Recon Reports Third Quarter 2012 Financial Results

BEIJING, May 14, 2012 /PRNewswire-Asia-FirstCall/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), a Chinese non-state-owned oilfield services provider to oil and gas companies and their affiliates, today announced its financial results for the third fiscal quarter ended March 31, 2012.

Third Quarter 2012 Highlights

  • Total revenues in the three months ended March 31, 2012 increased significantly to RMB13.02 million ($2.06 million) from RMB8.76 million in the three months ended March 31, 2011. New clients contributed to most of the increase. Total revenues in the nine months ended March 31, 2012 decreased to RMB48.81 million ($7.72 million) from RMB62.74 million in the nine months ended March 31, 2011, mainly due to the deconsolidation of one variable interest entity ("VIE") in 2010.
  • Gross profit for the three months ended March 31, 2012 increased 332.69% to RMB6.23 million ($0.99 million) from RMB1.44 million in the same period of 2011. This increase was mainly due to higher margin of our new products based on horizontal well fracturing technology.
  • Net income attributable to ordinary shareholders for the third quarter of fiscal year 2012 was RMB119,000 ($19,000), compared to a net loss attributable to ordinary shareholders of RMB2.01 million in the same quarter last year. Net loss attributable to ordinary shareholders improved from RMB21.85 million for the nine months ended March 31, 2011 to RMB1.89 million ($0.3 million) for the nine months ended March 31, 2012.
  • Adjusted EBITDA was RMB989,000 ($156,000) for the three months ended March 31, 2012, up 142.78% compared to a loss of RMB2.31 million in the same quarter in 2011. Adjusted EBITDA was RMB320,000 ($51,000) for the nine months ended March 31, 2012, an increase of 103.32% compared to a loss of RMB9.65 million in the same period last year.
  • Diluted net income per share was RMB0.03 ($0.00) for the three months ended March 31, 2012 and diluted net loss per share was RMB0.48 ($0.08) for the nine months ended March 31, 2012, compared to diluted net loss per share of RMB0.51 and RMB5.53 for the three- and nine-month periods ended March 31, 2011.

"We believe that Recon should act as a professional integrator of products and services, rather than simply acting as an equipment supplier," said Mr. Yin Shenping, CEO of Recon, "To achieve this goal, we have dedicated time and resources to optimize our operations and to improve our business model. Recently, we have mainly focused on introducing the most suitable products and technologies from the U.S. and Canada to domestic oilfield companies. We have made tremendous progress in this aspect by cooperating with international industry leaders such as Emerson and Baker Hughes. There are also many smaller foreign companies that possess expertise in one product in certain segmented areas of the oilfield service industry. We are actively seeking opportunities to cooperate with these companies as well."

Mr. Yin continued, "We have also devoted substantial resources to R&D as part of our long term strategy. Through such investment, we have combined our years of experience with advanced technologies to provide the best solutions to our clients. These efforts promote our competitiveness and encourage long-term profitability. We believe our business will remain strong in the coming years."

Third Quarter 2012 Financial Results

Total revenues increased by 48.59% for the third quarter of fiscal year 2012. The overall increase of hardware sales was mainly attributable our recently developed products to new customers consisting mainly of Sinopec's subsidiaries. During the nine months ended March 31, 2012, total revenues decreased by 22.21% compared to the year before, of which the deconsolidation of ENI was responsible for a decrease of RMB18.68 million in hardware and hardware-related revenues. Separating out the deconsolidation of ENI, our operating revenue increased by 7.56%.

Gross profit increased by RMB4.79 million, or 332.69%, to RMB6.23 million ($0.99 million) for the third quarter of fiscal year 2012. Gross profit as a percentage of revenues increased from 16.44% for the three months ended March 31, 2011 to 47.88% for the same period of 2012, which was due mainly to the higher gross profit margin of our new product based on horizontal well fracturing technology. Gross profit decreased by RMB3.02 million, or 14.50%, to RMB17.83 million ($2.82 million) for the nine months ended March 31, 2012. Gross profit as a percentage of revenue increased from 33.23% for the nine months ended March 31, 2011 to 36.52% for the same period of 2012.

General and administrative expenses increased by RMB1.56 million, or 47.16%, from RMB3.30 million in three months ended March 31, 2011 to RMB4.86 million ($0.77 million) in the same period of 2012, which was mainly attributable to increased expenses for research and development activities, and increased expenses related to staff wages in order to retain talented staff. General and administrative expenses decreased by RMB11.28 million, or 42.39%, from RMB26.60 million in the nine months ended March 31, 2011 to RMB15.33 million ($2.42 million) in the same period of 2012, as a result of the deconsolidation of ENI offset by increased research and development expenses and increased professional and consulting fees.

Income from operations was RMB103,000 ($16,000) for the three months ended March 31, 2012, an increase of RMB3.39 million, or 103.15%, from a loss of RMB3.29 million for the same period of 2011, attributable mainly to the increased revenues and lower costs. Loss from operations was RMB1.04 million ($164,000) for the nine months ended March 31, 2012, an improvement of RMB11.22 million from a loss of RMB12.26 million for the same period of 2011. The decrease in losses from operations was attributable primarily to lower operating expenses.

Net income attributable to ordinary shareholders was RMB119,000 ($19,000) for the three months ended March 31, 2012, an increase of RMB2.13 million or 105.90%, from a loss of RMB2.01 million for same period of 2011, attributable mainly to increased gross profit. Net loss attributable to ordinary shareholders was RMB1.89 million ($0.3 million) for the nine months ended March 31, 2012, an improvement of RMB19.95 million, or 91.35%, from a loss of RMB21.85 million for the same period of 2011, attributable mainly to lower operating expenses.

As of March 31, 2012, cash and cash equivalents was RMB2.36 million ($0.37 million). Except for RMB6.93 million ($1.1 million) of short-term borrowings and RMB9 million ($1.42 million) of short-term bank loans, there were no other finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

Net cash used in operating activities was RMB9.24 million ($1.46 million) for the nine months ended March 31, 2012, an increase of RMB4.26 million from RMB4.98 million for the same period of 2011. The increase in the use of cash in the current period was due to an increase in trade accounts receivable and purchase advances, which resulted from increased business.

Net cash provided in financing activities was RMB8.77 million ($1.39 million) for the nine months ended March 31, 2012, compared to net cash provided by financing activities amounting to RMB2.62 million for the same period of 2011. The increase in net cash provided by financing activities was mainly due to the increase of bank loans and short-term borrowings from related parties to supplement our working capital.

Net cash used in investing activities was RMB559,000 ($89,000) for the nine months ended March 31, 2012, a decrease of RMB1.84 million from RMB2.40 million for the same period of 2011. The decrease was mainly caused by a loss of cash due to the deconsolidation of ENI amounting to RMB2.23 million, while there was no such loss for the same period of 2012.

The current ratio decreased from 3.75 at June 30, 2011 to 2.68 at March 31, 2012. This was mainly caused by the increase in trade accounts payable, short-term bank loans and short-term borrowings.  

About Recon Technology, Ltd.

Recon Technology, Ltd. is a non-state-owned oil field service company in China. The company has been providing software, equipment and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. More information may be found at http://www.recon.cn or via e-mail at info@recon.cn.  

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission.

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Investor Contact:

Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: info@recon.cn

SOURCE Recon Technology, Ltd.



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