Changfeng Reports First Quarter 2013 Financial Results, Net Income Up 54%
May 30 2013 - 5:32PM
Marketwired Canada
Changfeng Energy Inc., (TSX VENTURE:CFY) ("Changfeng" or the "Company"), is
pleased to announce that the Company has filed its unaudited condensed interim
consolidated financial results for the first quarter ended March 31, 2013. The
unaudited condensed interim consolidated financial results and Management
Discussion and Analysis can be downloaded from www.SEDAR.com or from the
Company's website at www.changfengenergy.com.
Summary of the First Quarter of 2013 consolidated Financial Results
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in thousands in $Cdn except percentages and per share data
Q1 2013 Q1 2012 Change %
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Revenue 9,623 7,365 2,258 31%
Gross margin 5,509 3,902 1,607 41%
EBITDA 3,001 2,114 887 42%
Net income 1,273 826 447 54%
Basic EPS 0.020 0.013 0.007 54%
Diluted EPS 0.019 0.013 0.006 46%
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Revenue for the first quarter of 2013 was $ 9.6 million, representing an
increase of $2.2 million, or 31%, from $7.4 million for the same period of 2012.
This increase is mainly attributable to continued gas volume growth (22%) and
higher average selling prices for both its compressed natural gas ("CNG")
refueling retail station in Changsha City and the natural gas distribution
utility in Sanya City for commercial and industrial customers.
Gross margin for the first quarter of 2013 increased $1.6 million, or 41%, to
$5.5 million from $3.9 for the comparable period in 2012. As a percentage of
revenue, gross margin increased to 57% in the first quarter of 2013 from 53% in
the same period of 2012.
As a percentage of revenue, gross margin of the gas distribution utility
improved 6% (64% for the first quarter of 2013 versus 58% for the same period of
2012) reflecting the reduced volume of gas purchased at market rate prices and
higher-value commercial customers from the Haitang Bay district in the Sanya
Region. As a percentage of revenue, the gross margin of the CNG refueling
station improved 2% (24% for the first quarter of 2013 versus 22% for the same
period of 2012) primarily due to increases in selling price and operating costs
that increased at a lower rate than gas volume sold.
General and administrative expenses for the first quarter of 2013 were $1.8
million, an increase of $0.5 million, or 44%, from $1.3 million in the same
period of 2012. The increase was attributable to higher general expenses
including higher employee salary and benefits as a result of a higher inflation
rate in China, as well as because of the increase in sales. General and
administrative expenses as a percentage of sales for the first quarter of 2013
were 18%, compared to 17% in the first quarter of 2012, representing an increase
of 1%.
Travel and business development expenses for the first quarter of 2013 were $1.3
million, an increase of $0.2 million, or 21%, from $1.1 million in the first
quarter of 2012. Travel and business development expenses as a percentage of
sales for the first quarter of 2013 decreased to 14% from 15% in the first
quarter of 2012. These expenses normally fluctuate with travel and business
development activities in mainland China as the Company seeks to develop new
projects in close proximity to the new national pipelines. The majority of
travel and business development expenses does not relate to the Company's
business in Sanya City or the CNG refueling station but instead to projects
under consideration or development in mainland China.
Interest on long term debt for the first quarter of 2013 and the same period of
2012 was $0.5 million and $0.4 million, respectively, an increase of $0.1
million. The increase is due to the additional long-term loans obtained by the
Company in the fourth quarter of 2012 and the first quarter of 2013.
EBITDA for the first quarter of 2013 was $3.0 million, an increase of $0.9
million, or 42%, from $2.1 million for the same period of 2012. The increase was
driven primarily by higher sales. EBITDA as a percentage of revenue for the
first quarter of 2013 was 31%, compared to 28% in the first quarter of 2012,
representing an increase of 3% due to the sales increases but was partially
offset by higher operating expenses, as discussed above.
Net income for the first quarter of 2013 was $1.3 million, or $0.020 per share
(basic) and $0.019 per share (diluted) compared to $0.8 million or $0.013 per
share (basic and diluted) for the same period in 2012, primarily due to the
reasons discussed above.
Financial Position
Cash increased by $5.2 million to $11.6 million at March 31, 2013 from $6.4
million at December 31, 2012, primarily resulting from cash provided during the
quarter by operating activities of $1.7 million, cash flow from financing
activities of 5.5 million, offset by cash used during the quarter for capital
expenditures of $2.2 million.
The working capital deficit as at March 31, 2013 decreased to $4.2 million from
$12.2 million as at December 31, 2012, primarily resulting from the repayment of
a portion of the Company's line of credit and the increase in current assets
from long term debt financing.
On December 21, 2012, the Company entered into a term loan with Bank of China
("BOC"), Pingxiang for $3.3 million (RMB 20 million). As of March 31, 2013, the
Company had withdrawn $2.5 million (RMB 15 million).
On January 15, 2013, the Company entered into an agreement with the BOC, Sanya
to secure a bank loan facility in the amount of $8.2 (RMB 50 million). As of
March 31, 2013, the Company had withdrawn $6.5 million (RMB 40 million).
Adjusted working capital
Adjusted working capital is calculated as current assets less adjusted current
liabilities. Adjusted current liabilities are calculated as current liabilities,
excluding:
i. deferred revenue in connection with gas connection fees, which are
deferred when Changfeng receives payments from customers in advance of
work having commenced and are recognized on the percentage of completion
method; and
ii. the line of credit, as in China, typically, lines of credit are renewed
when due.
The calculation of adjusted working capital is provided in the table below:
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As at March 31, December 31,
in thousands in $Cdn 2013 2012
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Current assets 16,132 11,306
Less: Current liabilities 20,283 23,511
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Working capital (deficit) (4,151) (12,205)
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Add: Deferred revenue 9,776 8,911
Line of credit 1,634 4,791
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Adjusted working capital (deficit) 7,259 1,497
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Changfeng believes that adjusted working capital is a useful supplemental
measure as it provides an indication of its ability to settle its debt
obligations as they come due.
Mr. Huajun Lin, the Chairman and C.E.O. of the Company commented that "We had a
very successful quarter and are pleased with the financial results driven by the
gas sales volume increase in both the piped natural gas distribution operations
in Sanya City and the CNG refueling station in Changsha City and the
commencement of the piped natural gas distribution operations in Xiangdong
District, Pingxiang City. Going forward, we are hopeful that we will have
continuing market penetration in Sanya City and Xiangdong District, and will
endeavor to expand the business in Mainland China to bring long-term sustainable
value to the Company and our shareholders."
Changfeng Energy Inc., is a natural gas service provider with operations located
throughout the People's Republic of China. The Company services industrial,
commercial and residential customers, providing them with natural gas for
heating purposes and fuel for transportation. The Company has developed a
significant natural gas pipeline network as well as urban gas delivery networks,
stations, substations and gas pressure regulating stations in Sanya City &
Haitang Bay. Through its network of pipelines, the Company provides safe and
reliable delivery of natural gas to both homes and businesses. The Company is
headquartered in Toronto, Ontario and its shares trade on the Toronto Venture
Exchange under the trading symbol "CFY". For more information, please visit the
Company website at www.changfengenergy.com.
Forward-Looking Statements
Information set forth in this news release may involve forward-looking
statements under applicable securities laws. The forward-looking statements
contained herein are expressly qualified in their entirety by this cautionary
statement. The forward-looking statements included in this document are made as
of the date of this document and the Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as expressly
required by applicable securities legislation. Although Management believes that
the expectations represented in such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct. This
news release does not constitute an offer to sell or solicitation of an offer to
buy any of the securities described herein and accordingly undue reliance should
not be put on such.
FOR FURTHER INFORMATION PLEASE CONTACT:
Changfeng Energy Inc.
Mr. Yan Zhao CPA. CA
Chief Financial Officer
416.362.5032
yan.zhao@changfengenergy.com
Changfeng Energy Inc.
Ms. Ann S.Y.Lin
VP, Corporate Development and Corporate Secretary
416.362.5032
ann@changfengenergy.com
www.changfengenergy.com
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