THT Heat Transfer Technology, Inc. Announces Second Quarter 2011 Results

SIPING, China, August 16, 2011 /PRNewswire-Asia/ -- THT Heat Transfer Technology, Inc. (NASDAQ: THTI, "the Company", or "THT"), a leading provider of heat exchangers and heat exchange solutions in China's clean technology industry, today announced its unaudited financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Financial Highlights

• Sales revenue increased by 16.45% year-over-year to US$14.18 million, exceeding guidance.
• Gross profit increased by 13.73% year-over-year to US$6.08 million.
• Gross margin was 42.86%, compared to 43.88% for the second quarter of 2010.
• Operating income increased by 9.98% year-over-year to US$3.09 million.
• Net income attributable to common stockholders increased by 38.55% year-over-year to US$3.31 million.
• Basic and fully diluted net income per share was US$0.16, an increase compared with net income per share of US$0.15 for the second quarter of 2010.

Chairman and Chief Executive Officer Guohong Zhao commented, "I am pleased to report another solid performance, with top-line growth for the second quarter of 2011 surpassing guidance. Our plate heat exchangers ("PHEs"), heat exchange units and shell-and-tube heat exchanger divisions remained the key drivers behind our expansion, as we reaped the rewards of recent initiatives to expand our customer base. Simultaneous efforts to further streamline our cost base resulted in bottom-line growth yet again exceeding that of our top line.

"Integral to the continued success of our business is our unwavering focus on quality and technical innovation. The "U" Stamp certificate of authorization from the American Society of Mechanical Engineers ("ASME"), which we received in the second quarter is a testimony to the quality of our facilities, services and products. This prestigious ASME certification enables us to manufacture "pressure vessels" as defined and regulated by ASME codes, and positions us to better compete in international markets. In addition, the granting of a utility model patent for our Power Heat Exchanger allows us to offer customers an enhanced and more diversified product offering, as well as further differentiating us from competing industry players. We also continue to invest in the development of new products to keep us at the forefront of technological innovation. As a result of our R&D efforts, we recently applied for utility model and invention patents for our Semi-welded Plate Heat Exchanger which is widely used in the chemical industry.

"Our energy efficient platforms and broad range of high quality solutions position us to capitalize on the wealth of opportunities arising from China's rapid urbanization and government incentives to support carbon reduction. In the near-term, we expect government plans to build 36 million affordable homes by the end of 2015 to boost demand for our heat exchange units, which will be used in district heating systems. We anticipate that this home-building initiative will allow for incremental revenue growth in the second half of 2011, and expect revenue between US$12.00 million and US$14.00 million in the third quarter 2011."

Second Quarter 2011 Financial Results

Revenue

Revenue for the second quarter 2011 increased 16.45% to US$14.18 million, from US$12.18 million during the same period in 2010. The increase was primarily attributable to growth in sales across three product lines: PHEs, heat exchange units and shell-and-tube heat exchangers.

Sales volume for the three months ended June 30, 2011 amounted to 992 units, a 4.25% year-over-year decrease from 1,036 units. The rise in revenue reflected higher average selling prices across the Company's product range.

Revenue from PHEs totaled US$9.78 million, a 20.64% rise from US$8.11 million in the same quarter of 2010, primarily due to increased demand from the metallurgy, petrochemical and shipbuilding industries. Revenue from heat exchange units reached US$2.21 million, a 30.25% increase from US$1.70 million for the same period of 2010, primarily due to rapid urbanization in China. In addition, sales revenue from shell-and-tube heat exchangers amounted to US$0.49 million in the second quarter 2011, an increase of US$0.42 million compared with the same period in 2010.

Cost of Sales

Cost of sales for the second quarter 2011 rose 18.58% to US$8.10 million from US$6.83 million in second quarter 2010. The increase largely reflected the significant growth in revenue amid continued business expansion in the second quarter of 2011.

Gross Profit and Gross Margin

Gross profit increased 13.73% to US$6.08 million during the second quarter, from US$5.34 million in the same period of 2010, mainly reflecting the significant revenue growth during the quarter. Gross margin was 42.86% for the three months ended June 30, 2011, as compared to 43.88% during the same period in 2010. The decrease in gross margin was mainly attributable to the significant increase in labor and raw materials costs.

Operating Expenses

Administrative expenses increased 2.18% to US$1.03 in the second quarter, from US$1.01 million for the same period in 2010.

Research and development expenses increased 131.82% year-over-year to US$0.44 million, from US$0.19 million in the second quarter 2010. The increase was mainly due to the Company's continued investment in the development of new products.

Selling expenses increased 13.64% to US$1.52 million for the three months ended June 30, 2011, from US$1.34 million during the same period in 2010. The increase was mainly attributable to higher sales team salaries.

This resulted in a 17.89% rise in total operating expenses to US$2.99 million in the second quarter 2011 from US$2.54 million for the same period in 2010.

Other income

Other income amounted to approximately US$0.85 million in the second quarter, an increase of US$0.77 million compared with the same period in 2010. The increase is primarily due to the approximately UD$0.54 million received from Siping government grants.

Income before Income Tax

Income before income tax was approximately US$3.74 million in the second quarter, compared with approximately US$2.76 million in the second quarter 2010.

Income Tax

Income tax increased 21.13% to US$0.49 million in the second quarter 2011 from US$0.41 million in the same period of 2010.

Net Income

Net income attributable to common shareholders was US$3.31 million in the second quarter 2011, a 38.55% increase compared to US$2.39 million in the same period of 2010.

Basic and fully diluted net income per share was US$0.16 in the second quarter 2011, compared with US$0.15 in the same period of 2010.

Liquidity

Cash and cash equivalents totaled US$5.15 million as of June 30, 2011 compared with US$18.44 million as of December 31, 2010.

For the six months ended June 30, 2011, net cash outflow amounted to US$13.29 million, compared with a net cash outflow of US$2.48 million in the same period of 2010. The change was mainly due to an increase in cash used in operating activities to US$10.13 million, compared with US$0.91 million in the same period of 2010. The increase in cash used in operating activities was due to a US$5.54 million prepayment for the purchase of raw materials and staff advance in anticipation of increased production during the seasonally strong third quarter, a US$1.53 million rise in bills receivable compared with the same period in 2010, a US$3.38 million year-over-year increase in other payables and accrued expenses, and release of counter guarantee receivable of US$0.21 million. Net cash used in investing activities increased to US$2.86 million in the six months ended June 30, 2011, compared with US$0.56 million in the same period of 2010, due primarily to the purchase of land use rights in Siping relating to the Company's plans to build a new factory to expand production capacity, as well as to the purchase of equipment.

Third Quarter 2011 Guidance

THT expects to generate net revenues in the range of US$12.00 million to US$14.00 million in third quarter fiscal 2011, compared with US$12.78 million in the same period of 2010. This represents the Company's preliminary view, and is subject to change.

Conference Call

THT's senior management will host a conference call at 8:00 am (Eastern) / 5:00 am (Pacific) / 8:00 pm (Beijing) on August 16, 2011 to discuss the second quarter 2011 financial results and recent business activity. The conference call may be accessed by calling:

Please dial in approximately 10 minutes before the scheduled time of the call.

A replay of the conference call may be accessed by phone at the following numbers until August 26, 2011:

A live webcast of the conference call and replay will be available on the investor relations page of THT's website at: http://www.tht.cn/ir.asp.

About THT Heat Transfer Technology, Inc.

Through its Chinese operating subsidiaries, THT Heat Transfer Technology, Inc. designs, manufactures and sells plate heat exchangers, shell-and-tube heat exchangers, heat exchanger units and other heat exchanger products with total heat exchange solutions. Heat exchangers play an integral part in helping customers improve energy efficiency. Used in a number of industries, THT's products focus on energy conservation, emission reduction and other environmentally friendly applications. Its six major product categories are plate heat exchangers, shell-and-tube heat exchangers, air-cooled heat exchangers, weld plate heat exchangers, heat exchanger units and plate-and-shell heat exchangers. The Company also offers comprehensive heat exchange solutions.

THT's in-house R&D capabilities enable it to deliver tailored products that better meet the changing demands of its customers. The Company has a strong record of delivering high-quality products and services to leading domestic and international customers. THT has completed over 3,000 projects and has provided heat exchange solutions to several Fortune 500 companies. The Company is headquartered in Siping City, Jilin Province, China. For more information, please visit the Company's website at www.tht.cn.

Safe Harbor Statement

This press release contains certain statements that may include "forward looking statements". All statements other than statements of historical fact included herein are "forward-looking statements". These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the risk factor sections of the Company's periodic reports that are filed with the Securities and Exchange Commission and are available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

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