Longwei Petroleum Signs Sales Agreements With Seven Major Huajie Customers
TAIYUAN CITY, China, Nov. 15, 2012 /PRNewswire-FirstCall/ -- Longwei Petroleum Investment Holding Ltd. (NYSE MKT: LPH) ("Longwei" or the "Company"), an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), today announced it has signed purchase agreements with seven major customers for its Huajie facility, bringing the total since the Company commenced operations in early October to 16 new customers.
Longwei defines "major" customer as those customers with the purchase capacity to order at least 1.0% of the Company's total revenues. At fiscal year end June 30, 2012, Longwei had 46 major customers at its Taiyuan and Gujiao facilities, which each accounted for at least 1.0% (or approximately $5.1 million) or more of total annual revenues. During the fiscal year ended 2012, no single customer accounted for more than 2.7% of total revenues. The Company has now added 16 new major customers for its Huajie facility.
"Since opening the facility, we signed contracts with at least 16 major regional industrial companies in mining, steel and logistics," said Cai Yongjun, Chairman and Chief Executive Officer of Longwei. "We are pleased to receive the full support of local government and business leaders, as well as their endorsement to help us build our customer base. We are confident we can develop this new market quickly based on our experience during the Gujiao ramp-up phase in 2010."
At a site visit to the Huajie facility on October 23, 2012, local government leaders offered their support to ensure the success of the Huajie facility by assisting Longwei to expand its customer base by encouraging local enterprises in Fanshi County, Shanxi Province, to utilize the new facility and increase their petroleum consumption. The local leaders view the new facility as a stimulant for regional growth and as a key piece of infrastructure to support local employment and economic development.Longwei recently reported revenues of US $133.4 million and non-GAAP net income of $18.3 million, or $0.18 per share, adjusted for the non-cash warrant derivative liability charge, for the first fiscal quarter ended September 30, 2012. The Company's product sales volume increased 17.8% to 110,587 metric tons during the quarter. As of September 30, 2012, the Company reported total assets of US $360.0 million and book value per share of $3.47. Longwei expects year-over-year revenue growth of approximately 26.6% to $646.3 million, and net income growth of approximately 24.2% to $77.6 million, adjusted for the non-cash warrant derivative liability, for the fiscal year ending June 30, 2013. This growth rate does not account for any external financing for inventory, which could accelerate growth. The growth is driven primarily by the ramp-up of the Huajie facility and organic growth at the Company's two existing facilities. In the U.S., even Jim Cramer, the host of Mad Money on CNBC, seems to have weighed in on the Chinese economy "stabilizing," as China's trade surplus increased in October to its widest level in nearly four years and export growth rose to a five-month high. "Both the macro data and the micro from individual companies that do business in China are saying the same thing: the Chinese economy is stabilizing," said Mr. Cramer. "They've got inflation whipped and 2013 should be a better year for the People's Republic than 2012." CNBC ( November 12, 2012). Recent economic indicators show that the PRC economy has stabilized and expects higher growth in the fourth quarter of 2012. "Now is a critical point for the country's industrial economy. Positive factors are accumulating," said Zhu Hongren, Chief Engineer of the Ministry of Industry and Information Technology. The PRC also surpassed the United States as the world's largest recipient of global foreign direct investment in the first half of 2012, showing that global investors have confidence in the world's second-largest economy. China Daily ( October 26, 2012). The GDP growth rate for Shanxi Province during 2011 was 13%, according to China Daily ( March 13, 2012), and it is expected to be approximately 10% for 2012, which outpaces the general economic growth estimates of 7.5% in the PRC. The provincial government has estimated the fixed-asset investment in Shanxi to be RMB 5 trillion (approximately $790 billion) over the next five years, according to China Daily ( September 13, 2011). The provincial government also recently announced an additional RMB 1 trillion (approximately $158 billion) in local development projects as part of the region's industrial stimulus plan, according to China Securities News ( August 23, 2012). The Company believes its locations within Shanxi Province are advantageous to the growth of its business model. About Longwei Petroleum Investment Holding Limited
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