China Industrial Waste Management Announces 2011 Second Quarter Financial Results

DALIAN, China, Aug. 16, 2011 /PRNewswire-Asia/ -- China Industrial Waste Management, Inc. (OTCBB: CIWT) ("China Industrial Waste Management" or the "Company"), a leading environmental services and solutions provider in China, today announced its financial results for the second quarter ended June 30, 2011.

Second Quarter Highlights

• Revenues increased 69.4% to $8.3 million
• Gross profit increased 41.2% to $4.3 million
• Operating income increased 35.7% to $2.6 million
• Net income attributable to the Company increased 40.1% to $1.7 million
• Diluted earnings per share from continuing operations increased 71.4% to $0.12

"In the second quarter of 2011 we achieved another period of excellent financial results, reflecting strong overall demand for our products and services, including hazardous and non-hazardous waste disposal, sludge treatment, and recycled commodities," said Mr. Jason Dong, Chairman and Chief Executive Officer. "Through the first half of the year, our existing operations performed well across the board and we also are making significant progress on our Dagushan expansion project, which we expect to complete in late third quarter 2011. Given our recent momentum, we remain optimistic for continued strong performance in the second half of the year."

Second Quarter 2011 Results

Revenues increased 69.4% to $8.3 million in the second quarter of 2011 from $4.9 million in the same period last year.

Revenues from service fees increased 57.9% to $5.1 million, or 61.1% of total revenues, from $3.2 million, or 65.5% of total revenues, in the prior year period. The increase was due to: (i) increased demand for hazardous and non-hazardous waste disposal services from our existing and new customers, and (ii) approximately $0.2 million of incremental revenues from our sludge treatment business.

Sales of recycled commodities increased 91.3% to $3.2 million, or 38.9% of revenues, compared to $1.7 million, or 34.5% of revenues, in the same period last year. The sharp increase was attributable to: (i) higher sales volume as a result of favorable market prices, (ii) the addition of revenues generated from our disposal program for discarded household appliances which was jointly sponsored by the PRC Ministries of Commerce, Finance and Environmental Protection and started August 1, 2010, and (iii) approximately $600,000 of incremental revenues from our Zhuorui subsidiary, which became operational in 2011.

Gross profit increased 41.2% to $4.3 million from $3.1 million in the same period last year. Gross margin was 51.7% compared to 62.0% in the prior year period. The decline in gross margin is primarily attributable to: (i) the increased service fee revenue generated by our non-hazardous waste treatment operations, which have a lower gross profit margin compared with service fee revenue generated by our hazardous waste treatment operations; and (ii) increased costs for labor, transportation and raw materials utilized to produce recycled waste products.

Income from operations increased 35.7% to $2.6 million from $1.9 million in the prior year period. Operating margin was 30.7% compared to 38.3% in the prior year period. The decrease in operating margin primarily reflects the decline in gross margin, somewhat offset by a decline in operating expenses as a percent of sales to 21.0% in the second quarter of 2011 from 23.7% in the same period last year.  

Net income attributable to the Company increased 40.1% to $1.7 million from $1.2 million in the same period last year. Diluted earnings per share from continuing operations increased 71.4% to $0.12 from $0.07 in the same period last year.    

First Half 2011 Results

For the six months ended June 30, 2011, revenues increased by 59.8% to $14.4 million from $9.0 million in the same period last year. Revenues from service fees, which consist of service fees generated from industrial solid waste treatment, sewage treatment and sludge treatment, were $8.9 million, or 61.6% of revenues, compared to $6.2 million, or 68.4% of revenues, in the same period last year, an increase of 43.8%. Sales of recycled commodities were $5.5 million, or 38.4% of revenues, compared to $2.8 million, or 31.6% of revenues, in the same period last year, representing an increase of 94.4%.  

Gross profit was $7.4 million compared to $5.7 million in the same period last year, an increase of 29.1%. Gross margin was 51.3% compared to 63.5% in the year-ago period. Income from operations was $4.3 million compared to $3.5 million in the prior year period, an increase of 22.9%. Operating margin was 29.7%, compared to 38.8% in the prior year period.  

Net income increased 47.6% to $3.3 million from $2.2 million in the same period last year. Diluted earnings per share from continuing operations increased 100.0% to $0.20 from $0.10 in the same period last year.    

Financial Condition

As of June 30, 2011, the Company had cash and cash equivalents of $7.1 million. Working capital was $10.3 million. Shareholder's equity increased 11.5% to $36.0 million from $32.3 million at the end of 2010. Cash used in operations was $0.5 million, driven by $1.4 million increase in account receivable that served as advances to home appliances stores as required to acquire discarded electronic appliances, $2.2 million increase in inventory of the finished goods produced by Zhuorui after resuming operations in May 2011, $1.2 million increase in advance to suppliers for purchase of raw materials, offset somewhat by a $0.9 million increase in accounts payable.

Recent Developments

In May 2011, the Company's 90% owned subsidiary, Dalian Dongtai Industrial Waste Treatment Co., Ltd. ("Dalian Dongtai"), closed the sale of its entire 65% equity interest in Hunan Hanyang Environmental Protection Science & Technology Co., Ltd. ("Hunan Hanyang"), a waste treatment company established under the laws of the People's Republic of China, for a total purchase price of RMB29 million (approximately $4.46 million) to Hunan Tian Kun Jia He Investment Co., Ltd., a company established under the laws of the People's Republic of China and an unrelated party of the Company .

In July 2011, the Company announced that it has dismissed Jewett, Schwartz,Wolfe & Associates and engaged the firm of UHY LLP as its new independent registered public accountant. The change was announced on Form 8-K and filed with the US Securities and Exchange Commission on July 7, 2011. Both the dismissal of JSW and the appointment of UHY were considered and approved by the Board of Directors of the Company.

Business Outlook

The Company is currently building in Dalian one of the most advanced one-stop service centers for industrial solid waste treatment in China (the "Dagushan Expansion Project"). The construction of the Dagushan Expansion Project is now 95% complete and management expects the center to become operational late in the third quarter of 2011. Once fully operational, this new facility will double the Company's hazardous industrial solid waste treatment capacity to 114,000 tons per year.

Conference Call

The Company will host a conference call at 9:00 a.m. Eastern Daylight Time (EDT) on Tuesday, August 16, 2011, to discuss its financial results for the second quarter of 2011.

To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 275-8968. International callers should call +1 (706) 643-1666. The Conference Pass Code is 88229745.

If you are unable to participate in the call at this time, a replay will be available for fourteen days starting on Tuesday, August 16, 2011 at 11:00 a.m. EDT. To access the replay, call (855) 859-2056. International callers should call +1 (404) 537-3406. The Conference Pass Code is 88229745.

About China Industrial Waste Management, Inc.

China Industrial Waste Management is a leading environmental services and solutions provider in China. The Company is based in Dalian, Liaoning Province, China and has been engaged in the industrial solid waste treatment business since 1991. Today, the Company is the largest industrial solid waste management enterprise in northeastern China. China Industrial Waste Management's main businesses are industrial solid waste treatment and recycling, municipal sewage and sludge treatment, and environmental protection engineering.  For more information, please visit the Company's website (www.chinaciwt.com).

Cautionary Statement Regarding Forward-Looking Information

This release may include "forward-looking statements." You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain such words as "may," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," or the negative or other variations thereof or comparable terminology. These forward-looking statements are based on current expectations and projections about future events. Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, our actual performance may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission: the timing and magnitude of technological advances; the prospects for future acquisitions; the effects of political, economic and social uncertainties regarding the governmental, economic and political circumstances in the People's Republic of China, the possibility that a current customer could be acquired or otherwise be affected by a future event that would diminish their waste management requirements; the competition in the waste management industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs and the cost of attracting and retaining highly skilled personnel; our projected sales, profitability, and cash flows; our growth strategies; anticipated trends in our industries; our future financing plans; and our anticipated needs for working capital. Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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SOURCE China Industrial Waste Management, Inc.