BEIJING, Feb. 15 /Xinhua-PRNewswire-FirstCall/ -- Sinoenergy Corporation (OTC Bulletin Board: SNEN) ("Sinoenergy" or the "Company"), a manufacturer of compressed natural gas (CNG) vehicle and gas station equipment and a designer, developer and operator of CNG filling stations in the People’s Republic of China (PRC), today announced its financial results for the first quarter ending December 31, 2007 of its Fiscal Year 2008.
First Quarter 2008 Highlights
-- Net revenue increased 235.0% year-over-year to a record $8.8 million
-- Gross profit increased 130.3% year-over-year to a record $3.9 million
-- Operating income was $2.7 million, a 176.0% increase year-over-year
from $995,000
-- Net income increased 107.8% year-over-year to $2.3 million, $0.06 per
diluted share
Significant Highlights
-- Manufactured 45 CNG truck trailers in the quarter
-- Retail CNG filling stations began generating revenue
-- Acquired stake in CNG wholesale processing plants
-- Purchased a new manufacturing plant site
-- Applied to be listed on The NASDAQ Stock Exchange
"We had a successful quarter driven by growth in our CNG station equipment business, which accounted for more than 52% of net revenue in the first quarter of fiscal year 2008. An above average number of CNG truck trailers, 45 were manufactured during the quarter. Our new retail CNG filling station business began generating revenue, which we see as a milestone in developing a network of retail CNG filling stations,” said Mr. Bo Huang, CEO of Sinoenergy Corporation. “Despite unforeseen delays, including recent bad weather, we remain focused on developing our retail CNG filling station business, and we remain confident in our ability to develop this business into an important part of our Company during Fiscal 2008.”
First Quarter Fiscal Year 2008 Results
For the first quarter of Fiscal Year 2008, net revenue increased 235.0% to $8.8 million, from $2.6 million in the quarter ending December 31, 2006. This increase came primarily from the Company’s CNG station facilities business, which generated revenue of $4.6 million, or 52.7% of total revenue for the first quarter of Fiscal Year 2008. The sales of vehicle conversion kits, a business that was started in the first calendar quarter of 2007, contributed approximately $2.3 million, or 25.6% of sales, in the first quarter of Fiscal Year 2008.
Gross profit for the first quarter of Fiscal Year 2008 increased 130.3% to $3.9 million, from $1.7 million in the quarter ending December 31, 2006. Gross margin decreased from 65.0% for the quarter ending December 31, 2006 to 44.0% for the first quarter of Fiscal Year 2008. Part of this decrease was because the Company’s station facilities and services business did not receive any high-margin orders for CNG station construction consulting in 2007, during which time the Company began devoting its construction consulting resources to developing its own retail CNG filling stations. In 2007, the Company’s station facilities and services business focused on manufacturing CNG equipment, a lower-margin part of the business that had higher procurement costs in 2007 than in 2006. The Company’s fuel conversion kit business started operating in the second calendar quarter of 2007, but at a lower gross margin than the overall gross margin in the previous year’s quarter ending December 31, 2006. The gross margin earned by the non-standard container business in the first quarter of Fiscal Year 2008 was an unusually high 41%, instead of its usual 17% to 25%, because of a special order. Three retail CNG filling stations began generating revenue in this quarter.
Operating expenses for the first quarter of Fiscal Year 2008 were $1.2 million, an increase of 65.6% from $703,000 for the quarter ending December 31, 2006. Expenses related to opening and operating retail CNG filling stations grew with the Company’s efforts to develop a network of retail CNG filling stations. Expenses associated with the vehicle fuel conversion kit business grew along with increased sales. Procurement expenses grew for the Company’s station facilities and services business because of increased manufacturing.
Operating income for the first quarter of Fiscal Year 2008 was $2.7 million, an increase of 176.0% from $1.0 million for the quarter ending December 31, 2006.
Net income for the first quarter of Fiscal Year 2008 was $2.3 million, or $0.07 per basic share and $0.06 per diluted share, up from net income of $1.1 million, or $0.08 per share basic and $0.06 per share diluted for the quarter ending December 31, 2006.
Financial Condition
As of December 31, 2007, cash totaled $10.5 million, up from $3.3 million as of September 30, 2007. The increase in cash balance resulted from the September 2007 $30 million private placement financing. Working capital as of December 31, 2007 was $10.9 million. Third party accounts receivable increased from $5.8 million as of September 30, 2007 to $8.4 million as of December 31, 2007 because several of the Company’s businesses extended payment terms to customers. Short term liabilities were $25.8 million, and long term liabilities, a result of the financings that took place in September 2007, were $30 million. Stockholders’ equity totaled $39.1 million, up from $32.7 million as of September 30, 2007.
The Company invested $19.6 million for the first quarter of Fiscal Year 2008. $16.0 million of the total was for the purchase of property, plant and equipment, including the purchase of land use rights for the property on which the Company currently is located, and $1 million to purchase a minority position in one its subsidiaries.
Recent Events
On January 14, 2008, the Company announced its decision to apply for listing approval on The NASDAQ Stock Exchange. The company expects that listing on NASDAQ will increase the Company’s visibility in the investment community.
On January 11, 2008, the Company entered into an agreement with shareholders of Hong Kong Giant Power International Investment Ltd. (“GPI”) to purchase GPI for approximately $8.75 million. The Hong Kong government approved the sale and the transaction closed on January 16, 2008. This acquisition gives Sinoenergy access to natural gas resources as well as direct returns on equity investments in several existing large-scale and profitable CNG processing plants.
On December 24, 2007, Sinoenergy entered into agreements with shareholders of Qingdao Shan Yang Tai Chemistry Resources Development Co. Ltd. (“QSDY”) to purchase QSDY for approximately $5.33 million. In compliance with the local regulations, the Company provided additional paid-in capital of $4.28 million to QSDY. PRC government approval for this transaction was received on January 4, 2008. The purpose of this acquisition was to allow the Company to acquire the land rights to property owned by QSDY on which Sinoenergy will build new manufacturing facilities. The Company plans to sell the land use rights for its present facility, although at present it has no agreement or understanding with respect to any such sale.
Business Outlook
“We are very pleased with the performance of our CNG station facilities business. The Company expects to see improving sales in our conversion kit business. We will continue to manufacture truck trailers, and hope to increase the shipments of our non-standard pressure containers,” said Mr. Bo Huang. “Sinoenergy currently has 3 retail CNG filling stations that are operational, 10 retail CNG filling stations that are nearly complete and are waiting for government approvals, and another 20 retail CNG filling stations that are under construction.”
Guidance
Sinoenergy expects its net revenues in the second quarter ending March 31 of Fiscal Year 2008 to be $10 million and operating income to be from $3.0 to $3.5 million.
Conference Call
Sinoenergy management will host a conference call at 9:00 a.m. Eastern Time on Friday, February 15, 2008 to discuss financial results for the first quarter of fiscal year 2008. The conference call will include Mr. Tianzhou Deng, Chairman; Mr. Bo Huang, CEO; and Ms. Laby Wu, CFO. To participate in this 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 call (617) 801-9702. The Conference Pass Code is 805 403 67. If you are unable to participate in the call at that time, replay of the conference call will be available from 11:00 a.m. EST on Friday, February 15 to 11:00 a.m. EST on Friday, February 29. To access the replay, call (888) 286-8010. International callers should call (617) 801-6888. The Conference Pass Code is 41357331.
About Sinoenergy
Sinoenergy is a manufacturer of compressed natural gas (CNG) vehicle and gas station equipment as well as a designer, developer and builder of CNG stations in China. In addition to its CNG related products, including fuel conversion kits, the Company also manufactures a wide variety of pressure containers for use in different industries, including the design and manufacture of various types of pressure containers in the petroleum and chemical industries, the metallurgy and electricity generation industries and the food and brewery industries. Sinoenergy is developing a network of retail CNG stations that it will own and operate. The Company’s website is: http://www.sinoenergycorporation.com .
Forward-Looking Statements
Statements in this press release include “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Undue reliance should not be placed on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this press release, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our report on Form 10-KSB for the period ended September 30, 2007 and in other filings we make with the SEC. In addition, such statements could be affected by risks and uncertainties related to the ability to conduct business in the PRC, product demand, including the both the supply and demand for CNG, the ability of our CNG suppliers to provide us with natural gas in the quantities that we may require, our ability to develop, construct and operate a CNG station business, our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, including the effect of price controls on our business, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.
Sinoenergy Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands of United States dollars)
December 31, September 30,
2007 2007
ASSETS Unaudited Audited
CURRENT ASSETS
Cash 10,462 3,322
Restricted cash 821 1,225
Accounts receivable (net)
- Related party 121 169
- Third party 8,370 5,827
Other receivables
- Related party 333 332
- Third party 8,060 33,594
Deposits and prepayments-third party 5,792 2,795
Deferred expenses 89 58
Inventories 2,663 2,901
TOTAL CURRENT ASSETS 36,711 50,223
LONG TERM ASSETS
Long term investments 1,246 1,592
Property, plant and equipment (net) 17,892 8,388
Intangible assets 24,710 18,531
Other long-term assets 12,112 9,599
Goodwill 758 729
Long term deferred tax asset 4 4
TOTAL ASSETS 93,433 89,066
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short term bank loan 14,375 14,843
Accounts payable
- Related party -- --
- Third party 2,488 3,166
Notes payable 821 799
Other payables
- Related party 2,005 3,679
- Third party 4,825 1,502
Accrued expenses 144 319
Warranty accrual 93 76
Advances from customers 1,024 1,035
Income taxes payable -- 119
TOTAL CURRENT LIABILITIES 25,775 25,538
LONG TERM LIABILITIES
12% guaranteed senior notes 16,121 15,622
3% guaranteed senior convertible notes 10,978 13,823
TOTAL LONG TERM LIABILITIES 27,099 29,445
Minority interests 1,475 1,363
Commitments
STOCKHOLDERS’ EQUITY
Common stock - par value $.001 per
share; Issued and Outstanding -
31,418,065 shares at December 31,
2007, 14,636,472 shares at December
31, 2006 31 31
Series A convertible preferred stock
- $0.001 Par Value - none at
December 31, 2007, 5,692,307 shares
at December 31, 2006 -- --
Additional paid-in capital 25,077 22,000
Capital surplus 20 20
Statutory surplus reserve fund 1,140 1,140
Retained earnings 10,536 8,217
Accumulated other comprehensive income 2,280 1,312
Total stockholders’ equity 39,084 32,720
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY 93,433 89,066
Sinoenergy Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands of United States dollars except per share information)
Three Months Ended
December 31,
2007 2006
NET REVENUE 8,807 2,629
COST OF REVENUE (4,896) (931)
GROSS PROFIT 3,911 1,698
OPERATING EXPENSES
Selling expenses 156 38
General and administrative expenses 1,008 665
TOTAL OPERATING EXPENSES 1,164 703
INCOME FROM OPERATIONS 2,747 995
OTHER INCOME (EXPENSES)
Investment loss (20) --
Other non-operating income 145 69
Interest expense (560) (63)
Other expenses (1) (31)
OTHER LOSS NET (436) (25)
INCOME BEFORE INCOME TAXES 2,311 970
Income tax recovery 120 109
INCOME BEFORE MINORITY INTEREST 2,431 1,079
Minority interest (112) 37
NET INCOME 2,319 1,116
Other comprehensive income
Foreign currency translation
adjustments 968 5
COMPREHENSIVE INCOME 3,287 1,121
Earnings Per Share - Basic 0.07 0.08
Weighted Average Shares Outstanding
- Basic 31,418,065 14,636,472
Earnings Per Share - Diluted 0.06 0.06
Weighted Average Shares Outstanding
- Diluted 37,821,413 19,286,902
Sinoenergy Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(In thousands of United States dollars)
Three Months Ended December 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 2,319 1,116
Amortization of warrants for service 46 --
Amortization of options 72 30
Amortization of notes discount 28 --
Interest expense for long term notes
issued 585 --
Minority interest 112 (36)
Depreciation of property, plant and
equipment 140 102
Amortization of intangible assets 244 58
Provision for doubtful accounts 90 94
Changes in operating assets and
liabilities:
(Increase) in accounts receivable (2,595) (398)
(Increase) decrease in other
receivables, deposits and
prepayments (7,325) 2,480
Decrease in inventories 238 356
(Decrease) increase in accounts
payable (656) 40
(Decrease) increase in accrued
expenses (158) 36
(Decrease) in advances from
customers (11) (183)
Increase in other payables 3,020 948
(Decrease) in income tax payable (119) (101)
Net cash (used in) operating
activities (3,970) 4,542
CASH FLOWS FROM INVESTING ACTIVITES
Payment for purchase of property,
plant and equipment (9,646) (2,436)
Payment for purchase of land use right (6,423) (4,059)
Purchase of minority interest in
subsidiaries (1,023) --
Other payment for investment
activities (2,542)
Other receipts from investments -- 134
Net cash used in investing activities (19,634) (6,361)
CASH FLOWS FROM FINANCING ACTIVITES
Cash received from bank loan -- 371
Cash received from notes issued 29,840 --
Cash Received for other financing
activities -- 399
Cash paid for Bank loan (468) --
Net cash received in financing
activities 29,372 770
Effect of changes in exchange rate 968 5
Net increase/(decrease) in cash 6,736 (1,044)
Cash at beginning of the year 4,547 1,632
Cash at end of the year 11,283 588
Supplementary Cash flow disclosure:
Non-cash investing and financing
activities:
Increase in additional paid in capital
owning to beneficial conversion
features recording 2,959 --
Decrease in 3% guaranteed senior
convertible notes owing to beneficial
conversion features recording (2,959) --
Interest Paid 255 63
For more information, please contact:
Sinoenergy Corporation
Ms. Laby Wu, CFO
Tel: +86-10-8492-8149
Email: labywu@Sinoenergycorporation.com
CCG Elite Investor Relations Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
