Hanwei Energy Services Corp.
TSX : HE

Hanwei Energy Services Corp.

June 21, 2012 08:00 ET

Hanwei Energy Services Reports Year End Fiscal 2012 Financial and Operational Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 21, 2012) - Hanwei Energy Services Corp. (TSX:HE) ("Hanwei" or the "Company"), today reported its financial results for the year ended March 31, 2012 (the "2012 Fiscal Year"). All amounts are in Canadian Dollars unless otherwise noted.

For the year ended March 31, 2012:

  • Revenue from continuing operations was $27.7 million for the 2012 Fiscal Year compared to $30.7 million for the 2011 Fiscal Year. The difference was primarily due to timing on confirmed orders that will be completed in the 2013 Fiscal Year; as of March 31, 2012 the Company had confirmed orders to be completed of $4.5 million.

  • FRP pipe sales increased significantly in the Kazakhstan market to $8.3 million, representing a 214% increase (or $5.7 million) over the prior year's sales of $2.6 million for this market. This substantial increase is a result of ongoing marketing and sales efforts in Kazakhstan over the last 18 months. FRP pipe sales in the China market were $18.9 million and comparable to the $18.8 million achieved in the prior year.

  • Gross profit from continuing operations increased to $9.0 million or 32% of revenues as compared to $8.6 million or 28% of revenues for the 2011 Fiscal Year. The Company aims to maintain a minimum of 30% annualized gross profit margin going forward. The increase in gross profit margin was primarily due to savings driven through disciplined manufacturing cost management and improvements in logistics processes.

  • Positive EBITDA (earnings before interest, income taxes, depreciation and amortization) from continuing operations increased to $1.0 million as opposed to negative EBITDA of $3.3 million for the 2011 Fiscal Year representing a substantial $4.3 million EBITDA improvement. The rise in EBITDA from continuing operations was primarily driven through efficiencies in sales and marketing and reductions in general and administrative expenses in addition to the aforementioned savings. EBITDA per share from continuing operations for the 2012 Fiscal Year was $0.01 as compared to negative $0.05 for the 2011 Fiscal Year.

  • Net loss reduced considerably to $4.0 million as compared to a net loss of $27.2 million for the 2011 Fiscal Year. Basic and diluted loss per share was $0.06 for the 2012 Fiscal Year as compared to basic and diluted loss per share of $0.39 for the 2011 Fiscal Year.

Other Highlights:

  • As of June 21, 2012 and subsequent to the 2012 Fiscal Year end the Company's confirmed FRP pipe sales orders totaled $12.7 million (representing 46% and 41% of the 2012 and 2011 Fiscal Years' annual sales respectively). Of this amount $7.0 million or 55% of the sales orders are to customers in the China market with $5.7 million or 45% to customers in international markets.

  • Also as of June 21, 2012 the Company's international sales activities with bids submitted and being pursued total in excess of $150 million. The scope of these international bids are greater in number, geographic distribution, and potential project values than that previously undertaken in previous years and enquiries continue to be received on a monthly basis.

  • The Company continues to manage its bank loan facilities at reasonable levels. The total principal amount of all bank loans remained at $20.8 million as at March 31, 2012 and equal to the same total principal amount as at March 31, 2011 (for reference the principal amount of bank loans as at March 31, 2010 were $50.8 million). Bank loans have successfully been repaid, renewed or extended when they have reached maturity.

  • The Company previously adopted a formal plan to discontinue its wind power business in order to focus on its core FRP pipe business.

For the three months ended March 31, 2012:

  • Revenue for the fourth quarter of the 2012 Fiscal Year was $6.7 million as compared to $7.4 million for the same period of the prior year.

  • Net loss reduced considerably to $587,000 for the fourth quarter of the 2012 Fiscal Year as compared to a net loss of $20.0 million for the same period of the prior year.

  • Basic and diluted loss per share was $0.01 for the fourth quarter of the 2012 Fiscal Year as compared to basic and diluted loss per share of $0.28 for the same period of the prior year.

Hanwei will host a conference call to discuss its operational and financial results for the year ended March 31, 2012. 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: Friday, June 22, 2012

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

Dial in number: 1-888-213-3922 or 1-913-981-5583

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

Taped Replay Pass Code: 5864999

Live Webcast Link: http://public.viavid.com/index.php?id=100723

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 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, 2012 and Management Discussion and Analysis for the year ended March 31, 2012 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.

STATEMENT OF COMPLIANCE

For fiscal years commencing on or after January 1, 2011, Canadian Generally Accepted Accounting Principles ("Canadian GAAP") were converged with International Financial Reporting Standards ("IFRS"). The Company's financial statements for the year ended March 31, 2012 are the Company's first consolidated financial statements prepared in accordance with IFRS, and IFRS 1 First-time Adoption of International Financial Reporting Standards has been applied. An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 33 of the financial statements for the year ended March 31, 2012 and available on SEDAR at www.sedar.com. This note 33 includes reconciliations of financial position and total comprehensive income for comparative periods and of equity at the date of transition reported under previous Canadian GAAP ("previous GAAP") to those reported for those periods and at the date of transition under IFRS. In preparing its opening IFRS statement of financial position, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Canadian GAAP.

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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