FUQING, China, May 12 /Xinhua-PRNewswire/ -- China Clean Energy Inc. (OTC Bulletin Board: CCGY) ("China Clean Energy", "the Company") today reported financial results for the first quarter ended on March 31, 2008.
First Quarter 2007 Highlights
-- Revenue reached $4.5 million, up 8% from the first quarter of 2007
-- Gross Profit was $1 million, down 9% from the first quarter of 2007
-- Operating income totaled $311,686, compared to $446,834 in the first
quarter of 2007
-- Net income was $163,783, or $0.01 per share in the first quarter 2008
"The recent spike in the cost of our raw materials associated with the rapid increase in global crude oil prices and agricultural commodity prices in Asia and China during the quarter, combined with a stagnant wholesale diesel price in China impacted our results for this quarter," said Mr. Tai-ming Ou, Chairman and CEO of the Company. "We have made the necessary adjustments by shifting our focus away from biodiesel production and toward the sale of higher value-added specialty chemicals, the market for which is not regulated by the Chinese government."
First Quarter 2008 Results
Net revenue for the first quarter 2008 was $4.47 million, an increase of 8% over the same period in 2007. Biodiesel accounted for 12% and specialty chemicals for 88% of total revenue. The Company shipped 770 tons of biodiesel at an average price of $717 per ton after value added tax (VAT), and 2,909 tons of specialty chemicals (including dimer acid, printing inks, polyamide resins, hot melt adhesives, plant asphalt) at an average price of $1,350 per ton after VAT (including 1,000 tons of plant asphalt at $300 per ton). Exports accounted for 24% of the Company's specialty chemical shipments and 35% revenues.
Gross profit for the first quarter of 2008 was $1.04 million, compared to $1.15 million during first quarter of 2007. Gross margin for the first quarter of 2008 was 23.3%, down from 27.8% in the first quarter of 2007. The decrease in gross profit and gross margin was mainly due to an increase in the cost of raw materials, as the prices for waste cooking oil, cotton seed waste and rape seed waste feedstock, the principal raw materials of the Company's biodiesel and specialty chemical products, increased to over $500 per ton in February 2008, compared to an average cost of $320 per ton in the first quarter of 2007.
Operating expenses were $731,550 for the first quarter of 2008, as compared to $701,583 during the first quarter of 2007, representing a 4.3% increase.
The Company's higher operating cost structure resulted in lower operating profits, which were $311,686, with margins of 7.0%, in the first quarter of 2008, as compared to operating profits and margins of $446,834 and 10.8%, respectively, in the first quarter of 2007.
Net income for the first quarter of 2008 was $163,783, or $0.01 per basic and diluted share, as compared to net income of $400,706, or $0.02 per basic and diluted share, during the first quarter of 2007.
Private Placement
The Company completed a $15 million private placement of common stock and warrants in January 2008, that resulted in net proceeds of $13,627,403 of net proceeds to us. The proceeds will be used principally to build a refinery capable of producing 100,000 tons of biodiesel per year, or 100,000 tons specialty chemicals per year, or a combination of biodiesel and specialty chemicals at Jiangyin Industrial Park, Fuqing City, Fujian Province of China.
Financial Condition
At March 31, 2008, China Clean Energy had $6.2 million in total cash and approximately $9.3 million in working capital, and $0.2 million in debt. Cash flows from operations for the three months ended March 31, 2008 totaled $1.9 million, up from $236,301 during the three months ended March 31, 2007. This increase in cash flow from operations was attributable to $1.03 million of accounts receivable reductions, $440,595 in inventory reductions and our amortization of $253,618 of stock-based compensation expenses. Capital expenditures totaled $9.7 for the three months ended March 31, 2008 and shareholders' equity was $30.0 million, as compared to $14.8 million at the end of 2007.
Subsequent Events
On April 9, 2008, the Company engaged Moore Stephens Wurth Frazer and Torbet, LLP to serve as the Company's independent auditor. Moore Stephens Wurth Frazer and Torbet, LLP is an international independent auditing firm serving clients in many industries and geographic locations, and through its association with Moore Stephens International Limited in London has an international accounting network with over 621 offices in more than 95 countries.
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 specialty chemical products made from renewable resources.
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.
-- FINANCIAL TABLES FOLLOW --
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (UNAUDITED)
2008 2007
REVENUES $4,473,009 $4,138,366
COSTS OF GOODS SOLD 3,429,773 2,989,949
GROSS PROFIT 1,043,236 1,148,417
OPERATING EXPENSE
Selling and marketing 87,881 213,243
General and administrative 523,790 367,375
Depreciation and amortization 80,097 61,461
Research and development 39,782 59,504
Total operating expense 731,550 701,583
INCOME FROM OPERATIONS 311,686 446,834
OTHER INCOME (EXPENSE)
Interest income 7,022 2,524
Interest expense (27,755) (25,945)
Bank fee (4,934) (6,628)
Foreign Currency Transaction Loss (25,163) (16,079)
Loss on Disposal of Fixed Assets (490) --
Total other income (expense) (51,320) (46,128)
INCOME BEFORE PROVISION FOR INCOME
TAXES 260,366 400,706
PROVISION FOR INCOME TAXES 96,583 --
NET INCOME 163,783 400,706
OTHER COMPREHENSIVE INCOME
Foreign currency translation
adjustment 1,163,218 106,964
COMPREHENSIVE INCOME $1,327,001 $507,670
BASIC AND DILUTED EARNINGS PER SHARE
Weighted average number of shares 30,523,258 21,512,269
Earnings per share $0.01 $0.02
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2008 AND DECEMBER 31, 2007
A S S E T S
March 31, December 31,
2008 2007
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $6,199,022 $1,133,555
Accounts receivable, net of
allowance for doubtful accounts of
$310,495 and $407,593, as of March 31,
2008 and December 31, 2007,
respectively 1,860,909 2,795,363
Refundable income taxes 54,948 147,485
Inventories 967,714 1,361,478
Advances for inventory purchase 933,541 --
Prepaid expenses and other
receivables -- 32,330
Total current assets 10,016,134 5,470,211
PROPERTY, PLANT AND EQUIPMENT, NET 9,855,850 5,820,045
INTANGIBLE ASSETS 5,101,131 4,879,635
ADVANCES FOR CONSTRUCTION MATERIAL
AND EQUIPMENT PURCHASE 5,977,930 872,974
TOTAL ASSETS $30,951,045 $17,042,865
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $111,178 $150,557
Customer deposits 145,248 181,825
Accrued liabilities 149,633 83,824
Salaries payable 34,544 31,425
VAT payable 92,054 320,397
Other taxes payable 9,970 13,652
Short-term bank loans -- 1,028,228
Long-term bank loans - current
portion 195,532 202,792
Total current liabilities 738,159 2,012,700
NONCURRENT LIABILITIES
Long-term bank loans 215,796 241,097
TOTAL LIABILITIES 953,955 2,253,797
SHAREHOLDERS' EQUITY
Preferred stock, par value $0.0001
per share, authorized 10,000,000
shares, 0 shares issued and
outstanding -- --
Common stock, par value $0.0001 per
share, authorized 90,000,000
shares, 31,512,269 and 21,512,269
shares issued and outstanding as
of March 31, 2008 and December 31,
2007, respectively 3,151 2,151
Additional paid-in capital 20,933,855 7,053,834
Statutory reserves 785,536 785,536
Retained earnings 5,899,888 5,736,105
Accumulated other comprehensive
income (loss) 2,374,660 1,211,442
29,997,090 14,789,068
Total liabilities and
shareholders' equity $30,951,045 $17,042,865
CHINA CLEAN ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 (UNAUDITED)
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $163,783 $400,706
Adjusted to reconcile net income
to cash provided
by operating activities:
Depreciation 126,371 125,844
Amortization 59,407 49,248
Amortization of stock-based
compensation expense 253,618 --
Loss on disposal of assets 490 --
Changes in operating assets and
liabilities
Accounts receivable 1,028,595 (282,933)
Inventories 440,923 (73,565)
Other receivables and prepaid
expenses 32,330 (111,639)
Advances for inventory purchase (23,660) --
Accounts payable (42,189) 246,604
Customer deposit (43,216) --
Other payables and accrued
liabilities 66,010 --
Value added tax payables (236,551) --
Income tax and other tax
payables 92,421 (117,964)
Net cash provided by operating
activities 1,918,332 236,301
CASH FLOWS FROM INVESTING ACTIVITIES
Addition to construction in
progress (3,711,599) --
Purchase of property and
equipment (127,150) (26,815)
Proceeds from sale of equipment 1,747 --
Advances for construction
material and equipment purchase (5,850,585) (1,826,940)
Net cash used in investing
activities (9,687,587) (1,853,755)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) due to
related parties -- (6,419)
Net proceeds from issuance of
common stock 13,627,403 --
Payments on short-term bank loan (1,048,275) 242,410
Payments on long-term bank loans (49,977) --
Net cash provided by financing
activities 12,529,151 235,991
EFFECT OF EXCHANGE RATE ON CASH 305,571 36,929
INCREASE IN CASH AND CASH
EQUIVALENTS 5,065,467 (1,344,534)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,133,555 2,241,712
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $6,199,022 $897,178
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest expense $27,755 $25,945
Income taxes $86,113 $--
