TAIYUAN CITY, China, September 14, 2012 /PRNewswire-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE MKT: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today announced its financial results for the fiscal year ended June 30, 2012.
Fiscal Year 2012 Financial Highlights: (Year-over-Year, 12-Month Results)
"We are pleased to deliver another year of record performance," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "With the continued strong demand for petroleum products in Shanxi Province, revenues and net income reached an all-time high. Once the Huajie Petroleum asset acquisition is completed, we are set to quickly ramp operations at the new facility to drive further growth in the new fiscal year."
Summary of Fiscal 2012 Results of Operations
Revenues - During the year ended June 30, 2012, Longwei's sales increased 6.0% to $510.6 million, up from $481.6 million in 2011. The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of $256.3 million and $233.8 million, respectively, during fiscal 2012. The sales increase was primarily due to an increase in product sales price. The weighted average sales price per metric ton ("mt") of petroleum products sold increased approximately 17.7% to $1,199/mt from $1,019/mt for the years ended June 30, 2012 and 2011, respectively. The Company continues to allocate product sales between its two facilities to better service its customer base.
Longwei's revenues are derived from two segments: direct product sales and agency fees. For direct product sales, the Company purchases, takes physical possession of, and sells diesel, gasoline, fuel oil and solvents. For agency fees, the Company acts as a purchasing agent, earning a fee or commission by allowing intermediaries to use its licenses and buying power to purchase directly from the refineries. During the year ended June 30, 2012, compared to the prior fiscal year, Longwei's product sales increased $32.0 million or 7.0% from $458.1 million to $490.1 million, and agency fees decreased $2.9 million or 12.5% from $23.5 million to $20.5 million.
For the years ended June 30, 2012 and 2011, direct product sales revenues accounted for 96.0% and 95.1% of total revenues, and agency fees accounted for 4.0% and 4.9% of total revenues, respectively.
Total sales volume for the year ended June 30, 2012 dropped 9.0% to 408,880mt from 449,544mt for the year ended June 30, 2011. The drop in volume was primarily due to lower demand from certain customers because of rising fuel prices between the periods and the general economic slowdown in the PRC. During this timeframe, Longwei also declined certain sales opportunities to maintain its historical margin range during a period of rising inventory costs, while carefully managing its cash flow due to the large deposit paid for the Huajie Petroleum assets. The deposit of $87.1 million has been paid from cash generated through operations.
The increase in the price per mt of petroleum products was due to the increase in international crude oil prices and corresponding price increases set by the PRC to retail petroleum prices. During fiscal 2011 and 2012, the PRC increased retail petroleum prices six times and decreased retail prices three times.
Revenues for Longwei's fourth fiscal quarter of 2012 (three months ended June 30, 2012) increased $7.1 million or 5.5% to $136.3 million from $129.2 million for the third fiscal quarter of 2012 (three months ended March 31, 2012). Sales volume for the fourth fiscal quarter of 2012 increased 8,361mt or 8.2% to 110,217mt from 101,856mt for the third fiscal quarter of 2012. During the fourth fiscal quarter of 2012, the weighted average sales price per mt of petroleum products sold decreased approximately $38/mt or 3.1% to $1,188/mt from $1,226/mt because of PRC retail price decreases in both May and June 2012. These price decreases more closely aligned the PRC retail petroleum prices to the world prices during the fourth fiscal quarter of 2012 based on the decrease in crude oil prices.
The Company has 46 major customers, each accounting for at least 1% (or approximately $5.1 million) or more of total revenues. No customer accounted for more than 2.7% or 2.8% of Longwei's total revenues, respectively, for the years ended June 30, 2012 and 2011. The Company's top ten customers by revenues for the years ended June 30, 2012 and 2011 cumulatively represented approximately 23.7% and 24.0% of total revenues, respectively. No customer accounted for more than 7.3% or 8.7% of the Company's total accounts receivable balance at June 30, 2012 and 2011, respectively.
Cost of Sales - Cost of sales increased by $38.4 million or 10.0% to $422.1 million for the year ended June 30, 2012, compared to $383.7 million for the year ended June 30, 2011. As a percentage of total revenues, total cost of sales between the periods increased by 3.0% as a percentage of revenues to 82.7% from 79.7%. The increase in cost of sales was primarily due to higher weighted average inventory costs during a period of rising international prices and an extended period of lower retail prices implemented by the PRC to contain inflation. During the year ended June 30, 2012, the PRC retail price was lowered in October at a time when international crude prices subsequently increased. The PRC later adjusted retail prices up in February and March 2012 and then back down in May and June 2012 to more accurately reflect worldwide crude oil prices.
The Company also experienced a drop in agency fee revenues of $2.9 million or 12.5% to $20.5 million during the year ended June 30, 2012, compared to $23.5 million during the year ended June 30, 2011. When the Company earns higher agency fees, the net effect lowers the percentage of total cost of sales because there are no costs associated with the agency fees.
Longwei pays market prices to its refinery suppliers and carefully manages its inventory levels to adjust to pricing fluctuations. The 12-month weighted average cost basis per metric ton of product sold increased by $178/mt or 20.8% to $1,032/mt from $854/mt during the years ended June 30, 2012 and 2011, respectively. During the year ended June 30, 2012, the Company's gross profit margin on product sales declined 2.3% to 13.9% from 16.2% during the year ended June 30, 2011, because of higher inventory costs due to rising international crude oil prices.
Operating Expenses - Operating expenses for fiscal 2012 totaled $4.7 million as compared to $6.2 million for fiscal 2011. As a percentage of revenues, operating expenses decreased to 0.9% for the fiscal year ended June 30, 2012 from 1.3% for the fiscal year ended June 30, 2011. Operating income decreased 8.6% to $83.8 million during fiscal 2012, primarily due to the cost increases in the petroleum market and the retail price decrease in the PRC.
Net Income - Net income increased by $2.4 million or 3.8% to $65.1 million for the year ended June 30, 2012 from $62.7 million for the year ended June 30, 2011, primarily due to the reasons set forth above. Net income attributable to common shareholders increased 4.1% to $65.1 million for the year ended June 30, 2012 from $62.5 million for the year ended June 30, 2011.
EPS - The Company's basic GAAP earnings per share increased $0.01 or 1.6% to $0.65 from $0.64 for the year ended June 30, 2012 and 2011, respectively. The Company's diluted GAAP earnings per share decreased $0.01 or 1.6% to $0.61 from $0.62 for the year ended June 30, 2012 and 2011, respectively.
Liquidity and Capital Resources
Longwei's current assets increased $65.4 million or 45.9% to $208.0 million at year-end June 30, 2012 from $142.6 million at year-end June 30, 2011, primarily due to the increase in advances to suppliers to lock in pricing and future availability of product to take advantage of fluctuations in international crude oil prices. Longwei also maintained a cash deposit of $87.1 million for the purchase of the Huajie Petroleum fixed assets, accounted for under long-term fixed assets. Overall, Longwei had an increase in cash flows of $2.2 million during the 12-month period ended June 30, 2012, resulting from $5.2 million of cash provided by operating activities, $3.1 million of cash used in investing activities for facility and equipment improvements, $60,000 of cash used in financing activities for preferred stock dividend payments, and the effect of the exchange rate changes in cash of $206,000.
Longwei's current ratio is approximately 24:1 (current assets to current liabilities) and improves to approximately 35:1 including the fixed asset purchase deposit, but net of the fair value of the warrant derivative liability at June 30, 2012. Total current assets, including the fixed asset purchase deposit, were $295.1 million as of June 30, 2012. Longwei has no long-term debt as of June 30, 2012.
The average age of inventory increased to 45 days from 41 days during the year ended June 30, 2012 compared to the year ended June 30, 2011 to account for additional product purchases for on-hand inventory before a period of rising prices to take advantage of the Company's large storage capacity. During this time, Longwei also increased its advances to suppliers to lock in pricing and availability based on uncertainty associated with the international crude oil price fluctuations from tensions in the Middle East. The ratio of supplier advances to inventory increased to approximately 2.1:1 at June 30, 2012 from 1.1:1 at June 30, 2011, and the combined balance in both inventory on-hand and advances to suppliers increased $53.2 million or 48.7% to $162.5 million from $109.2 million during the 12-month period. Longwei has used its working capital to increase inventory and product availability based on current changes in market price. The Company is balancing its working capital to take advantage of pricing opportunities, as well as balancing the funding required to complete its acquisition of the Huajie Petroleum assets. The Company's accounts receivable, advances to suppliers, and inventory balances have now been built back up to historical levels based on sales last utilized at December 31, 2010, prior to operating cash flow being used for the deposit of the Huajie Petroleum assets.
Plan of Operations
Longwei anticipates the completion of the approximately $110.9 million asset purchase of Huajie Petroleum as soon as possible based on the Company's working capital management. The Company is currently negotiating potential financing opportunities, which may allow Longwei to accelerate the closing and provide additional working capital to shorten the ramp-up time for operations. Longwei expects to continue to expand its customer base by utilizing the Company's distribution platforms. The Company's strategy is to leverage its customer and supplier relationships to develop additional business. Management may also look for opportunities to expand its business that are considered accretive to earnings.
Longwei will continue to operate within its business model, which acts as a hedge on pricing levels and allows the Company a competitive advantage by utilizing Longwei's large storage capacity to adjust inventory levels based on the anticipated movement of industry pricing. Utilizing its excess storage capacity allows Longwei flexibility to take advantage of pricing, supply and demand fluctuations within the marketplace. The Company's inventory on-hand and supplier advance balance with refineries allows Longwei to lock in supply so that the Company can react quickly to purchases based on the timing of international crude oil pricing movements and the PRC pricing level adjustments.
Michael Toups, Chief Financial Officer of Longwei, stated, "We continue to capitalize on the growing domestic demand for petroleum products in China and expect strong top-line and bottom-line results in fiscal 2013. The pending addition of the Huajie Petroleum facility in northern Shanxi Province will provide an additional catalyst for growth in the quarters ahead."
Mr. Toups continued, "On September 11, 2012, China's National Development and Reform Commission increased gasoline prices by 6.1 percent and diesel prices by 6.5 percent per metric ton due to rising international crude oil prices. The adjustment will enable us to raise prices on our petroleum products, which we believe will strengthen our revenues and profit margins. By carefully managing our inventory levels in line with oil price fluctuations, and continuing to execute our business strategy, we expect improved shareholder value over the long term."
Longwei was recently named to the Forbes list of "Asia's 200 Best Under a Billion" from a universe of 15,000 companies. Forbes ranked the companies based on sales growth, earnings growth and return on equity in the past 12 months and over three years. As was reported, Longwei's three-year track record is 45% sales growth, 28% earnings per share growth and 28% return on equity. The Forbes article can be found at: http://www.forbes.com/sites/christinasettimi/2012/07/25/asias-200-best-under-a-billion
Conference Call and Webcast
Management will host a conference call to discuss these financial results on Monday, September 17, 2012 at 10:00 a.m. EDT (7:00 a.m. PDT).
To participate in the call, please dial (888) 437-9274, or (719) 325-2214 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.longweipetroleum.com, or alternately at http://ViaVid.net.
A replay of the call will be available for two weeks from 1:00 p.m. EDT on September 17, 2012, until 11:59 p.m. EDT on October 1, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 1342663. In addition, a recording of the call will be available via the Company's website at http://www.longweipetroleum.com for one year.
About Longwei Petroleum Investment Holding Limited
Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storage and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 120,000 metric tons located at storage facilities in Taiyuan and Gujiao, Shanxi. The Company's Taiyuan and Gujiao facilities can store 50,000 metric tons and 70,000 metric tons, respectively. The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.
The Company seeks to earn profits by selling its products at competitive prices with timely delivery to coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue from agency fees by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.
For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at info@redchip.com.
Forward-Looking Statements
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.
Contact:
At the Company:
Michael Toups, Chief Financial Officer
U.S. Office +1 727-641-1357
mtoups@longweipetroleum.com
http://www.longweipetroleum.com
Investor Relations:
Mike Bowdoin
RedChip Companies, Inc.
Tel: +1-800-733-2447, Ext. 110
Email: info@redchip.com
Web: http://www.redchip.com
Longwei Petroleum Investment Holding Limited and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
June 30, 2012 | June 30, 2011 | |||||||
Assets | (In Thousands) | |||||||
Current Assets: | ||||||||
Cash | $ | 11,578 | $ | 9,422 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts of $0 in 2012 and 2011 | 33,935 | 23,883 | ||||||
Inventories | 52,619 | 51,489 | ||||||
Advances to Suppliers | 109,865 | 57,756 | ||||||
Total Current Assets | 207,997 | 142,550 | ||||||
Deposit | 87,103 | 85,093 | ||||||
Property Plant and Equipment, Net | 47,202 | 45,662 | ||||||
Total Assets | $ | 342,302 | $ | 273,305 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts Payable | $ | 750 | $ | 589 | ||||
Warrant Derivative | 320 | 2,893 | ||||||
Taxes Payable | 7,687 | 8,096 | ||||||
Total Current Liabilities | 8,757 | 11,578 | ||||||
Total Liabilities | 8,757 | 11,578 | ||||||
Stockholders' Equity: | ||||||||
Preferred Stock, No Par Value, 100,000,000 Shares Authorized; 914,643 and 914,643 Issued and Outstanding as of June 30, 2012 and 2011 | 418 | 418 | ||||||
Common Stock, No Par Value; 500,000,000 Shares Authorized; 100,889,966 and 100,751,966 Issued and Outstanding as of June 30, 2012 and 2011 | 31,667 | 31,502 | ||||||
Additional Paid-in Capital | 7,992 | 7,992 | ||||||
Retained Earnings | 261,696 | 196,641 | ||||||
Other Comprehensive Income | 31,772 | 25,174 | ||||||
Total Stockholders' Equity | 333,545 | 261,727 | ||||||
Total Liabilities and Stockholders' Equity | $ | 342,302 | $ | 273,305 | ||||
Longwei Petroleum Holding Limited and Subsidiaries | |||||||
Consolidated Statements of Operations and Other Comprehensive Income | |||||||
For the Years Ended June 30, | |||||||
2012 | 2011 | ||||||
(In Thousands, Except Per Share Data) | |||||||
Net Sales | $ | 510,593 | $ | 481,553 | |||
Cost of Sales | 422,118 | 383,730 | |||||
Gross Profit | 88,475 | 97,823 | |||||
Operating Expenses | 4,700 | 6,154 | |||||
Operating Income | 83,775 | 91,669 | |||||
Derivative Income (Expense) | 2,573 | (5,447) | |||||
Interest Income | 20 | 20 | |||||
Interest Expense | - | - | |||||
Income Before Income Tax Expense | 86,368 | 86,242 | |||||
Income Tax Expense | (21,253) | (23,524) | |||||
Net Income | 65,115 | 62,718 | |||||
Foreign Currency Translation Adjustment | 6,598 | 12,983 | |||||
Comprehensive Income | $ | 71,713 | $ | 75,701 | |||
Net Income | $ | 65,115 | $ | 62,718 | |||
Preferred Stock Dividends Paid in Cash | (60) | (201) | |||||
Net Income Attributable to Common Stockholders | $ | 65,055 | $ | 62,517 | |||
Earnings per Common Share: | |||||||
Basic | $ | 0.65 | $ | 0.64 | |||
Diluted | $ | 0.61 | $ | 0.62 | |||
Weighted Average Common Shares Outstanding: | |||||||
Basic | 100,765 | 97,873 | |||||
Diluted | 101,773 | 101,684 | |||||
Longwei Petroleum Holding Limited and Subsidiaries | |||||||
Consolidated Statements of Operations and Other Comprehensive Income | |||||||
For the Years Ended June 30, | |||||||
2012 | 2011 | ||||||
(In Thousands, | |||||||
Cash Flows From Operating Activities: | |||||||
Net Income | $ | 65,115 | $ | 62,718 | |||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: | |||||||
Depreciation and Amortization | 2,684 | 2,266 | |||||
Stock Based Compensation | 165 | 902 | |||||
Change in Warrant Derivative Liability | (2,573) | 5,447 | |||||
(Increase) Decrease in Assets: | |||||||
Accounts Receivable | (9,432) | 3,334 | |||||
Inventories | 87 | (15,547) | |||||
Advances to Suppliers | (50,444) | 19,989 | |||||
Increase (Decrease) in Liabilities: | |||||||
Accounts Payable | 38 | (263) | |||||
Taxes Payable | (598) | 572 | |||||
Other Current Liabilities | 109 | 252 | |||||
Net Cash Provided By (Used in) Operating activities | 5,151 | 79,670 | |||||
Cash Flows From Investing Activities: | |||||||
Deposit made to Acquire Fixed Assets | - | (82,984) | |||||
Purchase and Improvements to Land and Buildings | (3,141) | (2,031) | |||||
Net Cash Provided By (Used in) Investing Activities | (3,141) | (85,015) | |||||
Cash Flows From Financing Activities: | |||||||
Proceeds from the Exercise of Warrants | - | 2,908 | |||||
Payment of Dividends | (60) | (201) | |||||
Net Cash Provided By (Used in) Financing Activities | (60) | 2,707 | |||||
Effect of Exchange Rate Changes in Cash | 206 | 1,935 | |||||
(Decrease) Increase in Cash | 2,156 | (703) | |||||
Cash, Beginning of Year | 9,422 | 10,125 | |||||
Cash, End of Year | $ | 11,578 | $ | 9,422 | |||
Supplemental Cash Flow Information: | |||||||
Cash Paid During the Year for: | |||||||
Income Taxes | $ | 22,956 | $ | 23,041 | |||
Supplemental Schedule of Noncash Investing and Financing Activities: | |||||||
Conversion of Preferred Stock into Common Stock | $ | - | $ | 2,754 | |||
Common Stock issued for Exercise of Warrants | $ | - | $ | 7,546 | |||
