Hanwei Energy Services Corp.
TSX : HE

Hanwei Energy Services Corp.

August 07, 2013 21:04 ET

Hanwei Energy Services Reports First Quarter Fiscal 2014 Financial and Operational Results

Cash flow from continuing operations increases by $1.8M to $3.5M for the quarter

$1.2M received from outstanding wind power accounts receivable subsequent to the quarter

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 7, 2013) - Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company") today reported its financial results for the three months ending June 30, 2013. All amounts are in Canadian Dollars unless otherwise noted.

Specific highlights for the three months ending June 30, 2013 include:

  • Cash flow from continuing operations increased by $1.8 million to $3.5 million for the period ending June 30, 2013 (as compared to $1.7 million for the same period of the prior year). The increase in cash flow from operating activities was primarily driven by collection of accounts receivable that continued to bolster the Company's cash position.
  • From available cash on hand and increased cash flow from continuing operations the Company has further reduced its bank debt from $17.2 million as of March 31, 2013 to $10.9 million as of June 30, 2013. This represents a 44% debt to equity ratio (total debt divided by total shareholders' equity) versus 69% as of March 31, 2013. The Company's cash balance as of June 30, 2013 was $1.6 million. Approximately $6.9 million of cash was utilized for repayment of certain short-term loans.
  • Net Asset Value per Share from continuing operations on a fully diluted basis was $0.51.

Subsequent to the quarter the Company also received a payment of RMB7 million ($1.2 million) as part of the outstanding accounts receivable due from its wind farm customers. The full amount of these receivables was previously allowed for and the Company's wind power business has been discontinued. As of the date of this press release approximately RMB172.6 million ($29.4 million) has been collected with a balance of RMB50.6 million ($8.6 million) outstanding. The Company is continuing its efforts to collect the balance of this outstanding amount. The Company's cash balance as of the date of this press release was $2.1 million.

Summary of Financial Results

With an increasing proportion of the Company's sales being generated internationally the Company's revenues may not be evenly distributed during the year or be similar on a year over year basis. As such timing of certain sales orders has significant impact on the Company's timing of revenues by quarter. For the three months ended June 30, 2013 revenues were $3.8 million representing a decline of 60% as compared to revenues of $9.6 million for the same period of the prior year. The decline was caused by continuing weakness in the Company's China market and timing of sales orders to be confirmed in its international markets. Of the $3.8 million of revenue 19% of this revenue was from the Company's China market and 81% from the Company's international markets (as compared to 59% from China market and 41% from international markets for the same period of the prior year).

Gross profit for the three months ended June 30, 2013 was $0.9 million or 23% of revenues as compared to gross profit of $3.3 million or 34% of revenues for the same period of the prior year. Gross profit margin was impacted in part due to a one-time $233,000 cost related to damage of a pipe order during shipping and delivery that was not recoverable under the Company's insurance program.

For the three months ended June 30, 2013 the decline in revenue also resulted in:

  • EBITDA from continuing operations of negative $174,000 as compared to EBITDA from continuing operations of $1.7 million for the same period of the prior year;
  • Loss from continuing operations of $1.2 million as compared to income from continuing operations of $0.9 million for the same period of the prior year.
  • Basic and diluted loss per share from continuing operations of $0.02 as compared to basic and diluted earnings per share of $0.01 of the prior year.

As of July 31, 2013, FRP pipe sales orders were $ 4.6 million. These sales orders are expected to be completed within the fiscal year ending March 31, 2014. Of these sales orders, $2.7 million or 59% are from customers in the China market with $1.9 million or 41% from customers in international markets. The Company continues to pursue a number of significant opportunities in its international markets.

Update on Major Cash Receivables

  • Tianjin Plant Divestment: As previously reported the Company reached an agreement on May 27, 2013, to sell all of the equity interest in its wholly owned subsidiary Hanwei Green to a private Chinese company for an amount of $11.1 million (RMB65 million). The major asset of Hanwei Green is a manufacturing plant located in Tianjin, China which was constructed for wind blade production. Regulatory documentation on the ownership transfer and sale is underway with the relevant government authorities. This is expected to be completed in 2013 and wherein the Company expects to receive $1.9 million (RMB11 million) from the buyer pursuant to the agreement. A second payment of $3.3 million (RMB19 million) is also expected at the end of 2013.
  • Wind Inventory Sale: During the year ended March 31, 2012, the Company executed a contract for sale of the majority of its wind power equipment inventory to a Chinese customer for agreed items totaling $16.1 million (RMB93.6 million). To date $12.3 million (RMB75.3 million) of this amount has been received by the Company. The balance to be paid is approximately $3.1 million (RMB18.3 million) and is expected to be received during 2013.

Hanwei will host a conference call to discuss its operational and financial results for the three months ended June 30, 201. Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host the call. Management invites analysts and investors to participate on the conference call:

Date: Thursday, August 8, 2013
Time: 11:30 a.m., Eastern Time
Dial in number: 1-888-417-8516 or 1-719-325-2362

A replay of the conference call will be available on the Company's website www.hanweienergy.com.

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp. is a world leader in the manufacturing of high pressure, fiberglass reinforced plastic ("FRP") pipe products, and associated technologies and services, for the international oil and gas and infrastructure industries. Hanwei serves major energy customers in the Chinese and global energy markets.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 18, 2013 and Management Discussion and Analysis for the year ended March 31, 2013 both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

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