China Natural Gas Announces First Quarter 2010 Financial Results
-- First Quarter 2010 revenue increased 4.5% year-over-year to $19.4 million -- Full Year 2010 revenue expected to increase 20% to 25% -- Full Year 2010 net income expected to increase 17% to 22%
NEW YORK, May 7 /PRNewswire-Asia/ -- China Natural Gas, Inc. ("China Natural Gas" or the "Company") (Nasdaq: CHNG), a leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural gas for industrial, commercial and residential use in Xi'an, China, today announced its financial results for the first quarter ended March 31, 2010.
Qinan Ji, Chairman and CEO of China Natural Gas, Inc. commented: "During the first quarter, we continue to diligently grow and expand our business. We acquired one additional fueling station in the first quarter, bringing the total number of fueling stations that we operate to 37. We also continue to make progress with the construction of our liquefied natural gas (LNG) facility in Shaanxi Province and we expect it to be completed by the stated June 30, 2010 timeline. We are also actively expanding in other regions including Henan and Hubei Province. The successful expansion of our CNG fueling station business in Xi'an and Henan Province has been a significant factor driving our revenue growth and results of operations for the quarter. We intend to continue to increase the number of CNG fueling stations in Xi'an and Henan Province, and we anticipate the growth of our CNG fueling stations and our LNG facility coming online in second half of the year continue to add to both our top-line and bottom-line growth."
First Quarter 2010 Results
Revenue in the first quarter of 2010 increased 4.5% to $19.4 million from $18.5 million in the first quarter of 2009, driven by sales from 2 new fueling stations added in third quarter 2009 and first quarter 2010, respectively, as well as an increase in the number of residential and commercial pipeline customers to 110,713 as of March 31, 2010 from 98,754 as of March 31, 2009. Sales of natural gas grew 3.5% year-over-year to $15.5 million, from $15.0 million in the first quarter of 2009. Gasoline revenue in the first quarter of 2010 increased 25.1% to $1.5 million, from $1.2 million in the prior year's period, mainly attributable to the increase of international oil price. Installation and services revenue grew 1.1% year-over-year to $2.41 million, from $2.39 million a year ago. In the first quarter of 2010, sales of natural gas, gasoline, and installation and other services contributed 80%, 8%, and 12% of total revenue, respectively.
Gross profit in the first quarter of 2010 contracted 5.6% to $9.1 million, from $9.6 million in the prior year's same period. Gross margin in the first quarter of 2010 was 47.0%, compared to 52.0% a year ago. Gross profit and gross margin decreased primarily due to increased procurement cost in Henan Province, a main area of operations.
Operating income in the first quarter of 2010 was $4.4 million, a decrease of 22.1% year-over-year, from $5.6 million in the prior year's period, largely impacted by Increase in operating expenses in the first quarter of 2010 by approximately $703,297 to $4.7 million versus $4.0 million in the same prior-year period.
Income tax expense was $911,145 for an effective tax rate of 18.6%, as compared to an effective tax rate of 19.2% in the first quarter of 2009.
Net income in the first quarter of 2010 decreased 4.9% to $4.0 million, or $0.19 per diluted share, from $4.2 million, or $0.29 per diluted share, in the first quarter of 2009.
As of March 31, 2010, the Company had $30.2 million of cash and cash equivalents on hand compared to $48.2 million of cash and cash equivalents as of December 31, 2009. The decrease was primarily attributable to the construction of the LNG plant, additions of fueling stations, and market development initiatives in Henan and Hubei Province.
Net cash provided by operating activities was $4.8 million for the three months ended March 31, 2010 compared to net cash provided by operations of $6.2 million for the three months ended March 31, 2009. The primary reason for the change was due to the decrease in net income, adjusted for non-cash expenses items of $1.2 million and an increase in working capital of $334,345.
Business Outlook
On March 4, 2010, the Company announced the execution of an installation contract with China Nuclear Industry Fifth Construction Co., Ltd. for its liquefied natural gas (LNG) project to ensure the project be completed by June 30, 2010. This date also marks the commencement of the test run and the prelude of commercial production. The Jingbian LNG project is the first liquefied natural gas plant in Shaanxi approved by the NDRC and Shaanxi Provincial Government. Upon completion, the LNG project will have production capacity of 500,000 cubic meters per day, or 150 million cubic meters on an annual basis. Liquefied natural gas is widely used in power generation, transportation, metallurgy, ceramics, glassworks and other aspects of the social economy.
On March 31, 2010, the Company announced that its joint venture with CNPC Kunlun Natural Gas Co. received local government approval to build one CNG compressor station and six fueling stations in Pingdingshan City, Henan Province. The development marked the formal launch of the joint venture between China Natural Gas, Inc. and CNPC in this region. The joint venture, Henan CNPC Kunlun Xilan Compressed Natural Gas Co., Ltd., will build one CNG compressor station and two fueling stations in Ye County, Pingdingshan City, two fueling stations in Baofeng County, Pingdingshan City, and two fueling stations in Wugang County, Pingdingshan City.
On April 8, 2010, the Company announced that it has received local government approval from Wuhan City, Yichang City, Xiangfan City and Huangshi City in Hubei Province to build liquefied natural gas (LNG) reserve stations, harbor LNG fueling stations, and inland LNG fueling stations in the region. The development marks the Company's initial endeavors expanding into the natural gas market in Hubei and, currently, harbor natural gas fueling stations are an untapped market in China.
Full Year 2010 Guidance
We expect an increase of 20% to 25% in revenue for the full year 2010, which will place our top line in an approximate range of $97.3 million to $101.3 million; and without the impact from non-cash, non-operating charges, we expect an increase of 17% to 22% in our net income, which will place our bottom line in the range of $22.0 million to $23.0 million.
We anticipate that our results of operations will continue to be positively affected by government policies encouraging the adoption of cleaner burning fuels and the increased adoption of CNG and LNG technology.
Conference Call
Management will hold a conference call on Monday, May 10, 2010 at 8:00 a.m. ET (5:00 a.m. Pacific) to discuss these first quarter results.
To participate in the call please dial (877) 941-4775, or (480) 629-9761 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 at the Company's website at http://www.naturalgaschina.com .
A replay of the call will be available for two weeks from 11:00 a.m. May 10, 2010, EDT until 11:59 p.m. EDT on May 24, 2010. The number for the replay is (800) 406-7325, or (303) 590-3030 for international calls; the passcode for the replay is 4293821. In addition, a recording of the call will be available via the company's website at http://www.naturalgaschina.com for one year.
About China Natural Gas, Inc.
China Natural Gas ( http://www.naturalgaschina.com ) transports and sells natural gas to vehicular fueling terminals, as well as commercial, industrial and residential customers through its distribution networks in China's Shaanxi and Henan Provinces. The Company owns approximately 120 km of high-pressure pipelines and operates 25 CNG fueling stations in Shaanxi Province and 12 CNG fuelling stations in Henan Province. China Natural Gas' four primary business lines include: (1) the distribution and sale of CNG through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; (2) the installation, distribution and sale of piped natural gas to residential, commercial and industrial customers through Company-owned pipelines; (3) the distribution and sale of gasoline through Company-owned CNG fueling stations for hybrid (natural gas/gasoline) powered vehicles; and (4) the conversion of gasoline-fueled vehicles to hybrid (natural gas/gasoline) powered vehicles through its auto conversion division.
SAFE HARBOR: FORWARD-LOOKING STATEMENTS
This press release includes statements that may constitute forward-looking statements made pursuant to the safe harbor provision of the 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. For example, statements about the future plans and goals of the JV with CNPC and its prospects are forward looking and subject to risks. China Natural Gas, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission on forms 10-K, 10-Q and 8-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, risks outlined in the Company's filings with the U.S. Securities and Exchange Commission, including its registration statements on Forms S-1 and S-3, in each case as amended. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
This release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2010 AND DECEMBER 31, 2009
March 31, December, 31
2010 2009
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $30,172,391 $48,177,794
Accounts receivable, net of allowance
for doubtful accounts of $196,138
and $163,280 as of March 31, 2010
and December 31, 2009, respectively. 1,514,070 1,289,116
Other receivables 491,020 709,741
Other receivable - employee advances 190,045 338,689
Inventories 874,678 841,837
Advances to suppliers 1,302,568 596,868
Prepaid expense and other current
assets 1,546,556 1,076,915
Loans receivable 14,259,240 293,400
Total current assets 50,350,568 53,324,360
INVESTMENT IN UNCONSOLIDATED JOINT
VENTURES 1,467,000 1,467,000
PROPERTY AND EQUIPMENT, NET 75,603,216 72,713,012
CONSTRUCTION IN PROGRESS 57,102,317 52,918,236
DEFERRED FINANCING COSTS 1,234,540 1,336,998
OTHER ASSETS 16,937,089 15,854,910
TOTAL ASSETS $202,694,730 $197,614,516
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $1,970,228 $2,081,261
Other payables 85,082 80,788
Unearned revenue 2,199,805 1,813,641
Accrued interest 200,509 786,052
Taxes payable 2,888,511 1,901,577
Total current liabilities 7,344,135 6,663,319
LONG TERM LIABILITIES:
Notes payable, net of discount
$11,946,508 and $12,707,713 as of
March 31, 2010 and December 31,
2009, respectively 28,053,492 27,292,287
Derivative liabilities - warrants 19,152,570 19,545,638
Total long term liabilities 47,206,062 46,837,925
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 per share;
5,000,000 shares authorized; none
issued -- --
Common stock, $0.0001 per share;
45,000,000 shares authorized,
21,183,904 shares issued and
outstanding at March 31, 2010 and
December 31, 2009 2,118 2,118
Additional paid-in capital 79,926,097 79,851,251
Cumulative translation adjustment 8,675,165 8,714,019
Statutory reserves 6,425,074 5,962,695
Retained earnings 53,116,079 49,583,189
Total stockholders' equity 148,144,533 144,113,272
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $202,694,730 $197,614,516
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Unaudited)
Three Months Ended March 31,
2010 2009
Revenues
Natural gas revenue $15,483,629 $14,965,819
Gasoline revenue 1,468,816 1,174,398
Installation and others 2,414,378 2,387,449
Total revenues 19,366,823 18,527,666
Cost of revenues
Natural gas cost 7,864,654 6,746,929
Gasoline cost 1,367,278 1,130,057
Installation and others 1,039,923 1,017,028
Total cost of revenues 10,271,855 8,894,014
Gross profit 9,094,968 9,633,652
Operating expenses
Selling expenses 2,891,790 2,580,825
General and administrative expenses 1,817,656 1,425,324
Total operating expenses 4,709,446 4,006,149
Income from operations 4,385,522 5,627,503
Non-operating income (expense):
Interest income 89,366 8,908
Interest expense -- (581,492)
Other income (expense), net 46,569 (2,303)
Change in fair value of warrants 393,068 197,051
Foreign currency exchange loss (8,110) (50,788)
Total non-operating income (expense) 520,893 (428,624)
Income before income tax 4,906,415 5,198,879
Provision for income tax 911,145 997,256
Net income 3,995,270 4,201,623
Other comprehensive income
Foreign currency translation loss (38,854) (152,115)
Comprehensive income $3,956,416 $4,049,508
Weighted average shares outstanding
Basic 21,183,904 14,600,152
Diluted 21,595,038 14,600,152
Earnings per share
Basic $0.19 $0.29
Diluted $0.19 $0.29
CHINA NATURAL GAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Unaudited)
Three Months Ended March 31,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,995,270 $4,201,623
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,472,595 1,389,565
Provision for bad debt 32,847 --
Amortization of discount on senior
notes -- 170,712
Amortization of financing costs -- 38,578
Stock based compensation 74,847 14,842
Change in fair value of warrants (393,068) (197,051)
Change in assets and liabilities:
Accounts receivable (257,812) (41,244)
Other receivable - employee advances 148,593 151,617
Inventories (32,830) 30,812
Advances to suppliers (705,460) 151,828
Prepaid expense and other current
assets (167,213) (100,912)
Accounts payable and accrued
liabilities (111,007) 304,860
Other payables 4,296 212,961
Unearned revenue 386,032 195,435
Accrued interest (585,543) (330,003)
Taxes payable 986,599 44,898
Net cash provided by operating
activities 4,848,146 6,238,521
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to third parties (14,259,140) --
Repayment of loans receivable 293,300 --
Purchase of property and equipment (253,844) (13,484)
Additions to construction in progress (7,425,192) (2,552,098)
Prepayment on long term assets (1,047,327) (426,913)
Return of acquisition deposit (124,653) --
Payment for intangible assets -- (35,822)
Payment for land use rights 4,722 --
Net cash used in investing activities (22,812,134) (3,028,317)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by financing
activities -- --
Effect of exchange rate changes on
cash and cash equivalents (41,415) (6,226)
NET (DECREASE) INCREASE IN CASH &
CASH EQUIVALENTS (18,005,403) 3,203,978
CASH & CASH EQUIVALENTS, BEGINNING OF
PERIOD 48,177,794 5,854,383
CASH & CASH EQUIVALENTS, END OF
PERIOD $30,172,391 $9,058,361
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $1,085,543 $1,084,130
Income taxes paid $-- $997,257
Non-cash transactions for investing
and financing activities:
Construction in progress transferred
to property and equipment $4,106,200 $--
Capitalized interest - amortization
of discount of notes payable and
issuance cost $863,662 $--
For more information, please contact:
China Natural Gas, Inc.
Jacky Shi
Investor Relations Director
Tel: +86-29-8832-3325 x922
Cell: +86-139-9287-9998
Email: [email protected]
RedChip Companies, Inc.
Jon Cunningham
Tel: +1-800-733-2447 x107
Email: [email protected]
Web: http://www.RedChip.com
SOURCE China Natural Gas, Inc.
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