BEIJING, April 3 /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 fiscal year ended on December 31, 2006.
Full Year 2006 Highlights
-- Total net revenues were $10.9 million
-- Operating income was $5.2 million
-- Net income was $5.2 million, or $0.32 per diluted share
-- Number of new households connected in 2006 was 24,500
Commenting on the results, Mr. Yu-Chuan Liu, President and CEO of the Company, said: "2006 was a very important year for Sino Gas, as we completed a reverse merger transaction and successfully became a publicly traded company in the U.S., gaining access to a broader investor base to support the future growth of our business. As part of the reverse merger we also completed two private financing transactions that were critical to support the expansion of our business in the second half of 2006. However, the funds did not arrive as early as planned, preventing us from completing our investment in two industrial projects and one mid-sized city during the fourth quarter. We estimate this delay resulted in a missed revenue opportunity of about $1.4 million in higher-margin connection fees, and adversely impacted our results for the quarter and the full year. Since receiving the net proceeds from our private financing transactions we have been able to complete the acquisition of several new subsidiaries and picked up the pace in the development of new projects which, we expect, will positively impact our results for the first quarter of 2007. Going forward, we remain confident in our business plan and the opportunities ahead for growing our business profitably"
Revenues for the three months ended December 31, 2006 decreased 22.2% over the same period in 2005 to $5.9 million, due to lower connection fees resulting from the delay in receiving the proceeds from the Company's private financing transactions.
Gross profit for the three months ended December 31, 2006 decreased 32% from the same period last year to $3.4 million, or 57% of revenues compared to $4.9 million, or 65% of revenues in the fourth quarter of 2005. This decrease in gross profit and margin was due to the loss in connection fees from missed project opportunities, which have a higher margin than gas sales.
Selling, general and administrative expenses were $558,846 or 9% of revenue, in the fourth quarter of 2006, versus 453,641 or 6% of revenue, in the comparable period last year. The increase in operating expenses in the quarter relative to the same period last year was mostly the result of advisory, legal and auditing fees associated with the Company's reverse merger transaction.
Operating income for the three months ending December 31, 2006 decreased 37% to 2.9 million, or 49% of sales, compared to $4.4 million for the same period of 2005.
Net income during the quarter decreased 35.6% year-over-year to $3.0 million, down from $4.5 million in the fourth quarter of 2005, mainly due to lower revenues and higher operating expenses. Earnings per diluted share were $0.19 in the quarter.
Full Year 2006 Results
Revenues for the fiscal year ended December 31, 2006 decreased 0.3% to $10.9 million, compared to $10.9 million in fiscal year 2005. Connection fees accounted for 66% of revenues in the past year, versus 75% in 2005, with natural gas sales accounting for the balance in both years. In 2006 gross profits were $6.5 million, or 60% of revenue, down from $6.8 million in 2005. Operating income decreased 11% to $5.2 million, or 48% of revenues, compared to $5.8 million in 2005. Net income decreased 9% to $5.2 million, or $0.32 per diluted share, compared to $5.7 million, or $0.40 per share for the fiscal year 2005.
Financial Condition
At December 31, 2006, the Company had $3.6 million in total cash and short-term investments, $6.8 million in working capital, and $2.4 million in short-term debt. Cash flow from operations for fiscal year 2006 totaled $5.3 million, up from $2.9 million in the same period last year. Capital expenditures totaled $9.1 million for the full fiscal year. Shareholders' equity stood at $25.4 million, compared to $12.6 million at year end 2005.
Business Outlook
The Company believes that the natural gas market is at a very early stage of its development, representing only 3% China's current energy consumption, compared to a world average of 24%. The Chinese government is actively encouraging the development of the natural gas industry in order to take advantage of China's substantial gas reserves, while diversifying energy sources and improving the environment. As a result, industry analysts forecast 270 cities in China to be supplied by natural gas in 2010, compared to 140 in 2005.
In order to participate in the expected rapid growth of the natural gas distribution industry in China, on September 7, 2006, Sino Gas International Holdings, Inc. (formerly Dolce Ventures, Inc.), completed a reverse merger with Gas Investment China Co., Ltd.(Gas (BVI)), a privately-held British Virgin Islands corporation, to reorganize as a publicly-traded company. The transaction was consummated on September 7, 2006, resulting in Gas (BVI) and its operating subsidiary in China, Beijing Zhong Ran Wei Ye Gas Co., Ltd. (Beijing Gas), becoming 100% indirectly owned by Sino Gas International Holdings, Inc. This transaction will give the Company access to the US capital markets and allow it to broaden its investor base and to support the accelerated growth of its business.
"Our strategy is to focus on small-to-mid-sized cities where there is less competition from larger players, to secure long term supply of natural gas to support the continuous expansion of our customer base, and to finance the development of our pipeline network at a favorable cost of capital to create long term value for our shareholders," Mr. Liu stated. "We are very pleased with our progress to-date in executing our strategy and we are excited about the opportunities ahead for profitable growth as we continue the build-out of our natural gas distribution systems to supply small- to mid-sized cities in China."
Recent Events
In December 2006, the Company entered into a stock purchase agreement to acquire Yuxian Jinli Gas Co., Ltd. and Xiahuayuan Jinli Gas Co., Ltd., two privately held natural gas distribution businesses in the Hebei Province of China for approximately $1.5 million in cash. The transaction added 4,800 residential customers to Sino Gas's distribution system, and will add other 4000 households in 2007.
In January 2007, the Company entered into a stock purchase agreement to acquire all the capital stock of Beijing Chenguang Gas Co., Ltd., a privately held natural gas distribution business in Beijing, China for approximately $3.35 million in cash. This transaction included the exclusive concession rights to operates seven gas distribution systems and added 25,202 residential customers and four industrial projects to Sino Gas's distribution system. This transaction was completed on 18th of February 2007.
Conference Call
The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, April 3, 2007 to discuss the fourth quarter and 2006 year end financial results. Joining Mr. Yu-chuan Liu, President and Chief Executive Officer of Sino Gas, will be Ms. Fang Chen, Chief Financial Officer, and Mr. Brad Shao, Assistant Chief Financial Officer. The Company plans to make an earnings announcement at the close of business on Monday, April 2, 2007. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-482-0024. International callers should dial 617-801-9702. When prompted by the operator, mention Conference Passcode 83082355. If you are unable to participate in the call at this time, a replay will be available for three days starting on Tuesday, April 3 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 67802839. International callers should dial 617-801-6888 and enter the same passcode 67802839.
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 23 natural gas distribution systems serving approximately 63,000 residential and eight commercial and industrial customers. Facilities include approximately 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 April 2, 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 April 2, 2007, and should be read in conjunction with the information provided therein.
-- FINANCIAL TABLES FOLLOW --
Sino Gas International Holdings, Inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(US Dollars - Audited)
Three Months Ended Fiscal Year Ended
December 31 December 31
2006 2005 2006 2005
Net revenues 5,899,562 7,587,621 $10,870,718 $10,907,289
Cost of revenues (2,540,014) (2,646,788) (4,389,142) (4,132,391)
Gross profit $3,359,548 $4,940,833 $6,481,576 $6,774,898
Selling and marketing
expenses (29,282) (33,100) (95,779) (99,768)
General and
administrative
expenses (461,876) (487,208) (1,155,849) (874,181)
Total Operating
Expense (558,846) 453,641 (1,319,316) (973,949)
Income from
continuing
operations 2,868,390 4,420,525 $5,229,948 $5,800,949
Finance costs, net (76,068) (3,668) (78,237) (2,486)
Other income 438,345 479,585 438,186 437,750
Other expenses (14,061) (13,703) (856) (1,865)
Income before
taxation 3,216,606 4,882,739 $5,589,041 $6,234,348
Income tax (239,529) (424,972) (423,284) (531,915)
Net income 2,977,077 4,457,767 $5,165,757 $5,702,433
Net income per share,
Basic 0.21 0.31 0.36 0.40
Diluted 0.19 0.31 0.32 0.40
Weighted average shares
outstanding of common
stock,
Basic 14,471,980 14,361,646 14,471,980 14,361,646
Diluted 16,085,778 14,361,646 16,085,778 14,361,646
Sino Gas International Holdings, Inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(US Dollars - Audited)
2006 2005
Assets
Cash and cash equivalents $ 3,638,673 $ 571,194
Pledged deposits 3,124,541 --
Notes receivable 477,390 --
Accounts receivable 6,534,740 7,770,168
Advances to suppliers 68,309 372,442
Prepaid expenses 141,878 12,097
Other receivables 1,263,800 437,922
Total current assets $ 15,249,331 $ 9,163,823
Investments in equity
securities $ 2,939,029 $ 2,443,378
Plant and equipment, net 10,608,530 3,200,682
Construction in progress 4,628,076 3,071,497
Intangible assets 457,830 437,265
Total long term assets $ 18,633,465 $ 9,152,822
Total Assets $ 33,882,796 $ 18,316,645
Accounts payable $ 3,891,388 $ 3,090,870
Short-term bank loans 2,430,445 --
Other payables 1,790,500 2,264,965
Unearned revenue 37,760 133,035
Accrued liabilities 325,922 201,384
Total current liabilities $ 8,476,015 $ 5,690,254
Total Liabilities $ 8,476,015 $ 5,690,254
Preferred stock A US$0.001
par value; 20,000,000
authorized; nil and
nil issued and outstanding
as of December 31, 2006 and
2005 respectively $ -- $ --
Preferred stock B US$0.001
par value; 5,000,000 authorized;
4,023,268 and nil issued and
outstanding as of December 4023 --
31, 2006 and 2005 respectively
Common stock US$0.001 par
value; 250,000,000
authorized; 14,692,647
and 14,361,646 issued and
outstanding as of December 31,
2006 and 2005 respectively 14693 14362
Additional paid-in-capital 12,069,176 4,812,650
Statutory reserves 2,025,022 1,219,720
Retained earnings 10,469,571 6,311,794
Accumulated other
comprehensive income 824,296 267,865
STOCKHOLDERS' EQUITY $ 25,406,781 $ 12,626,391
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 33,882,796 $ 18,316,645
Sino Gas International Holdings, Inc. AND SUBSIDIARIES
CASH FLOW STATEMENT
FOR FISCAL YEAR ENDED DECEMBER 31
(US Dollars - Audited)
2006 2005
Cash flows from operating activities
Net incomes $ 5,165,757 $ 5,702,433
Depreciation and amortization 155,374 131,865
Equity in investments (495,651) (404,436)
Decrease/(increase) in accounts and other
receivables 106,512 (6,139,281)
Increase in accounts and other payables 355,316 3,564,302
Net cash provided by operating activities $ 5,287,308 $ 2,854,883
Cash flows from investing activities
Purchase of plant and equipment $ (7,563,222)$ (1,065,108)
Pledge deposits (3,124,541) --
Payment for the construction in progress (1,556,579) (1,537,774)
Payment of cost of intangible assets (20,565) (365,145)
Net cash used in investing activities
$ (12,264,907)$ (2,968,027)
Cash flows from financing activities
Issue of common stock 7,430,965 --
Bank borrowings, net of repayment 2,430,445 --
Net cash provided by financing activities $ 9,861,410 $ --
Net in cash and cash equivalents
sourced/(used) 2,883,811 (113,144)
Effect of foreign currency translation on cash
and cash equivalents 183,668 15,992
Cash and cash equivalents-beginning of year 571,194 668,346
Cash and cash equivalents-end of year $ 3,638,673 $ 571,194
For more information, please 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
Ed Job, CFA
Tel: +1-646-213-1914 (New York)
Email: ed.job@ccgir.com
