SHANGHAI, Aug. 13 /PRNewswire-Asia-FirstCall/ -- Chemspec
International Limited (NYSE: CPC; "Chemspec" or the "Company"), a
leading China-based contract manufacturer of highly-engineered
specialty chemicals, today announced its unaudited financial
results for the second quarter ended June 30, 2009. Second Quarter
2009 Financial Highlights(1) -- Total sales were RMB233.5 million
(US$34.2 million), an increase of 8.1% from the second quarter of
2008 and an increase of 16.6% from the first quarter of 2009 --
Gross profit was RMB95.3 million (US$13.9 million), an increase of
9.7% from the second quarter of 2008 and an increase of 25.5% from
the first quarter of 2009 -- Income from operations was RMB67.2
million (US$9.8 million), an increase of 1.9% from the second
quarter of 2008 and an increase of 34.2% from the first quarter of
2009 -- Net income attributable to Chemspec International Limited
shareholders was RMB53.9 million (US$7.9 million), a decrease of
5.6% from the second quarter of 2008 and an increase of 64.7% from
the first quarter of 2009 -- Basic and diluted earnings per ADS
were RMB1.77 (US$0.26), as compared to RMB1.90 in the second
quarter of 2008 and RMB1.09 in the first quarter of 2009 (1)
Certain Renminbi (RMB) amounts in this press release have been
translated into U.S. dollar (USD) solely for the convenience of the
reader. The conversion of RMB into USD in this release is based on
the Federal Reserve Board certified exchange rate on June 30, 2009,
which was RMB6.8302 to USD1.00. The percentages stated are
calculated based on RMB. Dr. Jianhua Yang, Chairman and CEO of
Chemspec, commented, "We are pleased with our second quarter
financial results and our first quarterly reporting as a publicly
traded company. During the quarter, we saw a recovery in demand for
our specialty chemicals used in the manufacturing of electronics.
This helped drive an increase in sales in the second quarter of
2009 and demonstrates the strength of our business model. Despite
the challenging global economic environment, our fast and flexible
manufacturing facilities, strong process technologies, experienced
management team, lean cost controls as well as solid global
blue-chip customer base all contributed to our strong quarterly
financial results. However, looking forward, some of our customers
in the agrochemical and pharmaceutical end-markets around the world
have been affected by the challenging global economic environment
and have experienced a significant slowdown and/or decline in
growth in the second quarter of 2009. As a result, they have
reduced their purchase orders for deliveries in the third quarter
of 2009 in order to adjust the timing of their planned
commercialization of new products as well as reduce their inventory
levels. We believe we will still be able to achieve top line sales
growth this year because we continue to be selected as a reliable
and preferred source of fluorinated specialty chemicals by our
solid base of long-term blue chip end-users. We are confident that
our annual top line sales growth can continue in year 2010 based on
our strong project pipelines and as the global economy recovers."
Second Quarter 2009 Financial Results Total Sales For the three
months ended June 30, 2009, the Company generated total sales of
RMB233.5 million (US$34.2 million), an increase of 8.1% from
RMB216.0 million in the second quarter of 2008 and an increase of
16.6% from RMB200.3 in the first quarter of 2009. Total sales were
within the range of sales estimates previously provided by the
Company on August 3, 2009. Included in the total sales for the
three months ended June 30, 2009 was RMB 19.4 million (US$2.8
million) of sales of purchased goods. Gross Profit and Gross Margin
Gross profit was RMB95.3 million (US$13.9 million) in the second
quarter of 2009, an increase of 9.7% from RMB 86.8 million in the
second quarter of 2008, and an increase of 25.5% from RMB 75.9
million in the first quarter of 2009. Gross margin was 40.8% in the
second quarter of 2009, as compared to 40.2% in the second quarter
of 2008 and 37.9% in the first quarter of 2009. The increase in
gross margin in the second quarter of 2009 from the first quarter
of 2009 reflects the higher average unit selling price and the
Company's continued efforts to improve manufacturing processes and
cost control. Operating Expenses Selling expenses and general and
administrative expenses of RMB20.2 million (US$3.0 million) during
the second quarter of 2009, representing an increase of 38.8% from
RMB14.6 million in the second quarter of 2008 and an increase of
23.0% compared with RMB16.4 million in the first quarter of 2009.
The increases were caused primarily by an increase in
administrative headcount due to the fast growth and personnel needs
of the Company and to some extent the increased shipping costs
associated with the change of product mix. Research and development
expenses increased by 20.1% to RMB7.1 million (US$1.0 million)
during the second quarter of 2009 from RMB5.9 million in the second
quarter of 2008 and decreased by 19.6% from RMB8.8 million in the
first quarter of 2009. The increase compared with the same period
in 2008 was due primarily to an increase in hiring of highly
experienced scientists, especially from overseas, to enhance the
Company's R&D capabilities to meet the growing needs of
customers. The decrease from the preceding quarter was the result
of decrease in R&D material consumption. Income from operations
and earnings before income taxes Income from operations was RMB67.2
million (US$9.8 million) and earnings before income tax was RMB
68.2 million (US$10.0 million) in the second quarter of 2009,
increases of 1.9% and 6.1%, respectively, from the second quarter
of 2008, and increases of 34.2% and 44.5%, respectively, from the
first quarter of 2009. Net income attributable to Chemspec
International Limited shareholders Net income attributable to
Chemspec International Limited shareholders was RMB53.9 million
(US$7.9 million) in the second quarter of 2009, a decrease of 5.6%
from the second quarter of 2008, and an increase of 64.7% from the
first quarter of 2009. The slight decrease in year-over-year net
income attributable to Chemspec International Limited shareholders
was mainly caused by the difference in the Company's applicable
income tax rate as the income tax holidays of some of the Company's
subsidiaries expired and the increase of profit contribution by one
subsidiary whose applicable income tax rate is higher than other
subsidiaries. Income tax expense was RMB 12.7 million in the second
quarter of 2009 compared to RMB 6.4 million in the same period of
2008. Basic and diluted earnings per ADS were RMB1.77 (US$0.26) in
the second quarter of 2009, as compared to RMB1.90 in the second
quarter of 2008, and RMB1.09 in the first quarter of 2009. Cash
Flows As of June 30, 2009, the Company had RMB473.7 million
(US$69.3 million) of cash, as compared to RMB180.1 million as of
December 31, 2008. The increase in the Company's cash position is
primarily due to the net proceeds of approximately RMB 389.2 from
the Company's IPO. During the six months ended June 30, 2009, the
Company generated strong operating cash flows of RMB109.9 million
(US$16.1 million) as compared to RMB104.7 million for the same
period of 2008. Significant cash outflows for the six-month period
ended June 30, 2009 include capital expenditures of RMB 116.1
million (US$17.0 million) for the production facility expansion and
repayments of the Company's bank borrowings which decreased to
RMB15.0 million (US$2.2 million) from RMB 60.0 million as of
December 31, 2008. Statement Regarding Unaudited Financial
Information The financial information set forth above is based on
the Company's unaudited interim consolidated financial statements
and is subject to adjustments that may be identified by us and/or
our auditors during the audit of our annual consolidated financial
statements. Business Outlook Based on the Company's current
operations, total revenues for year 2009 are expected to be between
RMB 975 million and RMB 1,000 million, which would represent an
increase of 3.2% to 5.8% compared to RMB 944.9 million for the year
ended December 31, 2008. Conference Call Details Management will
host a conference call and live webcast to discuss the second
quarter results and forward outlook at 8:00 a.m. Eastern Daylight
Time (8:00 p.m. Beijing time) on Friday, August 14, 2009. The
dial-in details for the live conference call are as follows: --
U.S. Toll Free Number: 1-866-519-4004 -- International Dial-in
Number: +65-6735-7955 -- Mainland China Toll Free Number:
10-800-819-0121 -- Hong Kong Toll Free Number: 80-093-3053 -- U.K.
Toll Free Number: 080-8234-6646 -- Conference ID: CPC A live and
archived webcast of the conference call will be available on the
Investor Relations section of Chemspec's website at
http://www.chemspec.com.cn/ . A telephone replay of the call will
be available after the conclusion of the conference call through
10:00 a.m. Eastern Daylight Time, August 21, 2009. The dial-in
details for the replay are as follows: -- U.S. Toll Free Number:
+1-866-214-5335 -- International Dial-in Number: +61-2-8235-5000 --
Conference ID: 23225390 About Chemspec Chemspec is a leading
China-based contract manufacturer of highly engineered specialty
chemicals and the largest manufacturer of fluorinated specialty
chemicals in China based on sales. In manufacturing specialty
chemicals, Chemspec also provides process design and process
development services, which enable efficient and rapid production
of specialty chemicals that are incorporated into the products of
Chemspec's end users. Chemspec's customers and end users include
electronics, pharmaceutical and agrochemical companies. For more
information, please visit http://www.chemspec.com.cn/ . Safe Harbor
Statements This announcement contains forward-looking statements.
These statements constitute "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and as defined in the U.S. Private Securities Litigation Reform Act
of 1995. These forward-looking statements can be identified by
terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates" and similar statements.
Such statements involve certain risks and uncertainties that could
cause actual results to differ materially from those in the
forward-looking statements. Further information regarding these and
other risks is included in Chemspec's filings with the U.S.
Securities and Exchange Commission, including its registration
statement on Form F-1, as amended from time to time. Chemspec does
not undertake any obligation to update any forward-looking
statement, except as required under applicable law. Chemspec
International Limited Unaudited Consolidated Balance Sheets
December 31, June 30, June 30, 2008 2009 2009 RMB'000 RMB'000
USD'000 ASSETS Current assets Cash 180,081 473,667 69,349 Pledged
bank deposits 21,536 39,615 5,800 Accounts receivable, net 142,535
143,680 21,036 Bills receivable -- 300 44 Inventories 197,742
192,901 28,243 Prepayment and other receivables 16,865 19,454 2,848
Deferred income tax assets 345 937 137 Total current assets 559,104
870,554 127,457 Property, plant and equipment, net 385,526 502,747
73,606 Land use rights 53,105 55,566 8,135 Goodwill 6,942 6,942
1,016 Deferred offering costs 9,843 -- -- Deferred income tax
assets 360 400 59 Total assets 1,014,880 1,436,209 210,273
LIABILITIES AND EQUITY Current liabilities Bank borrowings 60,000
15,000 2,196 Accounts payable 77,785 69,893 10,233 Bills payable
27,562 32,658 4,781 Amounts due to related parties 38,019 38,002
5,564 Accrued expenses and other payables 55,714 87,579 12,822
Income taxes payable 6,213 7,817 1,145 Total current liabilities
265,293 250,949 36,741 Deferred income tax liabilities 14,851
20,152 2,951 Deferred income 5,565 5,412 792 Total liabilities
285,709 276,513 40,484 Equity Ordinary shares: HK$ 0.01 par value;
20,000,000,000 shares authorized as of December 31, 2008 and June
30, 2009; 1,800,000,000 and 2,179,680,000 shares issued and
outstanding as of December 31, 2008 and June 30, 2009, respectively
18,446 21,792 3,190 Additional paid-in capital 30,597 366,894
53,716 Statutory reserves 45,837 45,837 6,711 Accumulated other
comprehensive income 6,749 6,740 987 Retained earnings 619,521
703,599 103,013 Total Chemspec International Limited shareholders'
equity 721,150 1,144,862 167,617 Noncontrolling interests 8,021
14,834 2,172 Total equity 729,171 1,159,696 169,789 Total
liabilities and equity 1,014,880 1,436,209 210,273 Chemspec
International Limited Unaudited Quarterly Consolidated Statements
of Income Three-month period ended June 30 March 31 June 30 June 30
2008 2009 2009 2009 RMB'000 RMB'000 RMB'000 USD'000 Sales 215,977
200,299 233,520 34,189 Cost of sales (129,175) (124,379) (138,258)
(20,242) Gross profit 86,802 75,920 95,262 13,947 Selling expenses
(2,331) (2,923) (2,780) (407) General and administrative expenses
(12,231) (13,504) (17,429) (2,552) Research and development
expenses (5,873) (8,772) (7,056) (1,033) Other operating expenses
(466) (1,034) (1,384) (202) Other operating income -- 194 212 31
Government grants 50 200 398 58 Income from operations 65,951
50,081 67,223 9,842 Other income (expenses): Interest income 282
607 679 99 Interest expense (895) (771) (53) (8) Foreign currency
exchange (loss) gain, net (1,175) (2,740) 328 48 Other income 113
23 29 4 Earnings before income taxes 64,276 47,200 68,206 9,985
Income tax expense (6,408) (10,869) (12,746) (1,866) Net income
57,868 36,331 55,460 8,119 Net income attributable to
noncontrolling interests (781) (3,625) (1,588) (232) Net income
attributable to Chemspec International Limited shareholders 57,087
32,706 53,872 7,887 Basic earnings per share RMB 0.03 RMB 0.02 RMB
0.03 US$ 0.00 Diluted earnings per share RMB 0.03 RMB 0.02 RMB 0.03
US$ 0.00 Basic earnings per ADS RMB 1.90 RMB 1.09 RMB 1.77 US$ 0.26
Diluted earnings per ADS RMB 1.90 RMB 1.09 RMB 1.77 US$ 0.26
Chemspec International Limited Unaudited Consolidated Statements of
Cash Flows Six-month period ended June 30 June 30 June 30 2008 2009
2009 RMB'000 RMB'000 USD'000 Cash flows from operating activities
Net income 116,605 91,791 13,439 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation
and amortization of property, plant and equipment 10,874 15,982
2,340 Land use rights 343 482 70 Loss on disposal of property,
plant and equipment 401 1,895 277 Bad debt expense (309) -- --
Unrealized foreign exchange loss (gain), net 88 (542) (79)
Share-based compensation 5,599 10,211 1,495 Deferred income tax
expense 7,150 4,669 683 Changes in operating assets and
liabilities: Pledged bank deposits related to purchase of inventory
(11,042) (13,015) (1,906) Inventories (83,359) 4,841 709 Accounts
receivable (1,326) (828) (121) Bills receivable -- (300) (44)
Prepayment and other receivables 12,196 (2,589) (379) Accounts
payable 43,206 (7,892) (1,155) Bills payable related to purchase of
inventory 14,266 325 48 Accrued expenses and other payables (3,032)
3,249 476 Income taxes payable (6,973) 1,604 235 Net cash provided
by operating activities 104,687 109,883 16,088 Cash flows from
investing activities Capital expenditures, including interest
capitalized (54,457) (116,124) (17,002) Proceeds from the sale of a
subsidiary 3,420 -- -- Proceeds from sale of property, plant and
equipment 42 -- -- Non-interest bearing advances to related parties
(15,000) -- -- Non-interest bearing advances repaid by related
parties 32,000 -- -- Net cash assumed from acquisition of a
subsidiary 2,255 -- -- Payments for land use rights (10,466)
(2,943) (431) Pledged bank deposits related to purchase of
property, plant and equipment -- (5,064) (741) Net cash used in
investing activities (42,206) (124,131) (18,174) Cash flows from
financing activities Acquisition of additional equity interest in a
subsidiary (4,000) -- -- Capital contributions from noncontrolling
shareholders -- 1,600 234 Proceeds from issuance of ordinary shares
-- 389,022 56,956 Payments for initial public offering costs
(1,260) (35,488) (5,196) Proceeds from bank loans 70,000 15,000
2,196 Repayments of bank loans (40,000) (60,000) (8,784) Dividend
paid by subsidiary to noncontrolling shareholders -- (2,500) (366)
Proceeds from non-interest bearing borrowings from related parties
20,400 -- -- Repayments of non- interest bearing borrowings from
related parties (69,747) -- -- Net cash (used in) provided by
financing activities (24,607) 307,634 45,040 Effect of foreign
currency exchange rate changes on cash 261 200 29 Net increase in
cash 37,874 293,386 42,954 Cash at beginning of period 56,929
180,081 26,366 Cash at end of period 95,064 473,667 69,349
Supplemental disclosures of cash flow information: Income taxes
paid 10,027 11,942 1,748 Income taxes refund 16,274 -- -- Interest
paid, net of amounts of capitalized 1,117 824 121 Supplemental
schedule of noncash investing and financing activities: Payable for
purchase of property, plant and equipment 17,635 49,302 7,218
Payable for acquisition of additional equity interest in a
subsidiary 4,000 -- -- Bills payable for purchase of property,
plant and equipment -- 4,771 699 For further information, please
contact: Chemspec International Ltd. In Shanghai Bing Zhu Chief
Financial Officer Tel: +86-21-5270-2636 x8053 Email: Christensen In
New York Kathy Li Tel: +1-212-618-1978 Email: In Hong Kong Tip
Fleming Tel: +852-9212-0684 Email: DATASOURCE: Chemspec
International Limited CONTACT: Chemspec International Ltd., Bing
Zhu, Chief Financial Officer, +86-21-5270-2636 x8053, or
Christensen, Kathy Li, +1-212-618-1978, and Tip Fleming,
+852-9212-0684, , both for Chemspec International Limited Web site:
http://www.chemspec.com.cn/
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