Grand Power Logistics Group Inc.

Grand Power Logistics Group Inc.

December 01, 2008 07:00 ET

Grand Power Reports Third Quarter Results

- Revenue up by 34% in the quarter and 50% for the nine months of 2008 - Company initiates cost reduction plans

CALGARY, ALBERTA and HONG KONG, CHINA--(Marketwire - Dec. 1, 2008) - Grand Power Logistics Group Inc. (TSX VENTURE:GPW) ("Grand Power" or the "Company") today announced its consolidated financial results for the third quarter and nine months ended September 30, 2008. These results include the operating results of Grand Power's wholly owned subsidiary, Grand Power Express International Limited of Hong Kong ("GP Express"). All amounts are in Canadian Dollars unless otherwise noted.

For the quarter ended September 30, 2008, Grand Power reported revenue of $39.99 million, a 34 percent increase over the $29.84 million reported in the same period in 2007. For the nine-month period ended September 30, 2008, revenue grew to $98.74 million compared to $66.04 million, a 50 percent increase from the same period in 2007, and approximately $900 thousand less than revenue reported for all of 2007. Tonnage shipped increased by 47 percent to 17,490 tonnes for the three months ended September 30, 2008 compared to 11,865 tonnes for the corresponding period in 2007. For the first nine months of the year, tonnage shipped increased by 44 percent to 40,375 tonnes compared to 28,057 tonnes in the corresponding period in 2007. The strong year over year growth is largely due to the successful efforts in adding a substantial number of new revenue generating employees, developing more direct customer business and expanding the Company's markets in China, North America and Europe. The increased sales were achieved despite the negative effects of seasonality, severe weather including an earthquake, which occurred during the first half of the year, and the effects of the global economic slow-down, which began to take hold during the end of the third quarter.

Approximately 55 percent or $22.2 million of revenues for the third quarter were generated from the Company's Hong Kong based airfreight co-loading business operations, while approximately 45 percent or $18 million originated from its new airfreight business in China. In comparison, the Company's China business generated $7 million in revenue during fiscal 2007. Grand Power further expects that its operations in China will account for an increasing percentage of gross margin and increased revenue in 2008 and future years. Grand Power also expects to commence operations in ocean freight and trans-shipments within China in late 2008.

Gross profit margin for the third quarter and nine months was 5.2 percent (5.1 percent in 2007) and 4.8 percent (6.3 percent in 2007) respectively. Margin percentage declined from the previous year during the nine month period due to a number of factors, including higher terminal handling fees and security charges caused by the aforementioned weather and seasonality factors, as well as increased costs due to fuel surcharges as fuel costs rose significantly during the year.

The decrease in gross margin in 2008 was due to a number of factors, including the high start-up cost during Grand Power's expansion and transition phase as the Company engaged a large number of employees during the first half of the year, particularly in China, to pursue the direct client business. The increase in employees resulted in increase in working capital requirements as it takes time for new employees to be integrated into the operations, prior to the generation of revenue from their efforts. As a result of the new employees being integrated into the Company, Grand Power had to ship some of its cargos through other agents contributing to lower margin. Another factor is the higher fuel cost during this period as the fuel surcharge has almost doubled from the charges of a year ago.

On a consecutive quarter comparison, cargo shipments and revenue grew by 26 percent and 12 percent respectively in the third quarter of 2008 compared to the second quarter. As well, gross profit margin increased 22 percent in the third quarter to 5.19 percent from 4.25 percent for the second quarter due to lower fuel charges in the third quarter and the growth in direct customer business.

Net loss in the third quarter and first nine months of 2008 was $866 thousand and $2.64 million respectively, compared to net income of $25 thousand and $62 thousand during the corresponding periods in 2007. The basic and fully diluted loss for the three and nine month periods were $0.023 and $0.076 per share compared to earnings of $0.001and $0.003 ($0.002 fully diluted) per share during the same periods in 2007.

Since the end of the third quarter of 2008, the global financial crisis has spread around the world and has negatively impacted all sectors of the economy in many countries. In view of this situation, - Grand Power has taken several strategic actions to reduce corporate costs in order to mitigate the effects of the economic slowdown and ensure the Company can move forward through the financial crisis. The actions taken include the reduction of staffing from all divisions of the Company, relocating or reducing the size of the office in a number of operating centers, dissolving the in-house corporate finance team, relocating the office of subsidiaries in Hong Kong to the corporate office in Hong Kong, replacing inefficient subcontractors, tightening the credit period to clients, terminating low yield businesses and modifying some of the Company's operating procedures to be more cost effective. As a result of these measures, the Company expects that the cost savings will amount to approximately HK$1 million (Cdn$160,000) in the fourth quarter of 2008 and approximately HK$8.0 million (Cdn$1.28 million) in 2009.

"Our focus remains on expanding our operations in new growth segments," stated Ricky Chiu, President and CEO of Grand Power. "To facilitate our continued growth, we have taken a number of prudent steps that will better position us during the economic slowdown. Although industry data suggests that cargo exports have declined significantly over the past three months, we remain very confident in our ability to grow market share, and profitability going forward."

As at September 30, 2008, Grand Power had cash and cash equivalents of $9.50 million and working capital of $11.02 million versus $8.14 million and $12.18 million respectively at December 31, 2007.

Business Highlights

- Closed its non-brokered private placement in the amount of $1,420,000

- Significantly expanded its airfreight business through new direct sales contracts with ten additional airlines, increasing the number of airlines the Company has under contract to 15

- Signed an operating agreement with Beijing Jinfeng Air Service Co. Ltd. (BJAS) to set up a joint venture in Beijing to operate cargo logistics and transportation in Northern China

- Signed Letter of Intent to acquire 100,000 square meters of land and finance the construction and operation of bonded and non-bonded warehouse space at Shanghai Pudong Airport

- Named to the 2008 TSX Venture 50

- Added a significant number of new employees to expand Shanghai and Guangzhou operations in the core airfreight business, direct sales, ocean shipping, and warehousing and custom brokerage

- Received approval and membership from Cargo Accounts Settlement Systems (CASS) to simplify the billing and settling of accounts between airlines and freight forwarders

Financial Highlights:

3 months 3 months 9 months 9 months
ended ended ended ended
Sept. 30, 2008 Sept. 30, 2007 Sept. 30, 2008 Sept. 30, 2007
Revenue $39,997,321 $29,840,238 $98,748,082 $66,042,023
Gross Profit $2,075,219 $1,518,559 $4,715,100 $4,188,488
Gross Margin 5.19% 5.09% 4.77% 6.34%
Net Income (Loss) ($866,865) $25,059 ($2,640,370) $62,025
Cash Flow (by)/
from Operations ($738,739) $113,820 ($2,396,980) $628,440
Earnings, End
of Period ($290,025) $1,428,086 ($290,025) $1,428,086
Earnings (Loss)
per Share -
Basic (0.023) $0.001 (0.076) $0.003
Earnings (Loss)
per Share -
Diluted (0.023) $0.001 (0.076) $0.002

Grand Power will host a conference call to discuss its third quarter 2008 financial results. Mr. Ricky Chiu, President and CEO of Grand Power, will host the call.

Date: Monday, December 1, 2008
Time: 10:00 am Eastern
Dial In Number: 416-695-6617 or 1-866-852-2121
Taped Replay: 416-695-5800 or 1-800-408-3053 (available for 7 days)
Taped Replay Passcode: 266517

Live webcast link:

About Grand Power Logistics Group Inc.

Grand Power Logistics Group Inc. operates principally through its wholly owned Hong Kong based subsidiary, Grand Power Express International Limited (GP Express), and provides air-freight forwarding and sea-freight services, customs brokerage, logistics, warehousing and distribution, as well as other value added services. GP Express has established operations in various regions, particularly in the Greater Pearl River Delta (GPRD), China's largest economic region. GP Express' Subsidiaries or Branch Offices in this region are located in Macau, Shenzhen, Guangzhou, and Jiangmen. GP Express also operates in other regions through Subsidiaries and Branch Offices or Supporting Offices in Shanghai, Beijing, Tianjin, Xiamen, Taipei, Bangkok and Los Angeles.

Forward-looking statements: Statements included in this press release that are not historical facts may be considered "forward looking statements". All estimates and statements that describe the Company's objectives, goals or future plans are forward looking statements. Forward-looking statements involve inherent risks and uncertainties where actual results could differ materially from those currently anticipated.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

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