TAIYUAN CITY, China, May 11, 2012 /PRNewswire-Asia-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE Amex: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today announced its financial results for the three and nine months ended March 31, 2012.
Third Quarter Fiscal Year 2012 Financial Highlights: (Year-over-Year, 3-Month Results)
Nine Months Fiscal Year 2012 Financial Highlights: (Year-over-Year, 9-Month Results)
"Our two facilities continue to generate solid sales," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "Although rising fuel prices and the slow reaction of retail price increases implemented by the PRC impacted our margins during the third quarter, our earnings remain strong and we are well positioned for growth. We are working to finalize the Huajie Petroleum asset purchase, which will add another 100,000 metric tons to our storage capacity. As the largest private fuel distributor in Shanxi Province, we will continue to benefit from China's growing demand for petroleum products."
Summary of Third Quarter Results of Operations
Revenues - During the third quarter ended March 31, 2012, Longwei's sales increased 8.1% to $129.2 million, up from $119.6 million in the third quarter of fiscal 2011. The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of $60.6 million and $64.3 million, respectively, during the third quarter.
During this period Longwei's product mix was approximately split between diesel (52%), gasoline (47%), and other petroleum products (1%) sales. The weighted average sales price per metric ton ("mt") of petroleum products sold increased approximately 16.0% to $1,226mt from $1,057mt during the three months ended March 31, 2012 and 2011, respectively. The increase in the price per mt of petroleum products was due to the increase in international crude oil prices and corresponding retail petroleum price increases set by the PRC. Between the two periods ended March 31, 2011 and 2012, the PRC increased retail petroleum prices four times, but decreased retail prices once in October 2011. The Company continues to allocate product sales between its two facilities to better serve its customer base.
Total sales volume for the three-month period ended March 31, 2012 dropped 5.9% to 101,856mt from 108,216mt for the three-month period ended March 31, 2011. The drop in volume was primarily due to rising fuel prices between the periods and the PRC's attempts to slow down economic growth. During this timeframe Longwei also declined certain sales opportunities to maintain its margins during a period of rising inventory costs, as well as carefully managed its cash flow due to the large deposit paid for the Huajie Petroleum assets. The deposit of $87.0 million has been paid from cash flow generated through operations.
Cost of Sales - Costs of sales increased by $11.9 million or 12.4% to $107.4 million for the quarter ended March 31, 2012 from $95.5 million for the quarter ended March 31, 2011. The increase in cost of sales was primarily due to the higher weighted average inventory costs during a period of rising international prices and the PRC's slow reaction to implement price increases. The PRC retail price was decreased in October 2012 and subsequently increased in February and March 2012 to more accurately reflect worldwide crude oil prices. The Company pays market prices to its refinery suppliers and carefully manages its inventory levels to adjust to pricing fluctuations. The three-month weighted average cost basis per mt of petroleum product the Company sold increased by $172mt or 19.5% to $1,054mt in the three months ended March 31, 2012 from $882mt during the three months ended March 31, 2011.
Operating Expenses - Operating expenses for the third quarter totaled $913,000 as compared to $1.1 million for the third quarter of fiscal 2011. As a percentage of revenues, operating expenses decreased to 0.7% for the quarter ended March 31, 2012 from 0.9% for the quarter ended March 31, 2011. Operating income decreased 9.0% to $20.9 million during the third quarter of fiscal 2012, primarily due to the price increases in inventory and the slow adjustment of retail petroleum prices in the PRC.
Net Income - Net income decreased by $11.4 million or 43.4% to $14.9 million for the three months ended March 31, 2012 from $26.4 million for the three months ended March 31, 2011, primarily due to the increase in other income/expenses associated with the accounting for the non-cash warrant derivative liability charge. The non-cash expense charge for the change in the warrant derivative liability for the third quarter of 2012 was $733,177, compared to the non-cash income reported for the change in the warrant derivative liability of $9.2 million in the third quarter of 2011. The non-cash income and expense are accounted for in accordance with GAAP for the change in the fair value of the warrant derivative liability. Net income attributable to common shareholders decreased by $11.4 million or 43.4% to $14.9 million for the three months ended March 31, 2012 from $26.3 million for the three months ended March 31, 2011.
Net income for the nine months ended March 31, 2012 increased by $7.1 million to $47.9 million from $40.9 million for the nine months ended March 31, 2011.
EPS - The Company's basic and diluted GAAP earnings per share decreased $0.11 or 42.3% to $0.15 from $0.26 for the three months ended March 31, 2012 and 2011, respectively.
The Company's basic GAAP earnings per share increased $0.06 or 14.3% to $0.48 from $0.42 for the nine months ended March 31, 2012 and 2011, respectively. The Company's diluted GAAP earnings per share increased $0.07 or 17.5% to $0.47 from $0.40 for the nine months ended March 31, 2012 and 2011, respectively.
Liquidity and Capital Resources
Cash and cash equivalents totaled $6.9 million at March 31, 2012. As of March 31, 2012, the Company's current assets increased $48.2 million or 33.8% to $190.8 million at March 31, 2012 from $142.6 million at year-end June 30, 2011, primarily due to the increase in inventory and advances to suppliers to take advantage of price fluctuations in international crude oil prices during the quarter ended March 31, 2012. The Company also maintained a cash deposit of $87.0 million for the purchase of the Huajie Petroleum assets.
The Company's current ratio is approximately 21:1 (current assets to current liabilities) and improves to approximately 42:1 including the deposit, but net of the fair value of the warrant derivative liability at December 30, 2011. Total current assets including the purchase deposit for the Huajie Petroleum assets as of March 31, 2012 were $277.8 million. The Company had no long-term debt as of March 31, 2012.
The average age of inventory increased to 50 days from 44 days during the nine months ended March 31, 2012 compared to the nine-month period ended March 31, 2011 to account for additional product purchases for on-hand inventory during a period of fluctuating prices to take advantage of refinery price drops in product cost by utilizing the Company's large storage capacity. During this time the Company also increased its advances to suppliers to lock in pricing based on uncertainty associated with the international price fluctuations and the impact of declining world economic conditions on international crude oil prices. The ratio of advances to suppliers to inventory increased to approximately 1.5:1 at March 31, 2012 from 1.1:1 at June 30, 2011, and the combined balance in both inventory on-hand and advances to suppliers increased $42.2 million or 38.7% to $151.5 million from $109.2 million during the nine-month period. The Company has used its working capital to increase inventory and product availability based on current changes in market price. The Company is balancing its working capital to take advantage of pricing opportunities, as well as balancing the funding required to complete the acquisition of the Huajie Petroleum assets.
Longwei entered into a letter of intent with Shangxi Jiangtong Chemicals Co., Ltd. ("Jiangtong") in March 2011 to acquire the assets of Jiangtong's wholly-owned subsidiary Huajie Petroleum Co., Ltd. ("Huajie"). The Company intends to acquire the assets of a fuel storage depot in northern Shanxi Province (located in Xingyuan, Shanxi), including fuel tanks with a 100,000-metric-ton storage capacity. The Company has paid a deposit of 550 million RMB (approximately USD $87.0 million) toward the full purchase price of 700 million RMB (approximately USD $110.8 million). The assets are non-operational with no revenue-producing history and include land use rights for 98 acres of land, 100,000 tonnage fuel tanks with accessory facilities and equipment, a special transportation railway line, and a 3,000-square-meter office building. The Company engaged a third-party independent valuation firm for the appraisal of the fair market value of the assets to be acquired. Longwei will account for the purchase of the proposed assets as an asset purchase. The Company intends to use its cash on hand and working capital assets to finance the acquisition. Longwei is working with the seller and local officials to finalize the asset transfer.
2012 Financial Outlook
Based on slower volume sales and price fluctuations in international crude oil prices, as well as the PRC retail petroleum price fluctuations, the Company has adjusted its fiscal year end revenue and earnings guidance originally set in August 2011. The Company estimates it will generate revenues of approximately $520.0 million and net income of approximately $64.0 million (adjusted net of non-cash warrant derivative liability expenses) for the fiscal year ending June 30, 2012. The annual guidance is 8.0% ahead of last year's audited fiscal year end revenues of $481.6 million and in line with fiscal 2012 net income. Previous fiscal 2012 guidance was set before China's economy started slowing late last year following the PRC government's efforts to cool inflation and deflate a housing boom in the country. During this timeframe the Company also declined certain sales opportunities to maintain its margins during a period of rising inventory costs, as well as carefully managed its cash flow due to the large deposit paid for the Huajie Petroleum assets. The deposit of $87.0 million has been paid in cash generated through operations.
Economic indicators now show China's economic growth may have recently bottomed out and is starting to bounce back. A government reading on the manufacturing sector has recently shown improvement, as has an Organization for Economic Cooperation and Development ("OECD") forecast of future economic activity. OECD is an index of leading indicators and has estimated that China's economy has "regained momentum." According to UBS economist Tao Wang, "Looking ahead, there are already signs of stabilization and improvement." The Chinese government is now aiming for economic growth of 7.5% in 2012, lower than its goal for last year of about 8%. The World Bank predicts the Chinese economy will slow to an 8.2% growth rate this year but rebound to 8.6% in 2013. (CNNMoney, April 13, 2012).
"The International Energy Agency expects China to account for almost half of the world's oil demand growth over the next five years," stated Michael Toups, Chief Financial Officer of Longwei. "We expect strong long-term revenue and earnings growth as China's increasing industrialization continues to drive demand for fuel products. To meet this demand, we are continuing to work toward the closing of the Huajie asset acquisition. We remain focused on executing our business strategy, and we believe our commitment to achieving strong operational results will result in improved shareholder value."
Conference Call and Webcast
Management will host a conference call to discuss these financial results on Tuesday, May 15, 2012 at 10:00 a.m. EDT (7:00 a.m. PDT).
To participate in the call, please dial (888) 504-7961, or (719) 325-2157 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.longweipetroleum.com, or alternately at http://ViaVid.net.
A replay of the call will be available for two weeks from 1:00 p.m. EDT on May 15, 2012, until 11:59 p.m. EDT on May 29, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4273433. In addition, a recording of the call will be available via the Company's website at http://www.longweipetroleum.com for one year.
About Longwei Petroleum Investment Holding Limited
Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storage and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 120,000 metric tons located at storage facilities in Taiyuan and Gujiao, Shanxi. The Company's Taiyuan and Gujiao facilities can store 50,000 metric tons and 70,000 metric tons, respectively. The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.
The Company seeks to earn profits by selling its products at competitive prices with timely delivery to coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue under an agency fee by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.
For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at info@redchip.com.
Forward-Looking Statements
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.
Contact:
At the Company:
Michael Toups, Chief Financial Officer
U.S. Office +1 727-641-1357
mtoups@longweipetroleum.com
http://www.longweipetroleum.com
Investor Relations:
Mike Bowdoin
RedChip Companies, Inc.
Tel: +1-800-733-2447, Ext. 110
info@redchip.com
http://www.redchip.com
Longwei Petroleum Investment Holding Limited and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
March 31, 2012 | June 30, 2011 | |||||||
Assets | (In Thousands) | |||||||
Current Assets: | ||||||||
(Unaudited) | ||||||||
Cash | $ | 6,889 | $ | 9,422 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts of $0 as of March 31, 2012 and June 30, 2011 | 32,385 | 23,883 | ||||||
Inventories | 61,302 | 51,489 | ||||||
Advances to Suppliers | 90,188 | 57,756 | ||||||
Total Current Assets | 190,764 | 142,550 | ||||||
Deposit | 87,046 | 85,093 | ||||||
Property Plant and Equipment, Net | 47,177 | 45,662 | ||||||
Total Assets | $ | 324,987 | $ | 273,305 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts Payable | $ | 815 | $ | 589 | ||||
Warrant Derivative | 2,291 | 2,893 | ||||||
Taxes Payable | 5,858 | 8,096 | ||||||
Total Current Liabilities | 8,964 | 11,578 | ||||||
Total Liabilities | 8,964 | 11,578 | ||||||
Stockholders' Equity: | ||||||||
Preferred Stock, No Par Value, 100,000,000 Shares Authorized; 914,643 and 914,643 Issued and Outstanding as of March 31, 2012 and June 30, 2011 | 418 | 418 | ||||||
Common Stock, No Par Value; 500,000,000 Shares Authorized; 100,766,966 and 100,751,966 Issued and Outstanding as of March 31, 2012 and June 30, 2011 | 31,519 | 31,502 | ||||||
Additional Paid-in Capital | 7,992 | 7,992 | ||||||
Retained Earnings | 244,545 | 196,641 | ||||||
Other Comprehensive Income | 31,549 | 25,174 | ||||||
Total Stockholders' Equity | 316,023 | 261,727 | ||||||
Total Liabilities and Stockholders' Equity | $ | 324,987 | $ | 273,305 | ||||
The accompanying notes to consolidated financial statements are an integral part of these financial statements. | ||||||||
Longwei Petroleum Investment Holding Limited and Subsidiaries | ||||||||
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income | ||||||||
For the Nine Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In Thousands, Except Per Share Data) | ||||||||
Net Sales | $ | 374,236 | $ | 353,106 | ||||
Cost of Sales | 307,983 | 283,397 | ||||||
Gross Profit | 66,253 | 69,709 | ||||||
Operating Expenses | 2,889 | 4,097 | ||||||
Operating Income | 63,364 | 65,612 | ||||||
Derivative Income (Expense) | 602 | (7,948) | ||||||
Interest Income | 12 | 12 | ||||||
Interest Expense | - | - | ||||||
Income Before Income Tax Expense | 63,978 | 57,676 | ||||||
Income Tax Expense | (16,029) | (16,809) | ||||||
Net Income | 47,949 | 40,867 | ||||||
Foreign Currency Translation Adjustment | 6,375 | 9,550 | ||||||
Comprehensive Income | $ | 54,324 | $ | 50,417 | ||||
Net Income | $ | 47,949 | $ | 40,867 | ||||
Preferred Stock Dividends Paid in Cash | (45) | (186) | ||||||
Net Income Attributable to Common Stockholders | $ | 47,904 | $ | 40,681 | ||||
Earnings per Common Share: | ||||||||
Basic | $ | 0.48 | $ | 0.42 | ||||
Diluted | $ | 0.47 | $ | 0.40 | ||||
Weighted Average Common Shares Outstanding: | ||||||||
Basic | 100,762 | 96,931 | ||||||
Diluted | 101,764 | 101,508 | ||||||
The accompanying notes to consolidated financial statements are an integral part of these financial statements. | ||||||||
Longwei Petroleum Investment Holding Limited and Subsidiaries | ||||||||
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income | ||||||||
For the Three Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In Thousands, Except Per Share Data) | ||||||||
Net Sales | $ | 129,221 | $ | 119,574 | ||||
Cost of Sales | 107,367 | 95,486 | ||||||
Gross Profit | 21,854 | 24,088 | ||||||
Operating Expenses | 913 | 1,081 | ||||||
Operating Income | 20,941 | 23,007 | ||||||
Derivative Income (Expense) | (733) | 9,221 | ||||||
Interest Income | 4 | 3 | ||||||
Interest Expense | - | - | ||||||
Income Before Income Tax Expense | 20,212 | 32,231 | ||||||
Income Tax Expense | (5,286) | (5,860) | ||||||
Net Income | 14,926 | 26,371 | ||||||
Foreign Currency Translation Adjustment | 1,874 | 3,272 | ||||||
Comprehensive Income | $ | 16,800 | $ | 29,643 | ||||
Net Income | $ | 14,926 | $ | 26,371 | ||||
Preferred Stock Dividends Paid in Cash | (15) | (25) | ||||||
Net Income Attributable to Common Stockholders | $ | 14,911 | $ | 26,346 | ||||
Earnings per Common Share: | ||||||||
Basic | $ | 0.15 | $ | 0.26 | ||||
Diluted | $ | 0.15 | $ | 0.26 | ||||
Weighted Average Common Shares Outstanding: | ||||||||
Basic | 100,767 | 100,197 | ||||||
Diluted | 101,796 | 102,137 | ||||||
The accompanying notes to consolidated financial statements are an integral part of these financial statements. | ||||||||
Longwei Petroleum Investment Holding Limited and Subsidiaries | ||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||
For the Nine Months Ended March 31, | ||||||||
2012 | 2011 | |||||||
(In Thousands) | ||||||||
Cash Flows From Operating Activities: | ||||||||
Net Income | $ | 47,949 | $ | 40,867 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: | ||||||||
Depreciation and Amortization | 1,580 | 1,399 | ||||||
Stock Based Compensation | 17 | 857 | ||||||
Changes in Warrant Derivative Liability | (602) | 7,948 | ||||||
(Increases) Decreases in Assets: | ||||||||
Accounts Receivable | (7,955) | (915) | ||||||
Inventories | (8,631) | (22,451) | ||||||
Advances to Suppliers | (31,106) | 28,007 | ||||||
Increases (Decreases) in Liabilities: | ||||||||
Accounts Payable | 213 | (189) | ||||||
Taxes Payable | (2,424) | (2,258) | ||||||
Net Cash Provided By (Used in) Operating activities | (959) | 53,265 | ||||||
Cash Flows From Investing Activities: | ||||||||
Purchase and Improvements to Land and Buildings | (2,057) | (1,960) | ||||||
Deposit made to Acquire Fixed Assets | - | (32,232) | ||||||
Net Cash Provided By (Used in) Investing Activities | (2,057) | (34,192) | ||||||
Cash Flows From Financing Activities: | ||||||||
Payment of Dividends | (45) | (186) | ||||||
Proceeds from the Exercise of Warrants | - | 2,908 | ||||||
Net Cash Provided By (Used in) Financing Activities | (45) | 2,722 | ||||||
Effect of Exchange Rate Changes in Cash | 528 | 443 | ||||||
(Decrease) Increase in Cash | (2,533) | 22,238 | ||||||
Cash, Beginning of Period | 9,422 | 10,125 | ||||||
Cash, End of Period | $ | 6,889 | $ | 32,363 | ||||
Supplemental Cash Flow Information: | ||||||||
Cash Paid During the Year for: | ||||||||
Income Taxes | $ | 18,303 | $ | 17,250 | ||||
Supplemental Schedule of Noncash Investing and Financing Activities: | ||||||||
Conversion of Preferred Stock into Common Stock | $ | - | $ | 2,572 | ||||
The accompanying notes to consolidated financial statements are an integral part of these financial statements. | ||||||||
Longwei Petroleum Investment Holding Limited | ||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
For the Nine Months Ended March 31, | For the Three Months Ended March 31, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
GAAP Net Income Attributable to Common Shareholders | $ | 47,949 | $ | 40,867 | $ | 14,911 | $ | 26,346 | ||||||||
Non-GAAP adjustments: | ||||||||||||||||
Add: Non-Cash Charge for the Change in Fair Value of Derivative | (602) | 7,948 | 733 | (9,221) | ||||||||||||
Non-GAAP Net Income Attributable to Common Shareholders (a) | $ | 47,347 | $ | 48,815 | $ | 15,644 | $ | 17,125 | ||||||||
GAAP Earnings Per Share: | ||||||||||||||||
Basic | $ | 0.48 | $ | 0.42 | $ | 0.15 | $ | 0.26 | ||||||||
Diluted | $ | 0.47 | $ | 0.40 | $ | 0.15 | $ | 0.26 | ||||||||
Non-GAAP Earnings Per Share: | ||||||||||||||||
Basic | $ | 0.47 | $ | 0.50 | $ | 0.16 | $ | 0.17 | ||||||||
Diluted | $ | 0.47 | $ | 0.48 | $ | 0.15 | $ | 0.17 | ||||||||
Weighted Average Common Shares Outstanding: | ||||||||||||||||
Basic | 100,762,002 | 96,931,079 | 100,766,966 | 100,197,482 | ||||||||||||
Diluted | 101,764,016 | 101,508,266 | 101,795,609 | 102,136,976 | ||||||||||||
