Longwei Petroleum Announces Financial Results for Third Quarter Fiscal 2011

TAIYUAN CITY, China, May 17, 2011 /PRNewswire-Asia-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE Amex: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today announced its financial results for the three months ended March 31, 2011.

Third Quarter Fiscal Year 2011 Financial Highlights: (Year-over-Year, 3-Month Results)

• Revenues increased 23.4% to $119.6 million, compared with $96.9 million.
• Operating Income increased 27.1% to $23.0 million, compared with $18.1 million.
• GAAP Net Income Attributable to Common Shareholders increased 122.0% to $26.4 million, compared to $11.9 million.
• Basic EPS increased to $0.26 per share and diluted EPS to $0.26 per share, compared to $0.14 per share basic and $0.12 diluted EPS for the three months ended March 31, 2010.
• Non-GAAP* Net Income Attributable to Common Shareholders increased to $17.2 million, compared to $7.9 million.
• Working capital, net of the non-cash warrant derivative liability, increased 39.6%, or $46.2 million, to $163.0 million.  The Company has no long-term debt.
• Tangible book value was $235.8 million, or $2.35 per share, as of March 31, 2011.
• The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of $63.1 million and $51.3 million, respectively. Agency fees contributed $5.2 million to revenues.

Nine Months Fiscal Year 2011 Financial Highlights: (Year-over-Year, 9-Month Results)

• Revenues increased 55.2% to $353.1 million, compared with $227.5 million.
• Operating Income increased 55.4% to $65.6 million, compared with $42.2 million.
• GAAP Net Income Attributable to Common shareholders increased to $40.7 million, compared with $6.7 million.
• Basic EPS increased to $0.42 per share and Diluted EPS to $0.40 per share, compared to $0.08 per share basic and $0.07 diluted EPS for the nine months ended March 31, 2010.
• Non-GAAP* Net Income Attributable to Common Shareholders increased to $48.8 million, compared to $22.2 million.
• The Company's Taiyuan and Gujiao fuel storage facilities contributed revenues of $198.3 million and $138.1 million, respectively.  Agency fees contributed $16.7 million to revenues.

"Our business continues to produce strong year-over-year top and bottom line growth," stated Mr. Cai Yongjun, Chairman and CEO of Longwei. "To meet the constant growth in demand for fuel in China, we are in the process of nearly doubling our capacity through the acquisition of the assets of Haujie Petroleum. As of the end of the third quarter our deposit paid has reached $32.8 million, and as previously disclosed, we intend to pay the remaining balance of the purchase price using a combination of cash on hand, bank and other financing, and working capital. If we are unable to secure favorable terms for debt or equity financing, we will complete the purchase using cash on hand. We are very excited about the growth prospects moving forward and fully expect to meet our previous guidance of at least $500 million in revenues and $70 million in net income (adjusted for non-cash warrant derivative liability charges) for the 2011 fiscal year."

Results of Operations for the Three Months Ended March 31, 2011

The following table contains selected statements of operations information, which is unaudited and should be read in conjunction with our financial statements and related notes included elsewhere in the Company's Form 10-Q filed with the SEC on May 16, 2011.

Amendment of Second Quarter Fiscal 2011 Report

While preparing our third quarterly review, we noted warrants exercised were not correctly recorded during the second quarter ended December 31, 2010. When warrants were exercised we had not debited to warrant derivative liability expense (a non-cash charge) for $4.5 million and credited to common stock for the same amount. Consequently, we have understated common stock and understated derivative expenses. We also noted that we had not correctly applied the treasury stock method when computing dilution for fully diluted earnings per share. Under this method warrants and options are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Consequently we have overstated the fully diluted weighted average common shares outstanding.

Reconciliation of GAAP to non-GAAP Financial Measures

The unaudited non-GAAP information reflects the adjustment to GAAP Net Income Attributable to Common Shareholders on a non-GAAP basis, whereby the effect of the non-cash adjustment for each period presented of the change in the fair value of derivatives associated with the October 2009 Warrants is added back to the GAAP Net Income Attributable to Common Shareholders. This non-GAAP adjustment has been used to calculate the non-GAAP basic and diluted earnings per share. The non-GAAP operating results for the quarters presented are not necessarily indicative of results for any future periods, but management believes these non-GAAP financial measures provide useful information to investors for a more accurate picture of the Company's operations on an ongoing basis.

Non-GAAP adjustment net of the non-cash expense for the change in the fair value of the warrant derivative liability is added back to the GAAP Net Income Attributable to Common Shareholders in order to calculate the Non-GAAP Net Income Attributable to Common Shareholders and Non-GAAP Earnings per Share.  A reconciliation of these calculations is provided above. (The warrant derivative liability non-cash charge is associated with the issuance of Warrants for the October 2009 Financing.  The Warrants have a three year term and exercise price of $2.255 per share.)

China, the world's second largest oil consumer, saw its petroleum consumption rise by 12.9% in 2010 from 2009, the largest increase since 2005. Apparent oil demand, which is composed of output and imports but excludes stockpiles, reached 439 million metric tons in 2010, as reported by the China Petroleum and Chemical Industry Federation ("CPCIF"). Demand is expected to remain strong to support the country's fast economic growth. China's GDP grew 10.3% in 2010.

"China's petrochemical sector, which is expected to realize a profit of 690 billion yuan ($104 billion USD) in 2010, a 36% increase year-on-year, has started to expand again after hitting a low point as a result of the global financial crisis," said Zhu Fang, Vice Director of the Information and Marketing Department at the CPCIF. "From this year onward, the industry will experience a gradual and steady growth trajectory." Mr. Fang added, "The domestic petrochemical industry is expected to realize a profit of 840 billion yuan ($127 billion USD) in 2011, a 22% increase year-on-year."

"The demand for petroleum products continues to grow," said Michael Toups, CFO of Longwei. "We look forward to duplicating the success we've seen from the acquisition of the Gujiao facility with our newest acquisition target. The expanded capacity these assets provide will position us well to serve the growing demand in the region."

Conference Call and Webcast

Management will host a conference call to discuss these financial results on Thursday, May 19, 2011 at 8:30 a.m. EDT (5:30 a.m. PDT).

To participate in the call please dial (888) 203-7337, or (719) 457-2083 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 via the Company's website at http://www.longweipetroleum.com, or alternately at http://ViaVid.net.

A replay of the call will be available for two weeks from 11:30 a.m. EDT on May 19, 2011, until 11:59 p.m. EDT on June 2, 2011. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the pin number for the replay is 9855739. In addition, a recording of the call will be available via the Company's website at http://www.longweipetroleum.com for one year.

About Longwei Petroleum Investment Holding Limited

Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storage and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 120,000 metric tons located at storage facilities in Taiyuan and Gujiao, Shanxi. The Company's Taiyuan and Gujiao facilities can store 50,000 metric tons and 70,000 metric tons, respectively. The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.

The Company seeks to earn profits by selling its products at competitive prices with timely delivery to coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue under an agency fee by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.

For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at [email protected].  

Forward-Looking Statements

Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about Longwei's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Longwei's operations are conducted in the PRC and, accordingly, are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation. Other potential risks and uncertainties include but are not limited to the ability to procure, properly price, retain and successfully complete projects, and changes in products and competition. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. Readers should review carefully reports or documents the Company files periodically with the Securities and Exchange Commission.

SOURCE Longwei Petroleum Investment Holding Ltd.