Tht Heat Transfer (NASDAQ:THTI)

First Quarter 2012 Results

• Sales revenue decreased by 18.5% year-over-year to US$11.45 million.
• Gross profit decreased by 23.8% year-over-year to US$4.61 million.
• Gross margin was 40.2%, compared to 43.0% for the first quarter 2011.
• Operating income decreased by 74.3% year-over-year to US$0.84 million.
• Net income attributable to common stockholders decreased by 79.0% year-over-year to US$0.56 million.
• Basic and fully diluted net income per share was US$0.03, a decrease compared with net income per share of US$0.13 for the first quarter 2011.

Chairman and Chief Executive Officer Guohong Zhao commented, "Although demand for our heat exchange solutions was impacted by China's slowing macroeconomic environment during the first quarter 2012, our intensified focus on generating orders and cultivating client relationships allowed us to achieve revenue at the high end of our previously announced guidance range.

"Looking ahead to 2012 as a whole, we continue to expect the HVAC, metallurgical and petrochemical industries to generate steady demand. We remain focused on our four core growth initiatives relating to district heating, nuclear power, air cooled heat exchangers, and spare parts and repair services offerings, and we expect growth to be strongest in the nuclear sector. While we believe demand for our competitively priced, high-quality, customized offerings will drive value in the long term, we remain cautious in view of prevailing macroeconomic conditions, and we therefore anticipate second quarter 2012 revenue to be in the range of US$10 million to US$12 million."

Second Quarter 2012 Guidance

THT expects to generate sales revenue in the range of US$10 million to US$12 million in the second quarter 2012, compared with US$14.18 million in the same period of 2011. This represents the Company's preliminary view, and is subject to change.

Fourth Quarter 2011 Results

• Sales revenue increased by 26.62% year-over-year to US$19.20 million, exceeding the Company's previously stated guidance of US$12 million to US$14 million.
• Gross profit increased by 31.63% year-over-year to US$8.61 million.
• Gross margin for the fourth quarter 2011 expanded to 44.84%, compared to 43.14% for the fourth quarter 2010.
• Operating income decreased by 12.74% year-over-year to US$2.77 million.
• Net income attributable to common stockholders decreased by 44.03% year-over-year to US$1.81 million.
• GeoTeam calculated non-gaap Fourth quarter 2011 EPS of $0.08 vs $0.11 in prior year.

Chairman and Chief Executive Officer Guohong Zhao commented, "I'm pleased to report that the 27% year-over-year revenue growth we achieved during our seasonally strongest fourth quarter exceeded our guidance as the Company benefited from some relaxation of credit controls. The solid fourth quarter growth rounded out a year of overall top-line expansion driven mainly by demand from the HVAC (heating, ventilation, and air-conditioning), metallurgical and petrochemical industries in response to the Chinese government's active promotion of energy conservation and emissions reduction in these industries.

"While we expect steady demand from the HVAC, metallurgical and petrochemical industries to persist in 2012, we continue to focus on our four previously announced growth initiatives related to district heating, nuclear power, air cooled heat exchangers, and spare parts and repair service offerings. Taking into consideration the solid growth within China's heat exchanger market, we also plan to expand our production capacity this year to cater to the anticipated increase in orders for our broad portfolio of heat exchangers. Despite the positive industry dynamics and robust demand for our unique, customized solutions, we expect revenue for the first quarter 2012 to total between US$10 million and US$12 million as we await a further and sustained relaxation of credit policy."

First Quarter Fiscal 2012 Guidance

THT expects to generate net revenues in the range of US$10 million to US$12 million during the first quarter 2012, compared with US$14.05 million in the same period of 2011. This represents the Company's current and preliminary view, and is subject to change.

Third Quarter 2011 Results

Second Quarter 2011 Financial Highlights

• Sales revenue increased by 16.45% year-over-year to US$14.18 million, exceeding guidance.
• Gross profit increased by 13.73% year-over-year to US$6.08 million.
• Gross margin was 42.86%, compared to 43.88% for the second quarter of 2010.
• Operating income increased by 9.98% year-over-year to US$3.09 million.
• Net income attributable to common stockholders increased by 38.55% year-over-year to US$3.31 million.
• Basic and fully diluted net income per share was US$0.16, an increase compared with net income per share of US$0.15 for the second quarter of 2010.

Chairman and Chief Executive Officer Guohong Zhao commented, "I am pleased to report another solid performance, with top-line growth for the second quarter of 2011 surpassing guidance. Our plate heat exchangers ("PHEs"), heat exchange units and shell-and-tube heat exchanger divisions remained the key drivers behind our expansion, as we reaped the rewards of recent initiatives to expand our customer base. Simultaneous efforts to further streamline our cost base resulted in bottom-line growth yet again exceeding that of our top line.

"Integral to the continued success of our business is our unwavering focus on quality and technical innovation. The "U" Stamp certificate of authorization from the American Society of Mechanical Engineers ("ASME"), which we received in the second quarter is a testimony to the quality of our facilities, services and products. This prestigious ASME certification enables us to manufacture "pressure vessels" as defined and regulated by ASME codes, and positions us to better compete in international markets. In addition, the granting of a utility model patent for our Power Heat Exchanger allows us to offer customers an enhanced and more diversified product offering, as well as further differentiating us from competing industry players. We also continue to invest in the development of new products to keep us at the forefront of technological innovation. As a result of our R&D efforts, we recently applied for utility model and invention patents for our Semi-welded Plate Heat Exchanger which is widely used in the chemical industry.

"Our energy efficient platforms and broad range of high quality solutions position us to capitalize on the wealth of opportunities arising from China's rapid urbanization and government incentives to support carbon reduction. In the near-term, we expect government plans to build 36 million affordable homes by the end of 2015 to boost demand for our heat exchange units, which will be used in district heating systems. We anticipate that this home-building initiative will allow for incremental revenue growth in the second half of 2011, and expect revenue between US$12.00 million and US$14.00 million in the third quarter 2011.

Third Quarter 2011 Guidance

THT expects to generate net revenues in the range of US$12.00 million to US$14.00 million in third quarter fiscal 2011, compared with US$12.78 million in the same period of 2010. This represents the Company's preliminary view, and is subject to change.

First Quarter Results:

• Sales revenue increased by 38.74% year-over-year to US$14.05 million.
• Gross profit increased by 42.30% year-over-year to US$6.04 million.
• Gross margin was 43.00%, compared to 41.92% for the first quarter of 2010.
• Operating income increased by 82.79% year-over-year to US$3.28 million.
• Net income attributable to common stockholders increased by 77.17% year-over-year to US$2.66 million.
• Basic and fully diluted net income per share was US$0.13, compared with net income per share of US$0.09 for the first quarter of 2010.

Chairman and Chief Executive Officer Guohong Zhao commented, "I am pleased to announce a strong start to 2011, characterized by new contract wins and ongoing growth within our shell-and-tube heat exchangers, plate heat exchangers ("PHEs") and heat exchanger units divisions. These factors contributed to year-over-year revenue growth of nearly 38.74%, which exceeded our initial guidance. Furthermore, our efforts to optimize our product mix and streamline our cost structure have successfully translated into improved margins and bottom line growth outpacing that of our top line.

THT expects to generate net revenues in the range of US$12.00 million to US$14.00 million in second quarter fiscal 2011, compared with US$12.18 million in the same period of 2010. This represents the Company's preliminary view, and is subject to change.

Rodman and Renshaw on THTI                         5/16/2011

1Q11: Strong Revenue Growth Overshadowed by Higher DSO.

THT Heat Transfer, Inc. (THTI) posted 1Q11 results that were slightly above our expectations. Revenues came in at $14.1 million (~ up 38.7% YoY), above our estimate of $13.9 million and the company’s previously issued guidance of $12-$14 million. The company cited new contract wins, strong demand from metallurgical and petrochemical industries and successful market expansion as the primary reasons for a 38.7% YoY growth in sales. A substantial increase in sales volumes from 550 units in 1Q10 to 928 units in 1Q11 was partially offset by a 17.8% YoY decline in average selling prices from $18,416 to $15,143. Revenues from HVAC, petrochemical, metallurgical and shipbuilding applications accounted for, respectively, 35%, 34% and 24% of the total revenues.

Fully diluted EPS of $0.13 exceeded our estimate by two cents on a slightly higher gross margin of 43.0% versus out estimate of 42.3%. Despite a healthy top and bottom line growth, accounts receivable collection remains a problem. The company ended the quarter with $29.8 million in receivables and $1.8 million in retentions receivable and DSO of 213 days, compared to DSO of 159 in 1Q10 and 197 in the previous quarter. Consequently, we are maintaining our Market Perform rating notwithstanding the stock’s relatively inexpensive valuation at 7x times our FY11 EPS forecast of $0.52.

2Q11 Guidance below Expectations, Lowering Estimates 2Q11 revenue guidance of between $12 and $14 million came short of our expectations. We are revising our 2Q11 and 2H11 revenue projections accordingly. We now expect 2Q11 revenues and net income of $14.2 million and $2.3 million or $0.11 per fully diluted share. For the full FY11 we are forecasting revenues and a net income of $62.7 million (~ up 24.7% YoY) and $10.6 million (~ up 22.3% YoY) equivalent to $0.52 per share based on 20.5 million shares outstanding. We note that our revised full year net income estimate is below the company’s FY11 after tax net income make good provision of $12 million relating to the November 2010 financing. We now believe the company will have to trim down its SG&A expenses, improve its accounts receivable collection and/or raise their earnings through accretive acquisitions to meet this provision.

Risks

(1) Monetary tightening (2) Receivables collection (3) Fluctuating steel prices (4) Liquidity (5) Dilution to existing stockholders (6) Share overhang.


Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman and Renshaw on THTI                                    3/30/2011

THTI: FY10 Earnings Update

THT Heat Transfer, Inc.(THTI) reported 4Q10 and FY10 results. 4Q10 and FY10 revenues came in at $15.2 million (~ up 28.8% YoY) and $50.2 million (~ up 44.0% YoY), respectively, above the previously issued 4Q10 guidance of $12 to $14 million and our 4Q10 forecast of $13.4 million. Full year gross margin increased slightly from 42.8% in FY09 to 43.2% in FY10 on better product mix. Reported net income of $3.2 million in 4Q10 and $8.7 million or $0.53 per share in FY10 exceeded both our estimates of $1.8 million or $0.09 per share in 4Q10 and $7.3 million or $0.42 per share in FY10 and the company’s make good provision of $8 million in after tax net income. In light of THTI’s performance and 1Q11 revenue guidance of $12 to $14 million, we are revising our FY11 forecasts upwards. We now expect FY11 revenues of $73.3 million and net income of $12.0 million or $0.59 per share.

Discussion

• Revenues Driven by Higher Sales VolumeThe company reported a substantial increase in heat exchanger sales from 2,395 units in 2009 to 3,998 units in 2010 on strong demand from metallurgical, petrochemical and HVAC sectors. The sales of plate heat exchangers (PHEs), THTI’s main product, increased by 23.2% YoY to $27.0 million or 53.7% of the total FY10 sales. Similarly impressive growth was achieved in both PHE unit and air-cooled heat exchanger product lines. Revenues from PHE units and air-cooled heat exchangers increased by 147.2% YoY to $14.3 million or 28.4% of FY10 revenues and 495.7% YoY to $4.0 million or 8.0% of the total revenues, respectively (Exhibit 1: Annual Revenue Breakdown by Product). Sales to HVAC, petrochemical, power plants and metallurgical sectors increased by 51.8% YoY to $19.6 million, 6.9% YoY to $11.6 million, 85.2% YoY to $4.5 million and 860.1% YoY to $10.0 million, respectively. Revenues from the shipbuilding sector, however, declined by 46.9% YoY to just $3.5 million (Exhibit 2: Annual Revenue Breakdown by Application).
• A Promising Market:The company reported a dramatic increase (~495.7% YoY) in the sales of air-cooled heat exchangers. Air-cooled heat exchangers, which use air instead of water as a cooling agent, have been specifically designed for use in chemical and petrochemical industries in the geographic locations where water is scarce or the construction of auxiliary water supply costly. During the earnings call, management disclosed plans to build a new plant in Siping that will house the production of supersized air-cooled heat exchangers. The facility is expected to come online in the 1H12.
  
  Notice Regarding Privacy and Confidentiality:
  
  This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
  
  Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.
  
  Rodman & Renshaw, LLC may make a market in the securities being discussed.
  
  Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).
  
  Member FINRA.
  Member SIPC.
  

We believe that we maintain good relationships with the various banks we deal with and our current available working capital, after receiving the aggregate proceeds from our planned capital raising activities and bank loans referenced above, should be adequate to sustain our operations at our current levels through at least the next twelve months.

We believe that our current cash, cash flow from operations and the proceeds from the private placement in December 2010 will be sufficient to meet our present and reasonably anticipated capital and capital expenditure needs given the current state of our production line for the marketing of the products.  

Fourth Quarter 2010 (Unaudited) Financial Highlights

• Sales revenue increased by 28.84% year-over-year to US$15.16 million, exceeding the Company's previously stated guidance of $12 million to $14 million
• Gross profit increased by 43.97% year-over-year to US$6.54 million
• Gross margin for the fourth quarter 2010 was 43.14%, compared to 38.61% for the fourth quarter of 2009
• Operating income increased by 313.80% year-over-year to US$3.17 million
• Net income attributable to common stockholders increased by 342.70% year-over-year to US$3.24 million

Fiscal Year 2010 (Audited) Financial Highlights

• Sales revenue increased by 44.01% year-over-year to US$50.25 million
• Gross profit increased by 45.38% year-over-year to US$21.70 million
• Operating income increased by 92.39% year-over-year to US$9.58 million
• Net income attributable to common stockholders increased by 105.84% year-over-year to US$8.69 million
• Basic and fully diluted net income per share was US$0.53 for 2010, compared with net income per share of US$0.27 for 2009

Chairman and Chief Executive Officer Guohong Zhao commented, "We continued to build on the positive momentum generated in recent quarters and ended 2010 with a very solid performance. Top-line growth, which exceeded our guidance in the fourth quarter, contributed to more than 44% increase in revenues for the full year. At the same time, our focus on optimizing both our product mix and cost structure allowed us to almost double our net income in 2010.

"Our diverse product lines enable us to cater to a broad range of customers and end users as we capitalize on several key trends that are driving the clean technology movement in China. As China faces pressures from rapid urbanization, our heat exchanger units offer efficient and effective solutions to provide heating systems to growing populations in cities throughout China. In addition, our air-cooled exchangers enable water-deficient areas in Northern China to conserve and better utilize a very limited resource. As businesses recognize the cost effectiveness of switching to clean technology solutions and are further incentivized by government stimulus plans, our plate heat exchange ("PHE") products are quickly gaining traction across a range of industrial sectors, including the metallurgy, petrochemical and shipbuilding industries.

"As rapid urbanization and government stimulus plans designed to support carbon reduction initiatives continue to drive demand for energy efficient platforms, our broad product portfolio, integrated solutions and excellent track record of high quality applications have well prepared us to capitalize on these favorable dynamics in 2011. Additionally, our sound balance sheet and cash position, which were further strengthened by our recent fund raising, afford us with financial flexibility to invest in our future and pursue growth opportunities."

First Quarter Fiscal 2011 Guidance

THT expects to generate net revenues in the range of US$12.00 million to US$14.00 million in first quarter fiscal 2011, compared with US$10.13 million in the same period of 2010. This represents the Company's current and preliminary view, and is subject to change.

Rodman & Renshaw on THTI

THT Heat Transfer, Inc. reported 3Q10 results. Revenues came in at $12.8 million, up 45.2% YoY, in line with the previously issued guidance of $11 to $13 million in revenues. Both gross profit and gross profit margin exceeded our expectations at $5.6 million and 43.6% compared to 46.9% in 3Q09 and 43.9% in 2Q10. However, net income of $1.6 million (~up 11.2% YoY) and EPS of $0.10 came short of our expectations on higher SG&A expenses. We are adjusting our model to reflect the 4Q10 revenue guidance and higher share count due to the completion of $14.3 million capital raise. We now forecast revenues and net income of $48.4 and $7.3 million in FY10 and $62.5 and $9.8 million in FY11, translating into fully diluted EPS of $0.42 in FY10 and $0.46 in FY11. 

Discussion 

• Revenues Driven by Higher Sales Volume The company sold 1,547 units during the 3Q10, compared to 478 units for 3Q09. PHEs represented approximately 59.5% of the total sales during the 3Q10 and 57.1% of the total sales during the first nine months of FY10. For the first nine months, PHE, PHE Unit and air-cooled heat exchanger sales increased by 38% YoY, 153% YoY and 445% YoY, respectively. The sales of air-cooled heat exchangers, a fairly new product, have increased dramatically due to the strong demand from the petrochemical and chemical sectors and additional production capacity brought online in 1H10.

• Guidance and Make Good Provisions: The company has issued 4Q10 revenue guidance of $12 - $14 million. Concurrent with the completion of $14.3 million financing in November, 2010, the company has entered into a make good escrow agreement pursuant to which THT Heat Transfer committed to reaching after tax net income of $8 million in FY10 and $12 million in FY11. In the event that the company is unable to meet these provisions, 2 million shares (1 million for FY10 and 1 million for FY11), now held in escrow, will be released to the November 2010 private placement investors within 10 days of filing of the annual report. We believe the company will have to significantly trim down its SG&A expenses and/or raise their earnings through accretive acquisitions to meet these provisions.

• Dilution: On November 2, 2010 THT Heat Transfer has entered into a private stock purchase agreement with several investors issuing 4,453,500 shares of common stock for an aggregate purchase price of approximately $14,251,200, or $3.20 per share bringing the total number of shares outstanding to 20.5 million. The intended use of proceeds includes capacity expansion, equipment purchases and general working capital purposes.
  
  
  Notice Regarding Privacy and Confidentiality:
  
  This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
  
  Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.
  
  Rodman & Renshaw, LLC may make a market in the securities being discussed.
  
  Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Third Quarter 2010 Financial Highlights

• Sales revenue increased by 45.24% year-over-year to US$12.78 million

• Gross profit increased by 34.79% year-over-year to US$5.56 million

• Net income increased by 11.20% year-over-year to US$1.56 million

• Basic and fully diluted net income per share was US$0.10, compared with net income per share of US$0.09 for the third quarter of 2009

"Looking ahead, we believe we are well positioned to further capitalize on the many favorable trends and dynamics within China and the macro environment. Heightened demand for energy efficient technologies, ongoing urban development, and incentivized programs for reduced carbon emissions all play a role in cultivating demand for our products across a broad range of industries and position us for strong growth going forward."

Fourth Quarter Fiscal 2010 Guidance

THT expects to generate net revenues in the range of US$12.00 million to US$14.00 million in fourth quarter fiscal 2010, compared with US$11.77 million in the same period of 2009. This represents the Company's preliminary view, and is subject to change.

On November 2, 2010, THT Heat Transfer Technology, Inc. entered into a securities purchase agreement with several accredited investors pursuant to which the Company agreed to issue and sell to the Investors 4,453,500 shares of the Company’s common stock, representing approximately 21.8% of the issued and outstanding capital stock of the Company on a fully-diluted basis as of and immediately after consummation of the transactions contemplated by the Securities Purchase Agreement, for an aggregate purchase price of approximately $14,251,200, or $3.20 per share.

This works out to about 28% dilution.

In connection with its entry into the Securities Purchase Agreement, on November 2, 2010, the Company entered into a make good escrow agreement with Wisetop International Holdings Limited, the Investors, Infinity I-China Fund (Cayman) L.P. and the escrow agent, pursuant to which the Pledgor agreed to certain “make good” provisions in the event that the Company does not meet certain income thresholds for fiscal years 2010 and/or 2011. Pursuant to the Make Good Escrow Agreement, the Pledgor will establish an escrow account and deliver to the escrow agent certificates evidencing 2,000,000 shares of the Company’s common stock held by the Pledgor along with blank stock powers, to be held for the benefit of the Investors.

Make Good targets:

• 2010 after tax net income: $8,000,000
• 2011 after tax net income: $12,000,000

Chairman and Chief Executive Officer Guohong Zhao commented, "I am pleased to report that we achieved very strong results for the first quarter of 2010. We continue to benefit from the economic growth in China, which remains strong despite challenging macro economic environments in Europe and the US. The industrialization, urban development and energy needs in China are calling for a broad spectrum of products and operations that utilize energy efficient technologies such as our heat exchange technology. Our enhanced sales network and initiatives also helped drive our revenue growth and market share. In addition, our production leverage allows us to have better economies of scale which led to significant enhancement of profitability in the quarter.

"China's accelerated economic growth and increasing needs for products with higher energy efficiency in various industries will continue to fuel demand for our products. Some projects in metallurgy and petrochemical industries delayed during the economic recession have been resumed, which further boosted demand for our plate heat exchangers. We expect the growing demand for this flagship product will help drive significant growth in the coming quarters."

THT expects to generate net revenues in the range of US$10 million to US$12 million in second quarter fiscal 2010, compared with US$4.2 million in the same period of 2009. This represents the Company's preliminary view, and is subject to change.