Nf Energy Saving (NASDAQ:NFEC)

Third Quarter 2011 Highlights

• Revenue was $2.6 million 
• Gross profit was $0.5 million, representing a gross margin of 19.18%
• Net income was $0.071 million.
• YOY EPS was $0.01 vs. $0.38

Adjustment of forecast result of fiscal year 2011

In early 2011, based upon the assumption that the Company would obtain $15 million in financing, the Company projected that total revenue and the net profit in 2011 would be between $30 million to $32 million and $6 million to $6.5 million, respectively.

However, the Company now expects that annual revenue for 2011 will be approximately $15 million and net income will be approximately $2 million, which is a decrease of approximately 40% and 50% compared to 2010, respectively.

The main reason for adjusting the financial forecast for 2011 is primarily due to (i) the delay of financing that caused a delay in completing construction of the new manufacturing facility and as a result, the Company has to subcontracting part of the manufacturing process to third parties which lead to a decrease in product revenue and net income; and (ii). the agreements for the Gaizhou Biomass Energy Project and Petrol-chemical System Pipeline Project did not receive the anticipated consents due to lack of resource and as a result the expected project revenue was not generated.

Second Quarter 2011 Results

• Total revenue of $4.9 million for the three months ended June 30, 2011, decreased 32.3% from $7.2 million in the same period of 2010. This decrease is mainly due to a decrease in product and service revenue, in turn due to the move to the Company's new factory being incomplete during the quarter.
• Income from operations was $0.7 million for the three months ended June 30, 2011, as compared to $1.8 million for the same period of 2010, a decrease of $1.1million or approximately 62.5%. This decrease is primarily due to lower revenue and gross margin and the increase in operating expenses.
• Net income for the second quarter was $0.5 million, or $0.09 per diluted share compared to net income of $1.4 million or $0.26 per diluted share in the same period of 2010.

"We continue to make progress in moving our operations to our new factory. However progress has been slower than originally expected due to the difficulty in obtaining the necessary financing. The rate of growth of operations and financial results going forward will depend to a great degree on the amount of additional financing we can obtain and when we can obtain it. With the capital markets in turmoil financing visibility is low. We will therefore no longer give guidance with respect to our 2011 full year results. We will keep investors informed of our progress and we remain very positive about the market for our products and the growth opportunities ahead," said Mr. Gang Li, the Company's Chief Executive Officer.

First Quarter Results:

• Revenues decreased 7.9% year-over-year to $2.6 million
• Gross profit increased 17.7% year-over-year to $0.8 million, representing a gross margin of 30.6%
• Net income was $0.3 million or $0.05 per diluted share, representing a net margin of 11.2%
• The Company's move to its new factory and development of the facilities on target for completion during the second quarter

"The first quarter is our slowest of the year and this year we used some capacity at our partially-completed facilities to manufacture profitable components for Shenyang's underground railway project, in addition to working on our core energy-saving flow control equipment.  As we near completion of the new factory during the second quarter we expect to be ready to begin work on the bulk of our core product orders in the third and fourth quarters.  We are on schedule with our 2011 plan and our outlook for the full year remains unchanged," said Mr. Gang Li, the Company's Chief Executive Officer.

NF Energy reiterates its guidance for the full fiscal year 2011 revenue to be in the range of $30 million to $32 million and net income to be in the range of $6.0 million to $6.5 million. Guidance excludes any possible additional expenses for potential future financing activities.

Fourth Quarter Results:

• Revenues increased 42.0% year-over-year to $7.3 million
• Gross profit declined 24.4% year-over-year to $1.3 million, representing a gross margin of 17.7%
• Net income was $0.5 million or $0.09 per diluted share, representing a net margin of 6.8%

"Looking at NF Energy's performance for the year as a whole we are satisfied with the Company's operations and the results that we have achieved," commented Mr. Gang Li, Chief Executive Officer of the Company. "Although the Company's total revenue and profitability for the second half of the year was adversely affected by our move to our new facility and this financial result was a disappointment to us, we weigh this against the potential of our new facility that has the ability to eventually triple our production capacity to 20,000 tons per year."

NF Energy reiterates its guidance for the full fiscal year 2011 revenue to be in the range of $30 million to $32 million and net income to be in the range of $6.0 million to $6.5 million. Guidance excludes any possible additional expenses for potential future financing activities.

SHENYANG, China, March 3, 2011 /PRNewswire-Asia/ -- NF Energy Saving Corp., today announced unaudited preliminary results for the fiscal year ended December 31, 2010. The Company will release full financial results on or before March 25, 2011.

• Total unaudited revenue for the fiscal year ended December 31, 2010 was approximately $25.3 million, an increase of 24.8% from the year ended December 31, 2009.
• Full year 2010 operating income increased 2% to $5.6 million.
• Full year 2010 unaudited net income was approximately $4.3 million, down 9.9% for the year ended December 31, 2009 due to a one-time non-cash, non-operating accounting charge related to convertible securities issued by the Company in 2010.  
• Although fourth quarter revenues were $7.3 million, an increase of 42.0% compared to the fourth quarter of 2009, net income dropped to $0.5 million compared with $1.3 million in the fourth quarter of 2009.  This was primarily due to a decline of gross margin from 33% in the fourth quarter of 2009 to 18% in the fourth quarter of 2010 that was caused by the Company transitioning production from its old facility to its newly constructed facility.

All the foregoing results are preliminary and subject to revision based upon review by the Company's independent auditor.

"We are happy with our overall performance in 2010," said Mr. Gang Li, Chairman and Chief Executive of the Company. He added "Our new facilities, to which we moved production in late 2010, will more than triple our available capacity and allow us to expand more rapidly in future years. In 2011, we expect continued strong revenue growth and a return to growth in profitability, driven by increased market demand for both our energy management services and our intelligent flow control systems."

The Company is providing initial guidance for fiscal year 2011 of revenues of between $30 million and $32 million and net income of between $6 million and $6.5 million.

Second Quarter 2010 Highlights

• Revenues increased 38.3% year-over-year to $7.2 million.
  
• Gross profit rose 32.7% year-over-year to $2.0 million, representing a gross margin of 28.0% compared to 29.2% in the year ago period.
  
• Operating income grew 89.3% year-over-year to $1.8 million.
  
• GAAP net income increased 69.4% year-over-year to $1.4 million, representing a net margin of 19.0% compared to 15.5% a year ago.
  
•  Net income per diluted share was $0.10 compared to $0.06 in the same period last year

"We are pleased to report a strong second quarter performance for 2010, which we believe will continue through the remainder of this year," commented Mr. Gang Li, Chief Executive Officer of NF Energy Saving Corporation. "In addition to the strong financial performance, we have begun the expansion of our new manufacturing facility which we anticipate will be completed in September, 2010, increasing annual capacity to 20,000 tons of flow control equipment from our current capacity of 6,000 tons. We have also begun to achieve a change in our business mix towards energy conservation service projects, growing this segment's top line by 440.2% compared to the prior year period. We expect that with the increase in production capacity, coupled with steadily growing market demand, we are well positioned to gain market share, further strengthening the Company's leadership in the PRC intelligent energy efficient flow control market."

Guidance and Business Outlook

NF Energy expects full fiscal year 2010

• Revenue to be in the range of $28 million to $30 million.
  
• Net income to be in the range of $5.6 million to $6.0 million. The estimate does not include any possible additional expenses arising from the Company's upgrade to a major exchange or financing expense.

The Company's performance is expected to follow its typical pattern of a stronger third and fourth quarter due to favorable weather conditions at many of its customer sites, absence of holidays and stronger seasonal customer ordering patterns. In order to meet the expected increase in demand for energy efficiency as a result of the passage of China's Energy Conservation Law, NF Energy plans to increase capacity to 20,000 tons of flow control equipment per year by completing the construction of its new energy manufacturing facility in September 2010. Successful on time completion is also assumed in the aforementioned financial guidance.

"A series of policies related to energy conservation projects and tax benefits issued by the Chinese government associated with those projects indicate that low carbon emission and clean energy targets will be a new impetus for economic development, driving construction of innovative industrial systems," commented Mr. Gang Li, Chief Executive Officer of NF Energy. "In order to capitalize on these trends, NF Energy will further develop energy conservation projects to significantly grow all of its lines of business for the remainder of 2010."

the Company expects revenue for the fiscal year ending December 31, 2010 to be in the range of $27-30 million, a 33%-48% increase over revenue of $20.3 million for the fiscal year ended December 31, 2009.

Source: PR Newswire (April 20, 2010)