FUQING CITY, China, Aug. 8 /Xinhua-PRNewswire/ -- 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 record financial results for the second quarter ended on June 30, 2007.
Second Quarter 2007 Highlights
-- Revenue reached a record $5.3 million, up 61% from the second quarter
of 2006
-- Gross Profits reached a record $ 1.4 million, up 61% from the second
quarter of 2006
-- Operating Income totaled $818,516, compared to $735,461 in the second
quarter of 2006
-- Net Income rose to $793,110, or $0.04 per share, up 60% from the second
quarter of 2006
"We saw strong growth in our biodiesel and specialty chemical sales as we benefited from our recent capacity expansion for the full quarter," said Mr. Tai-ming Ou, Chairman and CEO of the Company, "We are also very pleased with the progress we made towards building our new biodiesel plant and expect to complete the approval process and secure a line of credit of up to $6.0 million by November of 2007."
Second Quarter 2007 Results
Net revenue for the second quarter was $5.3 million, an increase of 28% sequentially and 45% year-over-year. The Company shipped 2,745 tons of biodiesel fuel, equivalent to approximately 825,000 gallons, and 3,856 tons of specialty chemicals during the quarter, an increase of 68% and 14% over the same period of 2006, respectively. China Clean Energy benefited from strong demand for its biodiesel product in China, as well as above-expected demand for specialty chemicals from our international customers, with exports increasing to 45% of our total revenue during the quarter, compared to 28% of total revenue in the comparable period of 2006. Gross profit for the second quarter was $1.4 million, up 61% from the comparable period in 2006. Gross margin for the second quarter of 2007 was 27.2%, unchanged from the second quarter of 2006.
Additionally, China Clean Energy's feedstock prices have been quite stable over the last two years and the Company has entered into annual contracts with its top 10 feedstock suppliers. The Company's feedstock costs (including transportation costs) ranged between $331 to $368 per ton in the second quarter of 2006 and between $316 and $368 per ton in the second quarter of 2007.
Operating expenses came in at $611,802 for the second quarter of 2007, a 300% increase from $152,923 recorded in the second quarter of 2006. The increase was primarily due to higher legal, auditing and other professional fees resulting from China Clean Energy's new status as a public company as well as the Company's increased efforts to market its specialty chemical products internationally. Despite the Company's higher operating cost, operating profits were up 11.3% to $818,516 with operating margin coming in at 15.6% for the second quarter of 2007 compared with approximately $735,461 and 22.6% in the second quarter of 2006, respectively. The Company expects operating margins to improve in the future as it increases production capacity and benefits from economies of scale.
Recently the Company gained status as a Wholly Foreign Owned Enterprise ("WFOE") in China, and its operating subsidiary, Fujian Zhongde, applied for and was granted approval for income tax exemptions for 2007 and followed by 50% exemption in the subsequent three-year period. As a result, the Company did not record income tax expense in the second quarter of 2007, compared to $221,306 tax expenses recorded in the comparable period of 2006.
Net income for the second quarter of 2007 was $793,110 or $0.04 per basic and diluted share, versus net income of $496,153, or $0.03 per share on both basic and diluted basis for the comparable period of 2006.
First Half 2007 Results
Revenue for the six months ended June 30, 2007 increased 53.5% over the comparable period in 2006 to $9.4 million. Gross profits were up 53.3% in the same period to $2.6 million, with gross margin coming in at 27.5%. Operating expenses in the first half of 2007 increased 194% to $1.3 million as a result of our overall growth as well as our public status-related administrative expenses. Operating profits in the first half of 2007 were up 1.2% over the comparable period in 2006 to $1.2 million, with operating margins coming in at 14.2%. Net income for the six months ended June 30, 2007 were $1.2 million or $0.06 per basic and diluted shares, an increase of 54.5% and 14.9%, respectively. Cash flow from operations for the six months ended June 30, 2007 totaled $527,820, compared to $665,377 in the comparable period in 2006. Capital expenditures in the first half of 2007 totaled $1.9 million, including a partial payment for land-usage rights to build the Company's new 100,000 ton-per-annum biodiesel plant.
Financial Condition
At June 30, 2007, China Clean Energy had $1.1 million in total cash and short-term investments, approximately $3.4 million in working capital, and $1.5 million in debt. Shareholder's equity at the end of the second quarter stood at $12.1 million, a 14% increase over the $10.6 million recorded at the end of 2006.
Business Outlook
The outlook for the biodiesel fuel demand in China remains very positive as the economy in China has continued to grow rapidly, resulting in increased demand for motor vehicles as well as transportation fuel. In addition the Chinese government remains committed to reducing the country's reliance on imported energy and to improve the environment by encouraging the development of alternative renewable energy sources, such as biodiesel fuel. As a result the Company expects to see sustained and rapid growth in demand for biodiesel fuel in China over the next several years.
The outlook for the specialty chemicals business from renewable organic feedstock is also favorable as it benefits from increasing global awareness for the environment as a result of well-publicized concerns over global warming and climate change. The Company remains committed to its specialty chemicals segment as it enjoys strong long-term fundamentals, and it allows China Clean Energy to diversify its revenue and customer base, contributing to reduce risk.
"In March of 2007 we doubled our biodiesel production capacity to 10,000 tons per annum, and we have since been producing biodiesel fuel at full capacity, demonstrating the strong latent demand for biodiesel fuel in China. As we build our new biodiesel plant in Jiangyin to expand our biodiesel capacity by an additional 100,000 tons, equivalent to 30 million gallons per annum, we will be well positioned to participate fully in the expected rapid growth of the biodiesel fuel market in China, as well as to deliver solid results to our shareholders," stated Mr. Ou.
Conference Call
China Clean Energy will hold its second quarter conference call for all interested persons at 8:30 a.m. Eastern Time on August 8, 2007 to discuss its results. To participate in the live conference call, please dial 1-888-481- 7939 five to ten minutes prior to the scheduled conference call time. International callers should dial 1-617-847-8707. When prompted by the operator, mention Conference Passcode 82040026. If you are unable to participate in the call at this time, a replay will be available for seven days starting on Wednesday, August 8 at 12:00 p.m. Eastern Time. To access the replay, dial 1-888-286-8010, international callers dial 1-617-801-6888, and enter the passcode 81897408.
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, 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.
Contact:
China Clean Energy Inc. CCG Elite Investor Relations Inc.
Gary Zhao, CFO Crocker Coulson, President
Phone: +1-86-138-0133-9172 (China) Phone: +1-646-213-1915 (New York)
Email: gary.zhao@chinacleanenergyinc.com Ed Job, CFA
Phone: +1-646-213-1914
--FINANCIAL TABLES FOLLOW--
China Clean Energy, Inc. and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three months ended June 30, Six months ended June 30,
2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue: $ $ $ $
Net sales of
products 5,255,040 3,259,827 9,393,406 6,112,737
Government
subsidy - 1,202 - 7,167
Total revenue 5,255,040 3,261,029 9,393,406 6,119,904
Operating Costs and Expenses
Cost of goods
sold 3,824,722 2,372,645 6,814,671 4,437,849
Selling and
marketing 224,048 85,445 437,291 167,656
General and
administrative 315,813 21,935 765,377 147,873
Depreciation
of property,
plant and
equipment 22,802 8,192 35,015 16,422
Amortization
of intangible
assets 49,139 37,351 98,387 122,708
Total
operating
costs and
expenses 4,436,524 2,525,568 8,150,741 4,892,508
Income from
Operations 818,516 735,461 1,242,665 1,227,396
Other Income (Expense)
Interest income 1,429 2,125 3,931 4,318
Interest expense (26,835) (20,127) (52,780) (41,000)
Total Other
Income (Expense) (25,406) (18,002) (48,849) (36,682)
Income before
Income Taxes 793,110 717,459 1,193,816 1,190,714
Income Taxes - (221,306) - (417,946)
Net Income $793,110 $496,153 $1,193,816 $772,768
Other Comprehensive Income
Foreign currency
translation
adjustment 150,233 30,193 257,197 191,693
Comprehensive
Income $943,343 $526,346 $1,451,013 $964,461
Earnings per common share:
Basic $0.04 $0.03 $0.06 $0.05
Diluted $0.04 $0.03 $0.06 $0.05
Weighted average number of
common shares:
Basic 21,512,269 15,995,000 21,512,269 15,995,000
Diluted 21,512,269 15,995,000 21,512,269 15,995,000
China Clean Energy, Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEET
(US$)
June 30, December 31,
2007 2006
(Unaudited) (Audited)
Current Assets
Cash and cash equivalents $1,118,335 $2,241,712
Accounts receivable, net of
allowance for doubtful accounts of
$299,943 and $228,604, respectively 2,627,684 1,962,403
Other receivable - refundable value
added taxes - 24,904
Inventories 1,024,290 941,933
Prepaid expenses 332,851 37,696
Total Current Assets 5,103,160 5,208,648
Property, plant and equipment, net 4,634,295 4,692,200
Intangible assets, net 2,392,362 2,430,504
Deposits paid in connection with
contract for purchase of land use
rights 1,951,355 95,033
Total Assets $14,081,172 $12,426,385
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $493,958 $386,719
Current portion of bank indebtedness 1,174,409 1,282,462
Income taxes payable - 117,964
Due to related parties - 6,419
Total current liabilities 1,668,367 1,793,564
Noncurrent portion of bank
indebtedness 328,971 -
Total Liabilities 1,997,338 1,793,564
Commitments and Contingencies - -
Stockholders' Equity
Common stock par value $0.001 per
share, authorized
100,000,000 shares; issued and
outstanding 21,512,269
and 21,512,269 shares, respectively 21,512 21,512
Additional paid-in capital 7,034,473 7,034,473
Retained earnings 4,355,563 3,161,747
Accumulated other comprehensive
income (loss) 672,286 415,089
Total stockholders' equity 12,083,834 10,632,821
Total Liabilities and Stockholders'
Equity $14,081,172 $12,426,385
China Clean Energy, Inc. and Subsidiaries
CASH FLOW STATEMENT
(US$ - Unaudited)
Six months ended June 30,
2007 2006
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net income $1,193,816 $772,768
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities
Depreciation of property, plant and equipment 264,231 168,164
Amortization of intangible assets 98,387 122,708
Changes in operating assets and liabilities
Accounts receivable, net (665,281) (248,036)
Other receivable 24,904 -
Due from related parties - (221,593)
Inventories (82,357) 213,758
Prepaid expenses (295,155) -
Accounts payable and accrued liabilities 107,239 144,265
Income taxes payable (117,964) (316,657)
Net cash provided by (used in) operating
activities 527,820 635,377
Cash Flows from Investing Activities
Property, plant and equipment additions (89,805) (1,599,571)
Intangible asset additions - (541,100)
Deposits paid in connection with
contract for purchase of land use rights (1,856,322) -
Net cash provided by (used in)
investing activities (1,946,127) (2,140,671)
Cash Flows from Financing Activities
Increase (decrease) in current portion
of bank indebtedness (108,053) 12,506
Increase (decrease) in noncurrent
portion of bank indebtedness 328,971 -
Increase (decrease) in due to
related parties (6,419) -
Capital stock issued for cash - 50,000
Dividends paid - (753,420)
Net cash provided by (used in)
financing activities 214,499 (690,914)
Effect of exchange rate changes on
cash and cash equivalents 80,431 87,148
Increase (decrease) in cash and cash
equivalents (1,123,377) (2,109,060)
Cash and cash equivalents,
beginning of period 2,241,712 3,175,128
Cash and cash equivalents, end of period $1,118,335 $1,066,068
Supplemental disclosures of cash
flow information:
Interest paid $52,780 $41,000
Income taxes paid $ - $417,946
