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Longwei Petroleum Announces Financial Results for First Quarter of Fiscal 2013

Operating income increased 16.5% to $24.5 million, and book value reaches $3.47 per share

Management to host earnings conference call Wednesday, November 14th at 10:00 a.m. EST

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TAIYUAN CITY, China, Nov. 13, 2012 /PRNewswire-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE MKT: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today announced its financial results for the first quarter ended September 30, 2012.

First Quarter Fiscal Year 2013 Financial Highlights: (Year-over-Year, 3-Month Results for Quarters Ended September 30, 2012 and 2011)

  • Product sales volume in metric tons ("mt") increased 17.8% to 110,587mt, compared with 93,862mt.
  • Revenues increased 12.4% to $133.4 million, compared with $118.6 million.
  • The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of approximately $70.6 million and $57.6 million, respectively. Agency fees contributed $5.2 million to revenues.
  • Operating income increased 16.5% to $24.5 million, compared with $21.0 million.
  • Non-GAAP net income attributable to common shareholders increased 16.7% to $18.3 million, compared to $15.7 million.
  • Basic GAAP EPS remained unchanged at $0.18 per share for the three months ended September 30, 2012 and 2011. The Company's diluted GAAP EPS increased $0.02 or 13.3% to $0.17 from $0.15 for the three months ended September 30, 2012 and 2011, respectively.
  • Tangible book value per share increased approximately 4.8% to $3.47 per share at September 30, 2012, compared with $3.31 per share at June 30, 2012.
  • Total assets increased $17.7 million or 5.2% to $360.0 million at September 30, 2012, compared with $342.3 million at June 30, 2012.

"Our fiscal first quarter saw the completion of two very important initiatives," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "First, independent auditors completed a tax reconciliation of our SAT and SAIC filings with our SEC filings. The results verified no material differences. Second, we are very pleased to have completed our cash purchase of the Huajie Petroleum assets, which have nearly doubled our overall capacity to 220,000 metric tons. Together, we believe these accomplishments position us for strong shareholder value improvement."

"China's demand for oil is likely to show its largest increase in two years in the fourth quarter as the country's economic growth begins to pick up, according to industry experts." China Daily (November 9, 2012). The article continues, "In the fourth quarter, China is expected to use 9.64 million barrels of oil a day, which would result in the largest quarterly increase since the same period of 2010, according to the International Energy Agency and Sanford C. Bernstein & Co."

"We continue to capitalize on the growing domestic demand for petroleum products in China, and as proven in our first-quarter results, expect strong top-line and bottom-line results in fiscal 2013," stated Michael Toups, Chief Financial Officer of Longwei. "Our Huajie facility has come on-line in October and will be a major catalyst for growth in the quarters ahead."

Summary of First Quarter Results of Operations 

Revenues - During the first quarter ended September 30, 2012, Longwei's sales increased 12.4% to $133.4 million, up from $118.6 million in the first quarter of fiscal 2012. The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of approximately $70.6 million and $57.6 million, respectively, during the first quarter. The sales increase was primarily due to the increase in product sales volume of 17.8% year-over-year as a result of improving economic conditions and regional growth. However, the weighted average sales price per metric ton ("mt") of petroleum products sold decreased approximately 3.8% to $1,159/mt from $1,205/mt for the quarters ended September 30, 2012 and 2011, respectively. The Company continues to allocate product sales between its facilities to better service its customer base.

Longwei's revenues are derived from two segments: direct product sales and agency fees. For direct product sales, the Company purchases, takes physical possession of, and sells diesel, gasoline, fuel oil and solvents. For agency fees, the Company acts as a purchasing agent, earning a fee or commission by allowing intermediaries to use its licenses and buying power to purchase directly from the refineries. During the quarter ended September 30, 2012, compared to the year-ago period, Longwei's product sales increased $15.1 million or 13.3% from $113.1 million to $128.2 million, and agency fees decreased $0.3 million or 5.6% from $5.5 million to $5.2 million.

Total sales volume for the three months ended September 30, 2012 increased 17.8% to 110,587mt from 93,862mt for the three-month period ended September 30, 2011. The increase in volume was primarily due to improving economic conditions and regional growth.

The decrease in the price per mt of petroleum products was due to the average decrease in international crude oil prices and corresponding price decreases set by the PRC to retail petroleum prices. During the timeframe from fiscal year end June 30, 2011 through September 30, 2012, the PRC decreased retail prices four times, but also increased retail prices four times, most recently in August and September 2012.

Cost of Sales - Costs of sales increased by $11.3 million or 11.7% to $108.0 million for the three months ended September 30, 2012 from $96.6 million for the three months ended September 30, 2011. As a percentage of total revenues, total cost of sales between the periods decreased by 0.5% to 80.9% from 81.4%. The decrease in cost of sales as a percentage of revenue was primarily due to the lower weighted average inventory costs from inventory purchased in the prior quarter during a period of declining international prices and a current period of rising retail petroleum prices implemented by the PRC in August and September 2012.

We pay market prices to our refinery suppliers and carefully manage our inventory levels to adjust to pricing fluctuations. The three-month weighted average cost basis per metric ton of petroleum product we sold decreased by $53/mt or 5.2% to $976mt from $1,029/mt during the three months ended September 30, 2012 and 2011, respectively. During the three month period ended September 30, 2012, the Company's gross profit margin on product sales increased 8.2% to 15.8% from 14.6% during the three month period ended September 30, 2011, because of lower average inventory costs due to prior decreases in international crude oil prices. International crude oil prices have subsequently increased, but the PRC has also increased the retail price of petroleum to more accurately reflect the fluctuations in worldwide crude oil prices.

The Company also experienced a drop in agency fee revenues of $0.3 or 5.6% to $5.2 million during the three months ended September 30, 2012 compared to $5.5 million during the three months ended September 30, 2011. When the Company earns higher agency fees, the net effect lowers the percentage of total cost of sales because there are no costs associated with the agency fees.

Operating Expenses - Operating expenses for the first quarter totaled $0.9 million as compared to $1.0 million for the first quarter of fiscal 2012. As a percentage of revenues, operating expenses decreased to 0.7% for the quarter ended September 30, 2012 from 0.8% for the quarter ended September 30, 2011. The decrease was primarily due to lower professional fees paid during the period.

Operating Income - Operating income for the three months ended September 30, 2012 increased $3.5 million or 16.5% to $24.5 million from $21.0 million for the three months ended September 30, 2011, due to the increase in product sales volume of 17.8% year-over-year as a result of improving economic conditions and regional growth and the increase in overall gross profit margin of 0.5% due to lower average inventory costs.

Net Income - Net income attributable to common shareholders decreased by approximately $0.1 million or 0.4% to $17.8 million for the three months ended September 30, 2012 from $17.9 million for the three months ended September 30, 2011.

The non-cash expense for the change in the fair value of the warrant derivative liability for the first quarter of 2012 was $0.6 million, compared to the non-cash income reported for the change in the warrant derivative liability of $2.1 million in the first quarter of fiscal 2012. Non-GAAP net income attributable to common shareholders adjusted for the non-cash warrant derivative liability charge increased by $2.6 million or 16.7% to $18.3 million for the three months ended September 30, 2012 from $15.7 million for the three months ended September 30, 2011.

EPS - The Company's basic GAAP earnings per share remained unchanged at $0.18 for the three months ended September 30, 2012 and 2011. The Company's diluted earnings per share increased $0.02 or 13.3% to $0.17 from $0.15 for the three months ended September 30, 2012 and 2011, respectively.

Liquidity and Capital Resources

Cash and cash equivalents totaled $14.4 million at September 30, 2012. As of September 30, 2012, the Company's current assets decreased $5.2 million or 2.5% to $202.8 million from $208.0 million at year end June 30, 2012, primarily due to the use of cash on-hand and conversion of working capital assets during the quarter for the payment of $23.7 million for the balance of the Huajie Petroleum assets.

The Company's current ratio is approximately 22:1 (current assets to current liabilities). Total assets, including the Huajie Petroleum assets, as of September 30, 2012 were $360.0 million. The Company had no long-term debt as of September 30, 2012.

The average age of inventory decreased to 42 days from 55 days during the three months ended September 30, 2012 compared to the three-month period ended September 30, 2011. The Company turned on-hand inventory more quickly, but held more inventory through advances to suppliers by locking in petroleum pricing in the prior quarter when prices were at lower levels. At September 30, 2012, the Company's advances to suppliers were $109.6 million compared to $64.5 million at September 30, 2011.

Longwei completed the purchase of the assets of Huajie Petroleum Co., Ltd. ("Huajie") on September 26, 2012, pursuant to an Asset Purchase Agreement.  The Company acquired the assets of Huajie, a fuel storage depot in northern Shanxi Province (located in Xingyuan, Shanxi) including fuel tanks with a 100,000-metric-ton storage capacity. The Company paid RMB 700 million (approximately USD $110.6 million) for the assets. The assets included land use rights for 98 acres of land, 100,000-tonnage fuel tanks with accessory facilities and equipment, a special transportation railway line, and a 3,000-square-meter office building. The Company engaged a third-party, independent valuation firm for the appraisal of the fair market value of the assets acquired, which exceeded the purchase price. The Company used its cash on hand and conversion of working capital assets to finance the acquisition.

2013 Financial Outlook

Longwei expects revenue growth of approximately 26.6% to $646.3 million, and net income growth of approximately 24.2% to $77.6 million, adjusted for the warrant derivative liability, for the fiscal year ending June 30, 2013. This growth rate does not account for any external financing for inventory, which could accelerate growth. The growth is driven primarily by the ramp-up of the Huajie facility and organic growth at the Company's two existing facilities. The Company forecasts it can maintain profitability within the range-band of its historical margins, as proven by its track record during times of volatile fluctuations in the price of international crude oil.

The GDP growth rate for Shanxi Province during 2011 was 13%, according to China Daily (March 13, 2012), and it is expected to be approximately 10% for 2012, which outpaces the general economic growth estimates of 7.5% in the PRC. The provincial government has estimated the fixed-asset investment in Shanxi to be RMB 5 trillion (approximately $790 billion) over the next five years, according to China Daily (September 13, 2011). The provincial government also recently announced an additional RMB 1 trillion (approximately $158 billion) in local development projects as part of the region's industrial stimulus plan, according to China Securities News (August 23, 2012). The Company believes its locations within Shanxi Province are advantageous to the growth of its business model.

The financial guidance for fiscal year 2013 reflects the Company's current estimates based on the conditions and trends known to the Company as of the date of this release. Results are subject to change based upon further review by management and future changes in market and operating conditions.

Conference Call and Webcast

Management will host a conference call to discuss these financial results on Wednesday, November 14, 2012 at 10:00 a.m. EST (7:00 a.m. PST).

To participate in the call, please dial (888) 397-5352, or (719) 325-2402 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://www.longweipetroleum.com, or alternately at http://ViaVid.net.

A replay of the call will be available for two weeks from 1:00 p.m. EST on November 14, 2012, until 11:59 p.m. EST on November 28, 2012. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4109586. In addition, a recording of the call will be available via the Company's website at http://www.longweipetroleum.com for one year.

About Longwei Petroleum Investment Holding Limited

Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storing and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 220,000 metric tons located at three storage facilities within Shanxi: Taiyuan, Gujiao and Huajie, which have an individual storage capacity of approximately 50,000 metric tons ("mt"), 70,000mt, and 100,000mt, respectively.  The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi, but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.

The Company seeks to earn profits by selling its products at competitive prices with timely delivery to transportation companies, coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue from agency fees by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's Taiyuan and Gujiao facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.

Longwei was recently named to the Forbes list of "Asia's 200 Best Under a Billion" from a universe of 15,000 companies. Forbes ranked the companies based on sales growth, earnings growth and return on equity in the past 12 months and over three years. As was reported, Longwei's three-year track record is 45% sales growth, 28% earnings per share growth and 28% return on equity. The Forbes article can be found at: http://www.forbes.com/sites/christinasettimi/2012/07/25/asias-200-best-under-a-billion

For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at info@redchip.com.

Forward-Looking Statements

Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.

Contact:      

At the Company:

Michael Toups, Chief Financial Officer
Tel: U.S. Office +1-727-641-1357
Email: mtoups@longweipetroleum.com
Web: http://www.longweipetroleum.com

Investor Relations:

Mike Bowdoin
RedChip Companies, Inc.
Tel: +1-800-733-2447, Ext. 110
Email: mike@redchip.com
Web: http://www.redchip.com

Tina Xiao
Weitian Group LLC
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com
Web: http://www.weitian-ir.com

 

Longwei Petroleum Investment Holding Limited and Subsidiaries

Condensed Consolidated Balance Sheets




September 30,
 2012



June 30,
 2012

Assets


(In Thousands)

 Current Assets:








(Unaudited)




Cash


$

14,413



$

11,578

Accounts Receivable, Net of Allowance for Doubtful Accounts of $0

as of September 30, 2012 and June 30, 2012



30,775




33,935

Inventories



48,072




52,619

Advances to Suppliers



109,578




109,865









Total Current Assets



202,838




207,997









 Property, Plant and Equipment, Net



132,937




47,202

 Land Use Rights, Net



24,262




-

    Deposit Paid for Long-Term Assets



-




87,103









Total Assets


$

360,037



$

342,302









Liabilities and Stockholders' Equity








Current Liabilities:
















Accounts Payable


$

926



$

750

Warrant Derivative



895




320

    Taxes Payable



7,558




7,687









Total Current Liabilities



9,379




8,757









                  Total Liabilities



9,379




8,757









Stockholders' Equity:
















Preferred Stock, No Par Value; 100,000,000 Shares Authorized; 814,643 and 914,643 Issued

 and Outstanding as of September 30, 2012 and June 30, 2012



373




418

Common Stock, No Par Value; 500,000,000 Shares Authorized; 100,989,966 and 100,889,966

Issued and Outstanding as of September 30, 2012 and June 30, 2012



31,713




31,667

Additional Paid-in Capital



7,992




7,992

Retained Earnings



279,454




261,696

    Other Comprehensive Income



31,126




31,772









    Total Stockholders' Equity



350,658




333,545









Total Liabilities and Stockholders' Equity


$

360,037



$

342,302


The notes to consolidated financial statements, available in the Company's Form 10-Q filed with the SEC on November 13, 2012, are an integral part of these financial statements.

 

Longwei Petroleum Investment Holding Limited and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income




For the Three Months Ended

September 30,



2012



2011



(In Thousands, Except Per Share Data)




Net Sales


$

133,385



$

118,631









Cost of Sales



107,954




96,614









Gross Profit



25,431




22,017









Operating Expenses



918




973









Operating Income



24,513




21,044









 Derivative Income (Expense)



(575)




2,127

 Interest Income



5




4









Income Before Income Tax Expense



23,943




23,175









Income Tax Expense



(6,170)




(5,324)









Net Income



17,773




17,851









Foreign Currency Translation Adjustment



(646)




2,856









Comprehensive Income


$

17,127



$

20,707









Net Income


$

17,773



$

17,851

Preferred Stock Dividends Paid in Cash



(15)




(15)









Net Income Attributable to Common Stockholders


$

17,758



$

17,836









Earnings per Common Share:








Basic


$

0.18



$

.018









Diluted (September 30, 2011 – Restated)


$

0.17



$

0.15









Weighted Average Common Shares Outstanding:








Basic



100,961




100,752









Diluted



101,814




101,701


The notes to consolidated financial statements, available in the Company's Form 10-Q filed with the SEC on November 13, 2012, are an integral part of these financial statements.

 

Longwei Petroleum Investment Holding Limited and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows




For the Three Months Ended

September 30,



2012


2011



(In Thousands)

Cash Flows From Operating Activities:





Net Income


$

17,773


$

17,851








Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:







        Depreciation and Amortization



557



515

        Stock Based Compensation



17



17

        Changes in Warrant Derivative Liability



575



(2,127)

        (Increases) Decreases in Assets:







                  Accounts Receivable



3,095



(203)

                  Inventories



4,446



(13,935)

                  Advances to Suppliers



75



(6,149)

         Increases (Decreases) in Liabilities:







                  Accounts Payable



(28)



25

                  Taxes Payable



74



(2,620)

Net Cash Provided By (Used in) Operating activities



26,584



(6,626)








Cash Flows From Investing Activities:







         Purchase and Improvements to Land and Fixed Assets



(23,710)



-

Net Cash Provided By (Used in) Investing Activities



(23,710)



-








Cash Flows From Financing Activities:







         Payment of Dividends



(15)



(15)

Net Cash Provided By (Used in) Financing Activities



(15)



(15)








Effect of Exchange Rate Changes in Cash



(24)



131








(Decrease) Increase in Cash



2,835



(6,510)








Cash, Beginning of Period



11,578



9,422








Cash, End of Period


$

14,413


$

2,912








Supplemental Cash Flow Information:







         Cash Paid During the Year for:







                Income Taxes


$

5,585


$

6,956








Supplemental Schedule of Noncash Investing and Financing Activities:







         Conversion of Preferred Stock into Common Stock


$

-


$

-

         Deposits-Long Term Assets for Fixed Assets


$

87,103


$

-


The notes to consolidated financial statements, available in the Company's Form 10-Q filed with the SEC on November 13, 2012, are an integral part of these financial statements.

SOURCE Longwei Petroleum Investment Holding Ltd.



RELATED LINKS
http://www.longweipetroleum.com
http://ViaVid.net
http://www.forbes.com/sites/christinasettimi/2012/07/25/asias-200-best-under-a-billion
http://www.redchip.com
http://www.weitian-ir.com

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