FUQING CITY, China, May 15 /Xinhua-PRNewswire-FirstCall/ — China Clean Energy Inc., a leading producer of biodiesel fuel and environmentally friendly specialty chemical products made from renewable resources in The People’s Republic of China (“PRC”), today reported financial results for the first quarter ended on March 31, 2007.
First Quarter 2007 Highlights -- Revenue reached a record $ 4.1 million, up 45% from the first quarter of 2006 -- Gross Profits reached a record $ 1.1 million, up 45% from the first quarter of 2006 -- Operating income totaled $424,149, compared to $491,935 in the first quarter of 2006 -- Net income rose to $400,706, or $0.02 per diluted share, up 45% from the first quarter of 2006
“During the first quarter, we saw strong growth in our biodiesel business as we more than doubled our production capacity,” said Mr. Tai-ming Ou, Chairman and CEO of the Company, “We were also very pleased with the performance of our specialty chemical products with the increasing awareness of the environmental benefits of our products translating into increased demand for our products and higher prices.”
First Quarter 2007 Results
Net revenue for the first quarter was $4.14 million, an increase of 45% year-over-year. Gross profit for the first quarter was $1.1 million, up 45% from the comparable period in 2006. Gross margin for the first quarter of 2007 was 27.8%, unchanged from the first quarter of 2006.
Operating expenses came in at $724,268 for the first quarter of 2007, a 140% increase from $301,736 recorded in the first quarter of 2006. The increase was primarily due to higher legal, auditing and other professional fees resulting from China Clean Energy’s new status as a public company as well as the Company’s increased efforts to market its specialty chemical products worldwide. The Company’s higher operating cost structure resulted in lower operating profits, which came in at $424,149 with operating margin coming in at 10.3% for the first quarter of 2007 compared with approximately $491,933 and 17.2% in 2006, respectively. Going forward, the Company expects a recovery in its operating margins as it increases production capacity and benefits from economies of scale.
Recently the Company gained status as a Wholly-Owned-Foreign Enterprise in China, and its operating subsidiary, Fujian Zhongde, applied for and was granted approval for income tax exemptions for 2007 and 2008 followed by 50% exemption in the subsequent three year period. As a result, the Company did not record income tax expense in the first quarter of 2007, compared to $196,640 tax expenses recorded in the comparable period of 2006.
Net income for the first quarter of 2007 was $400,706 or $0.02 per basic and diluted share, versus net income of $276,615, or $0.02 per share on both basic and diluted basis for the comparable period of 2006.
At March 31, 2007, China Clean Energy had $897,178 in total cash and short-term investments, approximately $2.5 million in working capital, and $1.5 million in debt. Cash flow from operations for the three months ended March 31, 2007 totaled $236,301, up from negative $396,071 in the comparable period in 2006. Capital expenditures totaled $26,815 in the three months ended March 31, 2006. Shareholders’ equity stood at $11.1 million, compared to $10.6 million at the end of 2006.
The rapid increase in demand for motor vehicles as a result of strong economic growth and rising income levels in China, combined with the government’s commitment to reduce environmental pollution by encouraging the development of alternative renewable energy sources, is expected to support sustained and rapid growth in demand for biodiesel fuel over the next several years.
“As we enter into the second quarter we remain focused on our near objective of building our new biodiesel plant in Jiangyin to expand our biodiesel capacity, and are very exited with the growth opportunities for this market in China,” stated Mr. Ou. “We believe we are well positioned to participate in the expected rapid growth of the biodiesel fuel market in China, with the right strategies and a management team with extensive industry experience that can continue the successful execution of our business plan.”
About China Clean Energy:
China Clean Energy, through its wholly-owned subsidiary, Fujian Zhongde Technology Co., Ltd., is engaged in the development, manufacturing, and distribution of biodiesel fuel and specialty chemical products made from renewable resources. Since its inception, the Company has been engaged in the manufacture of high-quality specialty chemical products from renewable resources. Through its research and development efforts, the Company developed a proprietary process for refining biodiesel fuel from waste grease and certain vegetable oils. Using this proprietary process, the China Clean Energy began producing biodiesel in 2005 and commenced selling biodiesel commercially starting in December 2005.