BEIJING, Aug. 20 /Xinhua-PRNewswire-FirstCall/ -- Sino Gas International Holdings, Inc. (OTC Bulletin Board: SGAS) (''Sino Gas'' or the ''Company''), a leading developer of natural gas distribution systems in small and medium- sized cities, as well as a distributor of natural gas to residential, commercial and industrial customers in China, today reported financial results for the second quarter ended June 30, 2007.
Second Quarter 2007 Highlights
-- Revenue reached $2.8 million, up 232% from the second quarter of 2006
-- Gross profit reached $0.9 million, up 139% from the second quarter of
2006
-- Operating income totaled $0.5 million, up 128% from the second quarter
of 2006
-- Net income rose to $0.5 million, or $0.03 per fully diluted share, up
104% from the second quarter of 2006
-- Sales of natural gas totaled 4.5 million m3, up 125% from the second
quarter of 2006
-- Number of new households connected in the second quarter of 2007 was
4,336, an increase of 3,242 households from the same period in 2006
''Our strong second quarter results reflect the effective penetration of our existing markets with a significant increase in connected households and double the amount of gas sales,'' commented Mr. Yu-Chuan Liu, President and CEO of the Sino Gas. ''In addition, we have further expanded our presence in our target regions through various acquisitions and the formation of subsidiary gas companies. In the second half of 2007, we remain confident in our business plan and the opportunities ahead for organic growth and external expansion.''
Second Quarter 2007 Results
Revenues for the three months ended June 30, 2007 increased 232% over the same period in 2006 to $2.8 million, driven by new connection fees from an additional 4,336 households as well as a substantial increase in natural gas sales to 4.5 million cubic meters, up 125% over the same period in 2006. Connection fees accounted for 48% of revenues this quarter, with natural gas sales accounting for the balance.
Gross profit for the three months ended June 30, 2007 was $0.9 million, an increase of 139%, or 32% of revenues, compared to $377,476, or 45% of revenues in the second quarter of 2006. The increase in gross profit resulted from the overall increase in sales. Gross margin in the quarter declined due to lower margins on connection fees in second quarter of 2007, due to increased depreciation cost and unrecognized revenues. The Company plans to increase new connection fees as well as natural gas sales in the future. Compared to the first quarter of 2007, gross margin improved by 1,060 basis points.
Operating expenses in the second quarter of 2007 were $390,781, an increase of 155% from $153,299 in the comparable period last year. The increase in operating expenses in the quarter was due to the overall revenue growth. As a percentage of revenues, operating expenses were 14% in the second quarter of 2007 compared to 18% in the comparable period last year, reflecting the benefits of scale due to expansion of the business.
Operating income in the second quarter of 2007 increased 128% to $511,161, or 18% of revenues, compared to $224,177, or 27% of sales, for the same period of 2006. Operating income more than doubled because the growth in revenues was higher than the increase in expenses.
Net income during the quarter was $504,814, or $0.03 per fully diluted share, up 103.6% from $248,001, or $0.02 per fully diluted share, in the second quarter of 2006.
Six Month Results
Revenues for first half of 2007 increased 250% to $5.2 million, compared to $1.5 million in the first half of 2006. Connection fees accounted for 38% of revenues, versus 24% in the first half of 2006, with natural gas sales accounting for the balance in both periods. In the first half of 2007 gross profit was $1.4 million, or 27% of revenues, up 178% from $0.5 million, or 34% of revenues, in the year ago period. Operating income increased 161% to $0.6 million, or 12% of revenues, compared to $0.2 million, or 16% of revenues, in the first half of 2006. Net income increased 140% to $0.6 million, or $0.03 per fully diluted share, compared to $0.3 million, or $0.02 per share for the first half of 2006.
Financial Condition
At June 30, 2007, the Company had $6.7 million in cash and cash equivalents, $4.1 million in working capital and $2.6 million in bank notes and loans. In the first half of 2007, the Company generated $3.6 million in cash flows from operating activities, up from $2.0 million in the same period last year due to successful collection of accounts receivables. Capital expenditures totaled $1.8 million for the second quarter. Shareholders' equity stood at $29.7 million, compared to $25.4 million at year end of 2006.
Business Outlook
The Company believes that the underdeveloped natural gas market in China has immense opportunities for rapid growth. With natural gas contributing only 3% to China's total energy consumption, compared to a world average of 24%, many cities, especially small and mid-sized cities, remain unconnected. Under favorable Chinese government policies, Sino Gas has been aggressively planning its expansion to more provinces and regions.
For the 2007 fiscal year, the Company expects revenues between $26 million and $27 million and net income between $8 million $9 million. Third quarter of 2007 revenues are expected to be between $5.5 million and $6.5 million and net income between of $2.0 million and $2.5 million. For fiscal 2008, the Company expects revenues between $49 million and $51 million and net income between $12.5 million and $13.5 million.
''We remain highly confident that we have the right strategy and management team to take our business to the next level. We plan to continue to focus on acquiring distribution systems in small and mid-sized cities through acquisitions while further penetrating our existing markets. Meanwhile, we are making every effort to recover our receivables and make full use of our own capital. As we enter the seasonally strongest quarters of the year, we expect connection fees as well as the percentage of connection fees to sales to increase in the second half of the year,'' said Mr. Liu. ''Specifically, through organic growth we expect to add 30,000-40,000 new household users and one industrial user and sell a total of 30 million cubic meters of natural gas during the year, which is reflected in our guidance. In addition, we continue to actively evaluate a number of attractive acquisition candidates, which are included in our financial outlook for the rest of 2007 and 2008.''
Recent Events
In April 2007, the Company resumed a natural gas connection project for Shanghai Datun Energy Co., Ltd. in Pei County in Jiangsu Province. The second phase of connecting an additional 6,000 household in 2007 will finalize the project, which began last year, of connecting a total of 18,000 households. The completion of the project will bring approximately $1.74 million in revenue from connection fees from 6,000 households and is expected to generate $37,500 from gas sales to those households in the fourth quarter of 2007. The Company is contracted to supply natural gas for all the connected households for 30 years.
In June 2007, the Company entered into a stock purchase agreement to acquire all the capital stock of Guannan Zhongyuan Natural Gas Co., Ltd., a privately held natural gas distribution business in Jiangsu Province, China for approximately $987,000 in cash. This transaction included the exclusive concession rights for gas distribution and added 3,951 residential customers to Sino Gas' distribution system, with 3,240 households to be connected in Guannan County in 2007 and 4,360 households to be connected 2008. This transaction was completed on June 20, 2007.
In July 2007, the Company established Baishan Zhong Ran Wei Ye Gas Co., Ltd. (''Baishan Gas'') and acquired all of the operating assets of Baishan Gas Co., Ltd., a privately held natural gas distribution business in Jilin Province for approximately $5.0 million in cash and assumed debt. Baishan Gas' current distribution network includes 8,000 connected households and one gas station, with an estimated total of 30,000 households to be connected in the next three years. This transaction was completed on July 9, 2007.
About Sino Gas
The Company, through its indirectly wholly-owned subsidiary, Beijing Zhong Ran Wei Ye Gas Co., Ltd. (''Beijing Gas''), and the subsidiaries of Beijing Gas, is a leading developer of natural gas distribution systems in small and medium-sized cities in China, as well as a distributor of natural gas to residential, commercial and industrial customers in China. The company owns and operates 25 natural gas distribution systems serving approximately 75,000 residential and eight commercial and industrial customers. Facilities include over 700 kilometers (''km'') of pipeline and delivery networks with a designed daily capacity of approximately 70,000 cubic meters of natural gas (''m3''). The company is currently constructing four additional natural gas distribution systems and is planning two more natural gas distribution systems. Beijing Gas Company owns and operates natural gas distribution systems primarily in Hebei, Jiangsu and Anhui, Shandong Provinces. For further information, visit the Company's website at http://www.sino-gas.com .
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 companies 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.
All information in this release is as of August 20, 2007. The Company undertakes no duty to update any forward-looking statements to conform the release to actual results or changes in its circumstances or expectations after the date of this release.
The financial information stated above and in the tables below has been abstracted from the Company's Form 10-K, filed with the SEC on August 20, 2007, and should be read in conjunction with the information provided therein.
--FINANCIAL TABLES FOLLOW--
SINO GAS INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND JUNE 30, 2006
(Unaudited, stated in US Dollars)
Six months ended Three months ended
June 30, June 30,
2007 2006 2007 2006
Net revenues $5,234,372 $1,499,540 $2,796,145 $841,276
Cost of revenues 3,731,833 983,487 1,894,203 463,800
Gross profit 1,502,539 516,053 901,942 377,476
Operating expenses
Selling and marketing
expenses 199,494 26,825 143,296 16,622
General and administrative
expenses 688,859 253,820 247,485 136,677
Income from continuing $614,186 $235,409 $511,161 $224,177
operations
Finance costs, net 33,550 (3,142) 38,920 (3,056)
Other income 11,781 43,465 (24,307) 43,465
Other expenses (11,977) (2) (10,482) (2)
Income before taxation $647,540 $275,730 $515,292 $264,585
Income tax 27,343 17,587 10,478 16,584
Net income $620,197 $258,142 $504,814 $248,001
Net income per share,
Basic $0.04 $0.02 $0.03 $0.02
Diluted $0.03 $0.02 $0.03 $0.02
Weighted average shares
outstanding of
common stock,
Basic 15,216,279 14,361,646 15,273,626 14,361,646
Diluted 19,486,791 14,361,646 19,360,386 14,361,646
SINO GAS INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
AT JUNE 30, 2007 AND DECEMBER 31, 2006
(Stated in US Dollars)
June 30, December 31,
2007 2006
ASSETS (unaudited) (audited)
Current assets
Cash and cash equivalents $ 6,653,639 $ 3,638,673
Restricted cash -- 3,124,541
Notes receivable 1,031,503 477,390
Accounts receivable 5,064,425 6,534,740
Inventory 57,690 --
Advances to suppliers 1,063,674 68,309
Prepayments and others 122,344 141,878
Other receivables 1,834,598 1,263,800
Total current assets $ 15,827,873 $ 15,249,331
Long term assets
Investments in equity securities 3,087,297 2,939,029
Plant and equipment, net 14,645,720 10,608,530
Construction in progress 7,444,513 4,628,076
Intangible assets 307,108 457,830
Goodwill 112,750 --
TOTAL ASSETS $ 41,425,261 $ 33,882,796
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank Loans $ 2,623,020 $ 2,430,445
Accounts payable 6,794,401 3,891,388
Other payables 1,295,103 1,790,500
Unearned revenue 840,221 37,760
Accrued liabilities 135,705 325,922
Total current liabilities $ 11,688,450 $ 8,476,015
Minority interest 65,575 --
TOTAL LIABILITIES $ 11,754,025 $ 8,476,015
SINO GAS INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
AS OF JUNE 30, 2007 AND DECEMBER 31, 2006
(Stated in US Dollars)
2007 2006
STOCKHOLDERS' EQUITY
Preferred Stock A US$0.001 par value;
20,000,000 authorized; nil and
nil issued and outstanding as of June 30,
2007 and December 31, 2006 respectively -- --
Preferred Stock B US$0.001 par value;
5,000,000 authorized;
3,387,446 and 4,023,268 issued and
outstanding as of June 30, 2007 and
December 31, 2006 respectively $ 3,387 $ 4,023
Common Stock US$0.001 par value;
250,000,000 authorized;
16,644,149 and 14,692,647 issued and
outstanding as of June 30, 2007 and
December 31, 2006 respectively 16,423 14,693
Additional paid-in-capital 14,655,841 12,069,176
Statutory reserves 2,269,315 2,025,022
Retained earnings 11,089,768 10,469,571
Accumulated other comprehensive income 1,636,502 824,296
TOTAL STOCKHOLDERS' EQUITY $ 29,671,236 $ 25,406,781
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 41,425,261 $ 33,882,796
SINO GAS INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTHS ENDED JUNE 30, 2007 AND 2006
(Unaudited, stated in US Dollars)
Six months ended June 30,
2007 2006
Cash Flows from Operating Activities
Net income $620.197 $258,142
Depreciation and Amortization 696,453 65,154
(Increase)/decrease in accounts and
other receivables (630,427) 2,562,340
(Increase) in inventories (57,690) (12,899)
Increase/(decrease) in accounts and
other payables 3,019,392 (908,689)
Net cash provided by operating
activities $3,648,39 $1,964,049
Cash Flows from Investing Activities
Purchase of plant and equipment $(4,733,643) $(2,117,412)
Restricted Cash 3,124,541 --
Payment for the construction in progress (2,816,436) --
Payment of cost of intangible assets 307,163 (5,678)
Acquisition of subsidiaries (173,167) (27,854)
Increase in minority interest 65,575 --
Net Cash Used in Investing Activities $(4,225,967) $(2,150,944)
Cash Flows from Financing Activities
Repayment of Bank borrowings 192,575 --
Issue of share capital 2,587,759 --
Net Cash Provided by Financing Activities $2,780,334 $--
Net in Cash & Cash Equivalents
Sourced/(Used) $2,202,760 $(186,895)
Effect of foreign currency translation on
Cash & Cash equivalents 812,206 (27,121)
Cash & Cash Equivalents at Beginning of
Period 3,638,673 907,667
Cash & Cash Equivalents at End of Period $6,653,639 $693,651
Supplementary cash flow
information:
Interest received $98,584 $--
Interest paid 54,610 3,142
Income tax paid 27,343 17,587
Contact:
Sino Gas International Holdings, Inc.
Ms. Fang Chen, Chief Financial Officer
Tel: +86-10-8260-0527 (China)
Email: 0428gg@vip.163.com
CCG Elite Investor Relations
Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
