Chemspec International Limited Announces Third Quarter 2010 Unaudited Financial Results
SHANGHAI, Nov. 12, 2010 /PRNewswire-Asia-FirstCall/ -- Chemspec International Limited (NYSE: CPC; "Chemspec" or the "Company"), a leading China-based contract manufacturer of highly-engineered specialty chemicals, today announced its unaudited financial results(1) for the third quarter ended September 30, 2010.
Third Quarter 2010 Financial Highlights
- Total sales increased 53.7% from the third quarter of 2009(2) and 21.7% from the second quarter of 2010 to RMB 324.7 million (US$ 48.5 million), which was a new quarterly record for the Company.
- Gross profit totaled RMB 123.4 million (US$ 18.5 million), an increase of 38.0% from the third quarter of 2009(2) and 25.0% from the second quarter of 2010.
- Income from operations was RMB 85.9 million (US$ 12.8 million), an increase of 38.7% from the third quarter of 2009(2) and 23.4% from the second quarter of 2010.
- Net income attributable to the Company's shareholders was RMB 70.4 million (US$ 10.5 million), an increase of 34.6% from the third quarter of 2009(2) and 22.4% from the second quarter of 2010.
- Basic and diluted earnings per ADS(3) were RMB 1.95 (US$ 0.29) and RMB 1.94 (US$ 0.29), respectively. Both basic and diluted earnings per ADS were RMB 1.44 (US$ 0.22) in the third quarter of 2009(2) and RMB 1.59 (US$ 0.24) in the second quarter of 2010.
Dr. Jianhua Yang, Chairman and Chief Executive Officer of Chemspec, commented, "I am pleased to announce our third quarter financial results, which set a new record high in our Company's history. These results reflect a continued upswing in demand in our end markets, particularly in the electronics sector where our highly engineered specialty chemical products are used. Our pharmaceutical business remained stable and we started to see a mild recovery in the agrochemical business. The improved performance in both revenue and gross margin during the period was mainly attributed to the strong growth in our electronics chemical business, an active realignment of customer inventory, and an effective shift in product mix. Overall, we have experienced a strong recovery in our business over the first three quarters of this year and we expect to carry this momentum into the end of the year. Currently, we expect full fiscal year 2010 revenue to be approximately RMB 1,060 – 1,100 million, which represents growth of approximately 29% – 34% compared with fiscal year 2009."
Mr. Zixin Wang, Vice President of Finance, commented, "We are happy to report our strong financial results for the third quarter of 2010. While our inventories increased in absolute terms in the third quarter of 2010, primarily as a result of the increase in total sales, inventories as a percentage of total sales decreased compared with the second quarter of 2010. We attribute the decrease in inventories as a percentage of total sales to our continued efforts in managing our inventories efficiently. We have also been able to maintain fairly stable operating margins as a result of strict cost control measures over the past quarters. We expect to continue these efforts during the remainder of the year."
Third Quarter 2010 Financial Results
Total Sales
During the three months ended September 30, 2010, the Company generated total sales of RMB 324.7 million (US$ 48.5 million), representing an increase of 53.7% from RMB 211.3 million in the third quarter of 2009 and an increase of 21.7% from RMB 266.8 million in the second quarter of 2010. We attribute the increase in sales primarily to strong demand in the electronics chemical market during the third quarter of 2010.
Gross Profit and Gross Margin
Gross profit was RMB 123.4 million (US$ 18.5 million), which was an increase of 38.0% from RMB 89.5 million in the third quarter of 2009 and 25.0% from RMB 98.7 million in the second quarter of 2010. Gross margin was 38.0% in the third quarter of 2010, compared with 42.3% in the third quarter of 2009 and 37.0% in the second quarter of 2010. The changes in gross margin from the same period last year and the previous quarter were mainly due to the shift in product mix and price adjustments for certain products.
Operating Expenses
Selling expenses and general and administrative (SG&A) expenses were RMB 23.0 million (US$ 3.4 million) during the third quarter of 2010, representing an increase of 18.1% from RMB 19.4 million in the third quarter of 2009 and an increase of 44.8% from RMB 15.9 million in the second quarter of 2010. The increase in SG&A expenses compared with the same period of 2009 was primarily due to an increase in depreciation expenses related to the Company's new headquarters, and the payment of consulting fees related to Sarbanes–Oxley (SOX) compliance. The sequential increase was because the Company recognized a reversal in share-based compensation expenses in the second quarter of 2010 due to the forfeiture of options that were granted to former employees.
Research and development expenses increased by 113.2% to RMB 15.1 million (US$ 2.3 million) from RMB 7.1 million in the third quarter of 2009 and by 2.1% from RMB 14.8 million in the second quarter of 2010. The increase in R&D expenditures compared with the same period in 2009 was primarily due to higher material consumption as well as an increase in R&D headcount as the Company hired additional experienced scientists and engineers. Compared with the second quarter of 2010, R&D expenses remained stable.
Net income attributable to Chemspec International Limited shareholders
Net income attributable to Chemspec International Limited shareholders increased to RMB 70.4 million (US$ 10.5 million), a rise of 34.6% from RMB 52.3 million in the third quarter of 2009 and 22.4% from RMB 57.5 million in the second quarter of 2010. The increase in net income attributable to Chemspec International Limited shareholders was primarily due to the increase in sales.
Basic and diluted earnings per ADS were RMB 1.95 (US$ 0.29) and RMB 1.94 (US$ 0.29), respectively. Both basic and diluted earnings per ADS were RMB 1.44 (US$ 0.22) in the third quarter of 2009 and RMB 1.59 (US$ 0.24) in the second quarter of 2010.
Cash Flows
As of September 30, 2010, the Company had RMB 145.3 million (US$ 21.7 million) of cash, compared with RMB 351.1 million as of December 31, 2009. Significant cash outflows for the nine-month period ended September 30, 2010 included capital expenditure payments of RMB 181.1 million (US$ 27.1 million) for the expansion of production facilities and the increase in inventory to RMB 439.5 million (US$ 65.7 million) from RMB 393.6 million at the end of second quarter of 2010. The higher inventory was due to a rise in the production and sales of more complex products, primarily for the electronics end-market.
Business Outlook
Overall, the Company experienced a strong recovery in business during the first three quarters of 2010 and management expects that revenue for fiscal year 2010 will be between RMB 1,060 and RMB 1,100 million, which represents an increase of approximately 29% – 34% compared with fiscal year 2009.
Conference Call Details
The Company will host a conference call and live webcast to discuss its third quarter financial results at 8:00 am Eastern Standard Time (9:00 pm Shanghai Time) on Friday, November 12, 2010.
The dial-in details for the live conference call are as follows: |
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- U.S. Toll Free Number: |
+1-866-519-4004 |
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- International Dial-in Number: |
+65-6723-9381 |
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- Mainland China Toll Free Number: |
800-819-0121 |
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- Mainland China Domestic Mobile: |
400-620-8038 |
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- Hong Kong Toll Free Number: |
800-930-346 |
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Conference ID: |
CPC |
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A live and archived webcast of the conference call will be available on the Investor Relations section of Chemspec's website at http://www.chemspec.com.cn.
A telephone replay of the call will be available from 11:59 pm Eastern Standard Time on November 12, 2010 through 11:59 pm Eastern Standard Time on November 19, 2010.
The dial-in details for the replay are as follows: |
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- U.S. Toll Free Number: |
+1-866-214-5335 |
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- International Dial-in Number: |
+61-2-8235-5000 |
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Conference ID: |
24110185 |
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(1) Certain Renminbi (RMB) amounts in this press release have been translated into U.S. dollar (USD) solely for the convenience of the reader. The conversion of RMB into USD in this release is based on the noon buying rate in the City of New York for cable transfers in RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2010, which was RMB 6.6905 to USD1.00. The percentages stated are calculated based on RMB.
(2)2009 financial data have been adjusted to reflect the retrospective adjustment of the Company's financial data due to the acquisition of Jiangsu Kangpeng Nong Hua Limited on November 9, 2009. The transaction was considered a combination between entities under common control.
(3) 1 ADS=60 ordinary shares
About Chemspec
Chemspec is a leading China-based contract manufacturer of highly engineered specialty chemicals, especially, the fluorinated specialty chemicals. In manufacturing specialty chemicals, Chemspec also provides process design and process development services, which enable efficient and rapid production of specialty chemicals that are incorporated into the products of Chemspec's end users. Chemspec's customers and end users include electronics, pharmaceutical and agrochemical companies. For more information, please visit www.chemspec.com.cn.
For further information, please contact: |
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Chemspec International Ltd. |
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In Shanghai |
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Carol Fang |
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Manager, Investor Relations |
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Tel: +86-21-63638108 |
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Email: [email protected] |
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Christensen |
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In New York |
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Kathy Li |
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Tel: +1-212-618-1978 |
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Email: [email protected] |
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In Hong Kong |
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Tip Fleming |
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Tel: +852-9212-0684 |
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Email: [email protected] |
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Chemspec International Limited Unaudited Consolidated Balance Sheets |
|||||||
December 31, |
September 30, |
September 30, |
|||||
2009 |
2010 |
2010 |
|||||
RMB’000 |
RMB’000 |
USD’000 |
|||||
ASSETS |
|||||||
Current assets |
|||||||
Cash |
351,097 |
145,280 |
21,714 |
||||
Pledged bank deposits |
37,919 |
74,795 |
11,179 |
||||
Accounts receivable, net |
94,154 |
112,994 |
16,889 |
||||
Bills receivable |
1,327 |
623 |
93 |
||||
Inventories |
271,434 |
439,511 |
65,692 |
||||
Prepayment and other receivables |
38,738 |
80,843 |
12,083 |
||||
Amounts due from related parties |
64 |
- |
- |
||||
Deferred income tax assets |
3,424 |
6,515 |
974 |
||||
Total current assets |
798,157 |
860,561 |
128,624 |
||||
Property, plant and equipment, net |
699,181 |
809,430 |
120,982 |
||||
Land use rights |
56,064 |
59,144 |
8,840 |
||||
Intangible assets |
839 |
757 |
113 |
||||
Goodwill |
7,446 |
7,446 |
1,113 |
||||
Investment in an affiliate |
13,296 |
12,943 |
1,935 |
||||
Deferred income tax assets |
300 |
- |
- |
||||
Total assets |
1,575,283 |
1,750,281 |
261,607 |
||||
LIABILITIES AND EQUITY |
|||||||
Current liabilities |
|||||||
Bank borrowings |
- |
20,000 |
2,989 |
||||
Accounts payable |
81,870 |
161,085 |
24,077 |
||||
Bills payable |
49,738 |
55,323 |
8,269 |
||||
Accrued expenses and other payables |
183,266 |
129,609 |
19,372 |
||||
Amounts due to related parties |
23,659 |
8,559 |
1,279 |
||||
Deferred income |
- |
14,044 |
2,099 |
||||
Income taxes payable |
1,298 |
8,368 |
1,251 |
||||
Total current liabilities |
339,831 |
396,988 |
59,336 |
||||
Bank borrowings |
10,000 |
5,000 |
747 |
||||
Deferred income tax liabilities |
18,056 |
20,744 |
3,101 |
||||
Deferred income |
15,136 |
2,585 |
386 |
||||
Total liabilities |
383,023 |
425,317 |
63,570 |
||||
Equity |
|||||||
Chemspec International Limited shareholders' equity |
|||||||
Ordinary shares: Par value: HK$ 0.01; Authorized: 20,000,000,000 shares as of December 31, 2009 and September 30, 2010; Issued and outstanding: 2,167,620,000 shares as of December 31, 2009 and 2,169,624,240 shares as of September 30, 2010; |
21,686 |
21,705 |
3,244 |
||||
Additional paid-in capital |
323,916 |
322,288 |
48,171 |
||||
Statutory reserves |
63,422 |
63,422 |
9,479 |
||||
Accumulated other comprehensive income |
6,803 |
5,538 |
828 |
||||
Retained earnings |
770,425 |
906,212 |
135,448 |
||||
Total Chemspec International Limited shareholders' equity |
|||||||
1,186,252 |
1,319,165 |
197,170 |
|||||
Noncontrolling interests |
6,008 |
5,799 |
867 |
||||
Total equity |
1,192,260 |
1,324,964 |
198,037 |
||||
Total liabilities and equity |
1,575,283 |
1,750,281 |
261,607 |
||||
Chemspec International Limited |
|||||||||
Unaudited Quarterly Consolidated Statements of Income |
|||||||||
Three-month periods ended |
|||||||||
September 30, |
June 30, |
September 30, |
September 30, |
||||||
2009 |
2010 |
2010 |
2010 |
||||||
RMB’000 |
RMB’000 |
RMB’000 |
USD’000 |
||||||
(As adjusted) |
|||||||||
Sales |
211,305 |
266,831 |
324,692 |
48,530 |
|||||
Cost of sales |
(121,848) |
(168,101) |
(201,248) |
(30,080) |
|||||
Gross profit |
89,457 |
98,730 |
123,444 |
18,450 |
|||||
Selling expenses |
(2,405) |
(2,341) |
(3,203) |
(479) |
|||||
General and administrative expenses |
(17,044) |
(13,521) |
(19,767) |
(2,954) |
|||||
Research and development expenses |
(7,074) |
(14,765) |
(15,080) |
(2,254) |
|||||
Other operating expenses |
(1,297) |
(623) |
(121) |
(18) |
|||||
Other operating income |
311 |
522 |
242 |
36 |
|||||
Government grants |
11 |
1,618 |
400 |
60 |
|||||
Income from operations |
61,959 |
69,620 |
85,915 |
12,841 |
|||||
Other income (expenses): |
|||||||||
Interest income |
467 |
339 |
532 |
80 |
|||||
Interest expense |
(418) |
- |
- |
- |
|||||
Foreign currency exchange gain (loss), net |
220 |
(994) |
(1,625) |
(243) |
|||||
Equity in loss of an affiliate |
(85) |
(121) |
(134) |
(20) |
|||||
Other income |
376 |
165 |
45 |
7 |
|||||
Other expenses |
- |
(236) |
- |
- |
|||||
Earnings before income taxes |
62,519 |
68,773 |
84,733 |
12,665 |
|||||
Income tax expense |
(11,427) |
(10,663) |
(14,210) |
(2,124) |
|||||
Net income |
51,092 |
58,110 |
70,523 |
10,541 |
|||||
Net (income) loss attributable to noncontrolling interests |
|||||||||
1,200 |
(577) |
(122) |
(18) |
||||||
Net income attributable to Chemspec International Limited shareholders |
|||||||||
52,292 |
57,533 |
70,401 |
10,523 |
||||||
Basic earnings per share |
RMB 0.02 |
RMB 0.03 |
RMB 0.03 |
USD 0.00 |
|||||
Diluted earnings per share |
RMB 0.02 |
RMB 0.03 |
RMB 0.03 |
USD 0.00 |
|||||
Basic earnings per ADS |
RMB 1.44 |
RMB 1.59 |
RMB 1.95 |
USD 0.29 |
|||||
Diluted earnings per ADS |
RMB 1.44 |
RMB 1.59 |
RMB 1.94 |
USD 0.29 |
|||||
Nine-month periods ended |
|||||||
September 30, |
September 30, |
September 30, |
|||||
2009 |
2010 |
2010 |
|||||
RMB’000 |
RMB’000 |
USD’000 |
|||||
(As adjusted) |
|||||||
Sales |
643,244 |
811,674 |
121,317 |
||||
Cost of sales |
(381,562) |
(493,162) |
(73,710) |
||||
Gross profit |
261,682 |
318,512 |
47,607 |
||||
Selling expenses |
(8,428) |
(8,047) |
(1,203) |
||||
General and administrative expenses |
(49,079) |
(54,049) |
(8,078) |
||||
Research and development expenses |
(22,901) |
(43,550) |
(6,509) |
||||
Other operating expenses |
(3,765) |
(1,295) |
(194) |
||||
Other operating income |
717 |
1,273 |
190 |
||||
Government grants |
609 |
2,468 |
369 |
||||
Income from operations |
178,835 |
215,312 |
32,182 |
||||
Other income (expenses): |
|||||||
Interest income |
1,814 |
1,429 |
214 |
||||
Interest expense |
(1,841) |
(80) |
(12) |
||||
Foreign currency exchange loss, net |
(2,192) |
(2,666) |
(399) |
||||
Equity in loss of an affiliate |
(85) |
(353) |
(53) |
||||
Other income |
428 |
258 |
39 |
||||
Other expenses |
- |
(236) |
(35) |
||||
Earnings before income taxes |
176,959 |
213,664 |
31,936 |
||||
Income tax expense |
(35,588) |
(32,591) |
(4,871) |
||||
Net income |
141,371 |
181,073 |
27,065 |
||||
Net income attributable to noncontrolling interests |
(4,009) |
(826) |
(124) |
||||
Net income attributable to Chemspec International Limited shareholders |
137,362 |
180,247 |
26,941 |
||||
Basic earnings per share |
RMB 0.07 |
RMB 0.08 |
USD 0.01 |
||||
Diluted earnings per share |
RMB 0.07 |
RMB 0.08 |
USD 0.01 |
||||
Basic earnings per ADS |
RMB 4.25 |
RMB 4.98 |
USD 0.74 |
||||
Diluted earnings per ADS |
RMB 4.24 |
RMB 4.98 |
USD 0.74 |
||||
Chemspec International Limited |
|||||||
Unaudited Consolidated Statements of Cash Flows |
|||||||
Nine-month periods ended |
|||||||
September 30, |
September 30, |
September 30, |
|||||
2009 |
2010 |
2010 |
|||||
RMB’000 |
RMB’000 |
USD’000 |
|||||
(As adjusted) |
|||||||
Cash flows from operating activities |
|||||||
Net income |
141,371 |
181,073 |
27,064 |
||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||
Depreciation and amortization of property, plant and equipment |
26,468 |
52,391 |
7,831 |
||||
Amortization of land use rights |
810 |
978 |
146 |
||||
Amortization of intangible assets |
81 |
82 |
12 |
||||
Loss on disposal of property, plant and equipment |
3,035 |
606 |
91 |
||||
Equity in loss of an affiliate |
85 |
353 |
53 |
||||
Inventory writedowns |
2,541 |
1,788 |
267 |
||||
Gain on transfer of land use right to an affiliate |
(290) |
- |
- |
||||
Unrealized foreign exchange (gain) loss, net |
(200) |
892 |
133 |
||||
Share-based compensation |
12,506 |
266 |
40 |
||||
Deferred income tax expense (benefit) |
7,409 |
(103) |
(15) |
||||
Changes in operating assets and liabilities: |
|||||||
Pledged bank deposits related to purchase of inventory |
5,317 |
(30,428) |
(4,548) |
||||
Inventories |
(29,934) |
(169,865) |
(25,389) |
||||
Accounts receivable |
26,158 |
(19,662) |
(2,939) |
||||
Bills receivable |
(200) |
704 |
105 |
||||
Prepayment and other receivables |
(9,466) |
(34,527) |
(5,161) |
||||
Accounts payable |
10,353 |
79,215 |
11,840 |
||||
Bills payable related to purchase of inventory |
3,666 |
14,202 |
2,123 |
||||
Accrued expenses and other payables |
(4,192) |
(12,860) |
(1,922) |
||||
Deferred income |
4,357 |
1,493 |
223 |
||||
Income taxes payable |
868 |
7,070 |
1,057 |
||||
Net cash provided by operating activities |
200,743 |
73,668 |
11,011 |
||||
Cash flows from investing activities |
|||||||
Capital expenditures, including interest capitalized |
(188,626) |
(181,132) |
(27,073) |
||||
Investment in an affiliate |
(11,225) |
- |
- |
||||
Pledged bank deposit related to purchase of property, plant and equipment |
(19,294) |
(6,448) |
(964) |
||||
Non-interest bearing advances repaid by related parties |
2,500 |
64 |
10 |
||||
Payments for land use rights |
(3,121) |
(4,058) |
(607) |
||||
Net cash used in investing activities |
(219,766) |
(191,574) |
(28,634) |
||||
Cash flows from financing activities |
|||||||
Capital contributions from noncontrolling shareholders |
1,600 |
- |
- |
||||
Cash distribution to noncontrolling shareholders |
(2,500) |
- |
- |
||||
Dividends paid |
- |
(44,460) |
(6,645) |
||||
Proceeds from issuance of ordinary shares |
389,022 |
5,697 |
852 |
||||
Issuance costs of ordinary shares upon IPO |
(42,846) |
(3,028) |
(453) |
||||
Acquisition of additional equity interests in subsidiaries |
- |
(45,400) |
(6,786) |
||||
Proceeds from short-term bank borrowings |
15,000 |
20,000 |
2,989 |
||||
Repayments of short-term bank borrowings |
(75,000) |
- |
- |
||||
Proceeds from long-term bank borrowings |
5,000 |
- |
- |
||||
Repayments of long-term bank borrowings |
- |
(5,000) |
(747) |
||||
Repurchase of ordinary shares |
- |
(5,807) |
(868) |
||||
Deposit for purchase of ordinary shares |
(7,578) |
(1,133) |
|||||
Proceeds from non-interest bearing borrowings from related parties |
6,000 |
- |
- |
||||
Repayments of non-interest bearing borrowings from related parties |
(46,310) |
(1,000) |
(149) |
||||
Net cash provided by (used in) financing activities |
249,966 |
(86,576) |
(12,940) |
||||
Effect of foreign currency exchange rate changes on cash |
200 |
(1,335) |
(200) |
||||
Net increase (decrease) in cash |
231,143 |
(205,817) |
(30,763) |
||||
Cash at beginning of period |
180,602 |
351,097 |
52,477 |
||||
Cash at end of period |
411,745 |
145,280 |
21,714 |
||||
Supplemental disclosures of cash flow information: |
|||||||
Income taxes paid |
26,524 |
25,624 |
3,830 |
||||
Interest paid, net of amounts capitalized |
1,875 |
80 |
12 |
||||
Noncash investing and financing activities: |
|||||||
Accrued IPO cost |
6,900 |
- |
- |
||||
Payable for purchase of property, plant and equipment |
102,943 |
108,905 |
16,278 |
||||
Payable for acquisition of Kangpeng Nong Hua |
- |
5,900 |
882 |
||||
Bills payable for purchase of property, plant and equipment |
4,771 |
19,488 |
2,913 |
||||
Land use right contributed to an affiliate |
1,957 |
- |
- |
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SOURCE Chemspec International Limited
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