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Longwei Petroleum To Benefit From PRC Fuel Price Increase

Stocks in this article: LPH

At December 31, 2011 the Company had increased its combined balance of inventory on-hand and advances to suppliers by USD $24.2 million or 22.2% to $133.5 million since its fiscal year-end on June 30, 2011. Based on its inventory on-hand product mix of 58,738 metric tons (approximately 19.4 million gallons) of petroleum, the Company's retail inventory value at December 31, 2011 would have increased by approximately USD $5.6 million considering the recent price increase. Longwei also had USD $74.6 million in advances to suppliers at December 31, 2011, which allows the Company to lock in supply and pricing with refineries so that it can react quickly for purchases based on the timing of international crude oil price fluctuations and the PRC retail pricing adjustments.

"We will continue to operate within our business model, which we believe gives us a competitive advantage. By utilizing our large storage capacity and advances to suppliers, we are able to adjust inventory levels based on the anticipated movement of industry pricing, which acts as a hedge on pricing levels," stated Michael Toups, CFO of Longwei. "Utilizing our excess storage capacity allows us flexibility to take advantage of pricing, supply and demand fluctuations within the marketplace."

"The NDRC's decision will enable us to raise prices of our petroleum products, which we anticipate will have a positive effect on our revenues and profits going forward," stated Mr. Cai. "We also expect to experience a slight gross margin improvement, as our inventory on-hand is recorded on a weighted average basis and will be sold at higher market prices."

About Longwei Petroleum Investment Holding Limited

Longwei Petroleum Investment Holding Limited is an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China. The Company's oil and gas operations consist of transporting, storage and selling finished petroleum products, entirely in the PRC. The Company's headquarters are located in Taiyuan City, Shanxi Province. The Company has a storage capacity for its products of 120,000 metric tons located at storage facilities in Taiyuan and Gujiao, Shanxi. The Company's Taiyuan and Gujiao facilities can store 50,000 metric tons and 70,000 metric tons, respectively. The Company has the necessary licenses to operate and sell petroleum products not only in Shanxi but throughout the entire PRC. The Company's storage tanks have the largest storage capacity of any non-government operated entity in Shanxi.

The Company seeks to earn profits by selling its products at competitive prices with timely delivery to coal mining operations, power supply customers, large-scale gas stations and small, independent gas stations. The Company also earns revenue under an agency fee by acting as a purchasing agent for other intermediaries in Shanxi, and through limited sales of diesel and gasoline at two retail gas stations, each located at the Company's facilities. The Company seeks to continue to expand its customer base and distribution platform through the utilization of its large storage capacity, which allows the Company the flexibility to take advantage of pricing, supply and demand fluctuations in the marketplace.

For further information on Longwei Petroleum Investment Holding Limited, please visit http://www.longweipetroleum.com. You may register to receive Longwei Petroleum Investment Holding Limited's future press releases or request to be added to the Company's distribution list by contacting Dave Gentry at info@redchip.com.  

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