China Natural Gas Announces Fourth Quarter and Full Year 2008 Financial Results
Monday, March 16 2009 - 6:00
CHNG $2.25 $0.37 (%19.68)
NEW YORK, March 16 /PRNewswire-FirstCall/ -- China Natural Gas, Inc. (OTC
Bulletin Board: CHNG), one of the leading providers of pipeline natural gas
for industrial, commercial and residential use and compressed natural gas
(CNG) for vehicular fuel in Xi'an, China, today announced its fourth quarter
and full year financial results for the fiscal year ended December 31, 2008.
Financial Highlights for the Fourth Quarter of 2008:-- Revenues increased 62.9% to $18.4 million;-- Gross profit grew 76.2% to $9.5 million;-- Income from operations increased 90.8% to $5.8 million; and-- Non-GAAP net income of $4.2 million, or $0.14 per diluted share.
"We are delighted to announce our strong results for the fourth quarter
and full year 2008. We achieved revenue of $67.7 million and non-GAAP net
income of $16.2 million for the full year 2008. Both were in-line with our
expectations. Natural gas sales, which grew 97% year over year, continued to
drive our strong results," stated Mr. Qinan Ji, Chairman and CEO of China
Natural Gas.
Mr. Ji continued, "During 2008, we made significant progress expanding our
business and ended the year with 35 CNG filling stations as well as 96,033
residential, commercial and industrial pipeline customers. We also
successfully secured several exclusive contracts to further expand our
pipeline business, including the agreement with the town of Tangyu and the
recently announced exclusive contract with Xi'an Baqiao Science and Technology
Industrial Park. We believe these contracts will benefit our performance
going into 2009 and beyond."
"Even though our business model continues to prove resilient in this
current economic downturn, we remain prudent in expanding our businesses in
this challenging environment and with each dollar of our shareholders' money.
While focusing on growing natural gas business, we will take a more cautious
approach in opening new stations and anticipate fewer station acquisitions
this year. We will also continue to execute on our existing projects. Our
LNG project, expected to complete in the latter half of 2009, will fuel our
growth in 2010 and beyond. Our LNG plant facility will enable us to further
diversify our product portfolio and once it becomes fully operational in
January 2010, we believe we can distribute up to half a million cubic meters
of natural gas per day in the initial phase. In the mean time, we are working
diligently with NASDAQ to obtain listing as soon as we can," Mr. Ji stated.
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Revenue in the fourth quarter of 2008 increased 62.9% to $18.4 million
from $11.3 million in the fourth quarter of 2007. The increase in revenue was
driven by the contribution from 11 additional CNG fueling stations and the
addition of more than 11,000 residential, industrial and commercial pipeline
customers in 2008, bringing the number of stations to 35 and customers to
96,033. Revenue from sales of natural gas increased 68.8% to $15.3 million
from $9.0 million in the fourth quarter of 2007. Installation revenue was
$2.0 million, remained flat compared with $2.2 million in the prior year's
period.
In the fourth quarter of 2008, the Company began to break out revenue
contribution from the sale of gasoline through its CNG fueling stations, as
the revenue contribution from gasoline became material. The Company started
selling gasoline in late 2007 to better serve the diverse needs of its
customers. In the fourth quarter of 2008, gasoline revenue was $1.1 million,
or 6.1% of total revenue. While the company expects revenue from gasoline to
grow steadily, management believes that the sale of natural gas through its
own CNG stations presents the best opportunity for future growth and therefore
will maintain its focus on the expansion of the natural gas business.
Gross profit in the fourth quarter of 2008 increased 76.2% to $9.5 million
from $5.4 million in the fourth quarter of 2007. Gross margin increased 390
basis points to 51.6% in the fourth quarter, compared with 47.7% in 4Q07.
Gross margin performance reflects higher margin generated from the natural gas
revenue, partially offset by lower margin generated from gasoline sales. When
the Company renewed its supply contract in Henan in July of 2008, the purchase
cost per cubic meter of natural gas decreased to RMB 1.0 from RMB 1.55
previously. As a result, natural gas generated gross margin of approximately
55.0%, compared with 46.2% in the prior year's period.
Operating income in the fourth quarter of 2008 increased 90.8% to $5.8
million from $3.0 million in the prior year's period.
Operating margin in the fourth quarter of 2008 was 31.4%, an increase of
4.6% from 26.8% in the prior year's period. Operating expenses in the fourth
quarter of 2008 were $3.7 million, compared with $2.4 million in the prior
year period, reflecting significantly larger business operations, partially
offset by a 4.4% year over year decrease in general and administrative
expense.
The Company began to recognize non-cash non-operating expenses for the
amortization of debt discount and deferred offering costs related to the 5.0%
Guaranteed Senior Notes ("Notes") issued to Abax Lotus in January and March of
2008. In the fourth quarter of 2008, these non-cash non-operating expenses
were $420,048 (after tax) or 0.01 per diluted share.
Net income in the fourth quarter of 2008 increased 62.3% to $3.7 million,
or $0.13 per diluted share, from $2.3 million, or $0.08 per diluted share, in
the fourth quarter of 2007. Excluding the impact of the non-cash expenses
explained above, net income would have been $4.2 million, or $0.14 per diluted
share, representing a growth rate of 80.6%.
Financial Highlights for the Fiscal Year 2008:-- Revenue increased 91.3% to $67.7 million, driven by 11 additional CNGfilling stations in 2008 and continued growth of pipeline customers;-- Gross profit up 88.5% to $32.7 million;-- Income from operations increased 90.1% to $21.1 million;-- Non-GAAP net income of 16.2 million, or $0.55 per diluted share
Revenue for fiscal year 2008 increased 91.3% to $67.7 million from $35.4
million in fiscal year 2007. The increase in revenue was due primarily to
contribution from 11 additional CNG filling stations and the increase in
residential, industrial and commercial pipeline customers to approximately
96,033 from 84,500 in 2007. Revenue from sales of natural gas increased 97.1%
to $55.7 million from $28.3 million in the prior year. Installation revenue
increased 4.0% to $7.4 million from $7.1 million in the fiscal year 2007.
Gasoline revenue for the fiscal year was $4.6 million.
Gross profit for fiscal year 2008 increased 88.5% to $32.7 million from
$17.4 million in 2007. The increase in gross profit primarily reflected the
addition of 11 fueling stations. For fiscal year 2008, gross margin decreased
73 basis points to 48.3% from 49.1% in 2007. The decrease is primarily
attributable to the increase in gasoline sales, which generated gross margin
of 7.3%, compared with 51.1% generated by natural gas sales and 52.8% by
installation revenue.
Operating expenses in the fiscal year 2008 increased 85.7% to $11.7
million from $6.3 million, reflecting costs associated with larger business
operations, as well as continued expenses related to the identification of
future natural gas fueling station locations and costs associated with the
government licensing and approval process. Operating income increased 90.1%
to $21.1 million from $11.1 million. Operating margin decreased 20 basis
points to 31.1% from 31.3% in the prior year, as a result of increased
operating expense.
Net income for fiscal year 2008 increased 66.6% to $15.2 million, or $0.52
per share, from $9.1 million, or $0.35 per share, in the fiscal year 2007.
Excluding the impact of the non-cash expenses explained above, net income
would have been $16.2 million, or $0.55 per diluted share, representing a year
over year growth of 77.6%.
Balance Sheet
As of December 31, 2008, the Company had cash and cash equivalents of $5.9
million, compared with $20.4 million as of September 30, 2008, and $29.2
million as of June 30, 2008.
Conference Call
The Company will hold a conference call on Monday, March 16, 2009, at 8:00
am ET to discuss its fourth quarter and full year 2008 results. Listeners may
access the call by dialing 1-888-205-6743 or 1-913-312-0411 for international
callers. A webcast will also be available via the Company's website at
China Natural Gas, Inc. - Home. A replay of the call will be available through March
23, 2009. Listeners may access the replay by dialing 1-888-203-1112 or 1-719-
457-0820 for international callers, access code: 7468764.
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