- Revenue for the quarter increased 6.3% over the prior year period to $8.1 million
- Net income for the quarter was $2.1 million, representing a net margin of 25.7%
Shenyang, Liaoning Province, China, November 12, 2010 ¨C 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 third quarter ended September 30, 2010.
Third Quarter 2010 Highlights
- Revenues increased 6.3% year-over-year to $8.1 million
- Gross profit rose 4.8% year-over-year to $2.9 million, representing a gross margin of 35.4% compared to 35.9% in the year ago period
- GAAP net income was $2.1 million or $0.38 per diluted share, representing a net margin of 25.7%
- Common stock listed on NASDAQ Global Market
¡°We are pleased with our third quarter operating results, particularly since the business was affected significantly by the move to our new facility during the quarter,¡± noted Mr. Gang Li, Chief Executive Officer of NF Energy Saving Corporation. ¡°The logistics involved in moving and temporarily shutting down our largest machines meant deferring product deliveries until the fourth quarter and subcontracting work to third parties. Even so, we more than made up these revenue declines by increased project revenues from the sale of power from biomass and other projects and from increased service revenues and from taking on subcontracting work of our own to utilize spare capacity on our smaller machines.¡±
Third Quarter 2010 Results
NF Energy has three business segments: (1) the products segment which includes flow control equipment (valves) and energy saving equipment (wind power components); (2) the services segment which includes auditing, consulting, project reporting, and outsourced production; and, (3) the project segment which consists of project design and implementation as well as revenue sharing with third parties related to work on projects. Revenue for the third quarter of 2010 increased 6.3% to $8.1 million, from $7.6 million in the same period of 2009. The growth in revenue is primarily attributable to a significant increase in revenues from the Company¡¯s services and projects segments, which was offset by a decline in revenue for the products segment. The decline in product revenue was attributable to the Company¡¯s move to its new manufacturing facility which caused the Company to delay filling some product orders.
Gross profit for the third quarter of 2010 was $2.9 million, an increase of 4.8% over the $2.7 million in gross profit generated in the third quarter of 2009. The increase in gross profit was largely the result of higher revenues and lower raw materials prices in the projects segment compared to the prior year quarter. Gross margin for the third quarter of 2010 was 35.4% compared to 35.9% during the same period of 2009. The decline in gross margins was primarily the result of lower gross margins in the services segment as the Company provided more services on government related projects compared to the prior year quarter for which the Company cannot pass on price increases on raw materials costs to the customer and was also the result of lower margin subcontracting revenues.
Operating expenses in the third quarter increased 40.2% to $0.3 million, from $0.2 million in the same period of the prior year. The increase in operating expenses was the result of expenses associated with the move to the Company¡¯s new manufacturing facility and expenses related to the Company¡¯s common stock listing on the NASDAQ Global Market.
Income from operations for the third quarter of 2010 was $2.5 million, an increase of 1.6% from the $2.5 million of income from operations generated in the year ago period. Operating margins declined to 31.4% from 32.9% in the year ago period.
Net income for the 2010 third quarter was $2.1 million, or $0.38 per diluted share compared to net income of $2.2 million or $0.40 per diluted share in the third quarter of 2009.
As of September 30, 2010, the Company had $0.5 million in cash and cash equivalents compared to $0.2 million in cash and cash equivalents on December 31, 2009.
The Company generated $3.1 million in net cash from operating activities for the nine months ending September 30, 2010, compared to $2.8 million in the same period of 2009.
Recent Events and Updates
On August 23, 2010, NF Energy announced the signing of a contract with PT. Multinas Indonesia for technical consultancy services and energy saving drying and cooling equipment from which the Company expects to generate U.S. GAAP revenue of $290,000. NF Energy will provide technical consultancy services (comprising approximately 50% of the total revenue), in addition to energy saving drying and cooling equipment (accounting for the remaining 50% of the total contractual revenue).
On September 14, 2010, NF Energy announced the signing of a contract for work on an energy saving project with Fuxin HF Bio-energy Development Company for which the Company expects to generate U.S. GAAP revenue of approximately $882,000, all of which will be recorded in the fourth quarter of 2010. NF Energy will provide technical consultancy and project design, including equipment set up and testing. The project will help 800 households in the Fuxin Mongolian Autonomous County of Liaoning province China upgrade their energy system by transitioning to a clean energy source that will use crop waste and straw. The principal objective of the project is to develop bio-fuels to replace the previous coal powered energy source, reducing coal utilization by 15,000 tons per year thereby lowering environmental pollution.
On September 28, 2010, NF Energy announced that it had received certification as a recognized "Energy Service Company" by the National Development and Reform Commission (NDRC), one of China's main economic planning agencies, qualifying NF Energy to bid on energy conservation reconstruction projects that enjoy preferential benefits from the government of China, including income tax deductions, value-added tax and business tax exemptions, government-encouraged financing and direct government subsidies.
On October 4, 2010, NF Energy's common stock began trading under the symbol "NFEC" on the NASDAQ Global Market. As part of the Company¡¯s efforts to list on the NASDAQ Global Market, NF Energy executed a 2.5-for-1 reverse split of its common stock that was effective with the opening of the stock market on September 16, 2010.
On October 25, 2010, NF Energy announced that it had signed an agreement with the Gaizhou municipal government's Gaizhou Gas Industry Company to jointly invest in the Gaizhou Biomass Gas Supply Project. Once fully operational, the project is projected to generate revenue of up to RMB 96 million annually (approximately $14.1 million) and save 40,600 tons of standard coal per year. The total cost of the project is expected to amount to RMB 240 million (approximately $35.5 million). The two companies will split revenues generated from the project according to their respective investments, with NF Energy investing 62.2% of the capital required over a two-year time frame and Gaizhou Gas contributing the remaining 37.8%. NF Energy will be responsible for managing the project, including project design and construction.
Guidance and Business Outlook
NF Energy continues to anticipate full fiscal year 2010 revenue to be in the range of $28 million to $30 million and net income to be in the range of $5.6 million to $6.0 million. The estimation excludes any possible additional expenses arising from the Company¡¯s upgrade to the NASDAQ or any financing expense. Successful on time completion of the testing phase of the manufacturing equipment at the new facility is also assumed by the aforementioned financial expectations.
NF Energy will host a conference call at 9:00 a.m. ET on Friday, November 12, 2010, to discuss the Company¡¯s third quarter 2010 financial results. Hosting the call will be Mr. Gang Li, Chief Executive Officer, and Ms. Lihua Wang, Chief Financial Officer. The Company plans to distribute its earnings press release prior to the call.
To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 877-533-0441. International callers should dial 706-634-7331. The conference call pass code is 23621927.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, November 12, 2010 at 10:00 a.m. ET. To access the replay, dial 800-642-1687. International callers should dial 706-645-9291. The conference pass code is 23621927.
About NF Energy Saving Corporation
NF Energy Saving Corporation (OTCBB: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 current revenues are primarily from its energy saving flow control products. Headquartered in Shenyang city of China, the Company currently has 225 employees and several proprietary energy saving technologies and patents.
Safe Harbor Statement
This press release contains certain statements that may include ¡±forward-looking statements¡± as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes¡±, ¡°expects¡±, ¡°anticipate¡±, ¡°optimistic¡±, ¡°intend¡±, ¡°will" 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 and available from the Securities and Exchange Commission. All forward-looking statements attributable to the Company or 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.
For Immediate Release
Company Contact: Investor Relations Contact:
Ms. Lihua Wang, Director & CFO Mr. Mark Collinson, Partner
NF Energy Saving Corp. CCG Investor Relations
Tel: +86 24-8563 1159 Tel: +1 310-954-1343
Email: firstname.lastname@example.org Email: email@example.com
Website: www.nfenergy.com Website: www.ccgirasia.com