Changfeng Reports Second Quarter 2013 Financial Results, and Provides Business Update
August 22 2013 - 12:47PM
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 second quarter ended June 30, 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 Second Quarter of 2013 consolidated Financial Results
In thousands of Canadian Three months ended June
dollars 30, Six months ended June 30,
except percentages and
per 2013 2012 Change % 2013 2012 Change %
share amounts
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Revenue 9,190 7,122 2,068 29% 18,813 14,487 4,326 30%
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Gross margin 4,260 3,421 839 25% 9,769 7,323 2,446 33%
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Other operating income - 723 (723) - 723 (723)
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Net income 625 826 (201) -24% 1,897 1,652 245 15%
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EBITDA 2,104 1,416 688 49% 5,105 3,532 1,573 45%
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Adjusted net income (1) 625 283 342 121% 1,897 1,109 788 71%
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Note (1): The adjusted net income excludes a government grant of $542,535, net
of tax.
Revenue for the three months ended June 30, 2013 was $ 9.2 million, representing
an increase of $2.1 million, or 29%, from $7.1 million for the same period of
2012. Revenue for the six months ended June 30, 2013 was $ 18.8 million,
representing an increase of $4.3 million, or 30%, from $14.5 million for the
same period of 2012. This increase is mainly attributable to continued gas
volume growth (16% for the three months ended June 30, 2013 and 20% for the six
months ended June 30, 2013) and higher average selling prices for both its 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 three months ended June 30, 2013 increased $0.8 million, or
25%, and increased $2.4 million or 33% for the six months ended June 30, 2013,
compared to the same periods in 2012. As a percentage of revenue, gross margin
increased to 52% in the six months ended June 30, 2013 from 51 % in the same
period of 2012.
As a percentage of revenue, the gross margin of the gas distribution utilities
decreased 3% (51% for the three months ended June 30, 2013 versus 54% for the
same period of 2012). As a percentage of revenue, the gross margin of the CNG
refueling station improved 12% (29% for the three months ended June 30, 2013
versus 17% for the same period of 2012) primarily due to increases in selling
price, as well as operating costs that increased at a lower rate than gas volume
sold.
EBITDA (non-GAAP measure as identified and defined under section "Non-GAAP
Measures") for the three months ended June 30, 2013 was $2.1 million, an
increase of 0.7 million, or 49%, from $1.4 million for the same period of 2012.
EBITDA for the six months ended June 30, 2013 was $5.1 million, an increase of
$1.6 million, or 45%, from $3.5 million for the same period of 2012. The
increase was driven primarily by higher sales. EBITDA as a percentage of revenue
for the three months ended June 30, 2013 was 23%, compared to 20% in the same
period in 2012. EBITDA as a percentage of revenue for the six months ended June
30, 2013 was 27%, compared to 24% in the same period of 2012, representing an
increase of 3%. This increase was due to higher sales partially offset by higher
operating expenses.
Net income for the three months ended June 30, 2013 was $0.6 million, or $0.01
per share (basic and diluted) compared to $0.8 million or $0.01 per share (basic
and diluted) for the same period in 2012. Net income for the six months ended
June 30, 2013 was $1.9 million, or $0.03 per share (basic and diluted) compared
to $1.7 million or $0.03 per share (basic and diluted) for the same period in
2012.
Adjusted net income is calculated as net income before other operating income.
Other operating income represents a government grant received by the Company.
There is no guarantee that the Company will receive this government grant every
year. Changfeng believes that adjusted net income is a useful supplemental
measure of the Company's operating results.
Financial Position
Cash increased by $3.3 million to $9.7 million at June 30, 2013 from $6.4
million at December 31, 2012, primarily resulting from cash of $2.6 million
provided by operating activities, cash flow from financing activities of $4.3
million, offset by cash used for capital expenditures of $4.3 million.
The working capital deficit as at June 30, 2013 decreased to $5.6 million from
$12.2 million as at December 31, 2012, primarily resulting from the effective
conversion of the Company's line of credit to long term debt and an increase of
current assets.
On December 21, 2012, the Company entered into a term loan facility with the
Bank of China, Pingxiang Branch for $3.4 million (RMB 20.0 million). As of June
30, 2013, the Company had withdrawn $3.4 million (RMB 20.0 million).
On January 15, 2013, the Company entered into an agreement with the Bank of
China, Sanya Branch to secure a term loan facility in the amount of $8.6 million
(RMB 50.0 million). As of June 30, 2013, the Company had withdrawn $6.9 million
(RMB 40.0 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.
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.
The calculation of adjusted working capital is provided in the table below:
In thousands of Canadian June 30, December 31,
dollars 2013 2012
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Current assets 14,485 11,306
Less: Current liabilities 20,037 23,511
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Working capital (deficit) (5,552) (12,205)
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Add: Deferred revenue 10,461 8,911
Line of credit - 4,791
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Adjusted working capital 4,909 1,497
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Mr. Huajun Lin, the Chairman and C.E.O. of the Company commented that "We had
another 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 as well as commencing gas sales to industrial and residential customers 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 to our shareholders."
Business Update
Sanya Piped Gas Distribution Operation, Sanya City, Hainan Province
Further to the Press Release dated February 22, 2012 regarding the Gas to
Electricity Exchange Program, the construction of the facilities has been
completed and is going through the acceptance inspection by the relevant
authorities. The gas sales and purchase agreement is negotiated through the
government's coordination. The Company will provide further details regarding
the price, expected annual volumes and supply schedule of the gas once the
agreement is finalized.
Xiangdong Piped Gas Distribution Operation, Xiangdong District, Pingxiang City,
Jiangxi Province
The Company is continuing its market penetration in the Xiangdong District. As
of the date of this release, the Company is supplying gas to four (4) ceramic
manufacturers and one residential gated community.
In addition the Company has extended its pipeline network to the downtown area
and the outskirts of the town. A citygate in the Park to depressurize the piped
gas from WEP II is under construction.
There is nothing further to report on the process for the approval of the
construction of the section of the interprovincial pipeline that is proposed to
link the Company's citygate and PetroChina's citygate. The Company is working
with the local energy boards and regulatory authorities on this regulatory
approval process.
About Changfeng Energy Inc.
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.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSXV) accepts responsibility for the adequacy
or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Changfeng Energy Inc.
Mr. Yan Zhao CPA. CA
Chief Financial Officer
416.362.5032/647.528. 0115
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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