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Chemspec International Limited Announces Fourth Quarter and Full Year 2010 Unaudited Financial Results


News provided by

Chemspec International Limited

Apr 11, 2011, 07:39 ET

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SHANGHAI, April 11, 2011 /PRNewswire-Asia-FirstCall/ -- Chemspec International Limited (NYSE: CPC; "Chemspec" or the "Company", incorporated in the Cayman Islands), a leading China-based contract manufacturer of highly-engineered specialty chemicals, today announced its unaudited financial results(1) for the fourth quarter and full year ended December 31, 2010.

Fourth Quarter 2010 Financial Highlights

  • Total sales reached RMB270.4 million (US$41.0 million), representing an increase of 52.7% from the fourth quarter of 2009 and a decrease of 16.7% from the third quarter of 2010.
  • Gross profit totaled RMB98.7 million (US$15.0 million), an increase of 56.6% from the fourth quarter of 2009 and a decrease of 20.0% from the third quarter of 2010.
  • Income from operations was RMB51.6 million (US$7.8 million), an increase of 80.4% from the fourth quarter of 2009 and a decrease of 39.9% from the third quarter of 2010.
  • Net income attributable to the Company's shareholders was RMB45.3 million (US$6.9 million), an increase of 30.3% from the fourth quarter of 2009 and a decrease of 35.7% from the third quarter of 2010.
  • Basic and diluted earnings per ADS(2) were both RMB1.26 (US$0.19). Basic and diluted earnings per ADS were both RMB0.96 (US$0.15) in the fourth quarter of 2009. Basic and diluted earnings per ADS in the third quarter of 2010 were RMB1.95 (US$0.29) and RMB1.94 (US$0.29), respectively.

Full Year 2010 Financial Highlights

  • Total sales reached RMB1,082.0 million (US$163.9 million), an increase of 31.9% from RMB820.3 million in 2009.
  • Gross profit was RMB417.2 million (US$63.2 million), an increase of 28.5% from RMB324.7 million in 2009.
  • Income from operations was RMB266.7 million (US$40.4 million), an increase of 28.6% from RMB207.5 million in 2009.
  • Net income attributable to the Company's shareholders was RMB225.5 million (US$34.2 million), an increase of 30.8% from RMB172.4 million in the prior year.
  • Basic and diluted earnings per ADS were both RMB6.24 (US$0.95), as compared with both being RMB5.18 (US$0.78) in the prior year.

(1) Certain Renminbi (RMB) amounts in this press release have been translated into U.S. dollar (USD) solely for the convenience of the reader.  The conversion of RMB into USD in this release is based on the noon buying rate in the City of New York for cable transfers in RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2010, which was RMB 6.6000 to USD1.00.  The percentages stated are calculated based on RMB.

(2) 1 ADS=60 ordinary shares

Completion of Share Repurchase Program

The Company has substantially completed its share repurchase plan announced on September 22, 2010. The total funds used in the share repurchase plan were RMB11.0 million (US$1.6 million).

Dr. Jianhua Yang, Chairman and Chief Executive Officer of Chemspec, commented, "I am very pleased to announce our fourth quarter and full year financial results. In 2010, we set a new record that our sales passed the one-billion-RMB milestone. This is a testimony of our relentless effort in the year to expand our business development and strengthen the relationship with our customers, especially after the downturn of 2009. "

Dr. Yang continued, "In the fourth quarter of 2010, the total revenue grew 52.7% year over year and became the second highest in history for the same period of the year. With regard to the first quarter of 2011, our management estimates that our total sales to be between RMB205 and 210 million."

Mr. Zixin Wang, Vice President of Finance, commented, "We came out of the trough in 2009 and achieved record-high sales in 2010. The total revenue was in line with our guidance announced in November 2010. During the year, we increased our R&D expenses to meet the higher expectations of our customers and expanded the production facilities to meet potential demand in future. In addition, as a result of a rise in the production and sales of more complex products, our inventories rose to RMB 470.4 million as of December 31, 2010 from RMB271.4 million as of December 31, 2009. We will implement a number of inventory control measures that strive to reduce the inventory level gradually in the near future."

Fourth Quarter 2010 Financial Results

Total Sales

For the three months ended December 31, 2010, we generated total sales of RMB270.4 million (US$41.0 million), representing an increase of 52.7% from the fourth quarter of 2009 and a decrease of 16.7% from the third quarter of 2010. The increase from the fourth quarter of 2009 resulted from an increase in sales for chemicals used in both electronics and agrochemicals end-markets. The decrease in total sales compared to the third quarter of 2010 was mainly due to seasonally weakened sales in the electronics end-market.

Gross Profit and Gross Margin

In the fourth quarter of 2010, we generated gross profit of RMB98.7 million (US$15.0 million), representing an increase of 56.6% from the fourth quarter of 2009 and a decrease of 20.0% from the third quarter of 2010. We attribute the changes in the gross profit primarily to the corresponding fluctuations in the total sales in the corresponding quarters.

Our gross margin was 36.5% in the fourth quarter of 2010, as compared with 35.6% in the fourth quarter of 2009 and 38.0% in the third quarter of 2010. Compared with the fourth quarter of 2009, our gross margin increased slightly mainly because fewer inventories were written down in the fourth quarter of 2010. Compared to the third quarter of 2010, the decrease in our gross margin in the fourth quarter of 2010 was mainly due to the shift of the overall product mix.

Operating Expenses

Selling expenses and general and administrative expenses were RMB26.8 million (US$4.1 million), representing an increase of 13.5% from RMB23.6 million in the fourth quarter of 2009 and an increase of 16.7% from RMB23.0 million in the third quarter of 2010. We primarily attribute these increases in our general and administrative expenses to the increases in depreciation expenses for the Company's new headquarters and increased consulting fees related to Sarbanes–Oxley (SOX) compliance.

Research and development (R&D) expenses were RMB22.1 million (US$3.4 million), representing an increase of 176.2% from RMB8.0 million in the fourth quarter of 2009 and an increase of 46.7% from RMB15.1 million in the third quarter of 2010. The increases in R&D expenses were due to a greater amount of material consumption expenses that were related to an increase in the number of active R&D projects.

Income from Operations and Earnings Before Income Taxes

As a result of factors mentioned above, income from operations was RMB51.6 million (US$7.8 million) and earnings before income taxes was RMB51.6 million (US$7.8 million), respectively, in the fourth quarter of 2010, representing increases of 80.4% and 77.6%, respectively, from the fourth quarter of 2009, and decreases of 39.9% and 39.1%, respectively, from the third quarter of 2010.

Net Income Attributable to Chemspec International Limited Shareholders

Net income attributable to Chemspec International Limited was RMB45.3 million (US$6.9 million), an increase of 30.3% from the fourth quarter of 2009 and a decrease of 35.7% from the third quarter of 2010. The changes mainly reflected the changes in the total sales in the corresponding periods.

Basic and diluted earnings per ADS were RMB1.26 (US$0.19), as compared to RMB0.96 (US$0.15) in the fourth quarter of 2009 and RMB1.95 (US$0.29) and RMB1.94 (US$0.29), respectively, in the third quarter of 2010.

Full Year 2010 Financial Results

Total Sales

For the year ended December 31, 2010, we generated total sales of RMB1,082.0 million (US$163.9 million), representing an increase of 31.9% from the year ended December 31, 2009. The increase was mainly due to the general recovery of the global business environment, especially an increase in demand for chemicals used in the electronics end-market.

Gross Profit and Gross Margin

Our gross profit was RMB417.2 million (US$63.2 million) for 2010, representing an increase of 28.5% from 2009. We attribute the increase in gross profit primarily to the corresponding increase in our total sales.

Our gross margin was 38.6% in 2010, as compared to 39.6% in 2009. We attribute the decrease in the gross margin primarily to price adjustments for certain products.

Operating Expenses

Selling expenses and general and administrative expenses were RMB88.9 million (US$13.5 million) in 2010, representing an increase of 9.6% from RMB81.1 million in 2009. We attribute this increase primarily to the increase in our depreciation expenses as a result of our new headquarters that started operations in the second half of 2009 and an increase in the amount of consulting fees related to Sarbanes-Oxley (SOX) compliance in 2010.  

Research and development (R&D) expenses were RMB65.7 million (US$10.0 million) in 2010, representing an increase of 112.5% from RMB30.9 million in 2009. The increase in R&D expenses was due to a greater amount of material consumption expenses that were related to an increase in the number of active R&D projects to meet the anticipated demand from our customers.

Income from Operations and Earnings Before Income Taxes

For 2010, our income from operations was RMB266.7 million (US$40.4 million), representing an increase of 28.6% from RMB207.5 million in 2009.

Our earnings before income taxes was RMB265.2 million (US$40.2 million) in 2010, representing an increase of 28.8% from RMB206.0 million in 2009.

Net Income Attributable to Chemspec International Limited Shareholders

The net income attributable to Chemspec International Limited shareholders was RMB225.5 million (US$34.2 million), representing an increase of 30.8% from RMB172.4 million in 2009.

Basic and diluted earnings were both RMB6.24 (US$0.95), as compared to basic and diluted earnings of RMB5.18 (US$0.78) in 2009.

Cash Flows

As of December 31, 2010, we had RMB98.7 million (US$15.0 million) of cash, compared with RMB351.1 million as of December 31, 2009. Net cash outflows for 2010 mainly included capital expenditures of RMB248.7 million (US$37.7 million) for the expansion of production facilities.

First Quarter 2011 Guidance

Our management estimates that our total sales for the first quarter of 2011 to be between RMB205 and 210 million.

Conference Call Details

The Company will host a conference call and live webcast to discuss its fourth quarter financial results at 8:00 am Eastern Time (8:00 pm Shanghai time) on Monday, April 11, 2011.

The dial-in details for the live conference call are as follows:

- U.S. Toll Free Number:    

+1-866-519-4004

- International Toll Free Dial-in Number:  

+ 65-6723-9381

- Mainland China Domestic Number:                    

800-819-0121

- Mainland China Domestic Mobile

400-620-8038

- Hong Kong Toll Free Number:

800-930-346

Conference ID: CPC


A live and archived webcast of the conference call will be available in the Investor Relations section of Chemspec's website at http://www.chemspec.com.cn .

A telephone replay of the call will be available from 11:00 pm Eastern Standard Time on April 11, 2011 through 11:59 pm Eastern Standard Time on April 17, 2011.

The dial-in details for the replay are as follows:

- U.S. Dial-in Number:

+1-866-214-5335

- International Dial-in Number:                        

+61-2-8235-5000

- China North Dial-in Number:

10-800-714-0386

- China South Dial-in Number:

10-800-140-0386

- Hong Kong Dial-in Number:  

800-901-596

Conference ID: 48359124


Statement Regarding Unaudited Financial Information

The financial information set forth above is based on the Company's unaudited interim consolidated financial statements and is subject to adjustments that may be identified by us and/or our auditors during the audit of our annual consolidated financial statements.

About Chemspec

Chemspec is a leading China-based contract manufacturer of highly engineered specialty chemicals, especially, the fluorinated specialty chemicals. In manufacturing specialty chemicals, Chemspec also provides process design and process development services, which enable efficient and rapid production of specialty chemicals that are incorporated into the products of Chemspec's end users. Chemspec's customers and end users include electronics, pharmaceutical and agrochemical companies. For more information, please visit www.chemspec.com.cn.

Safe Harbor Statements

This announcement contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Chemspec's filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1, as amended from time to time. Chemspec does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

For further information, please contact:


Chemspec International Ltd.

In Shanghai

Carol Fang

Manager, Investor Relations

Tel: +86-21-63638108

Email: [email protected]

Chemspec International Limited

Unaudited Consolidated Balance Sheets










December 31,


December 31,


December 31,



2009


2010


2010



RMB’000


RMB’000


USD’000








ASSETS







Current assets







Cash


351,097


98,719


14,957

Pledged bank deposits


37,919


56,746


8,598

Accounts receivable, net


94,154


137,873


20,890

Bills receivable


1,327


1,200


182

Inventories


271,434


470,432


71,278

Prepayment and other receivables


38,738


73,449


11,128

Amounts due from related parties


64


-


-

Deferred income tax assets


3,424


6,369


965

Total current assets


798,157


844,788


127,998

Property, plant and equipment, net


699,181


871,398


132,030

Land use rights


56,064


59,201


8,970

Intangible assets


839


730


111

Goodwill


7,446


7,446


1,128

Investment in an affiliate


13,296


12,793


1,938

Deferred income tax assets


300


-


-

Total assets


1,575,283


1,796,356


272,175








LIABILITIES AND EQUITY







Current liabilities







Bank borrowings


-


25,000


3,788

Accounts payable


81,870


142,319


21,564

Bills payable


49,738


64,340


9,748

Accrued expenses and other payables


183,266


148,238


22,461

Amounts due to related parties


23,659


5,559


842

Deferred income


-


14,215


2,154

Income taxes payable


1,298


5,408


819

Total current liabilities


339,831


405,079


61,376

Bank borrowings


10,000


-


-

Deferred income tax liabilities


18,056


21,517


3,260

Deferred income


15,136


3,280


497

Total liabilities


383,023


429,876


65,133

Equity







Chemspec International Limited shareholders' equity







Ordinary shares:
   Par value: HK$ 0.01;
   Authorized: 20,000,000,000 shares
   as of December 31, 2009 and December 31,
   2010;
   Issued and outstanding:
   2,167,620,000 shares
   as of  December 31, 2009 and
   2,163,190,740 shares
   as of December 31, 2010


21,686


21,649


3,280

Additional paid-in capital


323,916


319,048


48,341

Statutory reserves


63,422


85,820


13,003

Accumulated other comprehensive income


6,803


5,197


787

Retained earnings


770,425


929,108


140,774








Total Chemspec International Limited
  shareholders' equity


1,186,252


1,360,822


206,185

Noncontrolling interests


6,008


5,658


857








Total equity


1,192,260


1,366,480


207,042

Total liabilities and equity


1,575,283


1,796,356


272,175








Chemspec International Limited

Unaudited Quarterly Consolidated Statements of Income













Three-month periods ended


 

December 31,

 

September 30,

 

December 31,

 

December 31,


 

2009

 

2010

 

2010

 

2010


 

RMB’000

 

RMB’000

 

RMB’000

 

USD’000










Sales

 

 

177,050

 

324,692

 

270,357

 

40,963

Cost of sales

 

(114,022)

 

(201,248)

 

(171,629)

 

(26,004)

Gross profit

 

63,028

 

123,444

 

98,728

 

14,959

Selling expenses

 

(2,817)

 

(3,203)

 

(3,083)

 

(467)

General and administrative expenses

 

(20,792)

 

(19,767)

 

(23,719)

 

(3,594)

Research and development expenses

 

(8,012)

 

(15,080)

 

(22,129)

 

(3,353)

Other operating expenses

 

(3,380)

 

(121)

 

(1,205)

 

(183)

Other operating income

 

236

 

242

 

351

 

53

Government grants

 

362

 

400

 

2,684

 

407

Income from operations

 

28,625

 

85,915

 

51,627

 

7,822

Other income (expenses):









Interest income

 

482

 

532

 

525

 

80

Interest expense

 

(309)

 

-

 

-

 

-

Foreign currency exchange gain (loss), net

 

230

 

(1,625)

 

(583)

 

(88)

Equity in loss of an affiliate

 

(91)

 

(134)

 

(150)

 

(23)

Other income

 

91

 

45

 

142

 

22

Earnings before income taxes

 

29,028

 

84,733

 

51,561

 

7,813











Income tax benefit (expense)

 

6,169

 

(14,210)

 

(6,408)

 

(971)

Net income

 

35,197

 

70,523

 

45,153

 

6,842

Net (income) loss attributable to
  noncontrolling interests

 

 

 

(433)

 

 

 

(122)

 

 

 

141

 

 

 

21

Net income attributable to Chemspec
  International Limited shareholders

 

 

 

34,764

 

 

 

70,401

 

 

 

45,294

 

 

 

6,863





















Basic earnings per share

 

RMB 0.02

 

RMB 0.03

 

RMB 0.02

 

USD 0.00











Diluted earnings per share

 

RMB 0.02

 

RMB 0.03

 

RMB 0.02

 

USD 0.00











Basic earnings per ADS

 

RMB 0.96

 

RMB 1.95

 

RMB 1.26

 

USD 0.19











Diluted earnings per ADS

 

RMB 0.96

 

RMB 1.94

 

RMB 1.26

 

USD 0.19

 

 

Years ended



December 31,


December 31,


December 31,



2009


2010


2010



RMB’000


RMB’000


USD’000








Sales


820,295


1,082,031


163,944

Cost of sales


(495,584)


(664,791)


(100,726)

Gross profit


324,711


417,240


63,218

Selling expenses


(11,245)


(11,130)


(1,686)

General and administrative expenses


(69,871)


(77,768)


(11,783)

Research and development expenses


(30,913)


(65,679)


(9,951)

Other operating expenses


(7,145)


(2,736)


(415)

Other operating income


953


1,624


246

Government grants


971


5,152


781

Income from operations


207,461


266,703


40,410

Other income (expenses):







Interest income


2,296


1,954


295

Interest expense


(2,149)


(80)


(12)

Foreign currency exchange loss, net


(1,961)


(3,249)


(492)

Equity in loss of an affiliate


(176)


(503)


(76)

Other income


519


400


61

Earnings before income taxes


205,990


265,225


40,186








Income tax expense


(28,838)


(38,999)


(5,909)

Net income


177,152


226,226


34,277








Net income attributable to
  noncontrolling interests


(4,721)


(685)


(104)








Net income attributable to Chemspec
  International Limited shareholders


172,431


225,541


34,173















Basic earnings per share


RMB 0.09


RMB 0.10


USD 0.02








Diluted earnings per share


RMB 0.09


RMB 0.10


USD 0.02








Basic earnings per ADS


RMB 5.18


RMB 6.24


USD 0.95








Diluted earnings per ADS


RMB 5.18


RMB 6.24


USD 0.95

Chemspec International Limited

Unaudited Consolidated Statements of Cash Flows








December 31,


December 31,


December 31,


2009


2010


2010


RMB’000


RMB’000


USD '000







Cash flows from operating activities






Net income

177,152


226,226


34,277

Adjustments to reconcile net income to net cash
 provided by operating activities:






Depreciation and amortization






of property, plant and equipment

37,204


70,760


10,721

Land use rights expenses

1,132


1,315


199

Loss on disposal of property, plant and equipment

6,505


8,661


1,312

Amortization of intangible assets

108


109


17

Bad debt expense

64


(81)


(12)

Write-downs of inventories

14,696


7,296


1,105

Equity in loss of an affiliate

176


503


76

Gain on transfer of land use right to an affiliate

(290)


-


-

Unrealized foreign exchange loss, net

92


255


39

Share-based compensation

15,443


1,499


227

Deferred income tax (benefit) expense

(644)


816


124

Changes in operating assets and liabilities, net of  
 effect of an acquisition






Pledged bank deposits related to purchase of inventories

994


(17,235)


(2,611)

Inventories

(67,867)


(206,294)


(31,256)

Accounts receivable

42,354


(44,199)


(6,697)

Bills receivable

(1,327)


127


19

Prepayment and other receivables

(14,141)


(34,575)


(5,239)

Accounts payable

488


60,449


9,159

Bills payable related to purchase of inventories

(5,158)


22,810


3,456

Accrued expenses and other payables

(2,202)


(8,749)


(1,326)

Deferred income

9,570


2,359


357

Income taxes payable

(5,097)


4,110


623

Net cash provided by operating activities

209,252


96,162


14,570







Cash flows from investing activities






Capital expenditures, including interest capitalized

(227,749)


(248,697)


(37,681)

Pledged bank deposits related to purchase of property,
 plant and equipment

(17,377)


(1,592)


(241)

Investment in an affiliate

(11,225)


-


-

Non-interest bearing advances to related parties

(64)


-


-

Non-interest bearing advances repaid by related parties

2,500


64


10

Payments for land use rights

(3,978)


(4,452)


(675)

Net cash used in investing activities

(257,893)


(254,677)


(38,587)







Cash flows from financing activities






Capital contributions to a subsidiary by
  noncontrolling shareholders

1,600


-


-

Cash distribution by a subsidiary to
  noncontrolling shareholders

(2,500)


-


-

Dividends paid

-


(44,460)


(6,735)

Proceeds from issuance of ordinary shares upon IPO

389,022


-


-

Proceeds from exercise of share options

-


6,178


936

Issuance costs of ordinary shares upon IPO

(46,719)


(3,028)


(459)

Acquisition of additional equity interest in subsidiaries
  from noncontrolling interests

(17,500)


(51,300)


(7,773)

Proceeds from short-term bank borrowings

15,000


20,000


3,030

Repayments of short-term bank borrowings

(80,000)


-


-

Proceeds from long-term bank borrowings

10,000


-


-

Repayment of  long-term bank borrowings

-


(5,000)


(758)

Repurchase of ordinary shares

(8,134)


(10,953)


(1,660)

Proceeds from non-interest bearing borrowings
  from related parties

6,000


-


-

Repayment of non-interest bearing borrowings
  from related parties

(47,687)


(4,000)


(606)

Net cash provided by (used in) financing activities

219,082


(92,563)


(14,025)

Effect of foreign currency exchange rate changes
  on cash

54


(1,300)


(197)







Net increase (decrease) in cash

170,495


(252,378)


(38,239)

Cash at beginning of year

180,602


351,097


53,196

Cash at end of year

351,097


98,719


14,957







Supplemental disclosures of cash flow information:












Income taxes paid

34,579


34,073


5,163

Interest paid, net of amounts capitalized

2,149


80


12







Noncash investing and financing activities:












Accrued IPO cost

3,028


-


-

Payable for purchase of property, plant and equipment

118,174


129,323


19,594

Payable for acquisition of noncontrolling interest in
  Jiangsu Wei Er

23,500


-


-

Payable for acquisition of Kangpeng Nong Hua

25,000


-


-

Bills payable for purchase of property, plant and equipment

28,105


19,897


3,015

Land use right contributed to an affiliate

1,957


-


-

SOURCE Chemspec International Limited

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