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China RuiTai Reports Third Quarter 2008 Financial Results



TAI'AN, Shandong, China, Nov. 18 /PRNewswire-FirstCall/ -- China RuiTai International Holdings Co., Ltd. (OTC Bulletin Board: CRUI) ("China RuiTai" or "the Company"), a leading producer and distributor of cellulose ether products in the People's Republic of China ("PRC"), today announced its financial results for the third quarter ended September 30, 2008.

Third Quarter 2008 Highlights

-- Revenues increased 2.0% year-over-year to $12.7 million and 29.4%

sequentially

-- Gross profit increased 45.7% year-over-year to $2.7 million and 47.4%

sequentially

-- Gross margin improved to 31.8%, from 22.2% for the same period last

year

-- Operating income increased 92.9% year-over-year to $2.6 million

-- Net income increased 133.7% year-over-year to $1.7 million, or $0.06

per fully diluted share, from $0.7 million, or $0.03 per fully diluted

share, a year ago

-- Added 300 new customers

Third Quarter 2008 Results

"We increased manufacturing to make up for restricted production during the Beijing Olympics, and our capacity utilization rate climbed to about 75% in the third quarter," said Mr. Dianmin Ma, Chairman and Chief Executive Officer of China RuiTai. "Our strategic shift to high-end products resulted in an increase in average selling prices. This, coupled with a decrease in raw materials prices, improved our gross margin. While order volume from overseas markets started to decline in October, prices held steady during the third quarter and export sales increased over the third quarter of 2007 due to growing demand from the PVC industry. Demand from the domestic market has grown steadily as we added another 300 new customers in the third quarter."

During the third quarter revenues were $12.7 million, up 2.0% from $12.5 million in the third quarter of 2007. The Company sold 2,047 metric tons of cellulose ether products in 10 categories compared to 2,497 metric tons in 11 categories a year ago. Hydroxypropyl Methyl Cellulose (HPMC), our high-end product, continued to be the best-selling product, accounting for 83% of total revenues. During the third quarter of 2008, the Company exported approximately 670 metric tons of cellulose ether products to overseas markets, an 80% increase compared to volume in the same period last year.

Gross profit for the third quarter of 2008 was $4.0 million, compared to $2.8 million in the same period of the prior year. Gross margin was 31.8% for the third quarter of 2008, up from 22.2% for the prior year period. Management attributes the improved gross profit margin to a decline in purified cotton prices, which decreased by 20% in the third quarter. Purified cotton accounts for 45% of total production cost. In addition, the improved product mix and strategic focus on higher-end products helped to increase gross margin.

Operating expenses were $1.4 million in the third quarter of 2008, down slightly from a year ago. An increase in general and administrative expenses was offset by lower selling expenses, which resulted from lower sales volumes. As a result of the economic slow down, the Company anticipates that operating expenses will decrease further. With a well-established brand name in China, the Company only targeted major industry exhibitions during the quarter, thereby reducing the number of exhibitions attended. As a result, advertising expenses decreased from the prior year.

Operating income for the third quarter of 2008 was $2.6 million, or 20.8% of revenues, compared to $1.4 million, or 11.0% of revenues, in the same quarter of 2007.

Net income for the third quarter of 2008 was $1.7 million, or $0.06 per fully diluted share, compared to $0.7 million, or $0.03 per fully diluted share, for the third quarter of 2007.

Nine Month 2008 Results

Revenues for the first nine months of 2008 were $32.0 million, up 10.0% from $29.0 million in the same period of 2007. Gross profit was $9.8 million, or 30.6% of revenues, up from $8.8 million, or 30.3% of revenues, in the first nine months of 2007. Operating income was $6.1 million, or 19.2% of revenues, compared to $5.8 million, or 20.0% of revenues, in the same period of 2007. Net income for the first nine months of 2008 was $3.9 million, compared to net income of $3.5 million, in the same period a year ago. Diluted earnings per share were $0.15, compared with $0.15 per diluted share in the same period a year ago.

Financial Condition

At September 30, 2008, the Company had cash and cash equivalents of $4.6 million, accounts receivable were $6.7 million and total assets of $89.4 million. At September 30, 2008, the Company had short-term debt of $23.5 million, bank checks payable of $35.9 million and shareholders' equity of $14.6 million. The Company generated $10.9 million in cash flow from operating activities during the first nine months of 2008, primarily through and increase in bank checks payable used to pay suppliers and net income. The Company had capital expenditures of $1.8 million, primarily for purchases of equipment for its new biopolyscharide facility.

Recent Events

In October, 2008, China RuiTai announced that it completed the construction of its new plant for manufacturing biopolysaccharide. Production is expected to begin by the end of 2008. Biopolysaccharide is a water-soluble and viscous polysaccharide that can be made into film and fiber and applied as a functional additive in various products, such as medicine capsules, food, and food wrapping films. The new two-story 4000 square-meter plant will be capable of producing 100 tons of biopolysaccharide per year.

Business Outlook

"We expect demand for our products in the domestic market to increase next year since China has reacted quickly to financial crisis and will implement a stimulus package," said Mr. Ma. "Once the government's plan is in place sales volumes will return to normal levels. For the export market, we expect volumes to remain soft until January or February of 2009. In the short term, we expect that sales volume in the fourth quarter will decrease by about 5%-10% due to the economic slowdown, but remain confident that the situation will improve once the government's stimulus package takes hold."

Going forward, the Company expects biopolysaccharide to improve its product mix it begins to ramp up production. Management expects biopolysaccharide to generate gross margins of approximately 60%-70%. The Company will start trial production of biopolysaccharide in December, 2008, and management expects to run real production beginning in February, 2009. Due to the large demand perceived in the domestic market, management believes that demand for its product will be strong and expects to sell between 80-100 metric tons in 2009. Management estimates a selling price for biopolysaccharide of RMB 200,000 (USD $29,300) per ton.

"As a result of anticipated lower sales in the fourth quarter, we estimate that 2008 revenue and net income will be roughly the same compared to 2007," said Mr. Ma. "Our gross margin estimate for 2008 is 32% based on a decrease in raw materials prices and our focus on higher-margin products."

Conference Call

The company will host a conference call at 8:00 a.m. ET on Tuesday, November 18, 2008, to discuss its financial results for the third quarter ended September 30, 2008. To participate in the event by telephone, please dial 888.419.5570 five to 10 minutes prior to the start time (to allow time for registration) and reference passcode 645 530 47. International callers should dial 617.896.9871 and enter the same conference ID number. A digital replay of the call will also be available on Tuesday, November 18 at approximately 11:00 a.m. ET, through Tuesday, November 25 at midnight ET. Dial 888.286.8010 and enter the conference ID number 616 313 81. International callers should dial 617.801.6888 and enter the same conference ID number.

About China RuiTai International Holdings Co., Ltd.

China RuiTai International Holdings Co., Ltd. (OTC BB: CRUI), through its operating subsidiary, is engaged in the production, sales, and exportation of deeply processed chemicals, with a primary focus on non-ionic cellulose ether products. Cellulose ether is an organic chemical that acts as a thickener and dissolves in water and other organic solvents. The Company is one of the largest non-ionic cellulose ether producers in China delivering products for the pharmaceutical, PVC manufacturing, construction industry, the personal care market and oil field exploration and recovery industries. China RuiTai exports to United States, Europe, India, Japan, and South East Asia.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: This press release contains certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to the company's ability to complete product orders, coordinate product design with its customers, ability to expand and grow its distribution channels, political and economic factors in the People's Republic of China, the company's ability to find attractive acquisition candidates, dependence on a limited number of larger customers and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

-- Financial Tables Follow --

CHINA RUITAI INTERNATIONAL HOLDINGS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, December 31,

2008 2007

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents $4,594,347 $4,166,713

Bank checks and commercial paper 1,732,239 621,204

Accounts receivable, net 6,692,791 3,053,295

Due from unaffiliated suppliers 656,669 1,112,948

Prepaid expenses 2,884,607 2,876,820

Inventory 8,609,951 6,656,028

Advance to employees 251,306 113,297

Restricted cash 22,815,131 14,738,564

Due from a related party-

current portion 11,712,980 4,448,878

Total current assets 59,950,021 37,787,747

Property and Equipment, net 13,115,405 11,306,271

Land use right, net 5,112,045 4,859,620

Long-term investment 886,639 830,984

Due from a related party 10,380,715 10,380,715

Total Assets $89,444,825 $65,165,337

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Bank loan $23,477,413 $19,269,317

Bank checks payable 35,885,692 22,059,772

Accounts payable and accrued

expenses 6,482,079 7,657,437

Taxes payable 5,074,824 3,560,918

Deferred revenue 1,042,918 737,027

Due to employees 1,795,925 1,265,898

Employee security deposit 955,918 810,802

Total Current

Liabilities 74,714,769 55,361,171

Minority Interest 144,927 98,053

Shareholders' Equity:

Preferred stock, par value $0.001,

10,000,000 shares authorized,

authorized, no shares outstanding -- --

Common stock, par value $0.001,

50,000,000 shares authorized,

26,000,000 shares issued and

outstanding as of September

30, 2008 and December 31, 2007 26,000 26,000

Additional paid-in capital 2,908,171 2,366,171

Unamortized contractual

services costs (303,522) --

Statutory Reserves 1,042,355 1,042,355

Retained earnings 9,609,338 5,700,875

Accumulated other comprehensive

income 1,302,787 570,712

Shareholders' Equity 14,585,129 9,706,113

Total Liabilities and

Shareholders' Equity $89,444,825 $65,165,337

CHINA RUITAI INTERNATIONAL HOLDINGS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended For the Nine Months Ended

September 30, September 30,

2008 2007 2008 2007

(unaudited) (unaudited) (unaudited) (unaudited)

Revenues

Sales $12,716,798 $12,474,708 $31,962,737 $29,063,171

Costs of Sales 8,678,426 9,702,507 22,174,756 20,255,655

Gross

Profit 4,038,372 2,772,201 9,787,981 8,807,516

Operating Expenses

Selling expenses

Sales commission 149,493 208,143 474,407 441,182

Freight-out 289,765 239,926 670,688 700,368

Adverting 16,262 146,505 33,695 176,655

Travel and

entertainment 23,618 39,545 86,704 220,485

Other selling

expenses 24,330 61,831 101,786 154,631

Total selling

expenses 503,468 695,950 1,367,280 1,693,321

General and

administrative

expenses

Payroll and

employees

benefits 119,775 102,588 392,549 196,924

Insurance 7,937 1,790 171,765 152,917

Consultant fees 167,398 -- 455,122 --

Office expenses 194,206 429,295 472,081 560,701

Taxes 71,258 43,793 175,017 91,113

Travel and

entertainment 50,303 41,836 202,985 144,212

Other general

and administrative 105,506 86,784 213,548 138,128

Total General and

Administrative

Expenses 716,383 706,086 2,083,067 1,283,995

Total Operating

Expenses 1,219,851 1,402,036 3,450,347 2,977,316

Income (Loss) from

Operation 2,818,521 1,370,165 6,337,634 5,830,200

Other Income

(Expense)

Interest income 461,173 69,894 1,182,170 165,469

Interest expense (1,052,253) (425,346) (2,234,495) (1,111,787)

Government

subsidies 171,885 -- 171,885 --

Gain (Loss) on

foreign currency

transactions (168,111) -- (203,073) --

Other income

(expense) 1,576 5,490 9,801 102,525

Total other

income (expense) (585,730) (349,962) (1,073,712) (843,793)

Income (Loss) before

Provision

Income Tax and

Minority Interest 2,232,791 1,020,203 5,263,922 4,986,407

Provision for Income

Tax 558,198 306,061 1,315,980 1,495,923

Income before

Minority Interest 1,674,593 714,142 3,947,942 3,490,484

Minority Interest (16,746) (7,142) (39,479) (34,905)

Net Income 1,657,847 707,000 3,908,463 3,455,579

Other Comprehensive

Income (Loss)

Effects of

Foreign

Currency

Conversion 41,539 98,036 732,075 235,723

Comprehensive Income

(Loss) $1,699,386 $805,036 $4,640,538 $3,691,302

Earnings per share

during the period

Basic $0.06 $0.03 $0.15 $0.15

Diluted $0.06 $0.03 $0.15 $0.15

CHINA RUITAI INTERNATIONAL HOLDINGS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

2008 2007

(unaudited) (unaudited)

Operating Activities

Net income (loss) $ 3,908,463 $ 3,455,579

Adjustments to reconcile

net income (loss) to

net cash provided (used)

by operating activities:

Minority interest 39,479 34,905

Depreciation 503,881 516,217

Amortization of

land use rights 51,444 71,407

Amortization of

contractual

service costs 238,478 --

Changes in operating

assets and liabilities:

(Increase)/Decrease in bank

checks and commercial paper (1,047,463) (1,173,564)

(Increase)/Decrease in

accounts receivable (3,364,446) (3,824,094)

(Increase)/Decrease in

prepaid expenses 181,090 (514,684)

(Increase)/Decrease in

inventory (1,477,159) 1,029,972

(Increase)/Decrease in

advance to employees (127,742) (818,838)

Increase/(Decrease) in

accounts payable and

accrued expenses (1,653,536) 2,114,397

Increase/(Decrease) in

bank checks payable 12,094,828 3,561,271

Increase/(Decrease) in

taxes payable 1,249,217 1,372,311

Increase/(Decrease) in

deferred revenue 251,260 1,708,351

Increase/(Decrease) in

employee security deposit 88,947 76,544

Net cash provided (used)

by operating activities 10,936,740 7,609,774

Investing Activities

Purchase of fixed assets (1,753,506) (4,605,079)

Loans to unaffiliated

suppliers -- (538,773)

Payback of loans to

unaffiliated suppliers 519,915 --

Loans to a related party (6,142,086) (5,504,763)

Net cash (used) by

investing activities (7,375,677) (10,648,615)

Financing Activities

Bank loans 2,857,610 2,538,231

Decrease (Increase) in

restricted cash to

secure bank checks (6,943,834) (2,333,959)

Loans from employees 436,098

Payback of loans from

employees -- (276,074)

Net cash provided (used)

by financing activities (3,650,126) (71,802)

Increase (decrease) in cash (89,063) (3,110,643)

Effects of exchange rates

on cash 516,697 52,610

Cash at beginning of period 4,166,713 6,286,289

Cash at end of period $ 4,594,347 $ 3,228,256

Supplemental Disclosures

of Cash Flow Information:

Cash paid (received)

during year for:

Interest $ 2,307,952 $ 996,717

Income taxes $ 394,386 $ 600,832

For more information, please contact:

China RuiTai International Holdings Co., Ltd.

Mr. Gang Ma, CFO

Tel: +86-538-385-0703

Email: fcmagang@163.com

CCG Investor Relations

Crocker Coulson, President

Tel: +1-646-213-1915

Email: crocker.coulson@ccgir.com

Web: http://www.ccgirasia.com

Source: China RuiTai International Holdings Co., Ltd.
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