SHANGHAI, Aug. 14 /PRNewswire-Asia/ -- Chemspec International Limited (NYSE: CPC; "Chemspec" or the "Company"), a leading China-based contract manufacturer of highly-engineered specialty chemicals, today announced its unaudited financial results for the second quarter ended June 30, 2009.
Second Quarter 2009 Financial Highlights(1)
-- Total sales were RMB233.5 million (US$34.2 million), an increase of
8.1% from the second quarter of 2008 and an increase of 16.6% from the
first quarter of 2009
-- Gross profit was RMB95.3 million (US$13.9 million), an increase of 9.7%
from the second quarter of 2008 and an increase of 25.5% from the first
quarter of 2009
-- Income from operations was RMB67.2 million (US$9.8 million), an
increase of 1.9% from the second quarter of 2008 and an increase of
34.2% from the first quarter of 2009
-- Net income attributable to Chemspec International Limited shareholders
was RMB53.9 million (US$7.9 million), a decrease of 5.6% from the
second quarter of 2008 and an increase of 64.7% from the first quarter
of 2009
-- Basic and diluted earnings per ADS were RMB1.77 (US$0.26), as compared
to RMB1.90 in the second quarter of 2008 and RMB1.09 in the first
quarter of 2009
(1) Certain Renminbi (RMB) amounts in this press release have been
translated into U.S. dollar (USD) solely for the convenience of the
reader. The conversion of RMB into USD in this release is based on the
Federal Reserve Board certified exchange rate on June 30, 2009, which
was RMB6.8302 to USD1.00. The percentages stated are calculated based
on RMB.
Dr. Jianhua Yang, Chairman and CEO of Chemspec, commented, "We are pleased with our second quarter financial results and our first quarterly reporting as a publicly traded company. During the quarter, we saw a recovery in demand for our specialty chemicals used in the manufacturing of electronics. This helped drive an increase in sales in the second quarter of 2009 and demonstrates the strength of our business model. Despite the challenging global economic environment, our fast and flexible manufacturing facilities, strong process technologies, experienced management team, lean cost controls as well as solid global blue-chip customer base all contributed to our strong quarterly financial results.
However, looking forward, some of our customers in the agrochemical and pharmaceutical end-markets around the world have been affected by the challenging global economic environment and have experienced a significant slowdown and/or decline in growth in the second quarter of 2009. As a result, they have reduced their purchase orders for deliveries in the third quarter of 2009 in order to adjust the timing of their planned commercialization of new products as well as reduce their inventory levels. We believe we will still be able to achieve top line sales growth this year because we continue to be selected as a reliable and preferred source of fluorinated specialty chemicals by our solid base of long-term blue chip end-users. We are confident that our annual top line sales growth can continue in year 2010 based on our strong project pipelines and as the global economy recovers."
Second Quarter 2009 Financial Results
Total Sales
For the three months ended June 30, 2009, the Company generated total sales of RMB233.5 million (US$34.2 million), an increase of 8.1% from RMB216.0 million in the second quarter of 2008 and an increase of 16.6% from RMB200.3 in the first quarter of 2009. Total sales were within the range of sales estimates previously provided by the Company on August 3, 2009. Included in the total sales for the three months ended June 30, 2009 was RMB 19.4 million (US$2.8 million) of sales of purchased goods.
Gross Profit and Gross Margin
Gross profit was RMB95.3 million (US$13.9 million) in the second quarter of 2009, an increase of 9.7% from RMB 86.8 million in the second quarter of 2008, and an increase of 25.5% from RMB 75.9 million in the first quarter of 2009. Gross margin was 40.8% in the second quarter of 2009, as compared to 40.2% in the second quarter of 2008 and 37.9% in the first quarter of 2009. The increase in gross margin in the second quarter of 2009 from the first quarter of 2009 reflects the higher average unit selling price and the Company's continued efforts to improve manufacturing processes and cost control.
Operating Expenses
Selling expenses and general and administrative expenses of RMB20.2 million (US$3.0 million) during the second quarter of 2009, representing an increase of 38.8% from RMB14.6 million in the second quarter of 2008 and an increase of 23.0% compared with RMB16.4 million in the first quarter of 2009. The increases were caused primarily by an increase in administrative headcount due to the fast growth and personnel needs of the Company and to some extent the increased shipping costs associated with the change of product mix.
Research and development expenses increased by 20.1% to RMB7.1 million (US$1.0 million) during the second quarter of 2009 from RMB5.9 million in the second quarter of 2008 and decreased by 19.6% from RMB8.8 million in the first quarter of 2009. The increase compared with the same period in 2008 was due primarily to an increase in hiring of highly experienced scientists, especially from overseas, to enhance the Company's R&D capabilities to meet the growing needs of customers. The decrease from the preceding quarter was the result of decrease in R&D material consumption.
Income from operations and earnings before income taxes
Income from operations was RMB67.2 million (US$9.8 million) and earnings before income tax was RMB 68.2 million (US$10.0 million) in the second quarter of 2009, increases of 1.9% and 6.1%, respectively, from the second quarter of 2008, and increases of 34.2% and 44.5%, respectively, from the first quarter of 2009.
Net income attributable to Chemspec International Limited shareholders
Net income attributable to Chemspec International Limited shareholders was RMB53.9 million (US$7.9 million) in the second quarter of 2009, a decrease of 5.6% from the second quarter of 2008, and an increase of 64.7% from the first quarter of 2009. The slight decrease in year-over-year net income attributable to Chemspec International Limited shareholders was mainly caused by the difference in the Company's applicable income tax rate as the income tax holidays of some of the Company's subsidiaries expired and the increase of profit contribution by one subsidiary whose applicable income tax rate is higher than other subsidiaries. Income tax expense was RMB 12.7 million in the second quarter of 2009 compared to RMB 6.4 million in the same period of 2008.
Basic and diluted earnings per ADS were RMB1.77 (US$0.26) in the second quarter of 2009, as compared to RMB1.90 in the second quarter of 2008, and RMB1.09 in the first quarter of 2009.
Cash Flows
As of June 30, 2009, the Company had RMB473.7 million (US$69.3 million) of cash, as compared to RMB180.1 million as of December 31, 2008. The increase in the Company's cash position is primarily due to the net proceeds of approximately RMB 389.2 from the Company's IPO. During the six months ended June 30, 2009, the Company generated strong operating cash flows of RMB109.9 million (US$16.1 million) as compared to RMB104.7 million for the same period of 2008. Significant cash outflows for the six-month period ended June 30, 2009 include capital expenditures of RMB 116.1 million (US$17.0 million) for the production facility expansion and repayments of the Company's bank borrowings which decreased to RMB15.0 million (US$2.2 million) from RMB 60.0 million as of December 31, 2008.
Statement Regarding Unaudited Financial Information
The financial information set forth above is based on the Company's unaudited interim consolidated financial statements and is subject to adjustments that may be identified by us and/or our auditors during the audit of our annual consolidated financial statements.
Business Outlook
Based on the Company's current operations, total revenues for year 2009 are expected to be between RMB 975 million and RMB 1,000 million, which would represent an increase of 3.2% to 5.8% compared to RMB 944.9 million for the year ended December 31, 2008.
Conference Call Details
Management will host a conference call and live webcast to discuss the second quarter results and forward outlook at 8:00 a.m. Eastern Daylight Time (8:00 p.m. Beijing time) on Friday, August 14, 2009.
The dial-in details for the live conference call are as follows:
-- U.S. Toll Free Number: 1-866-519-4004
-- International Dial-in Number: +65-6735-7955
-- Mainland China Toll Free Number: 10-800-819-0121
-- Hong Kong Toll Free Number: 80-093-3053
-- U.K. Toll Free Number: 080-8234-6646
-- Conference ID: CPC
A live and archived webcast of the conference call will be available on the Investor Relations section of Chemspec's website at http://www.chemspec.com.cn .
A telephone replay of the call will be available after the conclusion of the conference call through 10:00 a.m. Eastern Daylight Time, August 21, 2009.
The dial-in details for the replay are as follows:
-- U.S. Toll Free Number: +1-866-214-5335
-- International Dial-in Number: +61-2-8235-5000
-- Conference ID: 23225390
About Chemspec
Chemspec is a leading China-based contract manufacturer of highly engineered specialty chemicals and the largest manufacturer of fluorinated specialty chemicals in China based on sales. In manufacturing specialty chemicals, Chemspec also provides process design and process development services, which enable efficient and rapid production of specialty chemicals that are incorporated into the products of Chemspec's end users. Chemspec's customers and end users include electronics, pharmaceutical and agrochemical companies. For more information, please visit http://www.chemspec.com.cn .
Safe Harbor Statements
This announcement contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Chemspec's filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1, as amended from time to time. Chemspec does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Chemspec International Limited
Unaudited Consolidated Balance Sheets
December 31, June 30, June 30,
2008 2009 2009
RMB'000 RMB'000 USD'000
ASSETS
Current assets
Cash 180,081 473,667 69,349
Pledged bank deposits 21,536 39,615 5,800
Accounts receivable, net 142,535 143,680 21,036
Bills receivable -- 300 44
Inventories 197,742 192,901 28,243
Prepayment and other receivables 16,865 19,454 2,848
Deferred income tax assets 345 937 137
Total current assets 559,104 870,554 127,457
Property, plant and equipment, net 385,526 502,747 73,606
Land use rights 53,105 55,566 8,135
Goodwill 6,942 6,942 1,016
Deferred offering costs 9,843 -- --
Deferred income tax assets 360 400 59
Total assets 1,014,880 1,436,209 210,273
LIABILITIES AND EQUITY
Current liabilities
Bank borrowings 60,000 15,000 2,196
Accounts payable 77,785 69,893 10,233
Bills payable 27,562 32,658 4,781
Amounts due to related parties 38,019 38,002 5,564
Accrued expenses and other payables 55,714 87,579 12,822
Income taxes payable 6,213 7,817 1,145
Total current liabilities 265,293 250,949 36,741
Deferred income tax liabilities 14,851 20,152 2,951
Deferred income 5,565 5,412 792
Total liabilities 285,709 276,513 40,484
Equity
Ordinary shares: HK$ 0.01 par value;
20,000,000,000 shares authorized as
of December 31, 2008 and June 30,
2009; 1,800,000,000 and
2,179,680,000 shares issued and
outstanding as of December 31, 2008
and June 30, 2009, respectively 18,446 21,792 3,190
Additional paid-in capital 30,597 366,894 53,716
Statutory reserves 45,837 45,837 6,711
Accumulated other comprehensive
income 6,749 6,740 987
Retained earnings 619,521 703,599 103,013
Total Chemspec International Limited
shareholders' equity 721,150 1,144,862 167,617
Noncontrolling interests 8,021 14,834 2,172
Total equity 729,171 1,159,696 169,789
Total liabilities and equity 1,014,880 1,436,209 210,273
Chemspec International Limited
Unaudited Quarterly Consolidated Statements of Income
Three-month period ended
June 30 March 31 June 30 June 30
2008 2009 2009 2009
RMB'000 RMB'000 RMB'000 USD'000
Sales 215,977 200,299 233,520 34,189
Cost of sales (129,175) (124,379) (138,258) (20,242)
Gross profit 86,802 75,920 95,262 13,947
Selling expenses (2,331) (2,923) (2,780) (407)
General and administrative expenses (12,231) (13,504) (17,429) (2,552)
Research and development expenses (5,873) (8,772) (7,056) (1,033)
Other operating expenses (466) (1,034) (1,384) (202)
Other operating income -- 194 212 31
Government grants 50 200 398 58
Income from operations 65,951 50,081 67,223 9,842
Other income (expenses):
Interest income 282 607 679 99
Interest expense (895) (771) (53) (8)
Foreign currency exchange (loss)
gain, net (1,175) (2,740) 328 48
Other income 113 23 29 4
Earnings before income taxes 64,276 47,200 68,206 9,985
Income tax expense (6,408) (10,869) (12,746) (1,866)
Net income 57,868 36,331 55,460 8,119
Net income attributable to
noncontrolling interests (781) (3,625) (1,588) (232)
Net income attributable to Chemspec
International Limited shareholders 57,087 32,706 53,872 7,887
Basic earnings per share RMB 0.03 RMB 0.02 RMB 0.03 US$ 0.00
Diluted earnings per share RMB 0.03 RMB 0.02 RMB 0.03 US$ 0.00
Basic earnings per ADS RMB 1.90 RMB 1.09 RMB 1.77 US$ 0.26
Diluted earnings per ADS RMB 1.90 RMB 1.09 RMB 1.77 US$ 0.26
Chemspec International Limited
Unaudited Consolidated Statements of Cash Flows
Six-month period ended
June 30 June 30 June 30
2008 2009 2009
RMB'000 RMB'000 USD'000
Cash flows from operating activities
Net income 116,605 91,791 13,439
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, plant and equipment 10,874 15,982 2,340
Land use rights 343 482 70
Loss on disposal of property, plant
and equipment 401 1,895 277
Bad debt expense (309) -- --
Unrealized foreign exchange loss
(gain), net 88 (542) (79)
Share-based compensation 5,599 10,211 1,495
Deferred income tax expense 7,150 4,669 683
Changes in operating assets and
liabilities:
Pledged bank deposits related to
purchase of inventory (11,042) (13,015) (1,906)
Inventories (83,359) 4,841 709
Accounts receivable (1,326) (828) (121)
Bills receivable -- (300) (44)
Prepayment and other receivables 12,196 (2,589) (379)
Accounts payable 43,206 (7,892) (1,155)
Bills payable related to purchase of
inventory 14,266 325 48
Accrued expenses and other payables (3,032) 3,249 476
Income taxes payable (6,973) 1,604 235
Net cash provided by operating
activities 104,687 109,883 16,088
Cash flows from investing activities
Capital expenditures, including
interest capitalized (54,457) (116,124) (17,002)
Proceeds from the sale of a
subsidiary 3,420 -- --
Proceeds from sale of property, plant
and equipment 42 -- --
Non-interest bearing advances to
related parties (15,000) -- --
Non-interest bearing advances repaid
by related parties 32,000 -- --
Net cash assumed from acquisition of
a subsidiary 2,255 -- --
Payments for land use rights (10,466) (2,943) (431)
Pledged bank deposits related to
purchase of property, plant and
equipment -- (5,064) (741)
Net cash used in investing activities (42,206) (124,131) (18,174)
Cash flows from financing activities
Acquisition of additional equity
interest in a subsidiary (4,000) -- --
Capital contributions from
noncontrolling shareholders -- 1,600 234
Proceeds from issuance of ordinary
shares -- 389,022 56,956
Payments for initial public offering
costs (1,260) (35,488) (5,196)
Proceeds from bank loans 70,000 15,000 2,196
Repayments of bank loans (40,000) (60,000) (8,784)
Dividend paid by subsidiary to
noncontrolling shareholders -- (2,500) (366)
Proceeds from non-interest bearing
borrowings from related parties 20,400 -- --
Repayments of non- interest bearing
borrowings from related parties (69,747) -- --
Net cash (used in) provided by
financing activities (24,607) 307,634 45,040
Effect of foreign currency exchange
rate changes on cash 261 200 29
Net increase in cash 37,874 293,386 42,954
Cash at beginning of period 56,929 180,081 26,366
Cash at end of period 95,064 473,667 69,349
Supplemental disclosures of cash flow
information:
Income taxes paid 10,027 11,942 1,748
Income taxes refund 16,274 -- --
Interest paid, net of amounts of
capitalized 1,117 824 121
Supplemental schedule of noncash
investing and financing activities:
Payable for purchase of property,
plant and equipment 17,635 49,302 7,218
Payable for acquisition of additional
equity interest in a subsidiary 4,000 -- --
Bills payable for purchase of
property, plant and equipment -- 4,771 699
For further information, please contact:
Chemspec International Ltd.
In Shanghai
Bing Zhu
Chief Financial Officer
Tel: +86-21-5270-2636 x8053
Email: ir@chemspec.com.cn
Christensen
In New York
Kathy Li
Tel: +1-212-618-1978
Email: kli@christensenir.com
In Hong Kong
Tip Fleming
Tel: +852-9212-0684
Email: tfleming@christensenir.com
