China Ruitai International Holdings Co., Ltd. Reports Financial Results for the Third Quarter 2010

FEICHENG, China, Nov. 16, 2010 /PRNewswire-Asia/ -- China Ruitai International Holdings Co., Ltd. ("China Ruitai", " "Company") (OTC Bulletin Board: CRUI), a manufacturer and distributor of cellulose ether additives for use in the production of pharmaceuticals, construction materials, PVC products, foods and beverages and cosmetics, today announced its financial results for its third quarter ended September 30, 2010.

Third Quarter 2010 Highlights

• Revenue grew 9.8% to $11.2 million
• Gross profit up 8.2% to $3.6 million
• Net income was $1.9 million, EPS of $0.07

Company Overview and Third Quarter 2010 Results

China Ruitai is one of the largest manufactures of non-ionic cellulose ether products in China with 8,500 tons of annual capacity. The Company's organic products are used as a thickener, stabilizer and binding agent for a wide variety of products used every day in a number of industries including; pharmaceuticals, construction and building products, consumer goods, such as cosmetics and foods, including fruit preserves, ice cream, toothpaste and lipsticks. The Company produces 220 industry-specific products under its "RuiTai" brand, which are sold through a network of domestic and international distributors to Asia, Europe, the Middle East and North America. During the third quarter, the Company was operating at 85% capacity.

For the three month period ended September 30, 2010, the Company posted revenues of $11.2 million, a 9.8% increase from the same year ago period.  Increased demand from customers in the pharmaceutical, food and cosmetic industries were the primary contributors for revenue growth during the period. China Ruitai sales team has continued to focus its efforts on the higher priced, higher-margin pharmaceutical, cosmetic and food segment, where the Company added 38 new customers during the quarter. The Company raised prices in the construction industry to accommodate increased raw material pricing, which has resulted in a temporary moderation in demand.

"We have executed to the best of our ability in a challenging environment," began Chairman Dianmin Ma of China Ruitai. "We were able to pass on pricing increases in most of our product lines while we quickly adopted measures to reduce our raw material costs, which included the use of less expensive wood based cellulose as a substitute for the ginned cotton. We continued to increase the sell through to existing customers and add new ones, as evidenced by the EC contract we announced in October. With a number of smaller producers closing their doors, our competitive position as a leading producer of highly specialized non-ionic cellulose ether continues to improve. We believe Ruitai will emerge as a stronger company with brand recognition and a greater market share."

During the three month period ended September 30, 2010, the Company's cost of sales increased 10.6% to $7.6 million over the same period a year ago. This increase was driven by higher sales volumes as well as higher cotton and cholormethane prices, two main raw materials used to produce cellulose ether. By substituting wood cellulose for a portion of its key raw material input and achieving other manufacturing efficiencies, China Ruitai was able to significantly mitigate its input costs, which would have otherwise increased substantially with the increased market prices of ginned cotton.  

Gross profit margins fell 50 basis points to 32.1% in the third quarter of 2010 but showed improvement of 570 basis points versus the second quarter of 2009. The improvement in margins was driven by a favorable mix of high-margin (EC and HPMC) sales to pharmaceutical, cosmetic and food customers and strict cost controls for raw materials.

Selling expenses increased approximately 36.4% to $0.4 million during the third quarter, which was due to higher transportation costs and sales commissions associated with increased sales.

General and administrative ("G&A") expenses were $0.4 million, a decrease of 15.5% from the third quarter of 2009. Tight cost controls and improved collections of bad debt contributed to G&A expenses declining to 3.9% of total sales compared to 5.1% of sales in the corresponding period last year.

For the three-month period ended September 30, 2010, income from operations increased 9.5% to $2.7 million and operating margins were 24.3% for the quarter.

Net income for the quarter was $1.9 million, an increase of approximately 5.2% over the year ago period. Earnings per share for the quarter ended September 30, 2010 were $0.07 versus $0.07 in the same period 2009, based on 26.0 million diluted shares outstanding for both periods.

Nine months Results

Total revenue for the first nine months of fiscal 2010 was $32.6 million, up 21.3% from $26.9 million in the prior year's period. Revenues were driven by increased sales volumes of higher margin products complemented by sales to 93 pharmaceutical, food and cosmetics customers added year to date.

Gross profit in the first nine months of fiscal year 2010 was $9.8 million, 3.3% higher than the prior year. Gross margins were 30.2% and 35.5% in 2010 and 2009, respectively.

Selling, general and administrative expenses in the first nine months of fiscal year 2010 were $2.3 million, compared to $3.1 million in the prior year's corresponding period, a 26.3% decrease year-over-year. Improved collection of certain supplier advances and a reduction of bad debt reserves as a percentage of the Company's accounts receivables were partially offset by higher selling and marketing expenses.

Operating income advanced 17.4% to $4.9 million, with operating margin of 23.3%.

Net income in the nine months ended September 30, 2010 was $5.2 million compared to $4.4 million in the prior year's corresponding period, a 19.2% increase over the prior year. EPS increased 17.6% to $0.20 in the nine month period based on 26.0 million basic and diluted shares outstanding.

Financial Condition

As of September 30, 2010, the Company had $22.0 million in cash and cash equivalents, up from $10.1 million as of December 31, 2009; accounts receivable were $8.1 million, compared to $4.1 million as of December 31, 2009.The Company had $39.8 million in short term loans and $25.7 million in notes payable from several large financial institutions, including Bank of China, Shanghai Pudong Development Bank, and Feicheng Rural Credit Cooperative as of September 30, 2010. China Ruitai reduced notes payable by approximately $24.3 million compared to the end of year 2009 and plans further reductions over the next year by paying off the balance as they mature. Shareholder's equity was $27.9 million, a 26.8% increase from $22.0 million reported on December 31, 2009.

Guidance for 2010 and Outlook for 2011

Management is reaffirming 2010 guidance of $43 million in revenues, $7.0 in net income and $0.27 in earnings per share for the period ended December 31, 2010. The company expects to achieve gross margins of 30% or higher in the fourth quarter and for 2010.

China Ruitai is expanding its production facility which currently has 8,500 tons of production capacity annually. With some minor adjustments to the current production line, the Company anticipates it can increase capacity to 9,500 tons by the first quarter of 2011 with specific focus on producing more high-margin EC products for the pharmaceutical, food and cosmetic markets. This will help drive incremental growth during 2011.

About China Ruitai International Holdings Co.

China Ruitai is engaged in the production and sales of processed chemicals, with a primary focus on non-ionic cellulose ether products. Cellulose ether is an organic chemical that dissolves in water and other organic solvents. Due to the surface-active properties of cellulose ether, it acts as a thickener and stabilizer in aqueous solutions, making it a beneficial additive in a wide variety of commercial industries and products, including, but not limited to the pharmaceutical industry, the construction industry, PVC products, food and beverage products, petroleum, and cosmetics. Specific examples of applications in which cellulose ether products are used include: as a stabilizer and thickener in latex paint; in mortar dry mix for building materials; to improve the performance of resin in PVC production; as a membrane reagent, stabilizer, and thickener in pharmaceuticals; and to improve jam, ice cream, toothpaste and lipsticks in the food and cosmetic industries. China Ruitai is one of the largest non-ionic cellulose ether producers in China.

Forward-Looking Statements

This press release contains certain "forward-looking statements" that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to, the Company's ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems, political and economic factors in the PRC, compliance requirement of laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Financial Statements Follow –

SOURCE China Ruitai International Holdings Co., Ltd.