SHENYANG, Liaoning Province, China, Nov. 10, 2011 /PRNewswire-Asia/ -- NF Energy Saving Corporation. (NASDAQ: NFEC) ("NF Energy" or the "Company"), a leading energy saving services and solutions provider for China's power, petrochemical, coal, metallurgy, construction, and municipal infrastructure development industries, today reported financial results for its third quarter ended September 30, 2011.
Third Quarter 2011 Highlights
- Revenue was $2.6 million
- Gross profit was $0.5 million, representing a gross margin of 19.18%
- Net income was $0.071 million.
Third Quarter 2011 Results
The Company reported total revenue of $2.6 million for the three months ended September 30, 2011, a 67.76% decrease from revenue of $8.04 million in the same period of 2010. This decrease is mainly due to a significant decrease in service revenue, which in turn is due to the move to the Company's new factory not being completed during the quarter.Gross profit in the third quarter of 2011 was $0.5 million, a decrease of 82.53% from the $2.85 million in gross profit generated in the third quarter of 2010. The decrease in gross profit was primarily due to the period-over-period decrease in service revenues and an increase of the product cost. The main reduction in margin was due to the decline in service revenues as well as certain manufacturing operations being subcontracted out pending the completion of the Company's new factory. Total operating expenses were $0.32 million for the three months ended September 30, 2011, as compared to $0.31 million for the same period of 2010. However, when compared to the $0.4 million of total operating expenses in the second quarter of 2011, total operating expense are decreasing for the year. Income from operations was $0.18 million for the three months ended September 30, 2011, as compared to $2.53 million for the same period of 2010, a decrease of $2.35 million or approximately 93.18%. This decrease is primarily due to a significant reduction in service revenues and gross margin combined with an increase in operating expenses. N ine Months ended Sep tember 30, 2011 Results Revenue for the first nine months of 2011 was $10.09 million, down 44.23% from the first nine months of 2010. Gross profit was $2.42 million, down 56.42% from gross profit of $2.7 million in the comparable period a year ago. Gross margin was 23.96%, compared to 30.67% in the prior year period. Operating income was $1.33 million, down 72.71% from $4.85 million in the first nine months of 2010. Net income was $0.87 million, down 77.35% from $3.8 million in the first nine months of 2010. Diluted earnings per share were $0.16 for the first nine months of 2011 compared to $0.70 in the first nine months of 2010. Financial Condition As of September 30, 2011, the Company had $0.15 million in cash and cash equivalents compared to $0.82 million in cash and cash equivalents on December 31, 2010. Working capital was $2.15 million. The Company used $0.61 million in net cash from operating activities for the nine months ended September 30, 2011, compared to generating $3.16 million in the same period of 2010. Payments on construction in progress totaled $2.7 million. The Company raised $3.0 million from a bank loan and the issuance of short-term promissory notes. Adjustment of forecast result of fiscal year 2011 In early 2011, based upon the assumption that the Company would obtain $15 million in financing, the Company projected that total revenue and the net profit in 2011 would be between $30 million to $32 million and $6 million to $6.5 million, respectively. However, the Company now expects that annual revenue for 2011 will be approximately $15 million and net income will be approximately $2 million, which is a decrease of approximately 40% and 50% compared to 2010, respectively. The main reason for adjusting the financial forecast for 2011 is primarily due to (i) the delay of financing that caused a delay in completing construction of the new manufacturing facility and as a result, the Company has to subcontracting part of the manufacturing process to third parties which lead to a decrease in product revenue and net income; and (ii). the agreements for the Gaizhou Biomass Energy Project and Petrol-chemical System Pipeline Project did not receive the anticipated consents due to lack of resource and as a result the expected project revenue was not generated.