China Power Equipment Announces First Quarter 2013 Financial Results

XI'AN, China, May 16, 2013 /PRNewswire-FirstCall/ -- China Power Equipment, Inc. ("China Power Equipment" or the "Company," OTCBB: CPQQ), a manufacturer of a new generation of energy saving amorphous alloy transformer cores and transformers in China, today announced its financial results for the three months ended March 31, 2013.

First Quarter 2013 Highlights:

• Net revenues decreased 5.5% to $6.85 million year-over-year
• Net revenues from amorphous alloy transformer business increased 2.7% to 1.82 million year-over-year
• Gross margin for amorphous alloy transformer increased 2.7 percentage points to 23.6% year-over-year
• Net income increased 1.7% to $1.06 million with $0.04 in diluted EPS

"Although first fiscal quarter is typically our seasonably weakest of the year which affected the amount of revenues we were able to capture, we have observed a solid increase in the demand for energy-saving amorphous alloy transformers," said Mr. Song Yongxing, Chairman, CEO, and President of China Power Equipment Inc. "The acceleration in the growth of demand from State Grids Corps and industrial users was especially encouraging as we stepped up our marketing and sales efforts and strengthened our leading position in markets in Northwestern China. The Chinese government is further encouraging the promotion and application of energy-saving products. As one of the leading companies that has large-scale production capacity and outstanding new models of amorphous alloy transformers in northwestern China, we expect to capitalize on these trends and to capture a good share of these markets," concluded Mr. Song.

Total net revenues for the quarter decreased $0.40 million, or 5.5%, to $6.85 million, compared to the same period of 2012, which was primarily attributable to the lower average selling prices of the Company's amorphous alloy cores and transformers and the lower tonnage of amorphous alloy cores sold, partly offset by more units of amorphous alloy transformers sold. The lower tonnage of sold amorphous alloy cores in the first quarter of 2013 was mainly due to a longer Chinese New Year's holiday break and the Company's need to compensate its employees for the overtime worked in year 2012. During the three months ended March 31, 2013, the average selling prices per ton of amorphous alloy cores were 3.0% lower as compared with the same period of 2012. The slightly lower average prices of amorphous alloy cores were mainly due to the Company's marketing strategy to generate more demand and attract more orders. During the three months ended March 31, 2013, the average selling prices per unit of amorphous alloy transformers were 24.5% lower as compared with the same period of 2012. The lower average unit prices of amorphous alloy transformers were primarily due to more units of lower priced low capacity alloy transformers sold. Net revenues generated by sales of amorphous alloy cores decreased 8.2% to $5.04 million for the quarter, representing 73.5% of sales. Net revenues generated by sales of amorphous alloy transformers were $1.82 million, representing 26.5% of sales, an increase of 2.7% from the first quarter of 2012.

Gross profit decreased $137,420 or 7.5% during the three months ended March 31, 2013 as compared to the same period of 2012. The decrease of gross profit was primarily due to the lower sales from amorphous alloy cores. The consolidated gross profit margin (gross profit as a percent of total revenues) decreased 0.5 percentage points to 24.8% in the first quarter of 2013 from 25.3% in the first quarter of 2012. This was mainly due to the lower gross profit margin of amorphous alloy cores caused by its lower average selling prices. The gross profit margin of amorphous alloy transformers increased 2.7 percentage points due to the further ramp up of the transformer production lines.

Selling, general, and administrative ("SG&A") expenses totaled $0.40 million for the three months ended March 31, 2013, a decrease of approximately 25.9% from the same period of 2012, which was primarily attributable to a decrease in professional fee and administrative personnel expenses resulting from lower salary and lower director and officer insurance after the renewal in July 2012.

Net income for the first quarter ended March 31, 2013 was $1.06 million, an increase of 1.7% versus the same period of 2012, mainly due to the lower SG&A expenses and lower income taxes, offset by lower gross profit.

Financial Condition

Cash and cash equivalents were $24.26 million at March 31, 2013 compared to $21.98 million at December 31, 2012. Working capital increased to $33.14 million at March 31, 2013 from $31.63 million at the end of 2012. Accounts receivable was $8.59 million at March 31, 2013, a decrease of 15.02% from $10.10 million at the end of 2012 as the Company collected on certain prior period accounts receivable.

For the three months ended March 31, 2013, the Company generated $2.15 million of cash flow from operating activities, which was primarily attributable to the net income plus noncash expenses including depreciation, amortization and stock-based compensation, then increased by favorable changes in working capital.

About China Power Equipment, Inc.

China Power Equipment, Inc., is a U.S. corporation, which through its wholly-owned subsidiary, An Sen (Xi'an) Power Science & Technology Co., Ltd., and its affiliated operating company, Xi'an Amorphous Alloy Zhongxi Transformer Co., Ltd., designs, manufactures, and distributes amorphous alloy transformer cores and amorphous alloy core distribution transformers in the People's Republic of China. The company currently manufactures 59 different products, primarily amorphous alloy cores and amorphous alloy core transformers.

Safe Harbor Statement

Certain statements in this release concerning our future growth prospects are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. These forward-looking statements can be identified by terminology such as "anticipates," "believes," "could," "estimates," "expects," "future," "intends," "plans," "should," "will," and similar statements.

The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of the company's investments, risks and uncertainties regarding fluctuations in earnings, its ability to sustain its previous levels of profitability including on account of its ability to manage growth, intense competition, wage and inflation increases in China, its ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, its ability to successfully complete and integrate potential acquisitions, withdrawal of governmental fiscal incentives, political instability and regional conflicts, and legal restrictions on raising capital or acquiring companies outside China.

Additional risks that could affect the company's future operating results are more fully described in its filings with U.S. Securities and Exchange Commission. These filings are available at www.sec.gov and at www.chinapower-equipment.com.

The company may, from time to time, make additional written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q, and 8-K, in its annual report to shareholders, in news releases and other written materials, and in oral statements made by its officers, directors, or employees to third parties. The company does not undertake to update any forward-looking statements that may be made from time to time by or on its behalf, except as required under law.

For more information about China Power Equipment, please visit its website at www.chinapower-equipment.com.

For more information, please contact:

COMPANY:

Ms. Nicole Chen (English and Chinese)
Vice President of Finance
China Power Equipment, Inc.
Telephone: +86 (29) 6261 9758
Mobile: +86 186 1633 1170
Email: xa-fj@xa-fj.com