SOURCE: New Oriental Energy & Chemical Corp.

November 14, 2007 16:00 ET

New Oriental Energy & Chemical Corporation Reports Record Revenue for the Second Quarter Fiscal 2008 on Increase in Alternative Energy Sales

NEW YORK, NY--(Marketwire - November 14, 2007) - New Oriental Energy & Chemical Corp. (NASDAQ: NOEC)

--  Second Quarter Revenue Rose 129.4% to $18.2 million while Net Income
    Increased 14.7% to $900,000
--  A 790% Increase in DME Alternative Fuel Revenue to $12.2 million
    Contributed 67% of Total Revenue in the Quarter
--  Revenue for the First Six Months Increased 91.4% to $32.9 million and
    Net Income Grew 26.2% to $1.9 million
    

New Oriental Energy & Chemical Corp. (NASDAQ: NOEC), a specialty chemical and emerging alternative fuel manufacturer in The People's Republic of China (PRC), today announced second quarter and six month fiscal 2008 results for the period ended September 30, 2007.

Record Revenue

The Company reported record revenues in its fiscal second quarter of $18.2 million compared to $7.9 million in the same period from the prior year, representing an increase of 129.4 percent. Revenue growth was primarily a result of the Company's 100,000 tons of new DME capacity which came on line in August as well as the continued year over year growth in the Company's Urea business. DME revenues increased 790 percent to $12.2 million with alternative energy products comprising 67 percent of revenue as compared to 28.4 percent last year. The Company's fertilizer business collectively increased 5.7 percent with the largest contributor, Urea, increasing 11.5 percent as compared to the same period last year. During the second quarter fertilizer revenue represented 33.0 percent of the Company's total revenue.

Alternative Fuel Growth Drives Results

"The revenue growth that we experienced during the second quarter exceeded our initial guidance of $16.0 million as a result of our initiatives to increase our alternative fuel capacity, particularly DME, and our further capitalization on the growing demand in the market for cleaner, more efficient and cost-effective fuel alternatives for home heating and cooking," commented Mr. Chen Si Qiang, New Oriental Energy & Chemical Corporation's Chief Executive Officer. "While the second quarter saw DME sales increase, there was a normal seasonal sequential decline in the production of several of our fertilizer products due to the transition from the stronger summer growing season to winter. Overall, the demand for our fertilizer products remains robust as available arable land in China continues to decrease driving a greater need to improve overall crop yields."

Product Revenue Comparison:
(all numbers in thousands, revenues shown in USD)

                  2QFY08   Tons Sold   2QFY07  Tons Sold  % Change
                  -------   -------   -------   -------   -------
Urea              $ 5,455    28,345   $ 4,891    24,352      11.5%
DME               $12,206    25,426   $ 1,372     2,960     789.9%
Other             $   554     7,780   $ 1,679    13,425     -67.0%
Total Revenue     $18,216             $ 7,942               129.4%

The average sales price of DME on a per ton basis was $474 during the second quarter, representing a 2.5 percent decrease versus last year and a 7.5 percent increase from the first fiscal quarter. This change was a result of an increase in price for DME in the international chemical and energy market as raw material prices increased. Urea was sold for $192 per ton during the quarter and decreased 9.0 percent from the second fiscal quarter 2007 due to increased production capacity by manufacturers across China.

Cost of goods sold for the second quarter increased 143.1 percent to $16.4 million due to the increase in total sales, especially for DME and an approximate $0.4 million expense related to a system upgrade for the Company's production of fertilizer products which offset the benefits of the Company's new coal stick production line. Excluding this one time cost, Urea gross margins were relatively unchanged versus last year at 12.2 percent. Additionally, because the Company only has 45,000 tons of annualized methanol capacity, the Company had to purchase approximately 25,396 tons of outside methanol to meet expanded DME production, which accounted for approximately $8.0 million in cost of goods sold and resulted in DME gross margins of 13.0 percent. Gross profit increased 52.5 percent to $1.8 million while overall gross margins declined from 15.2 percent last year to 10.1 percent in the second quarter fiscal 2008 due primarily to the aforementioned expenses.

"As our new 100,000 tons of DME capacity came on line we needed to purchase outside methanol to meet demand, which had a significant impact on our gross margins," commented Mr. Ben Wang, New Oriental Energy & Chemical Corporation's Chief Financial Officer. "Going forward, we intend to expand our internal methanol capacity over the next year to meet this demand, which is expected to have a positive impact on our overall profitability."

Operating expenses for the second quarter of fiscal 2008 increased by 113.0 percent to $0.8 million as the Company incurred higher selling and distribution expenses related to the increase in total sales and higher general and administrative expenses due to the expansion in operations. Operating income for the second quarter increased 27.5 percent to $1.1 million with operating margins for the period declining to 6.0 percent from 10.8 percent last year.

Net Income Advances

Net income for the quarter increased 14.7 percent to $0.9 million with earnings per weighted average fully diluted share of $0.07 as compared to $0.8 million and $0.10 per share respectively last year. During the second quarter the Company had a 16.0 percent tax rate as compared to 2.2 percent last year. The Company utilized 12.64 million weighted average diluted shares outstanding for the second fiscal quarter this year as compared to 7.5 million last year. It is important to note that, because the Company did not go public until October 2006, only a portion of the fully diluted shares outstanding were used in last year's calculation. It should be noted further that if EPS in the second quarter of fiscal 2007 was calculated on the basis of 12.64 million shares outstanding, EPS would have been $0.06 per share compared to $0.07 per share in the second quarter of fiscal 2008.

For the six months ended September 30, 2007, total sales were $32.9 million, an increase of 91.4 percent compared to $17.2 million reported for the first six months of last year. Gross profit increased to $4.5 million from $2.9 million in 2006, reflecting gross margins of 13.5 percent and 16.8 percent respectively. Operating income increased 34.6 percent to $2.8 million. Net income for the period was $1.9 million, which represented a 26.2 percent increase over the $1.5 million reported for the previous period, with earnings per weighted average fully diluted share of $0.15 and $0.20, respectively.

Balance Sheet Highlights

The Company ended the second quarter of fiscal 2008 with $15.7 million in cash and restricted cash as compared to $8.0 million at the end of fiscal 2007. Cash flow from operations was $2.6 million for the first six months of 2008 as the Company made further improvements in working capital management. Accounts receivable and inventory both decreased from the end of last year and remain at adequate levels. The Company had a total of $18.2 million in short term debt and notes payable as compared to $7.9 million at the end of fiscal 2007.

Financial Guidance

"For the third quarter we anticipate revenue of $22 million which would represent over a 100 percent increase from the third quarter last year and a 21 percent increase over the second quarter of this year. Given our current visibility we expect fiscal 2008 to be another year of record revenue and net income with full year revenue of at least $75 million," concluded Mr. Chen Si Qiang.

Teleconference Information:

The Company will conduct a conference call to discuss these results at 4:30 p.m. ET on November 14, 2007. Interested participants should call 866-328-4270 when calling within the United States or 480-629-9564 when calling internationally. There will be a playback available until November 28, 2007. To listen to the playback, please call 800-406-7325 when calling within the United States or 303-590-3030 when calling internationally. Please use pass code 3801115 for the replay.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=000047C4 or at ViaVid's website at www.viavid.net. The webcast can be accessed through December 14, 2007.

About New Oriental Energy & Chemical Corp.

New Oriental Energy & Chemical Corp. is an emerging alternative fuel and specialty chemical manufacturer based in Henan Province, China. The Company is focused on the production of Dimethyl ether (DME), Methanol and fertilizer products. The Company sells its products primarily through a network of distribution partners.

Safe Harbor Statement:

This earnings release contains forward-looking statements concerning New Oriental Energy & Chemical Corp. The actual results may differ materially depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, new product development, shipment timelines, market acceptance of DME and new products, additional competition from existing and new competitors, changes in technology or product techniques, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. New Oriental Energy & Chemical Corp. undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.

                                  ASSETS
                                                  September 30,  March 31,
                                                      2007         2007
                                                  ------------ ------------
                                                   (Unaudited)
CURRENT ASSETS

Cash and cash equivalents                         $  7,456,591 $  2,616,149
  Restricted cash                                    8,220,629    5,430,426
  Notes receivable                                   1,344,730    1,395,858
  Inventories                                        2,474,159    3,786,130
  Prepayments for goods                              2,095,836      383,639
  Taxes receivable                                           -      155,863
  Due from employees                                    32,644      113,275
  Other assets                                         537,577      204,508
  Current assets of the discontinued operation               -       47,084
                                                  ------------ ------------
    Total current assets                            22,162,166   14,132,932

Plant and equipment, net                            15,433,734   11,571,652
Land use rights, net                                 1,534,329    1,510,695
Construction in progress                             3,326,257    5,208,277
Deposits                                             1,091,234      267,757
Deferred taxes                                         244,619      646,331
Other long-term assets                                  30,787       39,745
Other assets of the discontinued operation                   -      125,875
                                                  ------------ ------------

    TOTAL ASSETS                                  $ 43,823,126 $ 33,503,264
                                                  ============ ============


               LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                $  3,972,457 $  2,259,834
  Other payables and accrued liabilities               409,402      409,025
  Short-term debt                                   17,693,654    7,356,933
  Notes payable                                        549,875      572,781
  Customer deposits                                  3,509,118    5,385,425
  Payable to contractors                                62,717       96,861
  Due to related parties                             1,756,147    4,041,583
  Taxes payable                                        781,637       25,063
  Current liabilities of the discontinued
   operation                                                 -       12,711
                                                  ------------ ------------
    Total current liabilities                       28,735,007   20,160,216
                                                  ------------ ------------

LONG-TERM LIABILITIES
  Deferred taxes                                     1,113,571    1,619,110
  Due to employees                                     120,033      115,816
                                                  ------------ ------------
    Total long-term liabilities                      1,233,604    1,734,926
                                                  ------------ ------------

TOTAL LIABILITIES                                   29,968,611   21,895,142
                                                  ------------ ------------

SHAREHOLDERS' EQUITY
  Common stock, par value $0.001 per share;
   30,000,000 shares authorized, 12,640,000
   shares issued and outstanding as of September
   30, 2007 and March 31, 2007, respectively            12,640       12,640

  Additional paid-in capital                         4,573,205    4,573,205

  Retained earnings (restricted portion was
   $439,248 and $440,182 as of September 30,
   2007 and March 31, 2007, respectively)            8,449,928    6,563,558

  Accumulated other comprehensive income               818,742      458,719
                                                  ------------ ------------

Total Shareholders' Equity                          13,854,515   11,608,122
                                                  ------------ ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $ 43,823,126 $ 33,503,264
                                                  ============ ============




                        Three Months Ended          Six Months Ended
                          September 30,               September 30,
                    --------------------------  --------------------------
                        2007          2006          2007          2006
                    ------------  ------------  ------------  ------------

REVENUES            $ 18,215,622  $  7,942,195  $ 32,902,228  $ 17,189,339


COST OF GOODS SOLD   (16,376,557)   (6,735,973)  (28,450,295)  (14,306,635)
                    ------------  ------------  ------------  ------------


GROSS PROFIT           1,839,065     1,206,222     4,451,933     2,882,704

Selling and
 distribution            208,584       135,497       644,997       373,087

General and
 administrative          541,512       216,615     1,020,280       438,639
                    ------------  ------------  ------------  ------------

INCOME FROM
 OPERATIONS            1,088,969       854,110     2,786,656     2,070,978

OTHER INCOME
 (EXPENSES)

  Interest expense,
   net                  (161,789)      (50,830)     (261,049)     (118,532)


Governments grants        79,332             -        78,714             -

  Other income
   (expenses), net        (2,644)      (41,603)        7,905       (61,713)
                    ------------  ------------  ------------  ------------

INCOME FROM
 OPERATIONS BEFORE
 INCOME TAXES          1,003,868       761,677     2,612,226     1,890,733


INCOME TAXES            (160,976)      (16,842)     (747,548)     (399,468)
                    ------------  ------------  ------------  ------------

INCOME FROM
 CONTINUING
 OPERATIONS              842,892       744,835     1,864,678     1,491,265
                    ------------  ------------  ------------  ------------

DISCONTINUED
 OPERATION

  Income
  (loss) from
   discontinued
   operation               1,761         8,356         1,761         3,591
Income from
 disposition of
 long-term
 investment               19,359             -        19,931             -
NET INCOME               864,012       753,191     1,886,370     1,494,856
                    ------------  ------------  ------------  ------------

OTHER COMPREHENSIVE
 INCOME

Foreign currency
 translation gain        145,816        30,059       537,348        50,452

Unrealized gain on
 marketable
 securities                    -         2,561             -         5,043
                    ------------  ------------  ------------  ------------
OTHER COMPREHENSIVE
 INCOME BEFORE TAX       145,816        32,620       537,348        55,495
                    ============  ============  ============  ============



                              Three Months Ended       Six Months Ended
                                 September 30,           September 30,
                               2007        2006        2007        2006
                            ----------- ----------- ----------- -----------

INCOME TAX EXPENSE RELATED
 TO OTHER COMPREHENSIVE
 INCOME                          64,603      10,765     177,325      18,313
                            ----------- ----------- ----------- -----------

OTHER COMPREHENSIVE INCOME,
 NET                             81,213      21,855     360,023      37,182
                            ----------- ----------- ----------- -----------


COMPREHENSIVE INCOME        $   945,225 $   775,046 $ 2,246,393 $ 1,532,038
                            =========== =========== =========== ===========

WEIGHTED AVERAGE SHARES
 OUTSTANDING, BASIC AND
 DILUTED                     12,640,000   7,500,000  12,640,000   7,500,000
                            =========== =========== =========== ===========

INCOME PER SHARE FROM
 CONTINUING OPERATIONS,
 BASIC AND DILUTED          $      0.07 $      0.10 $      0.15 $      0.20
                            =========== =========== =========== ===========

INCOME (LOSS) PER SHARE
 FROM INCOME (LOSS) FROM
 DISCONTINUED OPERATION,
 BASIC AND DILUTED          $         - $      0.00 $         - $      0.00
                            =========== =========== =========== ===========

NET INCOME PER SHARE, BASIC
 AND DILUTED                $      0.07 $      0.10 $      0.15 $      0.20
                            =========== =========== =========== ===========

Contact Information

  • Company Contact:

    New Oriental Energy & Chemical Corp.
    Mr. Wang Gui Quan
    President
    Xicheng Industrial Zone of Luoshan, Xinyang
    Henan Province, The People's Republic of China
    Tel: (011-86) 376-2169211

    Investors Contact:

    Matthew Hayden
    HC International, Inc.
    matt@haydenir.com
    ph: (858) 704-5065

    Mark Miller
    East West Network Group
    mmeastwest@hotmail.com
    Ph: (770) 436-7429