Gushan Environmental Energy Limited Announces Fourth Quarter and Full Year 2007 Year Results
NEW YORK, March 5 /PRNewswire-FirstCall/ -- Gushan Environmental Energy Limited ("Gushan"; NYSE: GU), China's largest producer of biodiesel as measured by annual production capacity, today announced its unaudited financial results for the fourth quarter and year ended December 31, 2007.
Fourth Quarter 2007 Highlights
-- Total revenues increased 50.4% compared to the corresponding quarter of
2006
-- Income from operations increased 104.0% compared to the corresponding
quarter of 2006
-- One-time non-cash interest expenses of RMB108.9 million (US$14.9
million) in connection with the conversion of convertible notes
-- Net loss of RMB19.8 million (US$2.7 million) in the fourth quarter of
2007, compared to net income of RMB48.5 million (US$6.6 million) for
the fourth quarter of 2006
-- Sales volume of biodiesel increased 31.2% compared to the corresponding
quarter of 2006
-- Average selling price of biodiesel increased 13.5% compared to the
corresponding quarter of 2006
Full Year 2007 Highlights
-- Total revenues increased 22.3% compared to 2006
-- Income from operations increased 15.0% compared to 2006
-- One-time non-cash interest expenses of RMB108.9 million (US$14.9
million) in connection with the conversion of convertible notes
-- Net income decreased 30.8% compared to 2006
-- Sales volume of biodiesel increased 15.1% compared to 2006
-- Average selling price of biodiesel increased 5.2% compared to 2006
Three months For the year
(in US$ thousand, except per ended December 31 ended December 31
share data) 2006 2007 2006 2007
Revenues 24,753 37,237 113,026 138,193
Gross profit 9,438 16,212 51,784 60,193
Income from operations 6,692 13,652 45,662 52,522
Net income / (loss) 6,642 (2,715) 45,623 31,568
Diluted earnings per share 0.049 (0.021) 0.341 0.251
Diluted earnings per ADS 0.098 (0.042) 0.682 0.502
Gross profit margin 38.1% 43.5% 45.8% 43.6%
Net profit margin 26.8% -7.3% 40.4% 22.8%
Sale volume of biodiesel tons 35,344 46,382 158,994 182,969
ASP of biodiesel RMB/ton 4,494 5,100 4,393 4,621
Sale volume of by-products tons 4,471 5,316 21,479 22,134
ASP of by-products RMB/ton 4,858 6,601 5,868 7,346
Notes:
For the convenience of readers, certain RMB amounts have been translated into US dollars at the rate of RMB7.2946 to US$1.00, the noon buying rate for US dollars in effect on December 31, 2007 for cable transfers of RMB per US dollar as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that RMB amounts could have been, or could be, converted into US$ at that rate or at any other certain rate on December 31, 2007, or at any other date.
"In 2007, we achieved another year of solid growth and continued to build on our leadership in China's fast-growing biodiesel market," said Jianqiu Yu, Chairman and Principal Executive Officer of Gushan. "Demand for diesel in China to fuel the nation's rapid economic growth continues to outstrip growth in supply and Gushan is continuing to expand production capacity to meet growing demand. The Company's total production capacity increased from 170,000 tons, or approximately 51 million gallons, at the end of 2006 to 190,000 tons, or approximately 57 million gallons, at the end of 2007, and to 240,000 tons, or approximately 72 million gallons, currently with the recent opening of Gushan's plant in Beijing, the Company's fourth production facility. Further expansion of the Beijing plant and new plants set to open this year in Shanghai, Chongqing and Hunan are expected to boost Gushan's total annual production capacity to 400,000 tons, or approximately 120 million gallons, by the end of 2008. As a first mover in China's biodiesel market with a proven track record, proprietary production technology, a competitive cost structure, reliable supply of low cost raw materials, rigorous quality control and strong management team, Gushan is well-positioned for sustained growth and market leadership."
2007 Dividend
On March 5, 2008, the board of directors declared dividends of RMB0.41 (US$0.056) per ordinary share of the Company, or (RMB0.82 (US$0.112) per ADS in respect of the year. The dividend is payable on or before May 30, 2008 to shareholders of record at the close of business on April 3, 2008, U.S. Eastern Time. The dividend will be payable in cash, in US$, and the exchange rate between RMB and US$ shall be ascertained on the basis of the average of the noon buying rates as published by the Federal Reserve Bank of New York for the five trading days prior to April 3, 2008. As the dividend was declared after the balance sheet date, it has not been included in the liabilities at of December 31, 2007.
Fourth Quarter 2007 Results
Revenues
The Company's revenues increased by 50.4% from RMB180.6 million (US$24.8 million) for the fourth quarter of 2006 to RMB271.6 million (US$37.2 million) for the fourth quarter of 2007. During the same period its sales volume of biodiesel and by-products increased by 11,038 tons and 845 tons, representing an increase of 31.2% and 18.9%, respectively. This growth in revenues was due to an increase in sales volume, as well as an increase in the average selling price of the Company's biodiesel and by-products, respectively, from RMB4,494 (US$616.10) and RMB4,858 (US$666.00) per ton in the fourth quarter of 2006 to RMB5,100 (US$699.10) and RMB6,601 (US$904.90) per ton in the fourth quarter of 2007, representing an increase of 13.5% and 35.9%. The increase in sales volume was supported by an increase of 20,000 tons, or approximately 6 million gallons, in the annual production capacity of Sichuan Gushan during the fourth quarter of 2007. The increase also reflected the temporary suspension of production at the Fujian plant to install a covered storage tank in November 2006, which reduced revenues during the fourth quarter of 2006.
Cost of Revenues
Cost of revenues for the fourth quarter of 2007 totaled RMB153.4 million (US$21.0 million), an increase of RMB41.7 million (US$5.7 million) or 37.3%, compared to RMB111.7 million (US$15.3 million) for the fourth quarter of 2006. This increase was primarily attributable to increases in the Company's production volume and overall average per unit costs for vegetable oil offal and used cooking oil as a result of a general increase in labor and transportation costs in China.
Gross Profit
The Company's gross profit for the fourth quarter of 2007 totaled RMB118.3 million (US$16.2 million), an increase of RMB49.5 million (US$6.8 million), or 71.9%, compared to RMB68.8 million (US$9.4 million) in the fourth quarter of 2006. The Company's gross margin increased to 43.5% for the fourth quarter of 2007 from 38.1% for the fourth quarter of 2006 for the reasons discussed above.
Research and Development Expenses
Research and development expenses totaled RMB0.6 million (US$0.1 million) in the fourth quarter of 2007, an increase of 44.2% from RMB0.4 million (US$0.1 million) for the fourth quarter of 2006. This increase was primarily due to an increase in costs incurred in connection with the Company's joint research and development programs with two research institutions in China.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the fourth quarter of 2007 totaled RMB18.1 million (US$2.5 million), a decrease of 7.8% from RMB19.6 million (US$2.7 million) for the fourth quarter of 2006. This decrease was primarily due to a decrease in share-based compensation by RMB1.1 million (US$0.2 million) and decrease in provision for the statutory staff welfare expense by RMB8.0 million (US$1.1 million). The above increases were offset by an increase in staff bonus of RMB7.8 million (US$1.1 million).
Other Income (Expense)
Total interest expense for the fourth quarter of 2007 was RMB108.9 million (US$14.9 million) compared to nil for the fourth quarter of 2006. This was the result of one-time non-cash interest expense upon the conversion of the Company's convertible notes in the fourth quarter of 2007, into ordinary shares of the Company upon completion of the initial public offering. For the quarter ended December 31, 2006, all interest expenses derived from the convertible notes were fully capitalized.
Income Tax Expense
Income tax expense for the fourth quarter of 2007 was RMB12.1 million (US$1.7 million), compared with an expense of RMB0.7 million (US$0.1 million) for the fourth quarter of 2006. This increase is primarily the result of the expiration of the exemption from Enterprise Income Tax ("EIT") with respect to Sichuan Gushan and Handan Gushan. As of January 1, 2007, the income tax rate applicable to Sichuan Gushan and Handan Gushan increased from 3% to 18% and from 0% to 15%, respectively.
Net Income / (Loss)
The Company's net loss for the fourth quarter of 2007 was RMB19.8 million (US$2.7 million), while net income for the fourth quarter of 2006 was RMB48.5 million (US$6.6 million). This was mainly due to the one-time non-cash write- off of the unamortized amount of the beneficial conversion feature mentioned above.
Full Year 2007 Results
Revenues
The Company's full-year revenues increased 22.3% from RMB824.5 million (US$113.0 million) in 2006 to RMB1,008.1 million (US$138.2 million) in 2007. For the full year, sales volume of biodiesel and by-products increased 15.1% and 3.1%, respectively, to 182,969 tons and 22,134 tons. This was due to the full-year 2007 contribution to production from Fujian Gushan, which started production in February 2006, an increase in the annual production capacity of Sichuan Gushan by 20,000 tons, or approximately 6 million gallons, during the fourth quarter of 2007, which contributed to an increase in revenues and sales volume of that plant, and an increase in the average selling price of the Company's biodiesel and by-products from RMB4,393 (US$602.20) and RMB5,868 (US$804.40) per ton, respectively, in 2006 to RMB4,621 (US$633.30) and RMB7,346 (US$1,007.00) per ton in 2007, representing increases of 5.2% and 25.2%.
Cost of Revenues
Full-year 2007 cost of revenues totaled RMB569.0 million (US$78.0 million), an increase of RMB122.3 million (US$16.8 million), or 27.4%, from RMB446.7 million (US$61.2 million) in 2006. This increase was primarily attributable to increases in the Company's total production and an increase in the overall average per unit costs for vegetable oil offal and used cooking oil as a result of a general increase in labor and transportation costs in China.
Gross Profit
The Company's gross profit for 2007 totaled RMB439.1 million (US$60.2 million), an increase of RMB61.4 million (US$8.4 million), or 16.2%, compared to RMB377.7 million (US$51.8 million) in 2006. Gross margin decreased to 43.6% in 2007 from 45.8% in 2006 for the reasons discussed above.
Research and Development Expenses
Research and development expenses totaled RMB2.4 million (US$0.3 million) in 2007, an increase of 125.7% from RMB1.1 million (US$0.2 million) in 2006. This increase was primarily due to an increase in costs associated with the Company's joint research and development programs with two research institutions in China.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the year totaled RMB53.6 million (US$7.3 million), an increase of 22.9% from RMB43.6 million (US$6.0 million) in 2006. This increase was primarily due to an increase in share- based compensation by RMB3.9 million (US$0.5 million), an increase in basic staff cost by RMB4.5 million (US$0.6 million) due to expansion of the Company's Hong Kong office, Fujian headquarters, and Beijing and Shanghai plants, an increase of pre-operating expenses of Beijing Gushan and Shanghai Gushan by RMB1.6 million (US$0.2 million), and an increase of staff bonus of RMB7.8 million (US$1.1 million). The above increases were offset by a decrease in the statutory staff welfare expense by RMB7.9 million (US$1.1 million). Gushan also incurred professional fees in the amount of RMB9.9 million (US$1.4 million), which mainly included the audit fee of RMB6.4 million (US$0.9 million).
Other Income (Expense)
The Company's interest income for 2007 totaled RMB3.8 million (US$0.5 million), a decrease of RMB0.8 million (US$0.1 million) from RMB4.5 million (US$0.6 million) in 2006. This decrease was primarily due to a higher proportion of RMB deposits, which carry a lower interest rate than U.S. or Hong Kong Dollar deposits.
Total interest expense for 2007 was RMB108.9 million (US$14.9 million), an increase of RMB105.7 million (US$14.5 million) from RMB3.2 million (US$0.4 million) in 2006. This increase was entirely due to the one-off non-cash interest expenses of RMB108.9 million (US$14.9 million) in connection with the writing-off of the unamortized amount of the beneficial conversion feature of the Company's convertible notes in the fourth quarter of 2007, which resulted from the conversion of the Company's convertible notes into ordinary shares of the company upon completion of the initial public offering. For 2006, all interest expenses derived from the convertible notes were fully capitalized.
Income Tax Expense
Income tax expense for 2007 was RMB48.5 million (US$6.6 million), compared with RMB4.4 million (US$0.6 million) in 2006. The effective tax rate for 2007 was 17.4% compared to 1.3% for 2006. This increase is primarily the result of the expiration of the exemption from EIT with respect to Sichuan Gushan and Handan Gushan. As of January 1, 2007, the income tax rate applicable to Sichuan Gushan and Handan Gushan increased from 3% to 18% and from 0% to 15%, respectively.
Net Income
The Company's net income for 2007 was RMB230.3 million (US$31.6 million), a decrease of RMB102.5 million (US$14.1 million), or 30.8%, from RMB332.8 million (US$45.6 million) in 2006 for the reasons discussed above.
Financial Condition
As of December 31, 2007, the Company had working capital of RMB1,330.7 million (US$182.4 million), represented by total current assets of RMB1,455.5 million (US$199.5 million) and total current liabilities of RMB124.8 million (US$17.1 million). Of the total current assets, the Company had RMB1,380.7 million (US$189.3 million) in cash and cash equivalents. During the fourth quarter of 2007, the Company completed its initial public offering, generating net proceeds of RMB981.8 million (US$134.6 million), net of underwriting discounts and commissions.
Outlook for 2008
Gushan currently operates four production facilities, located in Sichuan, Heibei, Fujian and Beijing in China with an annual total biodiesel capacity of 240,000 tons, or approximately 72 million gallons. We expect to commence operations at our new Shanghai plant (with annual total biodiesel capacity of 50,000 tons, or approximately 15 million gallons) during the second quarter of 2008 and at our new plants in Chongqing and Hunan (each with annual total biodiesel capacity of 30,000 tons, or approximately 9 million gallons) during the fourth quarter of 2008. In addition, the Company expects to increase the annual biodiesel production capacity at its Beijing plant from 50,000 tons (or approximately 15 million gallons) to 100,000 tons (or approximately 30 million gallons) in the fourth quarter of 2008. As a result, the company expects that its annual total biodiesel capacity to reach 400,000 tons (or approximately 120 million gallons) by the end of 2008. Based on current circumstances and barring any unforeseen events, Gushan estimates that its total biodiesel production volume in 2008 will be approximately 270,000 tons, or approximately 81 million gallons.
Recent Events
In January 2008, the Company's Beijing plant commenced production, adding 50,000 tons (or approximately 15 million gallons) to the company's annual biodiesel production capacity.
In December 2007 and January 2008, the Company, through its newly established subsidiaries, Chongqing Gushan Bio-Sources Energy Co., Ltd. and Hunan Gushan Bio-Sources Energy Co., Ltd., entered into agreements for the acquisition of land use rights to areas in Chongqing and Hunan, respectively, for the construction of biodiesel facilities to further expand Gushan's production capacity.
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