Cleantech Solutions International Reports First Quarter 2016 Results

WUXI, China, May 16, 2016 /PRNewswire/ -- Cleantech Solutions International, Inc. ("Cleantech Solutions" or "the Company") (NASDAQ: CLNT), a manufacturer of textile dyeing and finishing machines as well as metal components and assemblies used in various clean technology and manufacturing industries and, since the first quarter of 2015, the petroleum and chemical industries, today announced its financial results for the three months ended March 31, 2016.

"In the first quarter of 2016, challenging economic conditions, falling steel prices, a continuous decline in oil prices and limited availability of credit in China presented numerous challenges for our business. Our forged rolled rings and related components segment and petroleum and chemical equipment segment both experienced significant reductions in sales and generated losses during the quarter. Given the sharp declines in revenue and future outlook, we are currently evaluating the long-term viability of these two segments on an ongoing basis. The dyeing equipment segment, which accounted for 92% of total revenue in the quarter, experienced softer demand for our low-emission airflow dyeing machines although it remained profitable," said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. "We continue working with our strategic advisors to assist us in implementing a new business plan with the objective of improving our long-term growth."

First Quarter 2016 Results

Revenue for the first quarter of 2016 decreased by 68.6% to $4.9 million, compared to $15.6 million for the same period of 2015.

The Company experienced a significant decline in sales of forged rolled rings and related components to customers in the wind power and other industries and to dyeing and finishing equipment customers compared to the comparable quarter last year. Furthermore, sales of equipment to customers in the petroleum and chemical industries declined due to the loss of its largest customer.   

• Revenue from the dyeing and finishing equipment segment decreased by 30.6% to $4.5 million, compared to $6.5 million for the first quarter of 2015. The decrease was primarily related to the challenging economic conditions and limited availability of credit in China. Additionally, the Company experienced a slowdown in shipments of its low-emission airflow dyeing machines as many companies in the dyeing industry had already upgraded to new models and did not require additional equipment. Also, some of our customers stopped operation in the first quarter of 2016 in order to comply with stricter environmental requirements, which resulted in the decrease in orders for dyeing machines from these customers. Additionally, the Company believes that orders for new low-emission airflow dyeing machines have slowed down in 2016 because the remaining potential customer base included more companies that did not have the ability to make the significant capital expenditures necessary to upgrade their equipment.
• Revenue from the sale of forged rolled rings and related products to the wind power and other industries fell by 96.4% to $0.3 million, compared with $7.3 million for the comparable period of the prior year. The significant decrease was mainly due to reduced demand for construction of wind power facilities, which was the Company's principal customer base during the quarter, due to the effects of lower oil and gas prices.
• Revenue from sales of equipment to customers in the petroleum and chemical industries fell 92.9% to $0.1 million, compared to $1.8 million for the comparable period last year.  Revenue in this segment is highly dependent upon sales to a very small number of Chinese petrochemical companies, whose purchasing policies affect both revenue and gross margin for this segment. In December 2015, the Company received a notice of contract termination in writing from the Company's largest customer in 2015 that alleged breach of contract for late delivery of product and for delivery of product with quality defects. Accordingly, the Company has not generated any revenues from this customer in the first quarter of 2016 and does not expect any further revenues from this customer in the future. 

Gross profit for the first quarter of 2016 was $0.2 million, compared to gross profit of $3.1 million for the same period in 2015. Gross margin was 4.3% during the first quarter of 2016 compared to 19.6% for the same period a year ago. The decline in gross margin for the first quarter of 2016 was primarily attributable to (i) the reduced scale of operations resulting from lower revenues, including the allocation of fixed costs mainly consisting of depreciation, to cost of revenues in the forged rolled rings and related products segment, as a result of which cost of revenue from this segment were greater than revenues, resulting in a negative gross profit from the segment, (ii) lower gross margin in the petroleum and chemical segment, primarily attributed to the reduced scale of operations resulting from lower revenues, which is reflected in the allocation of fixed costs, mainly consisting of depreciation, to cost of revenues, and (iii) a decline in gross margin from the dyeing and finishing equipment segment reduced scale of operations, which is reflected in the allocation of fixed costs, mainly consisting of depreciation, to cost of revenues, and the slight increase in raw material costs.

Operating expenses decreased 28.6% to $0.9 million, compared to $1.2 million in the comparable period last year, due to decreases in selling, general and administrative expenses, depreciation and research and development expenses.

Loss from operations was $0.7 million, compared to operating income of $1.8 million in the same period of 2015.

Net loss for the first quarter of 2016 was $0.8 million, or $(0.21) per basic and diluted share, compared to net income of $1.2 million, or $0.32 per basic and diluted share, in the first quarter of 2015.   

EBITDA, a non-GAAP measurement, which adds interest expense, income taxes, depreciation and amortization to net (loss) income, was $1.0 million, compared to $3.9 million in the first quarter of 2015. The calculation of EBITDA is shown in a table following the financial statements.

Financial Condition

As of March 31, 2016, Cleantech Solutions held cash and cash equivalents of $18.9 million compared to $18.8 million at December 31, 2015. Accounts receivable were $16.2 million at March 31, 2016 compared to $15.8 million at December 31, 2015. Inventories were $2.1 million at March 31, 2016 compared to $1.8 million at December 31, 2015. The Company had $3.0 million in short-term bank loans payable at March 31, 2016, down slightly from $3.1 million at December 31, 2015. Working capital was $26.6 million at March 31, 2016 compared to $24.9 million at December 31, 2015. Stockholders' equity was $80.4 million at March 31, 2016. In the first quarter of 2016, the Company generated $0.1 million in cash flow from operations compared to $5.0 million in the first quarter of 2015.

Business Outlook

"We are continuing to evaluate the viability of the our forged rolled rings and related components segment and our petroleum and chemical equipment segment on an ongoing basis, and may exit these businesses if we determine that it will be unlikely we can operate them profitably. In our core dyeing equipment business, we are focused on re-engaging with our existing clients, exploring opportunities to expand into Southeast Asia and introducing newer, more energy-efficient and environmentally-friendly models that we believe will entice textile manufacturers to upgrade their equipment. We continue working with our strategic advisors to develop a new business plan focused on long-term growth," Mr. Wu concluded.     

Use of Non-GAAP Financial Measures

The Company has included in this press release certain non-GAAP financial measures. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein.

About Cleantech Solutions International

Cleantech Solutions is a manufacturer of metal components and assemblies, primarily used in clean technology and other industries and dyeing and finishing equipment for the textile industry and forged rolled rings and related products, and a supplier of fabricated products and machining services to a range of clean technology customers, and a supplier of products for the petroleum and chemical industries. The Company's website is www.cleantechsolutionsinternational.com. Any information on the Company's website or any other website is not a part of this press release.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website, including factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2015 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-Q for the quarter ended March 31, 2016. All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.

Company Contacts:

Cleantech Solutions International, Inc.
Ryan Hua, Vice President of Operations
E-mail: [email protected] 
+86-510-8339-7559 
Web: www.cleantechsolutionsinternational.com

Compass Investor Relations
Elaine Ketchmere, CFA
Email: [email protected] 
+1-310-528-3031
Web:  www.compassinvestorrelations.com

SOURCE Cleantech Solutions International, Inc.

Related Links

http://www.cleantechsolutionsinternational.com