Hanwei Energy Services Corp.
TSX : HE

Hanwei Energy Services Corp.

February 08, 2012 17:05 ET

Hanwei Energy Services Reports Third Quarter Fiscal 2012 Financial and Operational Results

China FRP pipe sales increase 35% to $17.9 million for the nine-month period

Kazakhstan FRP pipe sales increase 49% to $3.5 million for the nine-month period

EBITDA increases by $1.9 million on a year over year basis for the nine-month period

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 8, 2012) - Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company"), today reported its financial results for the quarter ended December 31, 2011 (the "Reporting Period"). All amounts are in Canadian Dollars unless otherwise noted.

Update on FRP Pipe Orders

The Company has maintained its go forward strategy of focusing on its core FRP pipe business with a number of sales initiatives materializing with improved results. For the nine months ended December 31, 2011:

  • The Company's FRP pipe sales in the China market increased 35% to $17.9 million versus $13.3 million for the same period of the prior year. For the last ten years the Company has served a wide range of oil and gas projects with resilient, non-steel, composite pipes that have provided long term performance in high pressure, high temperature, and highly corrosive operating environments. A number of sales programs are currently underway in China focused on oil & gas, infrastructure, and salt mining pipe supply projects.
  • The Company has also confirmed FRP pipe orders in the Kazakhstan market of approximately $8.1 million. Of these orders approximately $3.5 million was delivered during the nine months ended December 31, 2011 representing a sales increase for the period of 49% versus $2.4 million for the same period of the prior year. For additional comparison, for the full year ended March 31, 2011 the Company had sales revenue in the Kazakhstan market of approximately $2.6 million.

In addition to the activities underway in China and Kazakhstan the Company continues to pursue a significant number of opportunities in new international markets. Such activities include: identifying and appointing new agents and distributors; obtaining vendor qualifications and registration with major end users, contractors and industry consultants; identifying bid and tender opportunities; and procuring strategic business transactions, so as to facilitate increased FRP pipe orders. Through these activities the Company is pursuing numerous projects in the Middle East, India, Australasia, Latin America, Canada and Europe.

Financial Highlights

  • Positive EBITDA from continuing operations for the nine-month period ending December 31, 2011 was $0.9 million as compared to negative EBITDA of $1.0 million for the same period of the prior year, representing a $1.9 million improvement.
  • Cash balance was $2.4 million as at December 31, 2011, representing an increase of $1.0 million from a cash balance of $1.4 million as of September 30, 2011.
  • Bank debt as of December 31, 2011 was $24.5 million (versus $26.6 million as of September 30, 2011 and $34.4 million as of December 31, 2010). Of this amount the Company has bank loans of Rmb50 million (or approximately $8 million) that mature at the end of March 2012, with activities underway to renew or replace such loans.
  • As a percentage of sales, gross margin improved to 35% and 31% for the three and nine month periods respectively, versus 24% and 25% for the same periods of the prior year.
  • Sales and marketing expenses for the three and nine months ended December 31, 2011 were $0.5 million and $2.4 million respectively, as compared to $0.9 million and $2.8 million respectively for the same periods of the prior year. The savings in sales and marketing expense was primarily related to efficiencies of utilizing international agents and distributors in new markets.

For the three months ended December 31, 2011:

  • Revenues from continuing operations, the Company's core FRP pipe business, were $4.6 million as compared to revenues of $12.0 million in the same three-month period of the prior year. This decrease in pipe revenues of $7.4 million was primarily due to the completion of a previous order to a Kuwait customer initiated in 2010; during the three-month period of the prior year the Company delivered $7.6 million of FRP pipe as part of this order.
  • The Company had a loss from continuing operations of $0.8 million for the three-month period as compared to a profit from continuing operations of $0.1 million for the same period in 2010. Loss per share from continuing operations was $0.01 as compared to earning per share from continuing operations of $0.00 for the same period of 2010.

For the nine months ended December 31, 2011:

  • Revenues from continuing operations were $20.9 million representing a decrease of $2.5 million or 10% compared to FRP pipe revenues of $23.4 million during the same nine-month period of the prior year.
  • The Company had a loss from continuing operations of $2.4 million as compared to a loss from continuing operations of $2.9 million for the same period in 2010. Loss per share from continuing operations was $0.03 as compared to loss per share from continuing operations of $0.04 for the same period of 2010.

Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host a conference call to discuss its operational and financial results for the quarter ended December 31, 2011. Management invites analysts and investors to participate on the conference call:

Date: Thursday, February 9, 2012
Time: 11:00 a.m., Eastern Time
Dial in number: 1-888-220-8474 or 1-913-312-1495
Taped Replay: 1-877-870-5176 or 1-858-384-5517 (available for 14 days)
Taped Replay Pass Code: 4629995
Live Webcast Link: http://viavid.net/dce.aspx?sid=0000934B

About Hanwei Energy Services Corp.

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

FORWARD-LOOKING INFORMATION

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 20, 2011 and Management Discussion and Analysis for the period ending March 31, 2011 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.

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.

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