FUQING CITY, China, Nov. 7 /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 record financial results for the third quarter ended on September 30, 2007.
Third Quarter 2007 Highlights
-- Revenue reached a record $5.5 million, up 48% from the third quarter of
2006
-- Gross Profits reached a record $ 1.4 million, up 37% from the third
quarter of 2006
-- Operating Income totaled $861,257, up 9% from the third quarter of 2006
-- Net Income was $834,586, or $0.04 per share, up 67% from the third
quarter of 2006
“We continued to see strong demand for our biodiesel as well as our specialty chemical products as we benefited from our capacity expansion in the first half of the year,” said Mr. Tai-ming Ou, Chairman and CEO of the Company, “We also made significant progress towards the build-out of our new 100,000 tons, or 30 million gallons per annum, biodiesel plant in Jiangyin and as of today have completed the approval process and received our business license, with construction work now expected to start in the fourth quarter of 2007 and production start-up expected during the fourth quarter of 2008.”
Third Quarter 2007 Results
Net revenue for the third quarter was $5.5 million, an increase of 48% year-over-year. Biodiesel accounted for 29% and specialty chemical represented 71% of revenues. The Company shipped 3,000 tons of biodiesel fuel, equivalent to approximately 900,000 gallons, and 3,541 tons of specialty chemicals during the quarter, an increase of 91% and 34% over the same period of 2006, respectively. During the quarter, record-high international oil prices as well as the rapid growth in the Chinese economy contributed to strong demand for China Clean Energy biodiesel as well as specialty chemicals products. The Company continued to experience strong demand from international customers for its environmentally-friendly specialty chemicals, with exports reaching 36% of our total revenue during the quarter, compared to 40% of total revenue in the comparable period of 2006.
Gross profit for the third quarter was $1.4 million, up 37% from the comparable period in 2006. Gross margin for the third quarter of 2007 was 26.1%, down from 28.2% in the third quarter of 2006 due to a reduction in export tax rebates from 13% to 5% effective in July that was partially compensated by an 8% increase in export prices implemented in August.
Additionally, China Clean Energy’s feedstock prices have been relatively stable over the last two years as the Company has entered into annual contracts with its top 10 feedstock suppliers. The Company’s feedstock costs (including transportation costs) ranged between $311 to $347 per ton in the third quarter of 2007 compared to $350 and $363 per ton in the same period of 2006.
Operating expenses came in at $565,029 for the third quarter of 2007, a 123% increase from $253,278 recorded in the third 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 9% to $861,257 with operating margin coming in at 16% for the third quarter of 2007 compared with approximately $790,529 and 21% in the third 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.
In first half of 2007 China Clean Energy gained status as a Wholly Owned Foreign Enterprise (“WOFE”) in China, and its operating subsidiary, Fujian Zhongde, applied for and was granted approval for income tax exemptions for 2007 followed by 50% exemption or at 12% income tax rate in the subsequent three-year period. As a result, the Company did not record income tax expense in the third quarter of 2007, compared to $226,017 tax expenses recorded in the comparable period of 2006.
Net income for the third quarter of 2007 was $834,586 or $0.04 per basic and diluted share, versus net income of $500,698, or $0.03 per share on both basic and diluted basis for the comparable period of 2006.
Nine Month Results
Revenue for the nine months ended September 30, 2007 increased 51% over the comparable period in 2006 to $14.9 million. Gross profits were up 47% in the same period to $4.0 million, with gross margin coming in at 27%. Operating expenses in the nine months to September 30, 2007 increased 169% to $1.9 million as a result of our overall growth as well as our public status-related administrative expenses. Operating profits in the first nine months of 2007 were up 4% over the comparable period in 2006 to $2.1 million, with operating margins coming in at 16%. Net income for the nine months ended September 30, 2007 were $2.0 million or $0.09 per basic and diluted shares, an increase of 54% and 12.5%, respectively. Cash flow from operations for the nine months ended September 30, 2007 totaled $1.2 million, compared to $1.4 million in the comparable period in 2006. Capital expenditures for the nine months ended September 30, 2007 totaled $2.6 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 September 30, 2007, China Clean Energy had $1.3 million in total cash and short-term investments, approximately $3.9 million in working capital, and $1.5 million in debt. Shareholder’s equity at the end of the third quarter stood at $13.0 million, a 23% increase over the $10.6 million recorded at the end of 2006.
Business Outlook
The fundamentals of China Clean Energy’s business remain very strong, with international oil prices at record highs, the Chinese economy expanding at a rapid pace, and energy security rising to the top of the government’s agenda, all contributing to a positive environment for the biodiesel industry in China. The combination of strong transportation fuel demand and tightening supply has forced the Chinese government to mandate an 8% increase in retail fossil diesel prices from approximately $736 to $795 per ton effective on November 1, 2007, and as a result China Clean Energy has increased its wholesale biodiesel price from $633 to $694 per ton, which the Company expects will positively impact margins and accelerate its growth in the quarters ahead. In addition governments both abroad and in China remain committed to reducing the adverse impact of fossil fuel on the environment by encouraging the adoption of environmentally friendly alternatives. As a result the Company expects to see sustained and rapid growth in demand for its biodiesel fuel in China as well as for its specialty chemical products both in China and abroad over the next several years. Although most of the near term growth in revenues is expected to be driven by biodiesel demand, the Company remains committed to its specialty chemicals segment as it enjoys strong long-term fundamentals, and allows China Clean Energy to diversify its revenue and customer base, contributing to reduce risk.
“We remain on track with our plans to expand our biodiesel capacity, and expect to take advantage of rising fuel prices in China to accelerate our growth and expand our margins as we participate in the expected strong growth in demand for our products, and deliver positive results to our shareholders,” stated Mr. Ou.
Conference Call
China Clean Energy will hold its third quarter conference call for all interested persons at 10:00 a.m. Eastern Time on November 7, 2007 to discuss its results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-339-2688. International callers should dial 617-847-3007. When prompted by the operator, mention Conference Passcode 44552799. If you are unable to participate in the call at this time, a replay will be available for seven days starting on Wednesday, November 7 at 12:00 p.m. Eastern Time. To access the replay, dial 888-286-8010 and International callers should dial 617-801-6888 and enter the passcode 36980307.
This conference call will be broadcast live over the Internet and can be accessed by all interested parties on China Clean Energy’s website at http://www.chinacleanenergyinc.com . To listen to the live webcast, please go to China Clean Energy’s website at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on China Clean Energy’s website for 90 days.
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 oil-based waste. 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 expand its production capacity; 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 CONDENSED STATEMENTS OF INCOME
(US$ - Unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue:
Net sales of products $5,459,688 $3,687,425 $14,853,094 $9,800,162
Government subsidy -- 645 -- 7,812
Total revenue 5,459,688 3,688,070 14,853,094 9,807,974
Operating Costs and Expenses
Cost of goods sold 4,033,402 2,644,263 10,848,073 7,082,112
Selling and marketing 164,642 100,356 601,933 268,012
General and
administrative 345,436 103,172 1,110,813 251,045
Depreciation of property,
plant and equipment 18,928 8,934 53,943 25,356
Amortization of
intangible assets 36,023 40,816 134,410 163,524
Total operating costs and
expenses 4,598,431 2,897,541 12,749,172 7,790,049
Income from Operations 861,257 790,529 2,103,922 2,017,925
Other Income (Expenses)
Interest incomes 1,983 2,473 5,914 6,791
Interest expenses (28,654) (26,287) (81,434) (67,287)
Total Other Income
(Expenses) (26,671) (23,814) (75,520) (60,496)
Income before Income
Taxes 834,586 766,715 2,028,402 1,957,429
Income Taxes -- (266,017) -- (683,963)
Net Income $834,586 $500,698 $2,028,402 $1,273,466
Other Comprehensive Income
Foreign currency
translation adjustment 127,602 100,658 384,799 292,351
Comprehensive Income $962,188 $601,356 $2,413,201 $1,565,817
Earnings per common
share:
Basic $0.04 $0.03 $0.09 $0.08
Diluted $0.04 $0.03 $0.09 $0.08
Weighted average number
of common shares:
Basic 21,512,269 15,995,000 21,512,269 15,995,000
Diluted 21,512,269 15,995,000 21,512,269 15,995,000
China Clean Energy Inc. and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEET
(US$)
September 30, December 31,
2007 2006
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $1,330,791 $2,241,712
Accounts receivable, net of allowance
for doubtful accounts of $394,390
and $228,604, respectively 2,645,196 1,768,262
Other receivable - refundable value
added taxes -- 24,904
Other receivable - recoverable
corporate income taxes 143,101 --
Inventories 712,626 941,933
Advance payments to suppliers 904,318 194,141
Prepaid expenses 41,317 37,696
Total Current Assets 5,777,349 5,208,648
Property, plant and equipment, net 5,056,649 4,692,200
Intangible assets, net 2,383,772 2,430,504
Deposits paid in connection with
contract for purchase of land use
rights and related costs 1,951,355 95,033
Total Assets $15,169,125 $12,426,385
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued
liabilities $648,060 $386,719
Current portion of bank indebtedness 1,190,273 1,282,462
Income taxes payable -- 117,964
Due to related parties -- 6,419
Total current liabilities 1,838,333 1,793,564
Noncurrent portion of bank
indebtedness 284,770 --
Due to related parties -- --
Total Liabilities 2,123,103 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 5,190,149 3,161,747
Accumulated other comprehensive
income (loss) 799,888 415,089
Total stockholders’ equity 13,046,022 10,632,821
Total Liabilities and Stockholders’
Equity $15,169,125 $12,426,385
China Clean Energy Inc. and Subsidiaries
CASH FLOW STATEMENT
(US$ - Unaudited)
Nine months ended September 30,
2007 2006
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
Net income $2,028,402 $1,273,466
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities
Depreciation of property,
plant and equipment 398,604 282,226
Amortization of intangible assets 134,410 163,524
Changes in operating assets
and liabilities
Accounts receivable, net (876,934) (224,110)
Other receivables (118,197) --
Due from related parties (6,419) (269,141)
Inventory 229,307 689,214
Advance payments to suppliers (710,177) --
Prepaid expenses (3,621) --
Accounts payable and accrued liabilities 261,341 (259,426)
Income taxes payable (117,964) (245,329)
Net cash provided by (used for)
operating activities 1,218,752 1,410,424
Cash Flows from Investing Activities
Property, plant and equipment additions (763,053) (1,701,617)
Intangible assets additions -- (541,100)
Deposits paid in connection with contract
for purchase of land use rights (1,856,322) --
Net cash provided by (used for)
investing activities (2,619,375) (2,242,717)
Cash Flows from Financing Activities
Capital stock issued for cash -- 50,000
Increase (decrease) in current portion
of bank indebtedness (284,798) 26,725
Increase (decrease) in noncurrent
portion of bank indebtedness 477,379 --
Dividends paid -- (753,420)
Net cash provided by (used for)
financing activities 192,581 (676,695)
Effect of exchange rate changes on
cash and cash equivalents 297,121 160,117
Increase (decrease) in cash and cash
equivalents (910,921) (1,348,871)
Cash and cash equivalents, beginning
of period 2,241,712 3,175,128
Cash and cash equivalents, end of
period $1,330,791 $1,826,257
Supplemental disclosures of cash
flow information:
Interest paid $81,434 $67,287
Income taxes paid $-- $683,963
For more information, please contact:
China Clean Energy Inc.
Gary Zhao, CFO
Tel: +86-138-0133-9172 (China)
Email: gary.zhao@chinacleanenergyinc.com
CCG Elite Investor Relations Inc.
Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Ed Job, CFA
Tel: +1-646-213-1914
Email: ed.job@ccgir.com
