You say, "Eek, it's a Chinese company!" I say, "So what?"
Thanks to aggressive marketing efforts, Yongye's revenue shot up by a staggering 95.9% from the year-ago quarter to $140.6 million. Almost 21% of the total sales came from new provincial markets that Yongye had been tapping for some months now. These promotional initiatives led to a whopping 64.1% jump to $25.6 million in Yongye's selling expenses.
Good marketing is definitely key to higher revenue, and fertilizer companies seem to have understood this well. Not just Yongye, but rival China Green Agriculture
Because of the solid top-line growth, Yongye's net income jumped to $39.1 million from $17.6 million a year ago.
While Yongye's focus on expanding its product reach is noteworthy, what impresses me more is its smart strategy of putting in the money where it pinches most -- sourcing raw materials. Instead of buying humic acid from intermediaries, the company is now using lignite coal from its own Wuchuan facility to extract its nutrients. In fact, since this facility became operational last year, Yongye has already started seeing a decrease in its costs.
Moreover, during its third quarter, Yongye also received government approval for a mineral resource exploration permit for its designated project site in Wuchuan, which is very close to its primary production facility. This seems to be a significant step toward the development of the site as a primary source of raw material for Yongye's nutrient products and should result in significant cost advantages in the future.
In Yongye's favor
What should add to Yongye's efforts are the favorable industry conditions. Across the board, fertilizer companies have been happily cashing in on the global agricultural boom. PotashCorp's
Likewise, Terra Nitrogen
Yongye's base in China is an added plus here. China's burgeoning population, higher spending power, and increased consumption are fueling the demand for food, lifting agriculture production. This translates into higher demand for fertilizers, which is where Yongye's branded fertilizers fit in well.
The Foolish bottom line
Yongye seems to be growing much faster than the market gives it credit for. Also, there is evidence that discourages us from looking at it with a suspicious eye.
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Fool contributor Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Yongye International. Motley Fool newsletter services have recommended buying shares of Yongye International and China Green Agriculture. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.