TIANJIN, China, Nov. 17 /PRNewswire-Asia-FirstCall/ -- China New
Energy Group Company (OTC:CNER) (BULLETIN BOARD: CNER) ("China New
Energy" or the "Company"), an energy project developer specializing
in development of natural gas distribution networks, and
distribution of natural gas in China, announced its financial
results for the third quarter ended September 30, 2009. Third
Quarter 2009 Highlights -- Revenue increased 25% year-over-year to
$2.8 million -- Gross profit increased 5% year-over-year to $1.8
million -- Net income totaled $0.5 million -- Appointed new Chief
Financial Officer "China New Energy continues to achieve strong
sales growth as natural gas consumption increases in our target
markets," said Mr. Yangkan Chong, Chief Executive Officer. "We have
exclusive natural gas distribution rights for three cities in
Northern China and our sales have benefited as more and more
households in these areas become connected to our distribution
network." Third Quarter Results For the third quarter of 2009,
revenue increased 25% to $2.8 million from $2.3 million in the same
quarter a year ago. The growth was primarily attributable to an
increase in the number of connected households in the cities where
the Company supplies natural gas and operates its gas distribution
network. Gross profit increased 5% to $1.8 million from $1.7
million a year ago. Gross margin was 63%, compared to 74% in the
same quarter in 2008. The decrease in gross margin was mainly due
to cost reallocation of the depreciation. Selling, general and
administrative ("SG&A") expenses increased 132%, to $0.8
million from $0.4 million during the same period in 2008. As a
percentage of revenues, SG&A expenses increased to 28% compared
to 15% for the same period in 2008. Mr. Chong commented, "The
increase in our SG&A expense was mainly attributable to the
fact that we are preparing to expand our business. We are spending
more in areas like business development, outside consultants, and
the hiring of additional staff to help strengthen the Company's
internal controls. We view this increased expenditure as an
investment in ensuring the long-term growth of China New Energy and
believe that it will ultimately help the Company achieve increased
revenue growth and profitability." Net income was $0.5 million for
the third quarter, down 45% from $0.9 million for the same period
of 2008, as a result of the factors described above. Nine Month
Results Revenue for the first nine months of 2009 was $6.0 million,
up 40% from $4.2 million a year ago, which was mainly attributable
to an increase in the number of connected households and an
increase in natural gas consumption. Gross profit was $3.9 million,
or 66% of revenue, up 26% from $3.1 million, or 73% of revenue, in
the same period of 2008. The decrease in the gross margin was
mainly due to cost reallocation of the depreciation. SG&A
expenses increased to $2.0 million, or 33% of revenue, up from $0.8
million, or 19% of revenue during the same period of 2008. As a
result, operating income for the nine months was $2.0 million or
33% of revenues, compared to $2.3 million or 54% of revenues in the
same period of 2008. Net income for the nine months was $1.1
million compared to $1.8 million for the same period of 2008.
Financial Condition As of September 30, 2009, the Company had cash
and cash equivalents of $4.9 million and working capital of $9.9
million. For the nine months ended September 30, 2009, the company
had $5.8 million of capital expenditures, which was mainly for the
construction of gas pipelines, gas stations and acquisitions.
Shareholders' equity was $27.8 million as of September 30, 2009.
Recent Developments The Company appointed Mr. Eric Yu as Chief
Financial Officer, effective on September 28, 2009. Mr. Yu replaces
Mr. Peng Mun Foo, who left the Company for personal reasons. Mr. Yu
most recently served as the CFO of an OTC Bulletin Board
U.S.-listed Chinese company and has worked as a CFO or Financial
Controller for almost ten years of which two were in the gas
business. Business Outlook Mr. Chong concluded, "As China continues
to undergo rapid urbanization and increasingly moves towards more
environmentally friendly fuels, it is anticipated that the use of
natural gas will continue to grow. Our strategy for capitalizing on
this opportunity is to continue to focus on under- penetrated,
growing small- and medium-sized cities where we can enter into
favorable franchise agreements with local governments that grant us
long-term exclusive rights to develop the local natural gas
distribution network and supply natural gas in their area. We
already have such agreements in Acheng, Dashiqiao, and Nandaihe. By
focusing on these types of markets, we can help avoid competition
as currently very few of these small- and medium-size cities have
access to natural gas. Our business development team is actively
exploring and evaluating potential areas for development of new
distribution networks and opportunities for expansion of our
existing distribution networks." About China New Energy Group
Company China New Energy Group Company ("China New Energy" or the
"Company") is a vertically integrated natural gas company engaged
in the development of natural gas distribution networks, and the
distribution of natural gas to residential, industrial, and
commercial users in small and medium sized cities in China. The
Company generates revenues primarily from the connection fees it
charges its customers for interconnecting to pipelines in its
natural gas distribution networks, and fees for natural gas usage.
The Company currently has exclusive natural gas distribution rights
for Acheng, Dashiqiao, and Nandaihe, three cities located in
Northern China. For more information, please visit
http://www.cnegc.com/ . Safe Harbor Statement Safe Harbor Statement
Under the Private Securities Litigation Reform Act of 1995: Any
statements set forth above that are not historical facts are
forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially from those in
the forward-looking statements. Such factors include, but are not
limited to, the Company's ability to access natural gas for
distribution, and ability to identify and develop operational
locations under favorable terms, changes in natural gas pricing
mechanism imposed by the Chinese government, changes in the
regulatory environment and future national or regional economic and
competitive conditions, and other factors detailed from time to
time in the Company's filings with the United States Securities and
Exchange Commission and other regulatory authorities. The Company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. -FINANCIAL TABLES FOLLOW- CHINA NEW
ENERGY GROUP COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Stated
in US Dollars) September 30, December 31, 2009 2008 (Unaudited)
ASSETS CURRENT ASSETS Cash and cash equivalents $4,878,751
$5,612,356 Restricted cash 196,873 221,152 Accounts receivable
3,925,491 2,183,087 Other receivables 2,159,614 2,254,997
Inventories, net 285,787 254,585 Prepayment 784,953 1,558,361 Other
current assets 94,017 3,340 Total current assets 12,325,486
12,087,878 Property, plant and equipment, net 7,676,229 6,844,262
Construction in progress 8,447,645 5,589,551 Related party
receivable -- 84,120 Intangible assets 1,804,658 1,814,316 TOTAL
ASSETS $30,254,018 $26,420,127 LIABILITIES AND EQUITY CURRENT
LIABILITIES Accounts payable $276,117 $111,660 Accrued expenses
277,271 256,071 Accruals and other payable-Third Party 526,837
3,144,043 Tax payable 523,770 693,116 Related party payable 97,888
-- Dividend payable on preferred stock 744,946 194,000 TOTAL
CURRENT LIABILITIES 2,446,829 4,398,890 China New Energy's
Stockholders' equity: Preferred Stock: 10,000,000 shares
authorized, $0.001 par value, 2,973,761 and 1,857,373 shares issued
and outstanding as of September 30, 2009 and December 31, 2008,
respectively 2,973 1,857 Common Stock: 500,000,000 shares
authorized, $0.001 par value, 100,000,041 shares issued and
outstanding as of September 30, 2009 and December 31, 2008,
respectively 100,000 100,000 Additional paid in capital 27,269,163
19,725,482 Accumulated (deficit) (2,382,613) (619,357) Statutory
surplus reserve fund 1,903,034 1,903,034 Accumulated other
comprehensive income 693,939 730,168 Total China New Energy's
Stockholders' equity 27,586,496 21,841,184 Non-controlling interest
220,693 180,053 TOTAL EQUITY 27,807,189 22,021,237 TOTAL
LIABILITIES AND EQUITY $30,254,018 $26,420,127 CHINA NEW ENERGY
GROUP COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME - (UNAUDITED) (Stated in US Dollars) For the
Three months ended For the nine months ended September 30,
September 30, 2009 2008 2009 2008 Revenues: Connection services
$2,659,930 $2,092,445 $5,433,912 $3,846,773 Natural gas 157,344
161,413 518,970 390,214 2,817,274 2,253,858 5,952,882 4,236,987
Cost of Sales: Connection services 683,068 454,061 1,376,630
833,644 Natural gas 367,411 121,565 649,622 295,257 1,050,479
575,626 2,026,252 1,128,901 Gross Profit 1,766,795 1,678,232
3,926,630 3,108,086 Operating Expenses: Selling, general and
administrative expenses 802,011 346,094 1,962,698 813,975 Total
operating expenses 802,011 346,094 1,962,698 813,975 Operating
income 964,784 1,332,138 1,963,932 2,294,111 Other Income
(Expenses): Interest Income 10,680 -- 20,307 -- Interest (expense)
(3,699) -- (4,370) -- Other Income 5,558 3,702 5,651 9,974 Total
other income 12,539 3,702 21,588 9,974 Income from continuing
operations, before tax 977,323 1,335,840 1,985,520 2,304,085 Income
Taxes 461,013 391,358 828,800 705,244 Income from continuing
operations, net of tax 516,310 944,482 1,156,720 1,598,841 Income
(loss) from discontinued operations, net of tax -- (7,116) --
223,410 Net Income 516,310 937,366 1,156,720 1,822,251 Net (Income)
attributable to non controlling interest (25,104) (37,009) (18,200)
(46,277) Net Income attributable to China New Energy Group $491,206
$900,357 $1,138,520 $1,775,974 Other Comprehensive income: Net
Income 516,310 937,366 1,156,720 1,822,251 Foreign currency
translation (42,159) 37,114 (41,854) 377,403 Comprehensive income
attributable to the Non-controlling interest 251 -- (12,026) --
Comprehensive income attributable to China New Energy Group
$474,402 $974,480 $1,102,840 $2,199,654 Income (Loss) per share -
Basic & diluted: Income (Loss) from continuing operations
attributable to the Company's common stockholders $0.00 $(0.06)
$(0.02) $(0.05) Discontinued operations attributable to the
Company's common stockholders $0.00 $0.00 $0.00 $0.00 Net income
(loss) attributable to the Company's common stockholders $0.00
$(0.06) $(0.02) $(0.05) Weighted average common shares outstanding:
Basic 100,000,041 100,000,041 100,000,041 98,321,560 Diluted
209,495,669 132,839,829 200,655,139 110,255,834 CHINA NEW ENERGY
GROUP COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
(UNAUDITED) (Stated in US Dollars) For The Nine Months Ended
September 30, 2009 2008 Cash flows from operating activities: Net
income attributable to China New Energy Group Company $1,138,520
$1,775,974 Income attributable to non-controlling interest 18,200
27,371 Adjustments to reconcile net income to net cash used in
operating activities: Depreciation 277,476 125,592 Amortization
9,572 6,429 Changes in operating assets and liabilities: Accounts
receivable (1,741,568) (374,181) Other receivables 205,909
(650,954) Inventories (31,228) 174,757 Prepayment 772,557 -- Other
current assets (90,613) -- Accounts payable 164,360 (398,948)
Accrued expenses 21,251 -- Accruals and other payable-Third Party
(710,835) (790,089) Taxes payable (169,093) (397,601) Net cash used
in operating activities (135,492) (501,650) Cash flows from
investing activities Addition of construction in progress
(2,857,106) (960,375) Addition of fixed assets (1,110,147) (97,692)
Payments made to acquire subsidiary (1,838,946) -- Acquisition of
an associated company -- 483,512 Net cash used in investing
activities (5,806,199) (574,555) Cash flows from financing
activities Repayment of cash advanced from director -- (210,711)
Issued preferred stock 4,752,140 9,000,000 Payment of offering
costs associated with preferred stock -- (1,507,144) Contribution
from former non-controlling interest 439,060 -- Loan from related
parties 24,279 -- Net cash flows provided by financing activities
5,215,479 7,282,145 Effect of exchange rate changes in cash (7,393)
(1,308,366) Net increase (decrease) in cash (733,605) 4,897,574
Cash - beginning of year 5,612,356 2,311,028 Cash - end of year
$4,878,751 $7,208,602 Supplemental disclosure of cash flow
information: Interest paid in cash $4,370 $-- Income taxes paid in
cash $522,594 $-- Supplemental disclosure of non-cash investing and
financing activities: Accrued dividend of preferred stock $550,946
$-- For more information, please contact: Company Contact: Eric Yu,
Chief Financial Officer Email: Web: http://www.cnegc.com/ Investor
Relations Contact: CCG Investor Relations Mr. Athan Dounis, Account
Manager Phone: +1-646-213-1916 Email: Mr. Crocker Coulson,
President Phone: +1-646-213-1915 (New York) Email: Web:
http://www.ccgirasia.com/ DATASOURCE: China New Energy Group
Company CONTACT: Company Contact, Eric Yu, Chief Financial Officer,
; or Investor Relations Contacts at CCG Investor Relations, Mr.
Athan Dounis, Account Manager, +1-646-213-1916, or , or Mr. Crocker
Coulson, President, +1-646-213-1915 (New York), or , for CNER Web
Site: http://www.cnegc.com/
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