NF Energy Saving Corporation Announces Fourth Quarter and Fiscal Year 2010 Results

SHENYANG, China, March 25, 2011 /PRNewswire-Asia-FirstCall/ -- 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 fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter 2010 Highlights

• Revenues increased 42.0% year-over-year to $7.3 million
• Gross profit declined 24.4% year-over-year to $1.3 million, representing a gross margin of 17.7%
• Net income was $0.5 million or $0.09 per diluted share, representing a net margin of 6.8%

Fiscal Year 2010 Highlights

• Revenues increased 24.8% year-over-year to $25.4 million
• Gross profit rose 3.2% year-over-year to $6.8 million, representing a gross margin of 26.9% compared to 32.6% in the year ago period
• Net income was $4.3 million or $0.79 per diluted share, representing a net margin of 17.0%
• Common stock listed on NASDAQ Global Market

"Looking at NF Energy's performance for the year as a whole we are satisfied with the Company's operations and the results that we have achieved," commented Mr. Gang Li, Chief Executive Officer of the Company. "Although the Company's total revenue and profitability for the second half of the year was adversely affected by our move to our new facility and this financial result was a disappointment to us, we weigh this against the potential of our new facility that has the ability to eventually triple our production capacity to 20,000 tons per year."

Fiscal Year 2010 Results

Revenue for the fiscal year 2010 increased 24.8% to $25.4 million, from $20.3 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.  

Gross profit for the fiscal year 2010 was $6.8 million, an increase of 3.2% over the $6.6 million in gross profit generated in the fiscal year 2009. Gross margin was 26.9% compared to 32.6%. This decrease in gross margin was mainly due to higher raw materials prices than expected and in some cases the Company was unable to pass the increases on to customers.

Operating expenses were $1.2 million and $1.1 million, or 4.9% and 5.6% of total revenues for the year ended December 31, 2010 and 2009 respectively. Increases in operating costs included the commencement of Land Use Right (LUR) tax payments on the Company's new facility, and the amortization of the cost of an intangible asset. In addition, the Company issued $960,000 of convertible notes at the beginning of 2010, and the issuance cost of the convertible notes also increased operating expenses.

Income from operations for the fiscal year 2010 was $5.6 million, an increase of 2.2% from the $5.5 million of income from operations generated in the year ago period.

Net income for the fiscal year 2010 was $4.3 million, or $0.79 per diluted share compared to net income of $4.8 million or $0.90 per diluted share in the fiscal year 2009.  Earnings per share reflect the one for 2.5 reverse split of the Company's common stock affected in September 2010.

Fourth Quarter 2010 Results

Revenue increased 42.0% to $7.3 million, from $5.1 million in the same period of 2009. Gross profit in the fourth quarter of 2010 was $1.3 million, a decrease of 24.4% over the $1.7 million in gross profit generated in the fourth quarter of 2009. The decrease in gross profit was largely the result of higher raw materials prices and in some cases the Company was unable to pass the increases on to customers.

Net income from operations for the fourth quarter of 2010 was $0.8 million and operating margins declined to 10.4% from 30.3% in the year ago period. Contributing to higher operating costs in the quarter was a full year of land use tax charge and increased amortization of intangible asset cost, totalling approximately $0.13 million for the new facility. In 2011 and going forward, the land use charge will be evenly spread across four quarters.

Net income for the 2010 fourth quarter was $0.5 million, or $0.09 per diluted share compared to net income of $1.4 million or $0.25 per diluted share in the fourth quarter of 2009 based on 5.5 million and 5.3 million fully diluted shares outstanding respectively.

Financial Condition

As of December 31, 2010, the Company had $0.8 million in cash and cash equivalents compared to $0.2 million in cash and cash equivalents on December 31, 2009. Working capital was $11.5 million.

The Company generated $3.4 million in net cash from operating activities for the twelve months ending December 31, 2010, compared to $2.9 million in the same period of 2009.

Recent Events and Updates

On Feb 23, 2011, NF Energy announced that it was honored with the highest award in China's Conservation Services Industry – "Well-known Brand Enterprise" award by China Energy Conservation Industry Service Committee. The Company's Chairman and CEO, Mr. Gang Li, was nominated for "The Man of 2010 China Energy Conservation Services Industry" award. The China Energy Conservation Service Industry Annual Conference is organized by the China Energy Conservation Service Industry Committee.

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 Friday, March 25, 2011, to discuss the Company's fourth quarter and fiscal year 2010 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 call pass code is 53222423.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, March 25, 2011 at 10:00 a.m. ET. 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 53222423.

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. The majority of revenues are from energy efficient flow control equipment and energy efficiency projects. 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

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