on our plantations to gather samples which make up the basis for the assessment of the total amount of trees on our plantations.

Business outlookIn light of rising lease prices and a challenging short term macro-economic outlook*, we have decided not to take out any more plantation leases this year in addition to the 6,700 hectares (ha) we have already leased. This means that we expect our plantation business to be free cash flow positive for the first time in FY 2012. We maintain our longer term goal of a total plantation size of at least 100,000 ha and we expect to be able to announce a revised plantation lease schedule, together with a detailed plan for the expansion of the bamboo fibre processing project, before the end of the year.

* Please refer to p. 8 for our view on the macro-economic outlook

As a result of the plantations we leased in previous years following the fund raising activities, we are now benefitting from a significant increase in the total mature plantation size. This means that revenue and net profit growth is more or less secured for FY 2011 and FY 2012. For the rest of the year, despite the macro-economic challenges, the outlook for the Company remains positive. The Management Board expects a significantly higher revenue and net profit in the second half of the year compared to the first half of the year. In the second half of the year, the Company will benefit from the following factors:

• A large gain in the fair value of biological assets to be booked in Q4

• A larger mature plantation size

• A seasonally higher revenue per ha

• Significantly larger sales of bamboo fibre

In FY 2011, we expect to achieve revenue of at least EUR 125 million and a net profit margin, including the contribution from the fibre processing project, of at least 40%. The Management Board expects the fibre processing project to be profitable in FY 2011 and that the profitability of this project will gradually improve over time.

In this context, the Management Board wishes to state that the use of fair value accounting, as compared to using the cost method, may lead to fluctuations in the net profit which are larger than actual changes in revenue and costs, excluding the impact of fair value accounting.

Lin ZuojunCEO and Founder


Asian Bamboo share price

Introduction

Despite strong Q1 earnings and a track record of four years of uninterrupted revenue and profit growth, the share price fell sharply during the quarter. At the moment we feel strongly that the share price does not reflect the Company’s fundamentals and the outlook for our business. We will continue our investor relations activities with the aim of regaining a fair valuation of our Company and we are confident that this can be achieved in the medium term.

On 5 June, we launched a buy back scheme (“the first scheme”) to buy back up to 100,000 shares. The first scheme ended on 17 June as the AGM approved a new share buy back resolution. The buy back activities were continued via a new scheme (“the second scheme”) launched on 19 June. This involved the buy back of up to 300,000 shares. In Q2 we bought back a total of 14,000 shares. Mr Lin Zuojun, the Company’s founder and CEO, bought 6,000 shares during the quarter and increased his stake in the Company to 37.4%.

We are seeing continued strong interest in our Company from institutional investors. We will participate in JP Morgan’s Small/Mid Cap Conference in London on 15-16 September and BNP’s

Asian Bamboo

SDAX

Shanghai Composite

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10%

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-40-35-30-25-20-15-10-505

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Share price and relevant index comparison chartJan – Jun

China Conference in Qingdao, China, on 12-14 October. In addition, Peter Sjovall, the Company’s CFO, will speak at IQPC’s Third Annual CFO Summit in Singapore on 18 October. It is encouraging to see a growing interest in our Company from Asian-based investors.

The Company is pleased that its FY 2010 Annual Report won the following awards at the 2011 ARC Awards (http://www.mercommawards.com/arc.htm) in the agriculture industry category:

• Overall report – Silver

• Written text – Gold

• Illustrations – Bronze

The ARC Awards draws entries from 35 countries and members of the judging faculty evaluate the entries based on international standards of excellence.

Finally, we are pleased to announce that Ms Anja Holst has been promoted to Investor Relations Director. Ms Holst has been working for Asian Bamboo since October 2008 and she primarily supports the Company’s CFO in the area of investor relations.


Macro-economic outlook

In our view, the short to medium term global macro-economic landscape remains challenging, with several western countries already faced with structurally high unemployment implementing austerity measures as a response to severe fiscal deficits and a worsening credit outlook. This situation is likely to put further pressure on global growth. The situation is much better in China, where economic growth remains at very high levels. However, sluggish global growth together with the effects of higher domestic interest rates – China’s central bank has raised rates five times since October in an effort to rein in inflation – are likely to have a negative effect on GDP growth.

As highlighted in the government’s most recent 5-year plan, the Chinese economy is going through a period of structural adjustment towards greater sustainability and sophistication. Rising labour and production costs, combined with a strengthening currency, have squeezed the profit margins of low value-added businesses, some of which are moving to lower wage countries such as Indonesia and Vietnam. At the same time, higher salaries and wealth effects mean that the Chinese consumer enjoys increased spending power and that the Chinese economy is increasingly driven by domestic consumption.

We believe that our corporate strategy is well aligned with the Chinese government’s macro-economic goals. Organic agriculture remains one of the government’s key priorities and our involvement in bamboo fibre processing fits the domestic consumption story and global consumers’ preferences for sustainable materials. In addition, we are confident that we can absorb the higher labour costs and pass on the cost increases to consumers due to their increased spending power. As bamboo shoots and bamboo wood are basic necessities, we expect consumers to continue to be largely price insensitive and demand for our products not to be significantly impacted by any economic slowdown.

In light of slower global growth it is likely that the Chinese Government’s tightening measures are nearing an end and we believe that the Chinese economy will experience a “soft landing”. Longer term, we believe that the Chinese economy will continue to grow at a faster pace than the developed economies and thus it is likely to continue attracting foreign investments. Overall, it is our assessment that the Chinese economy is in a strong position and that China will play a more significant role in the world economy in the future.

Introduction 8Asian Bamboo AG Q2 interim report 2011

Interim groupmanagement report


Our plantations

Interim group management report

In Q1-Q2 we added 6,700 ha of plantations, which took the total plantation size to 54,511 ha and a total of 7,601 ha of plantations were reclassified as mature. In Q2 there were not any changes to the plantations.

The development of our plantations in the first half of the year was as follows:

0

20,000

40,000

60,000

80,000

100,000

MatureImmature

8,00

5

3,92

8

5,87

6 8,77

3

18,3

67

8,26

2

22,2

29

9,50

7

12,7

60

35,0

51

55,0

00

100,

000H

EC

TA

RE

201XF2011F20102009200820072006

In the future, we expect the following total plantation size at year end:

Reclassified in (All numbers in hectares) 31.12.10 Q1-Q2 2011 New 30.06.11 30.06.10 Change

Mature 35,051 7,601 42,652 27,943 53%

Immature 12,760 -7,601 6,700 11,859 8,793 35%

Total 47,811 6,700 54,511 36,736 48%


Since mid-2009 we have been working on the bamboo fibre processing project and we are pleased to announce that we began booking revenue and profits in Q2 2011. So far we have invested only around EUR 1 million in R&D for this project as we are using Shaowu Zhongzhu (“Zhongzhu”) as an OEM manufacturer. Our dealings with Zhongzhu are on an arms length basis. We are selling bamboo trees at market prices to Zhongzhu and buying bamboo fibre, which is produced based on our requirements. This is a cost effective arrangement which gives us complete flexibility for the future. At the moment, Zhongzhu’s annual production capacity of bamboo fibre is around 20,000 tonnes. We expect that Zhongzhu will be able to produce 50,000 tonnes of bamboo fibre annually by the end of FY 2012.

Due to a sharp correction in the price of cotton in Q2, we decided to delay deliveries in anticipation of a rebound in the cotton price. The price of our bamboo fibre does not have a close correlation with the price development of cotton, but in broad terms the two prices move in the same direction. As revenue is recorded when the products are delivered, we booked only a relatively small amount of revenue from this segment in Q2. We expect to sell 15,000 tonnes of bamboo fibre this year.

For the rest of the year, we will focus on improving the quality of the bamboo fibre and adding new distribution channels. We have identified a number of customers, in addition to the customers we already have, and negotiations with them are at an advanced stage. Furthermore, we have started discussions with European based multinational companies in the industry.

The bamboo fibre processing project

ADBP Cotton Petroleum

Low

Positive

Yes

Stable

Abundant

Advanced

Viscose

High

Low

High

Negative*

Yes

Fragile

Limited

Simple

Cotton yarn

High

High

High

Negative

No

N/A

Limited

Advanced

Polyester, nylon, acrylic

Low

High

Price

Environmental impact

Biodegradable

Harvest

Supply

Production process

End product

Quality

Market share

* Whereas cotton is a natural material, cultivation requires large amounts of pesticides, herbicides, fertilisers and irrigation

Interim group management report 11Asian Bamboo AG Q2 interim report 2011


Excluding the impact of paper sales in Q1-Q2 2010*, revenues in Q1-Q2 2011 increased by 27% year-on-year. Sales of fresh winter, fresh spring bamboo shoots and dry bamboo shoots increased the most, rising by 37%, 50% and 62%, respectively, during the period due to a significantly larger mature plantation size this year compared to last year.

Sales of bamboo trees and processed bamboo shoots decreased by 4% and 20%, respectively. The slight decrease in sales of bamboo trees was due to the change in Zhongzhu’s business focus towards the production of bamboo fibre, which initially does not have a positive impact on demand for bamboo trees, but which we expect will gradually lead to a substantial increase in the demand for bamboo trees over the next few years. In FY 2011, sales of processed bamboo shoots will be more spread out during the year than last year when nearly the entire amount produced was sold in Q2, which means that sales of processed bamboo shoots in the second half will be significantly higher

Revenue breakdown

kEUR Q2 2011 Q2 2010 Change Q1-Q2 2011 Q1-Q2 2010 Change

Bamboo trees 2,031 2,738 -26% 4,313 4,495 -4%

Fresh winter bamboo shoots 319 10,761 7,871 37%

Fresh spring bamboo shoots 12,712 10,223 24% 24,312 16,191 50%

Processed bamboo shoots 5,185 7,156 -28% 7,020 8,821 -20%

Dry bamboo shoots 2,139 1,321 62% 2,139 1,321 62%

Bamboo fibre 704 704

Paper 426 2,701

Total 22,771 22,183 3% 49,249 41,400 19%

Cost of salesExcluding the impact of sales of paper in Q1-Q2 2010*, cost of sales increased by 2% to EUR 24.8 million in Q1-Q2 2011 (Q1-Q2 2010 Restated: EUR 24.4 million). In our view, it is not meaningful to analyse cost of sales on a quarter to quarter basis using the biological asset accounting methods we are now using.


Revenue analysis

than last year. The total annual production capacity of processed bamboo shoots is unchanged, year-on-year, at 1.4 million cans, but it will be increased next year to 1.8 million cans.

We expect that the increase in revenue for the full year will be significantly higher than the Q1-Q2 numbers for the following reasons:

• The mature plantation size is larger in the second half of the year compared to the first half of the year

• Overall sales in the second half of the year are seasonally higher than in the first half of the year

• Due to the impact of the rain storms last year, the comparable numbers in the second half of the year are much lower than the comparable numbers in the first half of the year

• Nearly all of the sales of ADBP (“bamboo fibre”) will be booked in the second half of the year



Gain/loss arising from changes in fair value less estimated costs to sell of biological assets (‘the loss in the fair value’)The gain/loss in the fair value in Q1-Q2 was calculated in the following way (all numbers in kEUR):

Fair value at end of period: 97,031Deduct: Fair value at beginning of period: 99,788Deduct: Increases due to new plantation leases: 4,819Deduct: Increases due to cultivation costs: 22,846Add: Decreases due to harvest: 23,386Add: Net foreign exchange differences: 5,601= Loss in the fair value: 1,435

Year-to-date we recorded a loss in the fair value of around EUR 1.4 million as the bamboo shoots and bamboo trees which were harvested reduced the total value of the biological assets and the new trees and shoots which will grow up during the year will be included in the calculation for the first time by the end of the year. We expect a significant gain in the fair value by the end of the year.

Gross profit including fair value changes (‘gross profit’)We book the fair value less estimated costs to sell of bamboo trees and bamboo shoots (‘the fair value’) as cost of sales when the harvested bamboo trees and bamboo shoots are sold. The gross profit margin for bamboo shoots is lower than for bamboo trees as the ratio between the fair value and price is higher for bamboo shoots than for bamboo trees. Therefore, under normal circumstances, the gross profit margin in Q1-Q2 is lower than the expected gross profit margin for the full year.


Excluding the impact of paper sales in Q1-Q2 2010*, the gross profit in Q1-Q2 2011 increased by 18% to EUR 23 million (Q1-Q2 2010 Restated: EUR 19.5 million) and the gross profit margin was 47% (Q1-Q2 2010 Restated: 50%).

Administrative expensesIn Q1-Q2 2011 administrative expenses decreased by 5% to EUR 4.2 million (Q1-Q2 2010 Restated: 4.4 million) of which EUR 1.3 million were non-cash option expenses calculated according to the Black-Scholes option formula.




Net profitIn Q1-Q2 2011, the net profit grew by 21% to EUR 18.4 million (Q1-Q2 2010 Restated: EUR 15.3 million) and the net profit margin was 37% (Q1-Q2 2010: 39%).


We expect that revenue, net profit and net profit margin for the full year will be higher than the Q1-Q2 numbers for the following reasons:

• There will be a significant gain in the fair value of biological assets booked in Q4

• Using the new accounting methods, most of the profit is generated from selling bamboo trees which are predominantly sold in the second half of the year

• The plantation size is larger in the second half of the year compared to the first half of the year

Financial positionkEUR 30 June 2011 31 December 2010 Change

Biological assets 97,031 99,788 -3%

Lease prepayments 191,247 164,940 16%

Cash and cash equivalents 41,368 56,658 -27%

Other assets 40,470 25,320 60%

Total assets 370,116 346,706 7%

Total equity 289,564 282,421 3%

Liabilities 80,552 64,285 25%

Total liabilities and equity 370,116 346,706 7%

Total assets grew by 7% to EUR 370 million (31 December 2010: EUR 347 million). Biological assets decreased by 3% to EUR 97 million (31 December 2010: EUR 100 million), as the fair value of the bamboo trees and the bamboo shoots which were harvested in Q1-Q2 were deducted from the biological asset value, whereas the bamboo trees which are currently growing and the bamboo shoots which will grow in the second half of the year will be included for the first time by the biological asset assessment by the end of the year. We expect that the fair value of biological assets will be significantly higher at the end of FY 2011 than at the end of Q2 2011.

In our view, the Company’s financial position remains very healthy as we are net cash and have strong operating cash flows.

Cash flowIn Q1-Q2, operating cash flow before working capital changes increased by 33% to EUR 27.5 million (Q1-Q2 2010 Restated: EUR 20.6 million).

In Q1-Q2 inventories increased by around EUR 4.3 million, mainly due to an increase in inventories of processed bamboo shoots. Trade receivables increased by around EUR 2.1 million and there were prepayments of around EUR 8.6 million made to Zhongzhu ahead of the launch of the bamboo fibre processing project. Net cash generated from operating activities decreased by 21% to EUR 17.6 million (Q1-Q2 2010 Restated: EUR 22.2 million). For the full year we expect an increase in the operating cash flow compared to FY 2010.


Investments


EmployeesAt the end of Q2 we had 1,198 employees (31 December 2010: 770). The second quarter is the peak in terms of number of employees as all the raw processing of bamboo shoots takes place during that quarter.

Risk managementFor a comprehensive description of our risk and opportunity management system as well as possible risks and opportunities, please see the Risk Report section in our FY 2010 Annual Report. There were no significant changes in risks and opportunities in the first two quarters of the year. Therefore, the statements concerning the risks and opportunities described in the Annual Report essentially remain unchanged. The risks to which the Company are exposed, both in isolation and in conjunction with other risks, are limited and do not according to current estimates jeopardise the continued existence of the Company.

OutlookOur integrated strategy remains unchanged. For a deeper analysis of our operating environment and strategic direction please refer to the Group Management Report on pages 35-47 in our FY 2010 Annual Report. Our corporate goals are:

• Production of 100,000 tonnes of bamboo fibre annually

• A plantation size of more than 100,000 ha

• An annual production capacity of processed bamboo shoots of 1.8 million cans

• Launch of the bamboo tree trading centre in Shaowu

• Development of new distribution channels and markets for bamboo trees, bamboo shoots and bamboo fibres and increase sales of fresh and processed bamboo shoots under our brand name ‘Xinrixian’

In FY 2011, we expect to achieve revenue of at least EUR 125 million and a net profit margin, including the contribution from the fibre processing project, of at least 40%.

In this context, the Management Board wishes to state that the use of fair value accounting, as compared to using the cost method, leads to fluctuations in the net profit which are larger than actual changes in revenue and costs, excluding the impact of fair value accounting.

2011

July 4

August 2

September 3

October 13

November 12

December 6

Total 40

2012

January 5

February 5

March 9

Total 19

In Q1-Q2 2011 total lease prepayments amounted to EUR 27.9 million (Q1-Q2 2010: EUR 30.1 million). Total outstanding payments on plantation leases entered into are EUR 59 million and the payment schedule is as follows (all numbers in EUR million):

Preliminary plantation lease payment schedule


Interim consolidated financialstatements and notes


17Asian Bamboo AG Q2 interim report 2011Interim consolidated financial statements

Consolidated statement of income and expensesfor the period from 1 January to 30 June 2011

Consolidated statement of comprehensive incomefor the period from 1 January to 30 June 2011

Q2 2011 Q2 2010 * Q1-Q2 2011 Q1-Q2 2010 * kEUR kEUR kEUR kEUR

Revenue 22,771 22,183 49,249 41,400

Cost of sales (9,280 ) (12,946 ) (24,845 ) (26,995 )

Gain/(loss) arising from changes in fair value

less estimated costs to sell of biological assets (2,407 ) 1,523 (1,435 ) 5,261

Gross profit including fair value changes 11,084 10,760 22,969 19,666

Other operating income 1 4 4 89

Distribution expenses (261 ) (229 ) (311 ) (257 )

Administrative expenses (1,955 ) (1,637 ) (4,166 ) (4,369 )

Other operating expenses (20 ) (8 ) (20 ) (19 )

Profit from operations 8,849 8,891 18,476 15,111

Share of loss associates (86 ) – (97 ) –

Finance income 357 620 468 637

Finance costs (136 ) (189 ) (302 ) (325 )

Profit before tax 8,984 9,321 18,545 15,422

Income tax (52 ) (82 ) (110 ) (82 )

Profit for the period (fully attributable to

the shareholders of the parent company) 8,932 9,239 18,435 15,340

Earnings per share

Basic and diluted (EUR per share) 0.58 0.66 1.21 1.10

Computed on the basis of shares 15,281,100 13,996,211 15,281,100 13,996,211

* Comparable numbers are adjusted in accordance with IAS 8

Q2 2011 Q2 2010 * Q1-Q2 2011 Q1-Q2 2010 * kEUR kEUR kEUR kEUR

Profit for the period 8,932 9,239 18,435 15,340

Exchange differences arising from currency translations (1,116 ) 17,850 (7,095 ) 40,306

Other comprehensive income (1,116 ) 17,850 (7,095 ) 40,306

Total comprehensive income for the period 7,816 27,089 11,340 55,646



Consolidated balance sheetfor the period ending 30 June 2011

30.06.2011 31.12.2010 kEUR kEUR

ASSETS

Non-current assets

Property, plant and equipment 3,523 4,467

Biological assets 97,031 99,788

Lease payments 191,247 164,940

Investment in associates 3,156 3,329

Other financial assets 3,042 2,491

Deferred tax assets 1,551 1,551

299,550 276,566

Current assets

Inventory 5,610 1,299

Trade and other receivables 4,084 1,943

Other financial assets 8,783 204

Current tax assets – 24

Lease and other prepayments 10,721 10,012

Cash and cash equivalents 41,368 56,658

70,566 70,140

Total assets 370,116 346,706

EQUITY AND LIABILITIES

Share capital 15,425 15,425

Par value of own shares (144 ) (130 )

Issued capital 15,281 15,295

Capital reserves 131,953 131,953

Statutory reserves of subsidiaries 8,191 8,191

Equity-settled employee benefits reserve 2,202 881

Foreign currency translation reserve 14,783 21,878

Retained earnings 117,154 104,223

Total equity 289,564 282,421

Non-current liabilities

Borrowings 10,392 11,261

Current liabilities

Borrowings 2,141 2,267

Trade payable 64,644 48,357

Other financial liabilities 1,920 400

Current tax liabilities 1,455 2,000

70,160 53,024

Total liabilities 80,552 64,285

Total liabilities and equity 370,116 346,706


Equity-settled Foreign Statutory employee currency Issued Capital reserves of benefits translation Retained capital reserves subsidiaries reserve reserve earnings Total kEUR kEUR kEUR kEUR kEUR kEUR kEUR

01.01.2010 13,895 91,608 5,415 – 2,635 77,658 191,211

Profit for the period* – – – – – 15,340 15,340

Other comprehensive income

for the period, net of income tax* – – – – 40,306 – 40,306

Total comprehensive income for the period* – – – – 40,306 15,340 55,646

Dividend payments – – – – – (4,173 ) (4,173 )

Issue of ordinary shares 1,400 42,000 – – – – 43,400

Share issue costs – (1,655 ) – – – – (1,655 )

30.06.2010* 15,295 131,953 5,415 – 42,941 88,825 284,429

01.01.2011 15,295 131,953 8,191 881 21,878 104,223 282,421

Profit for the period – – – – – 18,435 18,435

Other comprehensive income

for the period, net of income tax – – – – (7,095 ) – (7,095 )

Total comprehensive income for the period – – – – (7,095 ) 18,435 11,340

Recognition of share-based payments – – – 1,321 – – 1,321

Dividend payments – – – – – (5,503 ) (5,503 )

Buy back of ordinary shares (14 ) – – – – – (14 )

30.06.2011 15,281 131,953 8,191 2,202 14,783 117,154 289,564


Consolidated statement of changes in equityfor the period from 1 January to 30 June 2011


Consolidated statement of cash flowfor the period from 1 January to 30 June 2011

Q1-Q2 2011 Q1-Q2 2010 * kEUR kEUR

Profit before tax 18,545 15,422

Depreciation of property, plant and equipment 234 215

(Gain)/loss arising from changes in fair value less estimated costs to sell of biological assets 1,435 (5,261 )

Amortisation of lease prepayments 5,457 3,481

Interest income (468 ) (637 )

Interest expense 302 325

Share of loss of associates 97 –

Option scheme accrued 1,321 –

Increase in the biological asset value due to cultivation (22,846 ) (14,728 )

Decrease in the biological assets value due to harvest 23,386 21,798

Operating cash flow before working capital changes 27,463 20,615

Increase/decrease in inventories, trade receivables and other financial assets

if they are not allocated to investing or financing activities (15,582 ) (3,549 )

Increase/decrease in trade payables and other financial liabilities

unless they are classified as investing or financing activities 5,827 5,284

Interest income 468 637

Interest expense (302 ) (325 )

Income taxes paid (274 ) (414 )

Net cash generated from operating activities 17,600 22,247

Cash flow from investing activities

Payments made to acquire biological assets and

prepayments for the lease of plantations (27,863 ) (30,103 )

Payments for investments in other companies – (2,000 )

Payments for property, plant and equipment (38 ) (395 )

Cash flow used in investing activities (27,901 ) (32,498 )

Cash flow from financing activities

Proceeds from the issue of equity instruments – 43,400

Payment in connection with share issue – (1,655 )

Payment in connection with share buy back (342 ) –

Proceeds from borrowings – 14,404

Dividends paid to shareholders (5,503 ) (4,173 )

Cash flow from financing activities (5,845 ) 51,976

Net increase in cash and cash equivalents (16,146 ) 41,725

Cash and cash equivalents at beginning of year 56,658 29,143

Foreign exchange difference 856 2,952

Cash and cash equivalents at end of period 41,368 73,820


21Asian Bamboo AG Q2 interim report 2011Notes to the interim consolidated financial statements

Notesfor the period from 1 January to 30 June 2011

GEnERalThe interim consolidated financial statements for the period 1 January to 30 June 2011 comprise all subsidiaries of Asian Bamboo AG.

These subsidiaries are located in China (PRC) except for the interim holding companies, Hong Kong XRX Bamboo Investment Co., Ltd. and

Asian Bamboo (Hong Kong) Industrial Co., Ltd. which are both incorporated in Hong Kong.

The Group legal and organisational structure presented in the FY 2010 Annual Report did not change as of 30 June 2011.

Basis of pREpaRationThe interim consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as

adopted by the EU as of the balance sheet date, and the additional requirements of German commercial law pursuant to sec. 315a (1)

HGB (‘Handelsgesetzbuch’; German Commercial Law Code). The financial statements are prepared as condensed financial statements

with selected explanatory notes as stipulated by IAS 34 ‘Interim Financial Reporting’. The interim consolidated financial statements comply

with IFRS.

The preparation of financial statements in conformity with IFRS requires management to exercise judgment in the process of applying the

Group’s accounting policies and requires the use of accounting estimates and assumptions. The main areas in which estimates are used are

the fair value of biological assets and deferred tax liabilities. Revisions to accounting estimates are recognised in the period in which the

estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current

and future periods. The financial statements are significantly affected by the valuation of biological assets and lease pre-payments which

account for approximately 78% of total assets.

As part of the consolidated financial statements as of 31 December 2010, the Management Board came to the conclusion that certain

previously applied accounting, valuation and reporting methods did not fully comply with IFRS, which meant that previous financial

statements were corrected and restated in accordance with IAS 8. In accordance with IAS 8.42, these corrections in the financial statements

as of 31 December 2010 were carried out by restating FY 2009 numbers and the opening balance of FY 2009 (1 January 2009). Accordingly,

the 2010 comparative numbers have also been restated for the purpose of preparing the interim consolidated financial statements for the

period 1 January to 30 June 2011. For a detailed explanation and reconciliation of all corrections made please see note no. 1.4 of the

Group’s consolidated financial statements as of 31 December 2010.

With regard to the preparation of the interim consolidated financial statements in accordance with IAS 34 ‘Interim Financial Reporting’, the

Management Board is required to make estimates and judgments which influence the application of accounting policies within the Company

and the reporting of assets and liabilities as well as income and expenses. Actual amounts can differ from these estimates.

siGnificant accoUntinG policiEsThe accounting policies applied by the Group in the interim consolidated financial statements generally correspond to the methods applied

by Asian Bamboo AG in its consolidated financial statements for the year ending 31 December 2010. For further details, reference is made

to these consolidated financial statements, which can be found in the notes of the Company’s FY 2010 Annual Report at www.asian-

bamboo.com.

Income that may have been recorded during the reporting period for seasonal reasons, due to cyclical developments, or only occasionally, is

not cut off in the interim consolidated financial statements. Expenses that are incurred irregularly during the reporting period have been cut

off in those cases where they would also be cut off at year end.

fUnctional and pREsEntation cURREncyThe currency of the Group is the Euro. The functional currency of the foreign subsidiaries is the Chinese renminbi (RMB), since nearly all

transactions are done in RMB. The following exchange rates from RMB to EUR have been applied:

Q1-Q2 2011 31.12.2010 Q1-Q2 2010Exchange rates from RMB to EUR RMB/EUR RMB/EUR RMB/EUR

End of period 9.3416 8.822 8.3215

Average during period 9.1755 8.9712 9.0678


sEasonality oR cyclicality of intERiM opERationsThere are distinct harvesting cycles during the year. Winter bamboo shoots are harvested in Q1 and Q4, spring bamboo shoots are harvested

in Q1 and Q2 and bamboo trees are primarily harvested in Q3 and Q4. In Q2, fresh spring bamboo shoots and processed bamboo shoots are

the most significant product categories.

MatERial EvEnts sUBsEQUEnt to thE End of thE intERiM pERiodNo events of material importance for the Group requiring disclosure have occurred.

continGEnt liaBilitiEs and continGEnt assEtsThere have been no significant changes in contingent liabilities and assets in comparison with the annual consolidated financial statements

2010 and they can be classified as immaterial overall.

RElatEd paRtiEs tRansactionsBalances and transactions between the company and its subsidiaries, which are related parties of the company, are eliminated from the

interim consolidated financial statements insofar as the subsidiaries are consolidated. In addition, business relations are maintained with

companies over which Asian Bamboo AG can exercise a significant influence (associated companies.) Such relationships do not have a

material influence on the interim consolidated financial statements of the Group. Related persons are mainly the members of the

Management Board and the Supervisory Board. The remuneration received by this group of persons is disclosed annually in the remuneration

report. There were no other material transactions with related parties.

aUditoR’s REviEwThe interim consolidated financial statements and the interim management report for the period 1 January to 30 June 2011 were not

reviewed or audited by the auditor.

Hamburg, Germany, 12 August 2011

On behalf of the management

Lin Zuojun Jiang Haiyan Peter Sjovall Chairman COO CFO


Responsibility statement

“To the best of our knowledge, and in accordance with the applicable reporting principles, the interim consolidated financial statements give

a true and fair view of the assets, liabilities, financial position and profit and loss of the Group, and the interim group management report

includes a fair view of the development and performance of the business and the position of the Group, together with a description of the

principal opportunities and risks associated with the expected development of the Group.”

Hamburg, Germany, 12 August 2011

On behalf of the management

Lin Zuojun Jiang Haiyan Peter Sjovall Chairman COO CFO


Financial calendar FY 2011

15-16 september

Participation in JP Morgan’s Small/Mid Cap Conference in London

12-14 october

Participation in BNP’s China Conference in Qingdao, China

18 october

Participation in IQPC’s Third Annual CFO Summit in Singapore

11 november

Q3 Results Announcement

21-23 november

Participation in Deutsche Boerse’s Equity Forum in Frankfurt

Asian Bamboo AG

china26th Floor, Xinrixian Center,No 98-1, Jiangbin East AvenueMawei District, Fuzhou 350015P.R.China

Tel +86 (591) 8802 6008Fax +86 (591) 8802 6898

hong KongUnit 2209, 22/F, Wu Chung House,213 Queen’s Road East, Wanchai,Hong Kong

Tel +852 3973 7459Fax +852 3013 7688

GermanyStadthausbrücke 1-3, 20355 Hamburg

Tel +49 (0) 40 37644 798Fax +49 (0) 40 37644 500

Listed on: Frankfurt Stock Exchange, Prime StandardStock Code: 5ABISIN: DE000A0M6M79

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