WUXI, China, March 11 /PRNewswire-Asia/ -- WSP Holdings Limited (NYSE: WH) (“WSP Holdings” or the “Company”), a leading Chinese manufacturer of API (American Petroleum Institute) and non-API seamless casing, tubing and drill pipes used in oil and natural gas exploration, drilling and extraction (“Oil Country Tubular Goods” or “OCTG”), and other pipes and connectors, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2008.
Fourth Quarter 2008 Highlights
-- Net revenue was $299.3 million, an increase of 130.4% from the fourth
quarter of 2007
-- Gross profit was $56.0 million, an increase of 68.5% from the fourth
quarter of 2007
-- Gross margin was 18.7%, compared to 25.6% in the fourth quarter of 2007
-- Income from operations was $30.9 million, an increase of 34.7% from the
fourth quarter of 2007
-- Net income was $27.8 million, up 65.9% from $16.7 million in the fourth
quarter of 2007
-- Basic and diluted earnings per American Depository Share (“ADS,” each
ADS represents two ordinary shares) were both $0.27 for the fourth
quarter of 2008, compared to $0.20 for both in the fourth quarter of
2007
-- Won several supply contracts in February 2009 for a total of 142,777
tonnes of OCTG products to Chinese domestic oil and gas companies
Full Year 2008 Highlights
-- Net revenue was $912.1 million, an increase of 88.5% from 2007
-- Gross profit was $208.6 million, an increase of 65.8% from 2007
-- Gross profit margin was 22.9%, compared to 26.0% in 2007
-- Income from operations was $146.6 million, an increase of 41.6% from
2007
-- Net income was $99.3 million, an increase of 33.2% from 2007
-- Basic and diluted earnings per ADS were both $0.97, unchanged from 2007
-- WSP China was granted High and New Technology Enterprise status by the
Chinese government, which reduced WSP China’s income tax rate from the
uniform rate of 25% to a preferential rate of 15%
“In this quarter, despite a weak global economic environment, we experienced significant growth of our API business and continued to see solid growth in sales for our non-API products,” commented Mr. Longhua Piao, the Chairman and CEO of WSP Holdings. “Our marketing and sales strategy at the beginning of 2008 emphasized international sales of OCTG products because of strong overseas demand for high-end non-API products and higher export prices for API products compared to Chinese domestic market prices for API products. In response to weakening international demand for OTCG products, we adjusted our strategy by concentrating on sales of OCTG products to domestic customers in the fourth quarter of 2008.”
“Changes in our sales mix to the Chinese domestic market helped offset some of our sales decreases in international markets. Raw material costs decreased towards the end of the fourth quarter of 2008, while our average selling prices for API products decreased only slightly because selling prices for API products were largely determined by contracts entered into before the fourth quarter. Domestic prices for our non-API products remained firm because our sophisticated proprietary technologies make our products attractive to customers.”
Fourth Quarter 2008 Results
WSP Holdings’ net revenue in the fourth quarter of 2008 was $299.3 million, an increase of 130.4% from $129.9 million in the fourth quarter of 2007. Sales volume was 195,718 tonnes in the fourth quarter of 2008, up 80.5% from 108,460 tonnes in the fourth quarter of 2007.
The increase in net revenue in the fourth quarter of 2008 was primarily due to the strong growth in sales of API products and other products. During the fourth quarter of 2008, domestic sales were $128.9 million and international sales were $170.4 million, which contributed to 43.1% and 56.9% of our total sales revenues, respectively.
Sales volume of API products was 138,751 tonnes in the fourth quarter of 2008, a 137.6% increase from 58,406 tonnes in the fourth quarter of 2007. API product sales were $203.1 million in the fourth quarter of 2008, a 209.6% increase from $65.6 million in the fourth quarter of 2007 primarily due to an increase in sales of API products to customers in China during the fourth quarter of 2008. Sales of other products were $36.2 million in the fourth quarter of 2008, up 84.7% from $19.6 million in the fourth quarter of 2007 primarily due to strong demand for green pipes in the domestic market.
Non-API products are custom-made to customers’ specifications using more stringent manufacturing standards than API products, and have higher average selling prices than API products. Sales volume of non-API products was 28,433 tonnes in the fourth quarter of 2008, an increase of 16.7% from 24,368 tonnes in the fourth quarter of 2007. Sales of non-API products were $60.0 million in the fourth quarter of 2008, an increase of 34.4% from $44.7 million in the fourth quarter of 2007. Non-API products accounted for 20.1% of the Company’s net revenue in the fourth quarter of 2008, compared to 34.4% in the fourth quarter of 2007. The decrease of non-API product sales in terms of percentage to total sales was primarily due to the sudden increased demand of API products from domestic markets.
Gross profit in the fourth quarter of 2008 was $56.0 million, an increase of 68.5% from $33.2 million in the fourth quarter of 2007. Gross margin in the fourth quarter of 2008 was 18.7%, compared to 25.6% in the fourth quarter of 2007. Gross margin decreased mainly because of higher sales percentages of API products and green pipes which have lower margins than non-API products.
Operating expenses in the fourth quarter of 2008 were $25.1 million, an increase of 143.8% from $10.3 million in the fourth quarter of 2007. Operating expenses increased because of higher general and administrative expenses primarily related to the provisions for bad debt that resulted from uncollectable letters of credit from a Russian bank which was unable to make payment due to the bank’s financial difficulties, increased professional fees as result of being a public company, and higher salary expenses due to the hiring of additional employees. Marketing and selling expenses increased because of increased sales commissions to sales representatives involved in overseas sales. The increase in other operating income was primarily due to a government subsidy to one of the Company’s principal operating subsidiaries, Jiangsu Fanli Pipe Co., Ltd.
Income from operations in the fourth quarter of 2008 was $30.9 million, an increase of 34.7% from $23.0 million in the fourth quarter of 2007. Operating margin was 10.3% in the fourth quarter of 2008, compared to 17.7% in the fourth quarter of 2007.
Net interest expense was $4.6 million in the fourth quarter of 2008, compared to $2.8 million in the fourth quarter of 2007. Net interest expense increased because of larger bank loans due to more working capital required for the increased scale of operations, which was partially offset by lower interest rates as well as interest income earned from the proceeds of the Company’s initial public offering. There was an income tax benefit of $3.9 million in the fourth quarter of 2008, compared to income tax expenses of $1.2 million in the fourth quarter of 2008. The tax benefit was recognized because WSP China was granted “High and New Technology Enterprise” status by the Chinese government in the fourth quarter of 2008, which reduced WSP China’s income tax rate from 25% to 15%, effective retroactively as of January 1, 2008. Accordingly, provisions for income taxes accrued in excess of 15% up to the end of third quarter of 2008 of $9.1 million were reversed in the fourth quarter of 2008, resulting in a net tax credit of $3.9 million.
Net income was $27.8 million in the fourth quarter of 2008, an increase of 65.9% from $16.7 million in the fourth quarter of 2007.
Basic and diluted earnings per ADS were both $0.27 for the fourth quarter of 2008, compared to $0.20 for both in the fourth quarter of 2007.
There were 205,789,800 fully diluted weighted average ordinary shares outstanding in the fourth quarter of 2008, compared to 164,836,391 in the fourth quarter of 2007.
Full Year 2008 Financial Results
For the full year 2008, net revenue was $912.1 million, up 88.5% from $483.8 million in 2007. Revenues from non-API products grew 93.5% from $152.4 million in 2007 to $294.8 million in 2008, and revenues from API products increased 75.1% from $288.6 million in 2007 to $505.3 million in 2008. Revenues from other products increased 161.4% from $42.8 million in 2007 to $112.0 million in 2008.
Gross profit for the full year 2008 was $208.6 million, an increase of 65.8% from $125.8 million in 2007. Gross margin was 22.9% in 2008, compared to 26.0% in 2007. Income from operations for 2008 was $146.6 million, up 41.6% from $103.6 million in 2007. Operating margin was 16.1% in 2008, compared to 21.4% in 2007. Net income for the full year 2008 was $99.3 million, an increase of 33.2% from $74.6 million in 2007. Basic and diluted earnings per ADS were both $0.97 in 2008, compared to $0.97 for both in 2007.
Financial Condition
As of December 31, 2008, the Company had cash and cash equivalents and bank balances of $89.1 million from $180.1 million as of December 31, 2007. Restricted cash totaled $232.0 million as of December 31, 2008, compared to $120.8 million as of December 31, 2007. Inventory and accounts receivable increased proportionately with increased overall production.
Working capital was $123.2 million as of December 31, 2008, compared to $203.0 million as of December 31, 2007. Total shareholders’ equity was $482.6 million as of December 31, 2008, up from $341.1 million as of December 31, 2007.
Recent Developments
In February, 2009, the Company won a contract with CNPC in a bidding process to supply an aggregate of 90,202 tonnes of OCTG to CNPC. In addition, WSP Holdings received direct purchase orders for a total of 52,575 tonnes of OCTG from CNPC, SINOPEC and Shaanxi Yanchang Petroleum (Group) Co., Ltd.
In February 2009, WSP Holdings’ wholly-owned subsidiary Songyuan Seamless Oil Pipes Company Limited completed the construction of a new facility with a pipe finishing capacity of 60,000 tonnes per annum and began its trail production.
Liaoyang Seamless Oil Pipes Company Limited, a 70%-owned subsidiary, began trial production on a recently completed production line with pipe finishing capacity of 60,000 tonnes per annum
WSP Holdings’ wholly-owned major operating subsidiary Wuxi Seamless Oil Pipes Company Limited expanded its production capacity by introducing two new threading lines, with annual production capacity of 60,000 tonnes and 100,000 tonnes, respectively.
Business Outlook
For the full calendar and fiscal year 2009, WSP Holdings expects to generate net revenue between $650 million and $750 million and net income in the range of $70 million to $80 million.
“In 2009, we expect selling prices in China for our non-API products to remain at current levels for some time because our products are needed in extreme oil and gas exploration environments and our customers recognize the technological advantages of our products, such as our T-series premium connection and anti-corrosion pipes which use our proprietary technologies. Our non-API products have price advantages compared to our international competitors because of our lower costs of production, and we provide faster delivery to our international customers than most of our international competitors to attract more international customers. It is difficult to predict how selling prices for our API products in China will change during the remainder of 2009 because of a current oversupply of API products and aggressive price competition in the Chinese market. Based on the purchase contracts we won in February 2009, we estimate that average selling prices to our largest domestic customers will be lower and order volume will remain constant throughout 2009,” commented Mr. Piao. “Looking forward, we cannot predict what will happen to raw material prices in 2009, which will have an important impact on our API and non-API sales margins.”
“We welcome the economic stimulus package announced by the Chinese government which aims to increase spending on domestic civil and industrial infrastructure projects, particularly the West-to-East Gas Pipeline Project, which will encourage the domestic energy sector to grow and increase the demand for OCTG. We will also continue to expand our OCTG business to other regions, including Africa, the Middle East, Central and South America and Southeast Asia, to minimize the impact of declining sales in North America.”
“We have begun construction of new facilities in the Xinjiang Autonomous Region, which will allow us to lower manufacturing and transportation costs, take advantage of low regional labor costs in the region, and be in closer proximity to raw material sources and our customers’ oilfields in central and western China. We are developing these facilities to address Chinese domestic demand for API and non-API products,” concluded Mr. Piao.
Conference Call
WSP Holdings’ management will host a conference call at 9:00 a.m. Eastern Daylight Time on Wednesday, March 11, 2009 to discuss results for its fiscal quarter and year ended December 31, 2008. To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-659-2032. International callers should call 617-614-2712. The Conference Pass Code is 854 384 09.
Replay of the conference call will be available from 11:00 a.m. Eastern Daylight Time on Wednesday, March 11, 2009 to Wednesday, March 18, 2009. To access the replay, call 888-286-8010. International callers should call
617-801-6888. The Conference Pass Code is 634 469 56.
This conference call will also be broadcast live over the Internet and can be accessed by all interested parties on WSP Holdings’ website: http://www.wsphl.com/ . To listen to the live webcast, please go to WSP Holdings’ website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on WSP Holdings’ website for 90 days.
About WSP Holdings Limited
WSP Holdings develops and manufactures seamless Oil Country Tubular Goods (OCTG), including seamless casing, tubing and drill pipes used for on-shore and off-shore oil and gas exploration, drilling and extraction, and other pipes and connectors. Founded as WSP China in 1999, the Company offers a wide range of API and non-API seamless OCTG products, including products that are used in extreme drilling and extraction conditions. The Company’s products are used in China’s major oilfields and are exported to oil producing regions throughout the world. For further information, please visit WSP Holdings’ website at http://www.wsphl.com/ .
Safe Harbor Statements
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Among other things, the Company’s outlook for 2009 and quotations from management in this announcement contain forward-looking statements. A number of factors could cause actual results to differ materially from those contained in the forward-looking statement. Such factors include, but are not limited to, the Company’s ability to develop and market new products, the ability to access capital for expansion, changes from anticipated levels of sales, changes in national or regional economic and competitive conditions, changes in relationships with customers, changes in principal product profits and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to update or revise to the public any forward-looking statements, whether as a result of new information, future events or otherwise. This press release was developed by WSP Holdings, and is intended solely for informational purposes and is not to be construed as an offer or solicitation of an offer to buy or sell the Company’s stock. This press release is based upon information available to the public, as well as other information from sources which management believes to be reliable, but it is not guaranteed by WSP Holdings to be accurate, nor does WSP Holdings purport it to be complete. Opinions expressed herein are those of management as of the date of publication and are subject to change without notice.
Financial Tables Follow
WSP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for share and share-related data)
3 Months 3 Months 12 Months 12 Months
Ended Ended Ended Ended
December December December December
31, 31, 31, 31,
2008 2007 2008 2007
Net revenues $299,307 $129,882 $912,090 $483,783
Cost of revenues (243,294) (96,640) (703,531) (357,997)
Gross profit 56,013 33,242 208,559 125,786
Selling and marketing
expenses (6,682) (4,273) (22,770) (8,578)
General and
administrative expenses (20,462) (5,855) (41,740) (13,591)
Other operating income
(expenses) 2,060 (160) 2,589 (32)
Income from operations 30,929 22,954 146,638 103,585
Interest income 1,247 952 7,694 2,074
Interest expenses (5,810) (3,737) (23,013) (12,615)
Other income 192 58 767 212
Exchange differences (1,737) (1,593) (6,984) (1,898)
Income before provision
for income taxes and
minority interests 24,821 18,634 125,102 91,358
Provision for income
taxes 3,909 (1,167) (24,405) (15,188)
Net income before
minority interests 28,730 17,467 100,697 76,170
Earnings in equity
investment 1 -- 1 --
Minority interests (972) (735) (1,349) (1,609)
Net income $27,759 $16,732 $99,349 $74,561
Weighted average
ordinary shares
used in computation
of earnings per share
Basic 205,789,800 164,130,435 205,663,247 153,561,644
Diluted 205,789,800 164,836,391 205,663,247 153,738,133
Earnings Per Ordinary
Share
Basic $0.13 $0.10 $0.48 $0.49
Diluted $0.13 $0.10 $0.48 $0.48
Earnings Per ADS
Basic $0.27 $0.20 $0.97 $0.97
Diluted $0.27 $0.20 $0.97 $0.97
Note: Each ADS represents two ordinary shares
WSP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2008 2007
Assets
Cash and cash equivalents and bank balances $89,097 $180,130
Restricted cash 231,988 120,759
Accounts and bills receivable, net 246,463 137,497
Other current assets 351,828 187,656
Total Current Assets 919,376 626,042
Property and equipment, net 307,227 185,136
Land use rights 38,814 9,553
Other non-current assets 45,194 6,490
Total Assets 1,310,611 827,221
Current liabilities 796,135 423,032
Other liabilities 12,481 59,063
Total Liabilities 808,616 482,095
Minority interests 19,389 4,002
Total shareholders’ equity 482,606 341,124
Total Liabilities, Minority Interests and
Shareholders’ Equity $1,310,611 $827,221
For more information, please contact:
WSP Holdings Limited
Ms. Judy Zhu, IR Director
Tel: +86-510-8536-0401
Email: info@wsphl.com
Web: http://www.wsphl.com
CCG Investor Relations, Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
