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