NF Energy Saving Corporation Announces First Quarter 2011 Results

SHENYANG, China, May 11, 2011 /PRNewswire-Asia/ -- NF Energy Saving Corporation. (NASDAQ: NFEC) ("NF Energy" or the "Company"), a leading energy saving services and solutions provider for China's power, petrochemical, coal, metallurgy, construction, and municipal infrastructure development industries, today reported financial results for its first quarter ended March 31, 2011.

First Quarter 2011 Highlights

• Revenues decreased 7.9% year-over-year to $2.6 million
• Gross profit increased 17.7% year-over-year to $0.8 million, representing a gross margin of 30.6%
• Net income was $0.3 million or $0.05 per diluted share, representing a net margin of 11.2%
• The Company's move to its new factory and development of the facilities on target for completion during the second quarter

"The first quarter is our slowest of the year and this year we used some capacity at our partially-completed facilities to manufacture profitable components for Shenyang's underground railway project, in addition to working on our core energy-saving flow control equipment.  As we near completion of the new factory during the second quarter we expect to be ready to begin work on the bulk of our core product orders in the third and fourth quarters.  We are on schedule with our 2011 plan and our outlook for the full year remains unchanged," said Mr. Gang Li, the Company's Chief Executive Officer.

First quarter 2011 results

Total revenue of $2.6 million for the three months ended March 31, 2011, decreased 7.9% from $2.8 million in the same period of 2010. This decrease is mainly due to a decrease in product revenue due to the partial completion of the Company's new factory and facilities and the consequent deferral of the bulk of the manufacturing of energy-saving flow control equipment to the second half of the year, offset by higher service revenues from sub-contracted fabrication work for Shenyang's underground railway project.

Gross profit in the first quarter of 2011 was $0.8 million, an increase of 17.7% over the $0.7 million in gross profit generated in the first quarter of 2010. The increase in gross profit was primarily due to the period-over-period increase in higher margin service revenues.

Total operating expenses were $327,753 for the three months ended March 31, 2011, as compared to $172,487 for the same period of 2010, mainly due to the increase of general and administrative ("G&A") expenses from land use right taxes on our new facility located in Yinzhou District Industrial Park and amortization of the cost of an intangible asset.

Income from operations was $471,729, for the three months ended March 31, 2011, as compared to $506,964 for the same period of 2010, a decrease of $35,235 or approximately 7.0%. This decrease is primarily due to lower revenue and the increase in operating expenses.

Net income for the first quarter was $292,326, or $0.05 per diluted share compared to net income of $367,183 or $0.07 per diluted share in the same period of 2010. This decrease is primarily due to the decrease in revenue and the increased operating expense. In addition, interest expense rose to $122,478 compared to $80,644 in the same quarter last year

Financial Condition

As of March 31, 2011, the Company had $3.1 million in cash and cash equivalents compared to $0.8 million in cash and cash equivalents on March 31, 2010. Working capital was $11.3 million.

The Company used $0.5 million in net cash from operating activities for the three months ended March 31, 2011, compared to generating $3.1 million in the same period of 2010.  Payments on construction in progress totaled $0.2 million.  Cash provided by financing activities totaled $2.9 million, largely composed of proceeds from the issuance of a $1.5 million short-term loan due June 10, 2011 and an RMB 10 million or approximately $1.5 million loan due February 16, 2012.

Guidance and Business Outlook

NF Energy reiterates its guidance for the full fiscal year 2011 revenue to be in the range of $30 million to $32 million and net income to be in the range of $6.0 million to $6.5 million. Guidance excludes any possible additional expenses for potential future financing activities.

Conference Call

NF Energy will host a conference call at 9:00 a.m. EDT on Wednesday, May 11, 2011, to discuss the Company's first quarter 2011 financial results. Hosting the call will be Mr. Gang Li, Chief Executive Officer, and Ms. Lihua Wang, Chief Financial Officer.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-877-275-8968 for U.S. based callers, or +1-706-643-1666 for international callers. The conference pass code for the call is 63765621.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Wednesday, May 11, 2011 at 12:00 p.m. EDT. To access the replay, U.S. based callers should dial 1-800-642-1687, international callers should dial +1-706-645-9291. The conference pass code will remain 63765621.

About NF Energy Saving Corporation

NF Energy Saving Corporation (NASDAQ:NFEC) is a China-based provider of integrated energy conservation solutions utilizing energy-saving equipment, technical services and energy management re-engineering project operations to provide energy saving services to clients. The Company's customers are mainly concentrated in the electrical generation (large-scale thermal power generation, hydroelectric power, wind power, and nuclear power), water supply, and heat supply industries. For more information, visit http://www.nfenergy.com

Safe Harbor Statement

The statements contained herein that are not historical facts are considered "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, statements regarding the efficacy of investment in research and development are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but not limited to, the effect of political, economic, and market conditions and geopolitical events; legislative and regulatory changes that affect our business; the availability of funds and working capital; the actions and initiatives of current and potential competitors; investor sentiment; and our reputation. We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by any forward-looking statements. The factors discussed herein are expressed from time to time in more detail in our filings with the Securities and Exchange Commission available at http://www.sec.gov.

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SOURCE NF Energy Saving Corporation