WUHAN, China, Aug. 14 -- Wuhan General Group (China), Inc. (Nasdaq: WUHN) ('Wuhan General' or the 'Company'), a leading manufacturer of industrial blowers and turbines in China, operating through its subsidiaries, Wuhan Blower Co., Ltd. ('Wuhan Blower'), Wuhan Generating Equipment Co., Ltd. ('Wuhan Generating') and Wuhan Xingelin Machinery Equipment Manufacturing Co., Ltd. ('Wuhan Xingelin'), today reported financial results for the second quarter ended June 30, 2009.
Second Quarter 2009 Highlights
-- Second quarter revenue was $17.2 million, down 5.1% quarter-over-quarter
-- Gross profit was $4.1 million, a quarter-over-quarter increase of 7.6%
-- Gross margin was 23.8% compared to 21.0% in the first quarter of 2009
-- Net income was $18,316, while non-GAAP net income excluding the stock-based penalty payment was $1.2 million, or $0.05 per diluted share, compared to $1.1 million, or $0.03 per diluted share, for the first quarter of 2009
-- Launched its new corporate website under the domain name http://www.wuhangeneral.com in June
-- Joined the Russell Microcap(R) Index in June
'The slowdown in activities of our customers in the steel industry and power plants at the end of 2008 and early 2009 reduced demand for our blowers and turbines in the first half of 2009. Nevertheless, we have seen a pick up in orders recently as the steel industry began to recover in April 2009. Our sales cycle is long compared to other industries as it takes approximately 45 to 90 days to construct a typical blower and three to four months to construct a typical turbine. In July, we began to see improvements as our backlog of turbine and blower orders increased 126% and 210% respectively as compared to the first quarter of 2009,' commented Mr. Xu Jie, CEO of Wuhan General. 'Our gross margin increased quarter-over-quarter as economic conditions improved and the number of infrastructure projects available for bid increased.'
Second Quarter 2009 Results
For the second quarter ended June 30, 2009, total revenue was $17.2 million, compared to $31.0 million for the same period last year. Wuhan Blower generated $10.1 million in revenues, or 58.9% of the total revenues, compared to $14.7 million, or 47.3% of total revenues in the same period last year. Wuhan Generating contributed $6.9 million, or 40.4% of the total revenues, compared to $16.3 million, or 52.7% of total revenues for the same period last year. The remaining $0.1 million in revenues for the second quarter of 2009 was contributed by Wuhan Xingelin through sales of parts and components to unrelated third parties. The decrease in total revenue was primarily due to decreased activities by Chinese steel companies and power plants at the end of 2008 and beginning of 2009. Although these sectors have since rebounded along with the overall economic climate in China, the Company's sales lag recovery by approximately three months. Consequently, the Company expects to see the impact of improved economic conditions in sales for the second half of 2009.
Gross profit for the quarter was $4.1 million, down 57.4% from $9.6 million in the second quarter of 2008. However, gross profit increased 7.6% from $3.8 million in the first quarter 2009. Gross margin was 23.8%, down from 30.9% compared to the same period in 2008. The decrease in gross margin was primarily attributable to a decline in selling prices year-over-year. Compared to the first quarter of 2009, gross margin rose 2.8 percentage points as the Company managed to increase selling prices during the second quarter of 2009 while production costs remained at first quarter levels.
Operating expenses totaled $2.0 million, down 45.6% from $3.7 million from the same period last year. Selling expenses decreased 66.8% to roughly $0.3 million while selling expenses as a percent of revenue decreased from 3.0% to 1.8% year-over-year due to better control of selling expenses. General and administrative expenses declined 30.8% year-over-year, but increased as a percentage of sales from 7.2% for the three months ended June 30, 2009 to 9.0% for the corresponding three months last year due to lower economies of scale as a result of lower revenue. As a percentage of revenue, total operating expenses were 11.7% for the second quarter of 2009, compared to 11.9% for the same period last year.
Operating income was $2.1 million for the quarter compared to $5.9 million for the second quarter of 2008. However, operating income increased 12.5% from the first quarter of 2009 and operating margin improved from 10.2% to 12.1% during the same period.
Net income for the second quarter of 2009 was $18,316, or $0.00 per diluted share, compared to $5.5 million, or $0.12 per diluted share in the same period the prior year.
During the second quarter 2009, the Company incurred a non-cash charge of $1.2 million associated with shares of common stock issued as a penalty. Adjusting for this non-cash charge, non-GAAP net income for the second quarter of 2009 was $1.2 million, or $0.05 per fully diluted earnings per share. For a detailed reconciliation of non-GAAP net income to GAAP net income, see the financial tables at the end of this release.
Six Months Results
Total revenue for the first six months of 2009 declined to $35.2 million, down 37.8% from the first six months of 2008. Wuhan Blower generated $20.4 million in revenues, or 57.8% of total revenues, compared to $27.4 million, or 48.4% of total revenues in the same period last year. Wuhan Generating contributed $14.7 million, or 41.6% of the total revenues, compared to $29.2 million, or 51.6% of total revenues in the same period last year. The remaining $0.1 million in revenues in first half of 2009 was contributed by Wuhan Xingelin. Gross profit for the first six months of 2009 was $7.9 million, down 55.4% from overall gross profit of $17.6 million in the comparable period a year ago. Overall gross margin was 22.3% for the first six months of 2009, compared to 31.1% for the corresponding period in 2008. Income from operations was $3.9 million, down 65.3% from $11.3 million in the first six months of 2008. Net income for the first six months of 2009 was $1.1 million, down 89.0% from $10.3 million in the first six months of 2008. Fully diluted earnings per share were $0.03 for the first six months of 2009 compared to $0.22 in the first six months of 2008. Adjusting for non-cash charges associated with penalty shares, non-GAAP net income for the first six months of 2009 was $2.3 million or $0.08 per fully diluted earnings per share.
Financial Condition
As of June 30, 2009, Wuhan General had $2.0 million in cash and $43.0 million in accounts receivable compared to $2.8 million and $41.5 million respectively as of December 31, 2008. The Company had $34.4 million in working capital with a current ratio of 1.6 and stockholders' equity of $95.6 million as of June 30, 2009. Wuhan General's short-term bank loans and notes were $25.1 million as of June 30, 2009. At the present time, the Company has the option to refinance most of these loans and notes.
For the six months ended June 30, 2009, the Company generated $1.8 million in cash from operating activities compared to $0.9 million in the same period last year.
Business Outlook
'Although the first half of the year has been challenging, we see signs of our sales improving in the second half of 2009 as orders have increased, especially from steel companies and hydropower plants. These sectors should continue to benefit from the Chinese government's economic stimulus package,' said Mr. Xu. 'We are now focused on rebuilding our order backlog and winning new customers. We have deployed additional resources for collecting outstanding accounts receivable and have aligned our sales commissions more closely with successful collection, which in time should decrease the average collection time for our accounts receivable.'
The Company's newly established subsidiary Wuhan Xingelin began production in the first half of 2009. The Company expects the acquisition of Xingelin to allow it to produce parts and components for Wuhan Generating and Wuhan Blower at a lower cost compared to outsourcing production to third parties. Only the revenue from sales of parts and components to third parties is shown as revenue for Xingelin.
As of the end of July 2009, Wuhan Generating had a backlog of RMB 120 million (approximately $17.6 million), while Wuhan Blower had a backlog of RMB 222 million (approximately $32.5 million). The Company expects to realize the revenue from these orders in the third and fourth quarters of 2009.
For fiscal year 2009, Wuhan General maintains its prior guidance of revenues at least $70 million to $80 million and net income at least $7 million to $8 million, excluding the impact of non-cash penalty charge associated with the Company's capital market activities.
Conference Call
The Company will host a conference call at 8:00 a.m. EDT on Friday, August 14, 2009 to discuss the second quarter 2009 results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-866-730-5764. International callers should dial +1-857-350-1588. When prompted by the operator, mention conference passcode 833-944-51. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, August 14, 2009 at 10:00 a.m. EDT. To access the replay, please dial 1-888-286-8010 and enter passcode 474-200-84. International callers should dial +1-617-801-6888 and enter passcode 474-200-84.
About Wuhan General Group (China), Inc.
Through its subsidiaries Wuhan Blower, Wuhan Generating, and Wuhan Xingelin, Wuhan General is a leading manufacturer of industrial blowers and turbines in China and the Company is based in Wuhan, Hubei Province, China. Wuhan Blower is a China-based manufacturer of industrial blowers that are principal components of steam-driven electrical power generation plants. Wuhan Generating is a China-based manufacturer of industrial steam and water turbines used for electricity generation in coal, oil, nuclear, and hydroelectric power plants. Wuhan Xingelin manufactures silencers, connectors and other general parts for industrial blowers and electrical equipment, and it produces general machinery equipment. The Company's primary customers are from the iron and steel, power generation, petrochemical and other industries. Led by a strong management team, Wuhan General is well recognized for its technological sophistication and quality construction of blowers and turbines.
Safe Harbor Statement
Certain statements in this press release, including statements regarding future revenue, net income and sales, future demand for our products, improvement in economic conditions, the effects of the Chinese government's stimulus plan on our businesses and our customers' businesses, the synergy between Wuhan Xingelin and our blower and turbine businesses, our ability to refinance our debt and improvement in the collection of our accounts receivable may be forward-looking in nature or 'forward-looking statements,' as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks and uncertainties, including all business uncertainties relating to vulnerability of our business to general economic downturn, operating in the People's Republic of China (PRC) generally and the potential for changes in the laws of the PRC that affect our operations, our failure to meet or timely meet contractual performance standards and schedules and other factors that may cause actual results to be materially different from those described in such forward-looking statements. Certain of these risks and uncertainties are or will be described in greater detail in our filings with the Securities and Exchange Commission. These forward-looking statements are based on Wuhan General's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting Wuhan General will be those anticipated by the Company. Wuhan General undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
To view the Second Quarter Financial Table Results, please click Here
For more information, please contact:
Wuhan General Group, Inc.
Mr. Haiming Liu, CFO
Tel: +86-27-5970-0069
Email: haiming.liu@wuhangeneral.com
Web: http://www.wuhangeneral.com
CCG Investor Relations Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Ms. Linda Salo, Financial Writer
Email: linda.salo@ccgir.com
Tel: +1-646-922-0894
Web: http://www.ccgirasia.com
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