Hanwei Energy Services Reports Second Quarter Fiscal 2013 Financial and Operational Results

Marketwired

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 8, 2012) - Hanwei Energy Services Corp. (HE.TO) ("Hanwei" or the "Company"), today reported its financial results for the quarter ended September 30, 2012 (the "Reporting Period"). All amounts are in Canadian Dollars unless otherwise noted.

Update on Sales and Operations

For the three month and six month periods ending September 30, 2012 the Company achieved continued growth in its international markets. Revenue from international clients was $1.8 million for the three month period (representing an increase of 64% as compared to $1.1 million for the same period of the prior year) and $5.8 million for the six month period (representing a 100% increase as compared to revenues of $2.9 million for the same period of the prior year). 

During the three months ended September 30, 2012, however, the Company experienced a decrease in revenue from its China market due to the slowdown in the Chinese domestic economy resulting in reduction of projects and orders from Chinese clients. Revenue from China clients was $1.8 million for the three month period (representing a decline of 83% as compared to revenue of $10.3 million for the same period of 2011) and $7.4 million for the six month period (representing a 45% decline as compared to revenue of $13.4 million for the same period of 2011). For reference for the three month period ending June 30, 2012 the Company's sales to clients in its China market were $5.6 million versus $3.2 million for the same period of the prior year representing a 77% increase.

Regardless of the decrease in revenues from the China market the Company achieved positive EBITDA from continuing operations of $327,000 for the quarter and $2.0 million for the six month period with a gross profit margin of 40% for the quarter (as compared to 28% for the same period of 2011) and 36% for the six month period (as compared to 30% for the same period of 2011). The Company aims to maintain a minimum gross profit margin of 30% on an annualized basis driven by continued focus on disciplined cost management and production processes. 

FRP pipe sales recognized during the six months ended September 30, 2012 total some $13.2 million. In addition, the Company has confirmed sales orders yet to be completed, in addition to the revenues recognized as at September 30, 2012, of approximately $6.5 million as of November 6, 2012. These orders are expected to be produced and shipped during the balance of fiscal 2013. Of these sales orders, $1.8 million or 28% are from customers in the China market with $4.7 million or 72% from customers in international markets. The Company's active project tenders with bids submitted and being pursued total in excess of $150 million as of the date of this press release, and across regions that include Middle Asia, the Middle East, North and South America, Europe, Africa and Australiasia.

Financial Highlights

For the three months ended September 30, 2012:

  • Revenues from continuing operations were $3.6 million representing a decrease of 69% from $11.4 million during the same period of 2011. As before noted this decrease was primarily driven by a decline in the Company's Chinese market. 
  • Positive EBITDA from continuing operations was $327,000 (or 9% of revenues) versus EBITDA from continuing operations of $823,000 in the same three-month period of the prior year (or 7% of revenues). The improvement in EBITDA as a percentage of revenues was driven by continued focus on disciplined cost management and production processes. (Refer to the Company's Management Discussion and Analysis dated November 6, 2012 for the definition of EBITDA from continuing operations and a reconciliation between EBITDA from continuing operations and net income from continuing operations)
  • The Company had a loss from continuing operations of $278,000 (or $0.00 per share) for the three months ended September 30, 2012 as compared to a loss from continuing operations of $312,000 for the same period in 2011 representing an 11% improvement.

For the six months ended September 30, 2012:

  • Revenues from continuing operations were $13.2 million, representing a decrease of 19% from $16.3 million during the same period of 2011. As before noted the decrease was primarily driven by a decline in sales from the Company's Chinese market during the three month period ended September 30, 2012.
  • Positive EBITDA from continuing operations was $2.0 million (or 15% of revenues) compared to $225,000 (or 1% of revenues) in the same six-month period of the prior year representing a $1.8 million or 793% improvement.
  • The Company had income from continuing operations of $0.6 million (or income per share of $0.01) for the six months ended September 30, 2011 as compared to a loss from continuing operations of $1.6 million (or loss per share of $0.02) for the same period of the prior year representing a $2.2 million improvement. 

The Company continues to effectively manage its debt facilities. Total principal amount of all bank loans was $21.2 million as of September 30, 2012 compared to a total principal amount of $26.6 million as at September 30, 2011. Bank loans have successfully been repaid, renewed or extended when they became due.

Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host a conference call to discuss its operational and financial results for the quarter ended September 30, 2012. Management invites analysts and investors to participate on the conference call:

Date: Thursday November 8th, 2012
Time: 11:00 a.m., Eastern Time
Dial in number: 1-888-438-5535 or 1-719-325-2429
Taped Replay: 1-877-870-5176 or 1-858-384-5517 (available for 14 days)
Taped Replay Pass Code: 4422047

A replay of the conference call will be available on the Company's website www.hanweienergy.com.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp. is a world leader in the manufacturing of high pressure, fiberglass reinforced plastic ("FRP") pipe products, and associated technologies and services, for the international oil and gas and infrastructure industries. Hanwei serves major energy customers in the Chinese and global energy markets.

FORWARD-LOOKING INFORMATION

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 20, 2012 and Management Discussion and Analysis for the year ended March 31, 2012 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

Contact:
Hanwei Energy Services Corp.
Graham Kwan
Executive Vice President, Strategic Development
and Corporate Affairs
604-685-2239
gkwan@hanweienergy.com

Hanwei Energy Services Corp.
Yucai (Rick) Huang
Chief Financial Officer
604-685-2239
yhuang@hanweienergy.com
www.hanweienergy.com

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