China Linen Textile (OTC BB:CTXIF)

Third Quarter 2011 Results

Second Quarter Results

First Quarter Results:

• Q1 2011 revenues increased 79% to $15.8 million.
• Q1 2011 gross profit increased 109% to $5.7 million, gross margin up 507 basis points to 36.0%
• Q1 2011 net income increased 50% to $3.2 million; diluted EPS of $0.46 vs. $0.36 a year ago.

"The first quarter of this year was marked by continued growth in revenues and net income, which benefitted from both volume increases and price improvements. We successfully expanded the sales and distribution channels for our linen fabric and yarn during the past year and utilized new capacity brought on-line through the Lanxi Tianxianfang Linen Co. acquisition. We also began to realize cost saving benefits from the integration of this business," said Mr. Gao Ren, Chairman and CEO of China Linen. "Through the addition of a bleaching factory and our recently upgraded linen yarn dyeing facility, we are becoming a vertically integrated linen producer, which enables to us to capture more of the value chain while meeting increasing demand for our products both in China and abroad. International sales comprised 58% of revenues and were driven by growth in India and Turkey, including new markets such as Spain and Thailand, while higher domestic demand for linen products also drove revenue growth."

SUMMARY FINANCIALS

"We are very pleased with our results for 2010, which included outstanding revenues and earnings growth and improved gross margin," stated Mr. Gao Ren, Chairman and CEO of China Linen. "As a leading producer and exporter of linen in China, we continued to expand markets and produce new and competitive products.  We were excited to see increases in demand from both domestic and international markets, for both linen fabric and linen yarn during the year. We were able to add almost 50 new direct customers and open up new markets including India and Turkey. Going forward, we will continue to penetrate European market, expand sales in new markets like India and Turkey, and increase sales domestically.

"2010 marked a number of milestones for China Linen. We completed the purchase of Lanxi Tianxianfang Linen Co., Ltd. which increased our linen yarn and linen fabric production capabilities and also included a bleaching factory, a critical addition to our production process as we aim to become vertically integrated throughout the entire value chain. In December, we commenced operations at our newly upgraded linen yarn dyeing facility to produce higher margin higher demand new products," Mr. Gao continued.

"We remain optimistic into 2011 as macro trends seem to continue to favor the linen industry. While pure linen products are usually considered higher-priced and higher-end products than traditional textile products, record high cotton and chemical fiber prices have closed the price gap between the two. With increased interest and demand for linen products globally, combined with our expanded production capacity and our new capabilities, we are well positioned to take advantage of opportunities to gain market share in the linen industry," concluded Mr. Gao.

Fiscal Year 2011 Guidance

For the fiscal year 2011, the Company expects

• revenue to be in the range of $58-63 million
• net income to be in the range of $11.5-12.6 million.

Note

On March 30, 2011 the market took effect a 3.5:1 reverse split for the Company's shares. The new symbol on the date was CTXFD. Please note that a "D" has been appended as the 5th character for 20 business days including the effective date. Furthermore, the "F" was moved back in tandem with adding the "D". After 20 business days the symbol will revert back to the original CTXIF.

The above financial results discussion is on a pre-split basis. The pro forma number of ordinary shares and earnings per share in the financial statements reflect a post-split effect.

SUMMARY FINANCIALS

SUMMARY FINANCIALS

    First Quarter 2010 Results (unaudited)

                                       Q1 2010        Q1 2009       CHANGE
    Net Sales                        $8.8 million  $5.5 million     +58.7%
    Gross Profit                     $2.7 million  $1.1 million    +139.0%
    Net Income                       $2.1 million  $1.1 million     +89.8%
    EPS (Diluted)                           $0.10         $0.06     +89.1%


    Second Quarter 2010 Results (unaudited)

                                       Q2 2010        Q2 2009       CHANGE
    Net Sales                        $8.8 million  $8.3 million      +5.7%
    Gross Profit                     $2.7 million  $2.5 million      +7.4%
    Net Income                       $1.9 million  $1.6 million     +22.5%
    EPS (Diluted)                           $0.10         $0.08     +21.8%


    Six-Month 2010 Results (unaudited)

                                     6-Month 2010  6-Month 2009    CHANGE
    Net Sales                       $17.6 million $13.9 million    +26.9%
    Gross Profit                     $5.4 million  $3.7 million    +48.3%
    Net Income                       $4.0 million  $2.7 million    +50.3%
    EPS (Diluted)                           $0.20         $0.13    +49.6%

"We are pleased to report strong revenue and earnings growth during the first half of the year, which resulted from our increased marketing efforts, higher average selling prices for linen fabric, and the strong demand for our linen fabric in both domestic and international markets," stated Mr. Gao Ren, Chairman and President of China Linen. "We have seen an increase in demand from domestic and international customers this year due to the recovery of the global economy and the increasing awareness of the benefits of natural textiles, such as linen, among consumers."

"Our enhanced international market expansion is anticipated to introduce more customers and orders to generate incremental revenues for the balance of 2010. The addition of new production capacity from the lease agreement signed in July 2010 enables us to fulfill more of those orders and improve our 2010 financial performance. Combined with our increased marketing efforts, higher average selling prices for linen fabric, and the strong demand for our linen fabric in both domestic and international markets, these expansion efforts give us confidence in meeting our 2010 revenue and earnings guidance."

Reiterates 2010 revenue guidance of $38.1 million and 2010 net income guidance of $9.3 million, representing anticipated year-over-year growth of approximately 29.6% and 63.2%, respectively.

HARBIN, China, July 20 /PRNewswire-Asia--FirstCall/ -- CTXIF announced that it has expanded its linen yarn production capacity and added the capability to bleach linen fabric by entering into a Fixed Asset Lease Agreement with Lanxi Tianqianfang Linen Co., Ltd. (the "Lessor").

We believe the leased facility, which includes a building with an area of 23,358 square feet, a spinning production line with 3,000 spindles, bleaching machines and other equipment, will increase the Company's annual capacity by approximately 620 tons of linen yarn, or 39%, and 2.1 million meters of linen fabric, or about 26%, which, over the next twelve months, is expected to add approximately

• $4.9 million in revenue,
• $1.5 million in gross profit and
• $1.2 million in net income .

The bleaching factory, with annual capacity to bleach 10 million meters of linen fabric, is expected to generate approximately

• $1.5 million in additional net income over the next twelve months.

China Linen has commenced operation at the leased facility and expects to generate approximately $1.4 million in net income in the second half of 2010 from its new facility.

"We are pleased to sign this lease agreement which enables us to address our short-term capacity constraints while providing an option to acquire the facility," stated Mr. Gao Ren, chairman and president of China Linen. "We have seen an increase in demand from domestic and international customers this year, and this lease agreement enables us to fulfill more of those orders and improve our 2010 financial performance. In addition, we believe the bleaching facility will add a downstream vertical component to our value chain and further increase our gross margin. We plan to pursue more orders with the goal of full utilization of the leased facility and increasing our profit further for 2010 and 2011."