Fourth Quarter 2009 Highlights
— Net revenues increased 45.9% year over year to $15.9 million
— Revenue from the sale of forged products for the wind power and other industries increased 111.4% year over year to $10.5 million, or 65.9% of net revenues
— Revenue from the sale of forged products exclusively to the wind turbines industry increased 327.1% year over year to $6.8 million, or 43.0% of net revenue
— Gross profit increased 63.2% year over year to $4.3 million
— Net income allocable to common shareholders was $1.1 million, or $0.05 per diluted share
— Excluding a $1.6 million deemed preferred dividend and other non-cash expenses, adjusted net income was $2.7 million, or $0.11 per diluted share, up 86.0% year-over-year
2009 Full Year Highlights
— Net revenues increased 26.4% to $53.5 million year over year
— Revenue from the sale of forged products for the wind power and other industries increased 104.2% year over year to $35.7 million, or 66.8% of net revenues
— Revenue from the sale of forged products exclusively to the wind power industry increased 198.5% year over year to $20.1 million, or 37.6% of net revenue
— Gross profit increased 22.5% to $12.9 million
— Net income allocable to common shareholders was $5.6 million, or $0.24 per diluted share
— Excluding deemed preferred dividends and other non-cash expenses, adjusted net income was $7.8 million, or $0.34 per diluted share, up 35.1% from adjusted net income of $5.8 million, or $0.27 per diluted share, in 2008
— Opened new forged product manufacturing facility in Wuxi City
— Began construction of electro-slag remelted production line
— Listed on the NASDAQ Global Market
"This was a landmark year for China Wind Systems. We started production of our new forged products facility in March 2009 and won a number of sizable contracts for our forged products with customers in the wind power industry and other industries, resulting in substantial earnings growth," said Mr. Jianhua Wu, Chairman and CEO of China Wind Systems, Inc. "In October 2009, we announced our plans to expand our forged products facility to manufacture electro-slag remelted forged products for the high performance components market of the wind power industry, which we completed in March 2010. We have also listed our shares on the NASDAQ Global Market, further elevating our profile in the investment community."
Fourth Quarter 2009 Results
Net revenue for the fourth quarter of 2009 increased 45.9% to $15.9 million, compared to $10.9 million for the same period in 2008. The increase was primarily due to strong sales growth of forged rolled rings for the wind power industry segment. Revenue from the sale of forged rolled rings for the wind power industry and other industries grew 111.4% to $10.5 million, or 65.9% of net revenue, for the fourth quarter of 2009, compared to $4.9 million, or 45.5% of net revenue, for the same period of the prior year. Revenue from the sale of forged rolled rings exclusively for the wind power industry rose 327.1% to $6.8 million, representing 43.0% of net revenue, compared to $1.6 million, or 14.7% of net revenues in the fourth quarter of 2008. Revenue from the Company’s dyeing and finishing equipment segment decreased 8.2% to $4.9 million, or 30.9% of net revenues, compared to $5.3 million, or 49.0% of net revenue, for the fourth quarter of 2009 due to the impact of the global recession on China’s textile industry.
Gross profit for the fourth quarter of 2009 increased 63.2% to $4.3 million, from $2.7 million for the same period in the prior year. Gross margin was 27.3% compared to 24.4% for the same period in 2008. The dyeing and finishing equipment segment’s gross margin was 21.7%, down from 26.3% in the comparable period in 2008, resulting from higher raw materials costs and industry pricing pressure. Gross margin for forged rolled rings and electric power equipment was 25.1%, compared with 23.8% in the same period last year. The increase was attributable to cost savings resulting from the Company’s ability to manufacture its own forged products at its new forged products facility which came online in March 2009. As the Company improves its efficiency at the new facility, the Company expects the gross margins for forged products to continue to expand.
Operating expenses decreased 1.1% to $566,393, compared to $572,748 in the comparable period last year, primarily resulting from lower professional fees.
Operating income increased 80.8% to $3.7 million for the fourth quarter of 2009, from $2.1 million for the same period in the prior year.
Net income allocable to common shareholders was $1.1 million, compared to $1.5 million in the fourth quarter of 2008. Diluted earnings per share were $0.05 compared to $0.07 in the comparable period last year. Fourth quarter of 2009 adjusted net income excluding $1.6 million in non-cash deemed preferred stock dividends related to issuance of 2.4 million series A preferred shares and other non-cash expenses increased 86.0% to $2.7 million, or $0.11 per diluted share, from $1.5 million, or $0.07 per diluted share, a year ago. Diluted earnings per share were calculated using weighted average shares of 24,006,547 and 21,207,070 for the three months ended December 31, 2009 and December 31, 2008, respectively.
Fiscal Year 2009 Results
In 2009, revenue increased 26.4% to $53.5 million, as compared to $42.3 million in 2008. Gross profit increased 22.5% to $12.9 million, as compared to $10.5 million in 2008. Gross margin was 24.2%, as compared to 25.0% in 2008. Operating income increased 32.9% to $10.7 million, from $8.1 million in 2008. Net income allocable to common shareholders was $5.6 million, or $0.24 per diluted share, compared to $0.6 million, or $0.03 per diluted share, in 2008. Adjusted net income increased 35.1% to $7.8 million, or $0.34 per diluted share, from $5.8 million, or $0.27 per diluted share in 2008. Diluted earnings per share were calculated using weighted average shares of 22,821,086 and 21,207,070 for 2009 and 2008, respectively.
Financial Condition
As of December 31, 2009, the Company had cash and cash equivalents of $2.3 million, accounts receivable of $6.0 million and working capital of $4.7 million. The Company had $2.0 million in short-term loans payable and stockholders’ equity of $45.3 million.
In 2009, the Company generated $9.3 million in operating cash flow and spent $12.7 million in capital expenditures, primarily for property and equipment related to the new forged products facility and ESR production line.
Business Outlook
"We completed trial production at our new ESR production line in March 2010 and anticipate delivering the first batch of ESR product towards the end of April 2010," commented Mr. Wu. "We believe that this new product line strengthens our competitive edge among other forged components suppliers in the industry. In addition, as the trend in China’s wind power industry shifts towards producing larger 5MW offshore and near-shore wind turbines, we expect that, given our strategic positioning as a large precision forged rolled rings provider, we will be able to meet our 40,000-ton production capacity target and deliver 4,000 tons of ESR product in 2010."
Conference Call
China Wind Systems will conduct a conference call at 9:00 a.m. Eastern Time on Wednesday, March 31, 2010 to discuss its fourth quarter and full-year 2009 results. To participate in the live conference call, please dial (877) 359-2891 approximately ten minutes prior to the start of the call and when prompted enter passcode 658 881 10; international callers dial (702) 224-9578. A replay will be available for 14 days starting March 31 at 10:00 a.m. ET. To access the replay, dial (877) 642-1687 and enter passcode 658 881 10; international callers dial (706) 645-9291.
China Wind Systems supplies forged rolled rings to the wind power and other industries and industrial equipment to the textile industry in China. With its newly finished state-of-the-art production facility, the Company has increased its production and shipment of high-precision rolled rings and other essential components primarily to the wind power and other industries.
