Second Quarter 2011 Financial Highlights:
Total wind turbine generators (“WTGs”) commissioned amounted to an equivalent wind power projects output of 367.5MW, or 245 units of 1.5MW WTGs, representing an increase of 34.6% compared to Q2 2010.
Total revenue was RMB1,405.5 million (US$217.4 million), representing an increase of 7.2% compared to Q2 2010.
Gross profit was RMB267.2 million (US$41.3 million), representing an increase of 7.3% compared to Q2 2010. Gross margin of 19% for Q2 2011 was the same as in Q2 2010.
Total comprehensive income for the period was RMB74.6 million (US$11.5 million), a decrease of 54.1% compared to Q2 2010.
Basic (and diluted) earnings per ordinary share were RMB0.67(US$0.10) compared to basic (and diluted) earnings per ordinary share or RMB1.61 for Q2 2010.
Recent Development
On August 15 2011, Ming Yang announced a $50 million share repurchase plan
On August 4, 2011, the Company announced the signing of a strategic cooperative agreement with China Three Gorges New Energy Corp. to jointly develop offshore wind power in Guangdong.
On July 25, 2011, the Company announced the signing of an off-shore wind power engineering, procurement and construction (“EPC”) project contract with Guangdong Yudean Xuwen Wind Power Co., Ltd., a subsidiary of Guangdong Yudean Group Co., Ltd. (“Yudean”) for a 48MW offshore wind power project in Zhanjiang, Guangdong, and the joining of alliance to develop offshore wind power in Guangdong.
On July 2011, MY 1.5Se WTG successfully passed low voltage ride through “LVRT” testing.
Mr. Chuanwei Zhang, Chairman and CEO of Ming Yang commented, “We are pleased to report solid results this quarter amidst challenging macro environment. Our 1.5MW WTGs continued to see strong demand. We recognized revenue from WTGs commissioned amounted to an equivalent wind power projects output of 367.5MW, or 245 units of 1.5MW WTGs in the quarter, representing a 34.6% year-over-year growth. The gaining of new sales contract with a total output of 379.5MW, or 253 units of 1.5MW WTGs and 18 units of 2.5/3.0MW SCD WTGs during the quarter further underlined the high demand of our WTGs.”
“Despite the pricing environment in the industry, we were able to maintain our gross margin at 19.0% during the quarter compared to the same period last year, which demonstrates the success of our continuous cost optimization initiatives.”
“We continue to demonstrate solid execution of our new growth strategies. We had continued to integrate our upstream supply chain by signing the rare earth agreement in June; and to show the competitiveness of our SCD WTGs and the validity of our new business models with the signing of an EPC contract with Yudean; and further expanded our blue-chip strategic relationships with a link-up with China Three Gorges New Energy Corp.”
Mr. Zhang concluded, “The development of China‘s wind power industry has entered a crucial phase, where its focus is shifting from size and speed to quality and efficiency. In the past three years, Ming Yang has laid a solid foundation by focusing on quality product development, R&D, innovative business models, further integration of high-end supply chain, and development of wind and solar energy storage solutions, and mostly importantly our active participation in the development of off-shore wind power in China. As a result, Ming Yang is not beset by the numerous problems affecting many wind turbine manufacturers in China such as excessive development, quality issues, lack of LVRT technology integration and most importantly effective cost management. I believe Ming Yang is well placed to continue to take advantage of the opportunities present in the Chinese market, and to grow our market share in 2011 and beyond. “
Second Quarter 2011 Unaudited Financial Results
Revenue
Revenue in the second quarter of 2011 was RMB1,405.5 million (US$217.4 million), representing an increase of 7.2% from RMB1,310.5 million in the corresponding period in 2010. The Company commissioned amounted to an equivalent wind power projects output of 367.5MW, or 245 units of 1.5MW WTGs, compared to 182 units of 1.5MW WTGs for the corresponding period in 2010.
Gross Profit and Gross Margin
Gross profit in the second quarter of 2011 was RMB267.2 million (US$41.3 million), representing an increase of 7.3% from RMB249.1 million for the corresponding period in 2010. The increase over the second quarter of 2010 was primarily due to larger revenue commissioned at the same gross margin. The Company was able to maintain a stable gross margin year over year through continuous reduction in production costs, despite a 20.1% drop in average selling price (“ASP”) compared to second quarter of 2010.
Gross margin in the second quarter of 2011 was 19.0%, compared to 19.0% for the corresponding period in 2010.
Operating Expenses
Operating expenses as a percentage to revenue for the quarter was 10.1%, compared to 5.8% for the corresponding period of 2010. Operating expenses are defined as the sum of selling and distribution expenses, administrative expenses, and research and development expenses.
Selling and Distribution Expenses
Selling and distribution expenses were RMB56.0 million (US$8.7 million) for the second quarter of 2011, compared to RMB40.9 million for the corresponding period in 2010, representing an increase of 36.9%. Selling and distribution expenses accounted for 4.0% of revenue, compared to 3.1% of revenues in the second quarter of 2010. The year-over-year increase was primarily due to the increase in delivery and transportation costs of more finished WTGs.
Administrative Expenses
Administrative expenses were RMB58.4 million (US$9.0 million) for the second quarter of 2011, compared to RMB25.9 million for the corresponding period in 2010, representing an increase of 125.7%. This year-over-year increase was primarily due to US$3.5 million share-based compensation expenses incurred since the fourth quarter of 2010. Administrative expenses accounted for 4.2% and 2.0% of revenues for the second quarter of 2011 and the second quarter of 2010, respectively.
Research and Development Expenses
Research and development (R&D) expenses were RMB27.0 million (US$4.2 million) for the second quarter of 2011, compared to RMB8.7 million for the corresponding period in 2010, representing an increase of 211.1%. This increase was primarily due to research and development costs incurred with respect to the development of our new 5.0/6.0 MW WTGs. Research and development expenses accounted for 1.9% and 0.7% of revenues for the second quarter of 2011 and the second quarter of 2010, respectively.
Net Finance Expense/Income
Net finance expense was RMB25.0 million (US$3.9 million) for the second quarter of 2011, compared to RMB29.1 million in the corresponding period in 2010. The increase in finance expenses for the period was primarily due to the expenses incurred in entering into finance leases.
Profit Before Taxation
Profit before taxation was RMB107.8 million (US$16.7 million) for the second quarter of 2011, compared to RMB148.2 million in the corresponding period in 2010, representing a decrease of 27.3%.
Income Tax Expense
Income tax expense was RMB22.9 million (US$3.6 million) for the second quarter of 2011, compared to an income tax benefit of RMB14.3 million in the corresponding period in 2010.
Total Comprehensive Income for the Period and Earnings per Share
Total comprehensive income for the second quarter of 2011 was RMB74.6 million (US$11.5 million), compared to RMB162.5 million in the corresponding period in 2010, representing a decrease of 54.1%.
For the second quarter of 2011, basic and diluted earnings per ordinary share were RMB0.67 (US$0.10) compared to basic and diluted earnings per ordinary share of RMB1.61 for the corresponding period in 2010.
Cash and Cash Equivalents
Cash and cash equivalents as of June 30, 2011 was RMB1,716.9 million (US$265.6 million), down from RMB 2,486.0 million as of December 31, 2010. Change in cash and cash equivalents is due to change in working capital
Currency Conversion
Solely for the convenience of readers, certain Renminbi amounts have been translated into U.S. dollar amounts at the rate of RMB6.4635 to US$1.00, the noon buying rate in New York for cable transfers of Renminbi for U.S. dollars on June 30, 2011 as set forth in the H.10 weekly statistical release of the Federal Reserve Board. No representation is intended to imply that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollar amounts at such rate or at any other rate.
Business Update
Order Book Update
During the second quarter of 2011, Ming Yang entered into sales contracts for wind power projects with a total output of 429MW, including 253 units of 1.5MW WTGs and 18 units of 2.5/3.0MW SCD WTGs, and the Company’s order backlog amounted to 2,145MW, consisting of 1,263 units of 1.5MW WTGs and 85 units of 2.5/3.0MW WTGs. Cumulative signed orders since our inception amounted to 4,265MW, consisting of 2,676 units of 1.5MW WTGs and 85 units of 2.5/3.0MW SCD WTGs, as of June 30, 2011. In addition, the number of orders awarded and pending contract signing amounted to 1,587MW, including 891 units of 1.5MW WTGs and 85 units of 2.5/3.0MW SCD WTGs, as of June 30, 2011.
2.5/3.0MW SCD Small Batch Production
Ming Yang has started the delivery of its first batch of SCD shipment.
Business Outlook for Full Year 2011
For the full year of 2011, the Company targets to recognize revenue from WTGs equivalent to wind power projects with a total output of 1.8 to 2.0 GW. Based on an estimated total newly installed wind capacity of up to 20GW in China in 2011, the Company expects to attain a market share of between 9 and 10% for the year. This outlook reflects our current and preliminary view based on current market and operating conditions, and may be subject to change, which may be material. Our ability to achieve this outlook is subject to significant risks. See Safe Harbor Statement at the end of this press release.
Financial Information
The preliminary unaudited consolidated statements of comprehensive income and consolidated statements of financial position accompanying this press release have been prepared by management using International Financial Reporting Standards, or IFRSs. This preliminary financial information is not intended to fully comply with IFRSs because it does not present all of the financial information and disclosures required by IFRSs.
China Ming Yang Wind Power Group Limited (NYSE: MY) is a leading and fast-growing wind turbine manufacturer in China, focusing on designing, manufacturing, selling and servicing megawatt-class wind turbines. Ming Yang produces advanced, highly adaptable wind turbines with high energy output and low energy production costs and provides customers with comprehensive post-sales services. Ming Yang cooperates with aerodyn Energiesysteme, one of the world’s leading wind turbine design firms based in Germany, to develop wind turbines and share intellectual property rights. Ming Yang‘s key customers include the five largest state-owned power producers in China, with an aggregate installed capacity accounting for more than 55% of China‘s newly installed capacity in 2010.
