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Announces Record Third Quarter 2010 Financial Results - 36% Revenue Growth, 25% Net Income Growth, Ups Guidance for 2010, and Announces Guidance for 2011

NEW YORK, November 10, 2010 /PRNewswire-Asia/ - SmartHeat Inc. (NASDAQ: HEAT - News; website: www.smartheatinc.com), a market leader in China's clean technology, energy savings industry, today announced record financial results for the third quarter ended September 30, 2010. SmartHeat management is scheduled to host an investor conference call tomorrow at 9:00 a.m. EST on November 11, 2010.

Financial Highlights:
-- Revenues of $51.48 million, up 36.05% from 3Q09
-- Operating income of $13.02 million, up 21.71% from 3Q09
-- Net income of $11.11 million, up 25.07% from 3Q09

Financial Summary:

 

 

 

3Q10

 

 

 

3Q09

 

 

Change

Revenue

 

$

51,476,821

 

 

$

37,835,897

 

 

36.05%

˙˙˙ Gross Profit

 

$

18,414,968

 

 

$

13,148,438

 

 

40.05%

˙˙˙ Gross Profit Margin

 

 

35.77

%

 

 

34.75

%

 

 

˙˙˙ Operating Income

 

$

13,018,212

 

 

$

10,695,856

 

 

21.71%

˙˙˙ Operating Margin

 

 

25.29

%

 

 

28.27

%

 

 

Net Income

 

$

11,106,505

 

 

$

8,880,536

 

 

25.07%

˙˙˙ Net Margin

 

 

21.58

%

 

 

23.47

%

 

 

Diluted EPS

 

$

0.34

 

 

$

0.36

 

 

 

Revenues
In the third quarter of 2010, total sales increased 36.05% to $51.48 million compared to $37.84 million in 3Q09. All three of the Company's product lines contributed to higher sales in the third quarter and were a result of China's energy-saving policies, continued growth in energy-saving industry, and our successful market expansion.
The breakdown of revenues for the third quarter of 2010 was $43.66 million from PHE units and heat exchangers, with sales from PHE units up 19.64% compared to 3Q09 and sales from heat exchangers up 72.47% compared to 3Q09. Sales from heat meters were up 5.55% from 3Q09 and accounted for $7.82 million in revenues for the quarter.
The following table presents the revenue contribution by percentage for each major product line in 3Q10 in comparison with 3Q09.

 

 

Percent of Total Revenues

Product Line

 

3Q10

 

3Q09

Plate Heat Exchange (PHE) Unit

 

38.80%

 

44.13%

Heat Exchanger

 

46.01%

 

36.29%

Heat Meters

 

15.19%

 

19.58%

Total

 

100.00%

 

100.00%

Net Income
Net income in the quarter totaled $11.11 million ($0.34 per diluted share), up 25.07% from $8.88 million ($0.36 per diluted share) in 3Q09. The higher net income was driven primarily by increased sales from PHEs and PHE units. Earnings per share decreased by $0.02 per share because of our secondary offering in the third quarter of 2009.
Gross Profit Margin
Gross profit margin for 3Q10 was 35.77%, up from 34.75% in 3Q09. The margin enhancement is mainly due to fixed cost leverage resulting from significant sales growth and better product mix arising from sales to some high-margin projects. ˙
Operating Income
Operating income totaled $13.02 million, compared with $10.70 million in 3Q09, representing a 21.71% year over year growth. Higher operating income was mainly due to increased sales of the PHE and PHE unit product lines. Total operating expenses including selling, general and administrative ("SG&A") expenses was $5.40 million, compared with $2.45 million a year ago. Operating margin was 25.29% compared with 28.27% a year ago. The increase in operating expense and decline of operating margin was mainly due to increased sales and expansion of our business, including the hiring of more sales personnel, higher depreciation expense, training of the marketing team and establishing new sales offices in more regions of China. We anticipate robust revenue and operating income growth in the future due to the efforts we made in 2010 to develop our sales and distribution channels.
Updates Full Year 2010 Earnings Guidance and Target 2011 Earnings Guidance˙
SmartHeat is updating its full year 2010 guidance from $106 - $116 million in revenues to $110 - $120 million in revenues and from $20 - $22 million in net income to $22 - $24 million in net income.
In addition, SmartHeat is announcing full year 2011 guidance of $25 - $30 million in net income on $135 - $160 million in revenues.
Outlook
Mr. James Jun Wang, Chairman and Chief Executive Officer of Smart Heat Inc., commented: "We maintained the momentum from the first half of 2010 and delivered another set of strong results. We thank our hard working employees who are dedicated to executing our operational strategy. We are quite pleased to see the significant business expansion to West China and are very satisfied with the growth across all our existing business lines and the benefits we expect to receive from investments made to expand our sales and distribution channels."
"Government requirements to implement energy savings and emission reduction have increased the demand for our energy-saving products in all industrial sectors. Taking advantage of economic development in West China and urbanization trends throughout China will be continue to be part of our long-term strategy. Based on the successful expansion to West China's market and some second and third tier cities, SmartHeat is well positioned to reap significant benefits," concluded Mr. Wang.

Investor Conference Call Instructions:

SmartHeat management will host an earnings conference call tomorrow to discuss its third quarter financial results and outlook.

Date and time: 9:00 a.m. U.S. Eastern Standard Time, November 11, 2010
U.S. toll free number: +1-888-339-2688
International direct dial-in: +1-617-847-3007
Conference passcode: 95275033

About SmartHeat Inc.

Founded by James Jun Wang, a former executive at Honeywell China, SmartHeat Inc. (www.smartheatinc.com) is a NASDAQ Global Market listed (NASDAQ: HEAT - News) U.S. company with its primary operations in China. SmartHeat is a market leader in China's clean technology energy savings industry. SmartHeat manufactures heat exchangers, custom plate heat exchanger units (PHE Units) and heat meters. SmartHeat's products directly address air pollution problems in China where massive coal burning for cooking and heating purposes is the only source of economical heat energy in China. With broad product applications, SmartHeat's products significantly reduce heating costs, increase energy use, reduce air pollution, and have broad applications. SmartHeat's customers include global Fortune 500 companies as well as municipalities and industrial/residential users. China's heat transfer market is currently estimated at approximately $2.4 billion with double-digit annual growth according to China Heating Association.

Safe Harbor Statement

All statements in this press release that are not historical are forward- looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. SmartHeat's actual results may differ from its projections. Further, preliminary results are subject to normal year-end adjustments. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect SmartHeat's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in SmartHeat's filings with the Securities and Exchange Commission.

Corporate Communications Contact:
Ms. Jane Ai, Corporate Secretary
SmartHeat Inc.
Tel: 011-86-24-25363366
Email: info@SmartHeatinc.com

 

 


 

 

 

 

 

 
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