Chemspec International Limited Announces Second Quarter 2010 Unaudited Financial Results
SHANGHAI, Aug 13 /PRNewswire-Asia-FirstCall/ -- Chemspec International Limited (NYSE: CPC; "Chemspec" or the "Company"), a leading China-based contract manufacturer of highly-engineered specialty chemicals, today announced its unaudited financial results(1) for the second quarter ended June 30, 2010.
Second Quarter 2010 Financial Highlights
-- Total sales increased to RMB266.8 million (US$39.3 million), which was
a new second-quarter record in the Company's history and represented
increases of 15.4% from the second quarter of 2009(2) and 21.2% from
the first quarter of 2010
-- Gross profit was RMB98.7 million (US$14.6 million), an increase of 4.3%
from the second quarter of 2009(2) and 2.5% from the first quarter of
2010
-- Income from operations rose to RMB69.6 million (US$10.3 million), an
increase of 5.7% from the second quarter of 2010(2) and an increase of
16.5% from the first quarter of 2010
-- Net income attributable to Chemspec International Limited shareholders
improved by 9.8% to RMB57.5 million (US$8.5 million) from the second
quarter of 2009(2) and 10.0% from the first quarter of 2010
-- Both basic and diluted earnings per ADS(3) were RMB1.59 (US$0.23), as
compared to RMB1.72 (US$0.25) in the second quarter of 2009(2) and
RMB1.44 (US$0.21) in the first quarter of 2010
First Half Year 2010 Financial Highlights
-- Total sales rose 12.7% from the first half year of 2009(2) to RMB487.0
million (US$71.8 million), which was a record for first half year
performance in the Company's history
-- Gross profit increased by 13.3% to RMB195.1 million (US$28.8 million)
from the first half of 2009(2)
-- Income from operations was RMB129.4 million (US$19.1 million), an
increase of 10.7% from the first half of 2009(2)2
-- Net income attributable to Chemspec International Limited shareholders
was RMB109.8 million (US$16.2 million), an improvement of 29.1% from
the first half of 2009(2)
-- Both basic and diluted earnings per ADS(3) were RMB 3.04 (US$0.45), as
compared to RMB 2.81 (US$0.41) and 2.80 (US$0.41), respectively, in the
first half of 2009(2)
(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 June 30, 2010, which was RMB6.7815 to
USD1.00. The percentages stated are calculated based on RMB.
(2) 2009 financial data have been adjusted to reflect the retrospective
adjustment of the Company's financial data due to the acquisition of
Jiangsu Kangpeng Nong Hua Limited on November 9, 2009. The
transaction was considered a combination between entities under
common control.
(3) 1 ADS=60 ordinary shares
Dr. Jianhua Yang, Chairman and CEO of Chemspec, commented, "I am pleased to announce our better-than-expected second quarter financial results. After a very challenging period in the second half of 2009 and the start of 2010, we were able to set new records for second quarter performance in terms of total revenue and gross profit. While this significant upturn in our performance reflects a continued recovery in demand in a number of our end markets, especially in the electronics sector, and better economic conditions around the world, it also validates a number of our recent corporate initiatives, including a relentless focus on improving our business development capabilities, enhancing technical processes, and expanding customer relationships. During the first half of 2010, total revenue and gross profit also rose compared to the first half of 2009. We will continue to focus on improving our operational efficiency and building on this momentum over the remainder of the year."
Dr. David Tang, Executive Vice President and interim Chief Financial Officer, commented, "We are pleased to see the significant improvement in our business and the strong financial results. In response to the challenging market environment, we actively adjusted our product mix and pricing of certain commercial products in order to capture business from faster growing markets. The efforts clearly helped our top-line performance and we were able to maintain our gross margin at 37%. In the third quarter of 2010, we believe we will see a similarly competitive market environment. However, as long as the global economy continues to recover, we are cautiously optimistic that our total sales will exceed that of the second quarter of 2010 and our gross margin will remain at a similar level as the second quarter of 2010."
Second quarter of 2010 Financial Results
Total Sales
For the three months ended June 30, 2010, the Company generated total sales of RMB266.8 million (US$39.3 million), representing an increase of 15.4% from the second quarter of 2009 and 21.2% from the first quarter of 2010. The increase in sales from the first quarter of 2010 reflects the strong recovery in demand in various end markets, particularly in the electronics chemical market.
Gross Profit and Gross Margin
Gross profit was RMB98.7 million (US$14.6 million), representing an increase of 4.3% from the second quarter of 2009 and 2.5% from the first quarter of 2010. Gross margin was 37.0% in the second quarter of 2010, as compared to 40.9% in the second quarter of 2009 and 43.8% in the first quarter of 2010. The decrease in gross margin in the second quarter of 2010 was due to a shift in the overall product mix and price adjustments for some commercial products.
Operating Expenses
Selling expenses and general and administrative expenses were RMB15.9 million (US$2.3 million) during the second quarter of 2010, representing a decrease of 24.3% from RMB21.0 million in the second quarter of 2009 and a decrease of 31.8% as compared to RMB23.3 million in the first quarter of 2010. The decrease was primarily caused by a reversal in share-based compensation expenses due to forfeiture of options granted to our former employees.
Research and development expenses increased by 109.3% to RMB14.8 million (US$2.2 million) from RMB7.1 million in the second quarter of 2009 and by 7.7% from RMB13.7 million in the first quarter of 2010. The increase in R&D expenditure, compared with the same period in 2009, was primarily due to the depreciation of the Company's new R&D center in Shanghai as well as the hiring of experienced scientists and engineers. Compared to the previous quarter, the increase in R&D expenses was mainly due to the expansion of business activities and an increase in technical support headcount in the Company's plants.
Income from operations and earnings before income taxes
As a result of the factors mentioned above, income from operations rose to RMB69.6 million (US$10.3 million) in the second quarter of 2010, representing increases of 5.7% and 16.5%, respectively, from the second quarter of 2009 and the first quarter of 2010. Earnings before income taxes totaled to RMB68.8 million (US$10.1 million) in the second quarter of 2010, representing increases of 3.4% and 14.3%, respectively, from the second quarter of 2009 and from the first quarter of 2010. The increases in income from operations and earnings before income tax were due to the improvement of the sales as well as the decreases in the general and administration expenses.
Net income attributable to Chemspec International Limited shareholders
Net income attributable to Chemspec International Limited shareholders grew to RMB57.5 million (US$8.5 million), an increase of 9.8% from the second quarter of 2009 and 10.0% from the first quarter of 2010. The increase in net income attributable to Chemspec International Limited shareholders was primarily due to the increase in sales.
Both basic and diluted earnings per ADS were RMB1.59 (US$0.23), as compared to RMB1.72 (US$0.25) in the second quarter of 2009 and RMB1.44 (US$0.21) in the first quarter of 2010.
Cash Flows
As of June 30, 2010, we had RMB169.4 million (US$25.0 million) of cash, as compared to RMB 479.1 million as of June 30, 2009. Significant cash outflows for the six-month period ended June 30, 2010 included capital expenditure payments of RMB127.3 million (US$18.8 million) for the expansion of the production facilities and the increase of inventory to RMB393.6 million due to the Company's sales increase. In particular, the higher inventory was due to a rise in production and sales of more complex products, primarily for the electronic end-markets. These products typically require longer production cycles, and the Company often needs to hold higher levels of inventory to be able to quickly respond to customer orders that require fast turnaround.
Business Outlook
The market environment is expected to remain competitive in the second half year of 2010. The Company will continue to focus on improving its operational efficiency and building on its momentum for the rest of the year. As long as the global economy continues to improve, the management team is cautiously optimistic that total sales in the third quarter of 2010 will exceed that of the second quarter of 2010, and that the gross profit margin will remain at a similar level as the second quarter of 2010.
Conference Call Details
The Company will host a conference call and live webcast to discuss its second quarter financial results at 8:00am Eastern Time (8:00 pm Shanghai time) on Friday, August 13, 2010.
The dial-in details for the live conference call are as follows:
U.S. Toll Free Number: 1-866-590-4004
International Dial-in Number: +65-6723-9381
Mainland China: 800-819-0121 (land line)
400-620-8038 (Mobile)
Hong Kong Toll Free Number: +852-2475-0994
Conference ID: CPC
A live and archived webcast of the conference call will be available on the Investor Relations section of Chemspec's website at http://www.chemspec.com.cn .
A telephone replay of the call will be available two hours after the completion of the conference call through midnight, August 20, 2010.
The dial-in details for the replay are as follows:
U.S. Toll Free Number: +1-866-214-5335
International Dial-in Number: +61-2-8235-5000
Conference ID: # 93497216
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 http://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]
Christensen
In New York
Kathy Li
Tel: +1-212-618-1978
Email: [email protected]
In Hong Kong
Tip Fleming
Tel: +852-9212-0684
Email: [email protected]
Chemspec International Limited
Unaudited Consolidated Balance Sheets
December 31, June 30, June 30,
2009 2010 2010
RMB'000 RMB'000 USD'000
ASSETS
Current assets
Cash 351,097 169,373 24,976
Pledged bank deposits 37,919 79,006 11,650
Accounts receivable, net 94,154 93,304 13,759
Bills receivable 1,327 -- --
Inventories 271,434 393,574 58,036
Prepayment and other receivables 38,738 74,355 10,964
Amounts due from related parties 64 64 9
Deferred income tax assets 3,424 5,138 758
Total current assets 798,157 814,814 120,152
Property, plant and equipment, net 699,181 765,923 112,944
Land use rights 56,064 59,361 8,753
Intangible assets 839 784 116
Goodwill 7,446 7,446 1,098
Investment in an affiliate 13,296 13,077 1,928
Deferred income tax assets 300 100 15
Total assets 1,575,283 1,661,505 245,006
LIABILITIES AND EQUITY
Current liabilities
Accounts payable 81,870 139,990 20,643
Bills payable 49,738 70,799 10,440
Accrued expenses and other payables 183,266 128,333 18,924
Amounts due to related parties 23,659 22,659 3,341
Deferred income -- 2,684 396
Income taxes payable 1,298 3,259 481
Total current liabilities 339,831 367,724 54,225
Long-term bank borrowings 10,000 5,000 737
Deferred income tax liabilities 18,056 19,538 2,881
Deferred income 15,136 12,545 1,850
Total liabilities 383,023 404,807 59,693
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 June 30, 2010;
Issued and outstanding:
2,167,620,000 shares
as of December 31, 2009
and 2,172,227,100 shares
as of June 30, 2010; 21,686 21,726 3,204
Additional paid-in capital 323,916 322,852 47,608
Statutory reserves 63,422 63,422 9,352
Accumulated other comprehensive
income 6,803 6,366 939
Retained earnings 770,425 836,655 123,373
Total Chemspec International Limited
shareholders' equity 1,186,252 1,251,021 184,476
Noncontrolling interests 6,008 5,677 837
Total equity 1,192,260 1,256,698 185,313
Total liabilities and equity 1,575,283 1,661,505 245,006
Chemspec International Limited
Unaudited Quarterly Consolidated Statements of Income
Three-month periods ended
June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB'000 RMB'000 RMB'000 USD'000
(As adjusted)
Sales 231,245 220,151 266,831 39,347
Cost of sales (136,601) (123,813) (168,101) (24,788)
Gross profit 94,644 96,338 98,730 14,559
Selling expenses (3,073) (2,503) (2,341) (345)
General and administrative
expenses (17,892) (20,761) (13,521) (1,994)
Research and development expenses (7,055) (13,705) (14,765) (2,177)
Other operating expenses (1,384) (551) (623) (92)
Other operating income 212 509 522 77
Government grants 398 450 1,618 239
Income from operations 65,850 59,777 69,620 10,267
Other income (expenses):
Interest income 684 558 339 50
Interest expense (353) (80) -- --
Foreign currency exchange gain
(loss), net 328 (47) (994) (147)
Equity in loss of an affiliate -- (98) (121) (18)
Other income 29 48 165 24
Other expenses -- -- (236) (35)
Earnings before income taxes 66,538 60,158 68,773 10,141
Income tax expense (12,900) (7,718) (10,663) (1,572)
Net income 53,638 52,440 58,110 8,569
Net income attributable to
noncontrolling interests (1,258) (127) (577) (85)
Net income attributable to
Chemspec International
Limited shareholders 52,380 52,313 57,533 8,484
Basic earnings per share RMB 0.03 RMB 0.02 RMB 0.03 USD 0.00
Diluted earnings per share RMB 0.03 RMB 0.02 RMB 0.03 USD 0.00
Basic earnings per ADS RMB 1.72 RMB 1.44 RMB 1.59 USD 0.23
Diluted earnings per ADS RMB 1.72 RMB 1.44 RMB 1.59 USD 0.23
Six-month periods ended
June 30, June 30, June 30,
2009 2010 2010
RMB'000 RMB'000 USD'000
(As adjusted)
Sales 431,939 486,982 71,811
Cost of sales (259,714) (291,914) (43,046)
Gross profit 172,225 195,068 28,765
Selling expenses (6,023) (4,844) (714)
General and administrative expenses (32,035) (34,282) (5,056)
Research and development expenses (15,827) (28,470) (4,198)
Other operating expenses (2,468) (1,174) (173)
Other operating income 406 1,031 152
Government grants 598 2,068 305
Income from operations 116,876 129,397 19,081
Other income (expenses):
Interest income 1,347 897 133
Interest expense (1,423) (80) (12)
Foreign currency exchange loss, net (2,412) (1,041) (154)
Equity in loss of an affiliate -- (219) (32)
Other income 52 213 31
Other expenses -- (236) (35)
Earnings before income taxes 114,440 128,931 19,012
Income tax expense (24,161) (18,381) (2,710)
Net income 90,279 110,550 16,302
Net income attributable to
noncontrolling interests (5,209) (704) (104)
Net income attributable to Chemspec
International Limited shareholders 85,070 109,846 16,198
Basic earnings per share RMB 0.05 RMB 0.05 USD 0.01
Diluted earnings per share RMB 0.05 RMB 0.05 USD 0.01
Basic earnings per ADS RMB 2.81 RMB 3.04 USD 0.45
Diluted earnings per ADS RMB 2.80 RMB 3.04 USD 0.45
Chemspec International Limited
Unaudited Consolidated Statements of Cash Flows
Six-month periods ended
June 30, June 30, June 30,
2009 2010 2010
RMB'000 RMB'000 USD'000
(As adjusted)
Cash flows from operating activities
Net income 90,279 110,550 16,302
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, plant and equipment 17,200 34,107 5,029
Amortization of land use rights 538 643 95
Amortization of intangible assets 54 55 8
Loss on disposal of property, plant
and equipment 1,895 394 58
Equity in loss of an affiliate -- 219 32
Write-downs of inventories 1,694 (4,068) (600)
Unrealized foreign exchange (gain)
loss, net (542) 600 88
Share-based compensation 10,211 (1,754) (259)
Deferred income tax expense (benefit) 4,642 (32) (5)
Changes in operating assets and
liabilities:
Pledged bank deposits related
to purchase of inventories (13,015) (19,871) (2,930)
Inventories (1,900) (118,072) (17,410)
Accounts receivable 11,972 416 61
Bills receivable (300) 1,327 196
Prepayment and other
receivables (4,633) (35,617) (5,251)
Accounts payable (10,236) 58,120 8,570
Bills payable related to
purchase of inventory 325 12,229 1,803
Accrued expenses and other
payables 5,595 (13,641) (2,011)
Deferred income (143) 93 14
Income taxes payable 1,295 1,961 289
Net cash provided by operating
activities 114,931 27,659 4,079
Cash flows from investing activities
Capital expenditures, including
interest capitalized (116,407) (102,175) (15,066)
Pledged bank deposit related to
purchase of property, plant and
equipment (5,064) (21,216) (3,129)
Non-interest bearing advances repaid
by related parties 2,500 -- --
Payments for land use rights (2,943) (3,940) (581)
Net cash used in investing activities (121,914) (127,331) (18,776)
Cash flows from financing activities
Capital contributions from
noncontrolling interest shareholders 1,600 -- --
Cash distribution to noncontrolling
interest shareholders (2,500) -- --
Dividends paid - (43,616) (6,432)
Proceeds from issuance of ordinary
shares 389,022 2,495 368
Issuance costs of ordinary shares
upon IPO (35,488) (3,028) (447)
Acquisition of additional equity
interests in subsidiaries -- (31,300) (4,616)
Proceeds from short-term bank
borrowings 15,000 -- --
Repayments of short-term bank
borrowings (60,000) -- --
Repayments of long-term bank
borrowings -- (5,000) (737)
Proceeds from non-interest bearing
borrowings from related parties 6,000 -- --
Repayments of non- interest bearing
borrowings from related parties (8,367) (1,000) (147)
Net cash provided by (used in)
financing activities 305,267 (81,449) (12,011)
200 (603) (89)
Net increase (decrease) in cash 298,484 (181,724) (26,797)
Cash at beginning of period 180,602 351,097 51,773
Cash at end of period 479,086 169,373 24,976
Supplemental disclosures of cash flow
information:
Income taxes paid 12,857 16,452 2,426
Interest paid, net of amounts
capitalized 1,875 80 12
Noncash investing and financing
activities:
Accrued IPO cost 14,258 -- --
Payable for purchase of property,
plant and equipment 49,777 108,398 15,984
Payable for acquisition of Kangpeng
Nong Hua -- 20,000 2,949
Bills payable for purchase of
property, plant and equipment 4,771 36,937 5,447
SOURCE Chemspec International Limited
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