Expects to Report 2008 Revenues of $210 Million and Net Income of $28.5 Million, Representing an Increase of 142% and 231%, Compared to 2007
XI'AN, China, Feb. 18 /PRNewswire-Asia/ -- China Bio Energy Holdings Group (OTC Bulletin Board: CBEH), a leading manufacturer and distributor of bio-diesel and distributor of petroleum-related products including gasoline, diesel, and heavy oil in China is providing shareholders with an update on changing market conditions and its impact on the Company's 2009 growth plans.
China's Oil Pricing Reform
For the past 9 years, China's fuel prices have been controlled by the National Development and Reform Commission (NDRC) and not set by market supply and demand. Effective January 1, 2009, the Chinese government implemented a new pricing regime for refined oil products, aimed to link domestic oil prices more closely to changes in the global crude oil prices in a controlled manner.
In January 2009, the average sales price for China Bio Energy's oil products, which includes gasoline, diesel and heavy oil decreased 22.3% to $641* per ton (equivalent to approximately $1.77 per gallon of gasoline and $2.04 per gallon of petro-diesel), compared to an average price of $825* per ton (equivalent to approximately $2.28 per gallon of gasoline and $2.62 per gallon of petro-diesel), during the year 2008. This decrease is substantially less than the drop in world crude oil prices during the same period because the NDRC had held the domestic prices at lower levels during 2008.
* Exchange Rate -- $6.84RMB = $1US; 2008 average was $6.95RMB = $1US
Impact on China Bio Energy
The recent decrease in oil prices has put downward pressure on the Company's oil distribution and retail gas station revenues, but as a distributor the company maintains a stable margin. Since bio-diesel is sold at a similar price to regular diesel, overall bio-diesel revenues are also impacted. However, it's important to note that the Company's bio-diesel profit margins have largely remained the same due to the decline in raw material prices. The price of waste cooking oil, which currently constitutes over 50% of the raw materials used by China Bio Energy, has dropped nearly 50%. The price of non-edible seeds, another raw material for China Bio Energy, has also declined by 20%. An important reason for this decrease is that many smaller biodiesel producers were forced to close recently due to their lack of distribution channels and economy of scale which prevents them to compete effectively. Additionally, since the Company's patented technology allows the manufacturing process to utilize different proportions of waste oil and/or non edible seeds, China Bio Energy is able to optimize gross margins based on input prices.
Business Outlook for 2009
The Company is confident about the outlook for 2009. Supporting growth is the continued increase in fuel consumption needed to accommodate a larger number of commercial and passenger vehicles used in China. China's auto industry is now the second largest in the world, having just surpassed Japan, and is on track to surpass the U.S. to become the largest in the world. During the month of January 2009, the number of passenger vehicles sold in China was higher than that of the U.S. for the first time. The Company also expects to benefit from the government's continued support for bio-fuel and various tax incentives.
China Bio Energy's management plans to focus on growing its biodiesel production, its distribution business, and expanding the footprint of its retail service stations. On the distribution and retail side, the Company benefits from its advantageous location, well-established supplier relationships as well as an extensive distribution network that has valuable railway access to reach remote parts of China that other distribution companies cannot currently reach. The company plans to strengthen its outreach in certain key distribution areas. It also plans to add another five to seven retail gas stations through acquisition or lease, which will benefit its overall distribution profit margins.
The Company also plans to expand its current bio-diesel production capacity of 100,000 tons to 150,000 tons, either through strategic acquisitions or through a new build-out in 2009. The Company anticipates $15 million in capital expenditures to accomplish this goal. China Bio Energy has secured enough raw materials to supply 150,000 tons of capacity, but will also continue to work towards securing more long-term sources of raw materials.
Management believes the increase in sales volume from these initiatives will not only offset the impact of current decrease in fuel prices but also favorably impact overall profits.
2008 Earnings and Future Guidance
Management expects to report fiscal year 2008 revenues of $211 million and net income of $28.5 million, an increase of 142% and 231%, respectively, compared to fiscal year 2007. Management will host a conference call to accompany its 2008 earnings release during the second half of March. During the conference call management will provide 2009 guidance and additional details on the initiatives discussed in this release.
"We are extremely pleased with our results to date and believe that our vertically integrated model provides a strong platform for significant future growth. The long-term growth of fuel consumption in the PRC, coupled with our licenses and distribution footprint provides meaningful barriers to entry as we continue to gain market share. The Company currently has approximately $20 million in cash and equivalents on an unaudited basis, and generates positive cash flow, which will collectively be utilized to execute its growth plan." Mr. Gao Xincheng, Chief Executive Officer of China Bio Energy Holdings Group concluded.
About China Bio Energy Holdings Group
CBEH is a distributor of refined oil products including gasoline, diesel, and heavy oil, and a manufacturer and distributor of bio-diesel fuel. CBEH's bio-diesel fuel is made at its 100,000-ton capacity facility in Shaanxi Province. Feedstock consists of naturally growing non-edible seeds and waste oil from restaurants. CBEH's bio-diesel can be used as a complete substitute for petro-diesel or can be blended with petro-diesel. The Company's products are sold via its own distribution network, which includes four fuel depots in Shaanxi Province that have both road and rail access.
Safe Harbor Statement
This press release contains certain statements that may include "forward- looking statements". All statements other than statements of historical fact included herein are "forward-looking statements". These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
