SOURCE: New Oriental Energy & Chemical Corp.

New Oriental Energy & Chemical Corp.

February 22, 2011 16:16 ET

New Oriental Energy & Chemical Corp. Reports Third Quarter and Nine Month Losses

Company Anticipates Operations Will Restart by the End of This Month Following Production Halt in November Due to Cash Flow Problems

XINYANG, CHINA--(Marketwire - February 22, 2011) -  New Oriental Energy & Chemical Corp. (NASDAQ: NOEC) (the "Company"), a China-based specialty chemical and emerging coal-based alternative fuel manufacturer, today announced results for its third quarter and nine months ended December 31, 2010.

In the Company's third quarter, on a decline in revenues from $8,7700,449 in the same period last year to $943,757, the Company incurred a net loss of $(2,477,305) or $(0.15) per share on 17,012,458 weighted average shares outstanding. This compared with a net loss in the third quarter last year of $(1,616,408) or $(0.13) per share on 12,640,000 weighted average shares outstanding.

Revenues in the first nine months of the current fiscal year were $18,034,768 on which the Company incurred a net loss of $(5,799,489) or $(0.38) per share on 15,079,883 weighted shares outstanding. This compared with revenues in the prior fiscal year nine month period of $24,704,321 and a net loss in the period of $(7,940,922) or $(0.63) per share on 12,640,000 weighted average shares outstanding.

The Company described the declines in third quarter and nine month revenues and the resulting losses in these periods as mainly due to the fact that from June 21, 2010 to October 15, 2010 the Company ceased all production for maintenance of its manufacturing systems. Further, after a brief resumption of production, the Company again ceased production on November 15, 2010 due to its cash flow problems. The Company noted that as of December 31, 2010 it had a negative cash flow from operations of $6,247,498 and a working capital deficit of $43,244,159.

Financial Resources Being Sought To Resume Production in February

Mr. Chen Si Qiang, President and CEO of the Company, stated, "We have been working tirelessly to strengthen our financial position and to obtain the financing required to restart production. We believe production can be resumed by the end of February and that operating performance can return to normal levels within one year."

The Company said that its major shareholder has committed to provide financial assistance of RMB 30 million to RMB 50 million over the next few years, if necessary. In addition, he has extended repayment for one more year of a $10,448,908 loan and has promised to provide guarantees for future debt, if necessary.

The Company added that it intends to finance business activity through bank loans, related party loans and notes payable, if required, while other capital expenditures are expected to be financed by cash flow from operations when manufacturing is restarted. The Company anticipates improving cash flow as business operations rebound and the global economy continues to recover.

Currently, the Company also projects that the 200,000 ton new addition to its methanol manufacturing facility, previously expected to be completed by December 31, 2010, will now be completed in April. As of December 31, 2010 the Company entered into agreements and made a down payment of $25.1 million toward the purchase of production equipment to be used in its methanol production. The Company will be required to pay the $7.82 million remaining amount of the purchase price prior to delivery of equipment, which is estimated to occur this year, and will need $12 million to finish the methanol plant expansion.

Mr. Chen Si Qiang concluded, "We are sincerely appreciative for the cooperation we have received from the Company's lenders, suppliers and shareholders in this difficult period, and remain optimistic that our alternative energy products and solutions will ultimately achieve their potential."

 
NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(UNAUDITED)
           
    Three Months Ended
December 31,
    Nine Months Ended
December 31,
    2010     2009     2010     2009
                       
REVENUES $ 943,757   $ 8,770,449   $ 18,034,768   $ 24,704,321
                       
COST OF GOODS SOLD   (1,911,527)     (8,515,088)     (19,904,189)     (28,006,407)
                       
GROSS (LOSS) PROFIT   (967,770)     255,361     (1,869,421)     (3,302,086)
                       
General and administrative   549,159     622,722     1,680,316     1,829,231
                       
Selling and distribution   34,269     367,075     289,016     914,635
                       
Research and development   12,340     14,707     39,845     57,375
                       
LOSS FROM OPERATIONS   (1,563,538)     (749,143)     (3,878,598)     (6,103,327)
                       
OTHER INCOME (EXPENSES)                      
                       
Interest expense, net   (956,460)     (597,012)     (2,271,518)     (1,484,457)
                       
Government grants   338,156     -     335,008     -
                       
Other income, net   385     10,551     9,422     13,300
                       
Change in fair value of derivatives   (295,848)     -     6,197     -
                       
LOSS BEFORE INCOME TAXES   (2,477,305)     (1,335,604)     (5,799,489)     (7,574,484)
                       
INCOME TAX EXPENSE   -     (280,804)     -     (366,438)
                       
NET LOSS   (2,477,305)     (1,616,408)     (5,799,489)     (7,940,922)
                       
OTHER COMPREHENSIVE INCOME                      
                       
Foreign currency translation gain   31,253     18,681     80,651     8,255
                       
OTHER COMPREHENSIVE INCOME   31,253     18,681     80,651     8,255
                       
COMPREHENSIVE LOSS $ (2,446,052)   $ (1,597,727)   $ (5,718,838)   $ (7,932,667)
                       
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED   17,012,458     12,640,000     15,079,883     12,640,000
                       
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.15)   $ (0.13)   $ (0.38)   $ (0.63)

About New Oriental Energy & Chemical Corp.

New Oriental Energy & Chemical Corp. (NASDAQ: NOEC) is an emerging coal-based alternative fuels and specialty chemical manufacturer based in Henan Province, in the PRC. The Company's core products are urea and other coal-based chemicals primarily utilized as fertilizers. Future growth is anticipated from its focus on expanding production of coal-based alternative fuels, in particular, methanol, as an additive to gasoline and dimethyl ether (DME), which has been a cheaper, more environmentally friendly alternative to LPG for home heating and cooking, and diesel fuel for cars and buses. All of the Company's sales are made through a network of distribution partners in the PRC. Additional information on the Company is available on its website at www.neworientalenergy.com.

Safe Harbor Statement

This press release may contain 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, development, shipment, market acceptance, 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 risk 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.

Contact Information

  • Contact:

    Li Donglai
    Chief Financial Officer
    New Oriental Energy & Chemical Corp.
    Xicheng Industrial Zone of Luoshan, Xinyang
    Henan Province, The People's Republic of China
    Tel: (011-86) 139-3764-6299