FUQING CITY, China, March 14 /Xinhua-PRNewswire-FirstCall/ -- China Clean Energy Inc. (OTC Bulletin Board: CCGY) ("China Clean Energy", "the Company"), a leading producer of biodiesel fuel and environmentally friendly specialty chemical products made from renewable resources in The People's Republic of China ("PRC"), today reported financial results for the fiscal year ended on December 31, 2006.
Fiscal Year 2006 Highlights:
-- Revenues increased 34% year over year to $13.5 million
-- Gross profit increased 37% year over year to $3.8 million
-- Operating income was up 5% year over year to $2.2 million
-- Net income was $1.3 million, or $0.07 per share
Commenting on the results, Mr. Tai-ming Ou, Chairman and CEO of the Company, said: "2006 was a very successful year for China Clean Energy. Our sales reached new highs, as we benefited from the launch of our biodiesel fuel product in late 2005. In addition, China Clean Energy successfully became a publicly traded company in the U.S. which was an important milestone, as it gives us access to the capital necessary to expand our biodiesel capacity, and to lay the foundation to becoming a global leader in the biodiesel industry."
Revenues for the twelve months ended December 31, 2006 increased 34% over the same period in 2005 to $13.5 million, driven by the launch of the Company's biodiesel fuel product at the end of 2005, as well as the Company's expanded sales force. Net income reached $1.3 million for a 9.4% net margin, down 3.1% over 2005 as a result of one time expenses of $464,550 associated with the Company's reverse merger transaction during the fourth quarter, as well as increased spending on auditing, legal services, investor relations, and financial advisory services.
Gross profit for the year 2006 increased 37% from the same period last year to $3.8 million, or 28% of revenue. This increase in gross profit was due to an increase in sales and better utilization of the Company's manufacturing facilities.
Selling, general and administrative expenses were $941,225 in 2006 or 7% of revenue, compared to $662,812 in 2005. Operating income for the twelve months ending December 31, 2006, increased 5% to $2.2 million, or 16% of sales, compared to $2.1 million for the same period of 2005.
Financial Condition
At December 31, 2006, the Company had $2.2 million in total cash and short-term investments, $3.4 million in working capital, and $1.3 million in short-term debt. Cash flow from operations for the twelve months ended December 31, 2006, totaled $1.4 million, up from $1.3 million in 2005. Capital expenditures totaled $2.1 million in the twelve months ended December 31, 2006. Shareholders' equity stood at $10.6 million at the end of 2006, compared to $8.3 million at year end 2005.
Business Outlook
In order to participate in the expected rapid growth of the biodiesel industry in China, on October 24, 2006, China Clean Energy Inc. (formerly Hurley Exploration Inc.), completed a reverse merger with China Clean Energy Resources, Ltd., a privately-held British Virgin Islands corporation, to reorganize as a publicly-traded company. The transaction was consummated on October 24, 2006, resulting in China Clean Energy Resources, Ltd. and its operating subsidiary in China, Fujian Zhongde Technology Co., Ltd., becoming 100% owned by China Clean Energy Inc. This transaction will give the Company access to the US capital markets and allow it to broaden its investor base and to support the accelerated growth of its business.
"Our strategy going forward is to focus on expanding our biodiesel capacity rapidly. We recently announced an agreement to acquire land usage rights in the Fuqing Jiangyin Industrial Park, and we are in the planning stages of adding 100,000 tons of additional biodiesel capacity in two phases, the first 50,000 tons expected to come on stream in the first half of 2008. In addition, we will continue to try to leverage our expertise in the manufacturing of specialty chemicals from renewable resources as well as our supplier relationships to attain a favorable cost structure," Mr. Ou stated. "We are very pleased with our progress to-date in executing our plan and we are excited about the opportunities ahead for profitable growth as we continue the build out of our biodiesel production capacity."
About China Clean Energy:
China Clean Energy, through its wholly-owned subsidiary, Fujian Zhongde Technology Co., Ltd., is engaged in the development, manufacturing, and distribution of biodiesel fuel and specialty chemical products made from renewable resources. Since its inception, the Company has been engaged in the manufacture of high-quality specialty chemical products from renewable resources. Through its research and development efforts, the Company developed a proprietary process for refining biodiesel fuel from waste grease and certain vegetable oils. Using this proprietary process, the China Clean Energy began producing biodiesel in 2005 and commenced selling biodiesel commercially starting in December 2005.
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's ability to raise additional capital to finance the Company's activities; the effectiveness, profitability, and the marketability of its products; legal and regulatory risks associated with the share exchange; the future trading of the common stock of the Company; the ability of the Company to operate as a public company; the period of time for which its current liquidity will enable the Company to fund its operations; the Company's ability to protect its proprietary information; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, they cannot assure you that their expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
CONSOLIDATED CONDENSED INCOME STATEMENT, BALANCE SHEET and CASHFLOW STATEMENT FOLLOW
China Clean Energy, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(US$ - Audited)
Year Ended December 31,
2006 2005
Net sales of products $13,489,710 $10,040,188
Government Subsidy 9,640 43,500
Total revenues 13,499,350 10,083,688
Operating costs and expenses:
Cost of goods sold 9,699,164 7,270,006
Selling and marketing 411,850 390,259
General and administrative 529,377 272,553
Expenses relating to the "reverse
acquisition" of CCER 464,550 --
Depreciation of property, plant and
equipment 34,771 34,039
Amortization of intangible assets 204,948 66,579
Total operating costs and expenses 11,344,660 8,033,436
Income from operations 2,154,690 2,050,252
Interest income 7,001 4,334
Interest expense (89,137) (64,491)
Income before income taxes 2,072,554 1,990,095
Income taxes (802,694) (679,884)
Net income $1,269,860 $1,310,211
Earnings per common share:
Basic $0.07 $0.08
Diluted $0.07 $0.08
Weighted average number of common shares
used to compute earnings (loss) per common
share:
Basic 17,017,580 15,995,000
Diluted 17,017,580 15,995,000
China Clean Energy, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEET
(US$ - Audited)
December 31, December 31,
2006 2005
Assets
Current Assets
Cash and cash equivalents $2,241,712 $3,175,128
Accounts receivable, net of allowance for
doubtful
accounts of $228,604 and $170,822
respectively 1,962,403 1,537,402
Other receivable - refundable taxes 24,904 --
Due from related parties -- 14,875
Inventories 941,933 1,300,134
Prepaid expenses 37,696 --
Total Current Assets 5,208,648 6,027,539
Property, plant and equipment, net 4,692,200 2,824,026
Intangible assets, net 2,430,504 1,981,130
Deposit paid in connection with
contract for purchase of land use rights 95,033 --
Total Assets $12,426,385 $10,832,695
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $386,719 $672,853
Short-term bank loan 1,282,462 1,239,612
Income taxes payable 117,964 366,353
Due to related parties 6,419 302,944
Total Current Liabilities 1,793,564 2,581,762
Stockholders' Equity
Common stock par value $.001 per share;
authorized
100,000,000 shares; issued and outstanding
21,512,269
and 15,995,000 shares, respectively 21,512 15,995
Additional paid-in capital 7,034,473 5,596,490
Retained earnings 3,161,747 2,645,307
Accumulated other comprehensive income
(loss) 415,089 (6,859)
Total stockholders' equity 10,632,821 8,250,933
Total Liabilities and Stockholders'
Equity $12,426,385 $10,832,695
China Clean Energy, Inc. and Subsidiaries
CASH FLOW STATEMENT
(US$ - Audited)
Year Ended December 31,
2006 2005
Operating activities
Net income $1,269,860 $1,310,211
Adjustments to reconcile net income to net
cash
provided by (used in) operating activities:
Stock-based compensation 178,500 0
Depreciation of property, plant and
equipment 402,138 328,345
Amortization of intangible assets 204,948 66,579
Changes in operating assets and liabilities:
Accounts receivable, net (433,820) (879,454)
Other receivable (24,904) 0
Due from related parties 14,875 (359)
Inventories 358,201 710,030
Prepaid expenses (37,696) 0
Accounts payable and accrued liabilities (286,134) (450,784)
Income taxes payable (248,389) 232,273
Net cash provided by (used in) operating
activities 1,397,579 1,316,841
Investing activities
Property, plant and equipment additions (2,063,652) (237,897)
Intangible assets acquired (545,225) (743,760)
Deposit paid in connection with
contract for purchase of land use rights (95,033) 0
Net cash provided by (used in) investing
activities (2,703,910) (981,657)
Financing activities
Net proceeds from sale of common stock
and capital contributions 1,265,000 1,983,380
Short-term bank loan 42,850 695,246
Due to related parties (296,525) (384,604)
Dividends paid (753,420) (741,628)
Net cash provided by (used in) financing
activities 257,905 1,552,394
Effect of exchange rate changes on cash and
cash
equivalents 115,010 (6,859)
Increase (decrease) in cash and cash
equivalents (933,416) 1,880,719
Cash and cash equivalents, beginning of
period 3,175,128 1,294,409
Cash and cash equivalents, end of period $2,241,712 $3,175,128
Supplemental disclosure of cash flow
information:
Interest paid $89,137 $64,491
Income taxes paid $1,051,083 $679,884
