TSX: HE
VANCOUVER, Aug. 14 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the
"Company") today announced its financial results for the three and six months
ended June 30, 2009. All currency amounts referred to in this news release are
in Canadian dollars unless stated otherwise.
Summary of Financial Highlights:
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In thousands of Canadian For the three months For the six months
dollars except per share ended ended
data and number of shares
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June 30, June 30, June 30, June 30,
2009 2008 2009 2008
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Sales $12,910 $18,858 $15,495 $24,799
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Gross profit 5,177 7,983 5,786 9,903
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Operating income (loss) 811 4,131 (2,372) 3,483
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Net Income (loss) 158 2,911 (3,324) 2,198
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Income per share - basic and
fully diluted 0.00 0.05 (0.05) 0.04
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Revenues were $12.9 million for the three months ended June 30, 2009, a
decrease of $5.9 million or 32 percent compared to the same period in 2008.
Revenues were $15.5 million for the six months ended June 30, 2009, a decrease
of $9 million or 38 percent compared to the same period in 2008. The decreases
in the three and six month periods were caused primarily by reduced revenues
from the wind power business and offset by increased sales in the pipe
business. Net income for the three months ended June 30, 2009 was $0.2 million
compared to a net income of $2.9 million for the same period in 2008. Net loss
was $3.3 million for the six months ended June 30, 2009 compared to net income
of $2.2 million for the same period in 2008. The decrease in net income for
the three and six month periods were primarily driven by the timing of wind
power deliveries.
The Company had basic and diluted earnings per share of nil for the three
months ended June 30, 2009 versus basic and diluted earnings per share of
$0.05 for same period in 2008. For the six month period, the Company had basic
and diluted loss per share of $0.05 versus basic and diluted earnings per
share of $0.04 for the comparable period in 2008. As at June 30, 2009, the
Company had approximately 60.8 million common shares outstanding, which
excludes the 8,051,746 shares issued under the earn-out provisions for the
acquisition of Daqing Deta Electric Co., Ltd. ("Deta").
Working capital was $51.8 million as at June 30, 2009, a decrease of $6.3
million from $58.1 million as of December 31, 2008, primarily due to an
increase in accounts payable and short-term loans. Cash totalled $14.4 million
as at June 30, 2009, representing an increase of $2.5 million from December
31, 2008.
Segmented Results
FRP Pipe
The pipe business grew by 15 percent and 18 percent respectively for the
three and six months ended June 30, 2009. Revenues from the pipe business were
$11.2 million for the three months ended June 30, 2009 and $13.2 million for
the six months ended June 30, 2009. The growth of the pipe business was
impacted by the economic downturn as oil fields delayed their projects. While
economic conditions and energy demand continue to improve in China, the
Company continues to anticipate that certain oil field development projects
will be delayed in 2009, which could lead to a decrease in the demand for its
FRP pipe products. As part of its FRP pipe business strategy, Hanwei has been
developing products and customers in other industries and expects to make
further progress in the second-half of 2009, partially offsetting the lower
demand for FRP oil pipe. Hanwei has been successful in diversifying its FRP
pipe business and reducing its reliance on a few large customers, by investing
in product development of larger diameter pipe and new joint methods and
expanding its international sales and marketing team.
Currently, Hanwei has sufficient FRP pipe capacity at Daqing for 2009;
however, the Company will need to add capacity to have the flexibility to grow
the business in 2010. Hanwei is planning to increase capacity in China by
adding FRP pipe production lines to its new Tianjin facility. The Company
expects that the new lines could be added at a very low capital cost, and
within the 2009 capital expenditure budget since the infrastructure is already
in place.
Wind Power
Revenues from the wind power business were $1.4 million for the three
months ended June 30, 2009, a decrease of $6.7 million compared to the same
period in 2008, and $1.9 million for the six months ended June 30, 2009, a
decrease of $10.6 million compared to the same period in 2008. Hanwei
delivered 18 blades for the three months ended June 30, 2009 compared to eight
turbines for the same period in 2008. For the six month period, Hanwei
delivered 24 blades compared to 12 turbines for the same period in 2008. This
decrease of wind power revenues is due to a timing difference in deliveries as
well as the lower dollar value of blades versus turbines. Deliveries for the
wind power business are driven by the customer's wind farm development
schedules and are expected to increase in the second half of 2009 based on the
customer's development schedule.
Hanwei has secured the supply chain and funding to deliver 118 MW of wind
power equipment to Daqing Ruihao Energy Technology Co., Ltd. ("Ruihao") under
its agreement to supply 1,200 MW of wind power equipment products. The wind
power equipment is to be supplied to three subsidiaries of Ruihao, including
Daqing Longjiang Wind Power Co. Ltd. ("Longjiang"), with the majority of
deliveries expected in the second half of 2009 and in early 2010. Longjiang
owns and operates the wind farm in Du Meng County, Heilongjiang Province,
where it is installing the initial 40 wind turbines supplied and delivered by
Hanwei in fiscal 2008. Ruihao is developing two other wind farms in
Heilongjiang Province that will be supplied under the agreement with Hanwei.
On April 22, 2009, Hanwei announced that it had signed a non-binding
letter of intent ("LOI") with the Baotou Development and Reform Commission and
with Beijing Kunding Xunlei New Energy Technology Ltd. to provide wind power
turbines and blades for a 400 MW wind farm located approximately 100
kilometers from Baotou, Inner Mongolia Autonomous Region of China. With this
LOI, Hanwei is in the early stages of securing its second major customer in
the wind power business; however, the Company has identified a number of
challenges to move the LOI to formal contracts and start delivering wind power
equipment, including the requirement for Hanwei to deliver 2 MW to 3 MW
turbines, a technology the Company currently does not have.
On June 24, 2009, Hanwei announced that it had signed a second wind power
LOI in the Inner Mongolia Autonomous Region with the Xilinguole Prefecture
Administration Bureau, Inner Mongolia Autonomous Region of China ("Xilinguole
Bureau") contemplating the supply of wind power turbines and blades for up to
3,000 MW of wind resources located in the area administered by the Xilinguole
Bureau. Under the non-binding LOI, it is contemplated that the parties will
cooperate to develop a 3,000 MW wind resource under certain terms and
conditions including Hanwei establishing, on a best efforts basis, a wind
power subsidiary in Xilinguole to build a manufacturing facility in the region
with an initial capacity of at least 200 turbines and blade sets per annum
before the end of 2010. Under the terms of the agreement, Xilinguole Bureau
will facilitate all government approvals for the wind farm and manufacturing
facility and exclusively promote the use of wind power equipment manufactured
by Hanwei.
