Second Quarter 2009 Highlights    -- Revenue was $31.9 million, an increase of 38.2% from the second      quarter of 2008   -- Gross profit was $6.7 million, an increase of 15.1% from the second      quarter of 2008   -- Gross profit margin was 20.9%, compared to 25.1% in the second      quarter of 2008   -- EBITDA (Earnings before Interest, Taxes, Depreciation, and      Amortization) for the second quarter of 2009 was $6.2 million, an      increase of 12.5% from the second quarter of 2008   -- Net income was $5.0 million, while non-GAAP net income excluding the      non-cash stock-based compensation was $5.4 million, an increase of      6.5% from the second quarter of 2008   -- Diluted earnings per share was $0.13 and non-GAAP diluted earnings      per share was $0.14, up 22.7% and 35.9%, respectively, from the      first quarter of 2009   -- Total volume sold was 14,404 metric tons, up 27.2% from 11,328      metric tons in the second quarter of 2008    

"We are extremely pleased to report another quarter of record revenue, underlying the resilience of our business model and the ongoing potential for the profitable growth of our business driven by the continuous healthy growth in China's automobile sector," said Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics. "During the quarter we made solid progress across all areas of our business, as we obtained new customers, and expanded our distribution network beyond northeast region of China to the more expansive northern China market. We remain optimistic about our business prospect and look forward to reporting positive financial results for the quarters to come. In addition, we are pleased to announce to have acquired 7 additional product certifications for automotive applications during the second quarter of 2009 and will begin shipments in the third and fourth quarter of 2009."

Second Quarter 2009 Results

Revenues for the second quarter 2009 were $31.9 million, up 38.2% from $23.1 million in the same period of 2008, and 20.9% from the first quarter 2009. The increase in revenue is primarily attributable to the increase in sales volume and selling prices driven by increasing demand for modified plastics for automotive applications in China.

Gross profit for the second quarter 2009 was $6.7 million, up 15.1% from $5.8 million in the second quarter 2008. Gross margin was 20.9% compared to 25.1% in the same period last year, and 21.8% in the first quarter 2009 due to the product mix change during second quarter 2009 associated with a volume increase of lower margin products sold for use in economy cars as a result of the on-going sales tax cut and government subsidies to stimulate demand of automobiles in China.

Selling expenses for the second quarter 2009 were $0.06 million, up 102.2% from $0.03 million in the same period last year as the Company invested to grow its customer base and to expand its geographic reach into the North China market. General and administrative (G&A) expenses were $1.1 million, up 417.1% from $0.2 million for the same period of last year, and up 6.6% from the first quarter 2009. The year-over-year increase in G&A expenses reflects increased stock based compensation, depreciation expense and other expenses related to becoming a public company in the U.S. stock market. Research and Development ("R&D") expenses were $0.2 million compared to $0.3 million in the same period last year. The slight decrease of research and development expense was primary due to installation of new equipment at the research and development center during the second quarter 2009, where some of the new product development activities were postponed to the third quarter, still on time as we planned.

Operating income for the second quarter 2009 was $5.3 million, unchanged from the $5.3 million in the same period a year ago, and up 20.8% from $4.4 million in the first quarter 2009. Operating margin was 16.6% compared to 22.9% in the second quarter of 2008 and 16.6% in the first quarter 2009. The year-over-year reduction in operating margin is primarily due to the increase in operating expenses associated with becoming a public company, but also reflects lower gross margin related to product mix.

Interest expense in the second quarter 2009 was $0.3 million, compared to $0.2 million in the second quarter of 2008.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the second quarter of 2009 was $6.2 million, up 12.5% from $5.5 million in the second quarter of 2008. For a detailed reconciliation of adjusted EBITDA, please see the financial tables at the end of this release.

Net income in the second quarter 2009 was $5.0 million, down 2.0% from $5.1 million in the same period last year and up 24.4% from the first quarter 2009. Fully diluted earnings per share for the second quarter 2009 were $0.13, a sequential increase of 22.7% over the first quarter 2009.

During the second quarter 2009, the Company incurred a non-cash charge of $0.4 million associated with stock-based compensation. Adjusting for this non-cash charge, non-GAAP net income for the second quarter of 2009 was $5.4 million, or $0.17 basic earnings per share and $0.14 fully diluted earnings per share. For a detailed reconciliation of non-GAAP net income to GAAP net income, please see the financial tables at the end of this release.

Six Months Results

For the first six months of 2009, total revenue was $58.3 million, up 74.2% from the first six months of 2008. Total volume sold during the first six months was 32,303 metric tons compared to 17,656 metric tons in the comparable period of last year. Gross profit for the first six months of 2009 was $12.4 million, up 52.4% from gross profit of $8.2 million in the comparable period a year ago. Gross margin was 21.3% and 24.3% for the first six months of 2009 and 2008, respectively. Income from operations was $9.7 million, up 31.7% from $7.3 million in the first six months of 2008. EBITDA was $11.0 million in the first six months of 2009, up 42.2% from $7.7 million in first six months of 2008. Net income for the first six months of 2009 was $9.0 million, up 25.3% from $7.2 million in the first six months of 2008. Basic earnings per share were $0.56 and fully diluted earnings per share were $0.23 for the first six months of 2009. Adjusting for non-cash charges associated with stock-based compensation, non-GAAP net income for the first six months of 2009 was $9.4 million or $0.59 basic earnings per share and $0.24 fully diluted earnings per share.

Financial Condition

As of June 30, 2009, China XD plastics had $1.5 million in cash and cash equivalents, $13.7 million in working capital and a current ratio of 1.4. Shareholder's equity as of June 30, 2009 stood at $33.5 million compared to $24.1 million at the end of 2008.

Business Outlook and Guidance

During the second quarter China XD Plastics expanded its production capacity to 70,000 tons from 40,000 tons at the end of 2008, and strengthened its northeast sales office and its distribution network in the Northeast and North China region to take advantage of growth opportunities in those markets.

The automotive industry environment in China remains healthy, despite the economic slowdown worldwide. During the first half of 2009, total number of vehicles sold in China topped 6 million units, according to China Association of Automobile Manufacturers. The on-going stimulus plan implemented by the government in China reduced the sales tax on vehicles with an engine capacity of less than 1.6 liters by half to 5% and provided subsidies to farmers for replacing three-wheeled vehicles or outdated trucks with small fuel efficient vehicles. These measures are expected to continue to support the continued growth of the auto industry in China, which is expected to contribute to a further increase in the demand for China XD Plastics' products.

For 2009, the Company reaffirms its guidance for annual revenues in the range of $110.0 million to $130.0 million, and annual net income in the range of $17.0 million to $20.0 million. This guidance is based on non-GAAP results and excludes non-cash charges resulting from stock compensation expense.

"As we enter the third quarter we remain well positioned to achieve our goals for 2009, and to position China XD Plastics as a leader in the modified plastics industry in China," said Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics. "Going forward, our priority remains to invest in technology development, certify additional products with the automotive OEMs, add high margin products, and gradually expand our capacity to drive future growth in our core business."

Recent Events

On July 30, 2009, China XD Plastics announced that the Company's information is now made available via Standard & Poor's Market Access Program, an information distribution service that enables subscribing publicly traded companies to have their company information disseminated to users of Standard & Poor's Advisor Insight.

On July 13, 2009, China XD Plastics announced it has signed a half-year provisional agreement with Tianjin Huapu Company to distribute its specialized modified plastics for automotive applications in Northern China.