Hanwei Energy Services Corp.
TSX : HE

Hanwei Energy Services Corp.

June 21, 2011 08:00 ET

Hanwei Energy Services Reports Year End Fiscal 2011 Financial and Operational Results

-- FRP pipe orders continue to improve

-- Discontinuing Wind power equipment business

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 21, 2011) -Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company"), today reported its financial results for the year ended March 31, 2011 (the "Reporting Period"). All amounts are in Canadian Dollars unless otherwise noted.

Financial Highlights

For the three months ended March 31, 2011:

  • Revenue for the fourth quarter of fiscal 2011 was $7.4 million, an increase of 486% compared to the comparable period in 2010. The increase was driven by improvements in the FRP pipe business from a combination of new projects and completion of existing projects which included an initial order from the Middle East market, a growing area of focus for the Company.
  • Net loss from continuing operations was $22.7 million as compared to a loss of $53.7 million for the comparable period of 2010, primarily due to a $34.9 million impairment charge associated with the discontinuation of the wind power business.
  • Basic and diluted loss per share of $0.34 for the three months ended March 31, 2011 (compared to basic and diluted loss per share of $0.89 for the same period of 2010).

For the year ended March 31, 2011:

  • Revenue was $30.7 million as compared to revenue of $43.0 million for the 15 months ended March 31, 2010, representing a decline of 28%. The FRP pipe business contributed the full amount of the $30.7 million in revenue from continuing operations in fiscal 2011, versus $33.1 million for the 15 month period in fiscal 2010.
  • The wind power equipment business, currently in the process of being discontinued, did not recognize any revenues for the year ended March 31, 2011 while revenues of $9.8 million were recognized for the 15 months ended March 31, 2010. The FGD business was discontinued in 2010.
  • The Company had a net loss of $30.8 million as compared to a net loss of $65.7 million for the 15 months ended March 31, 2010. The net loss included a $34.9 million impairment charge associated with the wind power business.
  • The Company had basic and diluted loss per share of $0.44 for the year ended March 31, 2011 as compared to basic and diluted loss per share of $1.08 for the fifteen months ended March 31, 2010.

The financial results for the year ended March 31st, 2011 included the following unusual items:

  • The Company received payments of $22.5 million from its wind power customers as a partial payment of a $26.5 million outstanding receivable for which a full allowance was provided during the fifteen months ended March 31, 2010. The payments have been recorded as recovery of bad debts.
  • The wind power business incurred an aforementioned $34.9 million impairment charge which included: (a) Property, Plant and Equipment (wind power turbine assembly equipment, wind power blade manufacturing equipment and moulds, and a manufacturing facility in Tianjin, China), (b) Prepayments and Inventories (primarily composed of wind power turbine assembly parts and wind power blade manufacturing materials), and (c) an Accounts Receivable allowance as noted above (due to uncertainty in the collectability of these amounts during the course of the year).

Major Corporate Developments

Update on FRP Pipe Sales

As of March 31, 2011 the Company has recorded revenue of approximately $9.3 million on a $9.8 million order from the Kuwait Oil Company ("KOC").

The Company is actively engaged on a number of bids for the supply of its FRP pipe products in several international markets including the Middle East and Middle Asia. Subsequent to the year ended March 31, 2011, the Company confirmed new FRP pipe sales contracts for a combined amount of $3 million to Kazakhstan customers. In addition to these new international orders, subsequent to the year ended March 31, 2011 the Company has also received sales orders in China totaling approximately RMB60 million ($9.0 million). These orders are expected to produced and shipped in the 2012 fiscal year.

Update on Wind Power Business

The Company has pursued and evaluated various opportunities to reposition its wind power business. As at March 31, 2011, no acceptable opportunities have been identified. Management has decided not to further pursue this business and is engaged in a process of liquidating its assets relating to the wind power business, including inventories and manufacturing plant and equipment. While the wind power business does not qualify as discontinued operations under Canadian GAAP for the year ended March 31, 2011, the Company has ceased all new manufacturing and sales operations of its wind power business with the exception of collecting outstanding accounts receivable, selling existing inventory and liquidating plant and equipment, and administrative tasks for dissolving this business.

The Company has written down the applicable assets of the wind power business to their fair value during the year ended March 31, 2011 as noted above. The Company has been vigorously pursuing collection of an outstanding accounts receivable amount from its wind farm customers. To–date, the Company has collected RMB149.3 million ($22.5 million) with an amount of RMB29.3 million ($4.4 million) still outstanding as at June 20, 2011. The full amount of this outstanding receivable of RMB178.6 million ($26.5 million) was provided for during the year ended March 31, 2010.

Repayment of Bank Loans

With renewed strategic focus on the FRP Pipe business and with FGD business discontinued and the wind power business in a process of being discontinued, the Company has less need for working capital loans and is in the process of reducing its current level of debt. The total amount of short-term loans decreased from $50.8 million at March 31, 2010 to $20.8 million at March 31, 2011.

Hanwei will host a conference call to discuss its operational and financial results for the year ended March 31, 2011. 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: Tuesday, June 21, 2011

Time: 11:00 a.m., Eastern Time

Dial in number: 1-877-627-6585 or 1-719-325-4820

Taped Replay: 1-877-870-5176 or 1-858-384-5517 (available for 14 days)

Taped Replay Pass Code: 2908198

Live Webcast Link: http://viavid.net/dce.aspx?sid=00008803

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp. is the leading Chinese 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 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 20, 2011 and Management Discussion and Analysis for the year ended 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.

The Company has included in this press release figures based on unusual items, gross profit and working capital which are non-GAAP measures. Readers are cautioned that such measures are not recognized under Canadian GAAP and should not be construed to be an indicator of performance or liquidity or cash flows. The Company's method of calculating this measure may differ from the method used by other entities and accordingly the Company's measure may not be comparable to the measure used by other entities.

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