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New Oriental Energy &Amp; Chemical Corporation Announces Fiscal 2007 Financial Results

Posted on: Monday, 2 July 2007, 09:22 CDT

New Oriental Energy & Chemical Corp. (NASDAQ: NOEC)

 --  Company Reports a 26.6% Increase in Annual Revenue to $39 million --  Alternative Fuel Revenue Increased 108% to $12.2 million --  New DME Production Facility Scheduled to be Available by September     2007 will add 100,000 tons of Additional Annualized Capacity --  Company Anticipates First Quarter Revenues of at least $15.5 million      

New Oriental Energy & Chemical Corp. (NASDAQ: NOEC), a specialty chemical and emerging alternative fuel manufacturer in The People's Republic of China (PRC), today announced financial results for the fiscal year ending March 31, 2007.

Financial Results

The Company reported record revenue of $39.0 million for fiscal year 2007 compared to $30.8 million last year, representing an increase of 26.6 percent. Revenue growth primarily resulted from a 106.8 percent increase in alternative fuel revenues to $12.2 million, which represented 31.3 percent of total revenues, as compared to $5.9 million or 19.2 percent of revenues during fiscal 2006. Methanol comprised an unusually high percentage of total revenue as management strategically shifted production to increase methanol output to capitalize on the significant increase in market prices during the December quarter.

"During fiscal 2007, the Company began to benefit from our previous investments focused on expanding alternative fuel production capabilities, specifically for DME and Methanol," stated Mr. Chen Si Qiang, New Oriental Energy & Chemical Corporation's Chief Executive Officer. "At the end of this fiscal year we had the capacity to produce 50,000 tons of DME annually which represents a 400 percent increase from production levels at the beginning of fiscal 2007. By leveraging strong market demand for DME and Methanol, we were able to show meaningful year over year revenue growth and an overall improvement in gross margins."

 Product Revenue Comparison: (all numbers in USD thousands)                                 Fiscal 2007   Fiscal 2006   % Change                                 -----------   -----------   -------- Urea                                $22,041       $23,092      (4.5%) Carbonate Hydrogen Ammonia            2,090         1,584      31.9% Liquified Ammonia                     1,853           226     719.9% Methanol                              7,315         5,271      38.8% DME                                   4,886           592     725.3% Ammonia Water                           157           ---       N/A LPG (Liquefied Petroleum Gas)           655                     N/A Total                               $38,997       $30,765      26.7% 

Cost of goods sold for fiscal year 2007 increased 25.5 percent to $33.4 million as the Company increased overall revenue while also incurred expenses related to reclassification of previously stated coal inventory. The Company anticipates modest expenses in fiscal 2008 related to further inventory adjustments. Gross profit increased 35.0 percent to $5.6 million with gross margins improving by almost one percent to 14.5 percent. The improvement in gross margins was due primarily to a larger contribution of alternative fuels as a percentage of revenue, an improvement in overall utilization levels and improved production efficiency through the installation of new automation equipment, which was offset by rising coal and electricity costs and the aforementioned non-cash charge to inventory. Additionally, management believes that the recent integration of a new coal stick line will reduce the cost of the Company's primary feedstock, which should enable further gross margin improvements.

Operating expenses for fiscal 2007 increased 104.2 percent to $1.9 million and were impacted by higher overall expenses related to increased revenue levels, additional staffing to improve internal controls and higher costs related to being a public company. Operating margins for the period were 9.5 percent as compared to 10.5 percent last year.

Net income for fiscal 2007 increased 9.8 percent to $3.0 million with earnings of $0.30 per weighted average fully diluted share as compared to $2.7 million and $0.37 reported during fiscal 2006. The Company utilized 9.9 million weighted diluted shares outstanding for fiscal 2007, as compared to 7.5 million for the previous year. It is important to note that, because the Company did not go public until October 2006, only a portion of the total fully diluted outstanding shares were used in each respective calculation. As of March 31, 2007 the Company had 12,640,000 fully diluted shares outstanding.

Balance Sheet Highlights

The Company ended fiscal 2007 with $8.1 million in cash and restricted cash compared to $5.4 million the previous year. Inventories of $3.8 million were comprised of $2.6 million Urea and Bicarbonate Ammonia, which was produced and stored to meet demand for the growing season, in addition to product delivery delays caused as China implemented the accelerated railway system for customer transportation during the fourth fiscal quarter. Short term debt at the end of fiscal 2007 was $7.4 million.

The Company continues to maintain strong working capital management with little related receivables and a limited amount of inventory. As a result, cash flow from operations for fiscal 2007 was $5.1 million.

Capital expenditures of $8.8 million for fiscal 2007 were primarily related to the Company's 100,000 ton DME expansion. Management anticipates that the new DME production line will be fully implemented and operational by September, 2007, which will provide New Oriental with 150,000 tons of annualized DME capacity. Based on the average market price of DME during the past year of $450 per ton and an optimal capacity utilization of 80 to 85 percent, this would equate to approximately $54 and $57.4 million in total annual revenue potential.

First Quarter Guidance

For the first quarter of 2008, which ends June 30, management expects to report revenues of at least $15.5 million with continued GAAP profitability and would represent a 65 percent increase from the $9.4 million in revenues recorded during the first quarter of fiscal 2007. Alternative energy is estimated to account for approximately $4.3 million, or 28 percent of total revenue.

"While DME production and use is still in its infancy, we believe that the favorable price profile when compared to other fuel sources, and improving user dynamics will drive further consumer adoption and growth for the foreseeable future. Currently, there are 11 factories in the PRC which produce DME and we are the largest in the Henan Province. To help facilitate our long term growth and expansion plan, the Company expects to commence building a new 200,000 ton Methanol production line this fall, which will be utilized as the primary self-produced feedstock for additional DME production and would move us significantly closer to our goal of producing 600,000 tons of DME annually by 2010," Mr. Chen Si Qiang concluded.

About New Oriental Energy & Chemical Corp.

New Oriental Energy & Chemical Corp. is an emerging alternative fuel and specialty chemical manufacturer based in Henan Province, China. The Company is focused on the production of Dimethyl ether (DME), methanol and fertilizer products. The Company sells its products primarily through a network of distribution partners.

Safe Harbor Statement:

This earnings release contains forward-looking statements concerning New Oriental Energy & Chemical Corp. The actual results may differ materially depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, new product development, shipment timelines, market acceptance of DME and new products, additional competition from existing and new competitors, changes in technology or product techniques, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. New Oriental Energy & Chemical Corp. undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.

                      ASSETS                                                     March 31,    March 31,                                                       2007         2006                                                   ------------ ------------ CURRENT ASSETS Cash and cash equivalents                         $  2,655,143 $  3,281,761   Restricted cash                                    5,430,426    2,120,494   Notes receivable                                   1,395,858       10,099   Inventories, net                                   3,794,220    1,078,592   Prepayments for goods                                383,639      835,712   Taxes receivable                                     155,863            -   Due from employees                                   113,275       49,021   Other assets                                         204,508       34,586                                                   ------------ ------------       Total current assets                          14,132,932    7,410,265 Plant and equipment, net                            11,657,546    9,527,685 Land use rights, net                                 1,550,676      580,597 Construction in progress                             5,208,277    3,154,836 Deposits                                               267,757    1,172,321 Notes receivable                                             -    1,247,349 Deferred taxes                                         646,331      369,450 Other long-term assets                                  39,745            -                                                   ------------ ------------      TOTAL ASSETS                                 $ 33,503,264 $ 23,462,503                                                   ============ ============     LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES   Accounts payable                                $  2,259,961 $  2,627,224   Other payables and accrued liabilities               416,672      440,937   Short term debt                                    7,356,933    6,677,210   Notes payable - current portion                      572,781      453,788   Customer deposits                                  5,385,425    1,860,459 Payable to contractors                                  96,861            - Due to related parties                               4,041,583    1,139,129   Taxes payable                                         30,000       59,110                                                   ------------ ------------           Total current liabilities                 20,160,216   13,257,857                                                   ------------ ------------ LONG-TERM LIABILITIES   Notes payable - non-current                                -      572,781   Deferred taxes                                     1,619,110    1,243,751   Due to employees                                     115,816       90,856                                                   ------------ ------------           Total long-term liabilities                1,734,926    1,907,388                                                   ------------ ------------ TOTAL LIABILITIES                                   21,895,142   15,165,245                                                   ------------ ------------ SHAREHOLDERS' EQUITY  Common stock, par value $0.001 per share;   30,000,000 shares authorized, 12,640,000 and   7,500,000 shares issued and outstanding as of   March 31, 2007 and 2006, respectively                 12,640        7,500  Additional paid-in capital                          4,573,205    4,583,591  Retained earnings (restricted portion was   $440,182 and $293,558 as of March 31, 2007 and   2006, respectively)                                6,563,558    3,545,887  Accumulated other comprehensive income                458,719      160,280                                                   ------------ ------------ Total Shareholders' Equity                          11,608,122    8,297,258                                                   ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $ 33,503,264 $ 23,462,503                                                   ============ ============                                                     2007          2006                                                 ------------  ------------ REVENUES                                        $ 38,997,412  $ 30,763,619 COST OF GOODS SOLD                                33,352,455    26,583,680                                                 ------------  ------------ GROSS PROFIT                                       5,644,957     4,179,939 Selling and distribution                             668,247       300,383 General and administrative                         1,257,047       642,705                                                 ------------  ------------ INCOME FROM OPERATIONS                             3,719,663     3,236,851 OTHER INCOME (EXPENSES)    Interest expense, net                            (238,150)     (139,476)    Government grants                                 372,290       392,888    Other expenses, net                               (19,159)      (26,392)                                                 ------------  ------------ Income Before Income Taxes                         3,834,644     3,463,871 Income Taxes                                         816,973       716,287                                                 ------------  ------------ NET Income                                         3,017,671     2,747,584                                                 ------------  ------------ Other comprehensive income Foreign currency translation gain                    445,431       238,854 Unrealized gain on marketable securities                   -           105                                                 ------------  ------------ OTHER COMPREHENSIVE INCOME BEFORE TAX                445,431       238,959 INCOME TAX EXPENSE RELATED TO OTHER  COMPREHENSIVE INCOME                                146,992        78,856                                                 ------------  ------------ Other comprehensive income, net                      298,439       160,103                                                 ------------  ------------ COMPREHENSIVE INCOME                            $  3,316,110  $  2,907,687                                                 ============  ============ WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND  DILUTED                                           9,922,137     7,500,000                                                 ============  ============ NET INCOME PER SHARE, BASIC AND DILUTED         $       0.30  $       0.37                                                 ============  ============ 

 Contact:  For Company: New Oriental Energy & Chemical Corp. Mr. Ben Wang, CFO Xicheng Industrial Zone of Luoshan, Xinyang Henan Province, The People's Republic of China Tel: (86) 376-2169961  For Investors: Matthew Hayden HC International, Inc. (760) 994-0034 Matt.hayden@hcinternational.net  Mark Miller East West Group Network mmeastwest@hotmail.com (770) 436-7429  

SOURCE: New Oriental Energy & Chemical Corp.

Source: MARKET WIRE

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