CHNG reported awesome results today beating the estimates of .09 eps for the quarter by reporting a solid .11 eps. CHNG has been riding the bear storm with class not showing much weakness despite the sell offs in the general market. As i stated my plan was to repurchase some CHNG on some solid earnings and they did just that today and managed to rally in the opposite direction of the markets.
China Natural Gas Reports Second Quarter 2007 Financial Results
Wednesday August 15, 8:27 am ET
NEW YORK, Aug. 15 /PRNewswire-FirstCall/ — China Natural Gas, Inc. (OTC Bulletin Board: CHNG - News), one of the leading providers of pipeline natural gas for industrial, commercial and residential use and compressed natural gas (CNG) for vehicular fuel in Xi’an, China, today announced its second quarter financial results for the period ended June 30, 2007.
Financial Highlights for the Second Quarter 2007:
– Revenue increased 122% year over year to $8.3 million
– Gross profit increased 157% year over year to $4.1 million
– Gross margin increased year over year to 50.1%
– Income from operations increased 191% year over year to $3.2 million
– Net income increased 196% year over year to $2.7 million
– Net income per share increased 192% year over year to $0.11 per share
“We are very pleased with our performance through the second quarter of 2007. Approximately 17 filling stations contributed to our revenue performance, including four in the Henan province as we expanded our presence outside of Xi’an. Additionally, we completed the construction of 3 filling stations during the second quarter of 2007, and we expect to have a total of 20 filling stations contributing to our third quarter 2007 revenue, which is ahead of our previous expectation as we have ramped up several new stations faster than anticipated,” stated Mr. Qinan Ji, Chairman and CEO of China Natural Gas.
Revenue for the second quarter was $8.3 million, an increase of $4.6 million or 122% compared to $3.7 million in the second quarter of 2006. The significant increase in revenue was due primarily to additional CNG filling stations contributing to revenue, and the year over year increase in residential, industrial and commercial pipeline customers to approximately 78,216 from 62,555 in the second quarter of 2006. Revenue from sales of natural gas increased 170% to $6.8 million from $2.5 million in the prior year period and contributed approximately 82% of revenue performance in the second quarter of 2007. As a percentage of revenue, this is up substantially from 67% of revenue in the second quarter of 2006, and compares to 73% in the first quarter of 2007. Construction and installation revenue increased 24% to $1.5 million from $1.2 million in the second quarter of 2006, generating approximately 18% of revenue performance in the second quarter of 2007.
Gross profit increased 157% to $4.1 million in the second quarter of 2007 from $1.6 million in the second quarter of 2006. Gross margin of 50.1%, compared to 43.2% in the prior year’s period, reflects the significant increase in revenues generated from company-owned CNG filling stations. Management believes that sales of CNG through its filling stations provide the best opportunity for future revenue and profit growth. In fact, gross margin attributable to the retail CNG business alone was 48.8% in the second quarter of 2007, up substantially from 36.0% in the second quarter of 2006, and down from 49.4% in the first quarter of 2007.
In the second quarter of 2007, operating income increased 191% to $3.2 million from $1.1 million in the second quarter of 2006 and operating margin increased substantially to 38.7% compared to 29.7% in the prior year’s period. Operating expenses in the second quarter of 2007 increased 83% to $943,306 from $516,018 the year before, reflecting the construction and operation of 3 new natural gas filling stations during the second quarter of 2007, as well as continued expenses related to the identification of future natural gas filling station locations and costs associated with the government licensing and approval process. Selling and marketing expense was $682,423, up 118% from $312,610 compared to the same period last year, and reflects the Company’s increased efforts to attract new customers to the filling stations and obtain new residential and commercial customers. General and administrative expense was $260,883, roughly flat to the second quarter of 2006, demonstrating the Company’s fixed administrative cost structure despite significant build out of the retail CNG business. As a percentage of revenue, operating expenses decreased to 11% in the second quarter of 2007 from 14% in the second quarter of 2006.
Net income for the second quarter of 2007 increased 196% to $2.7 million, or $0.11 per share, compared to $927,269, or $0.04 per share, in the second quarter of 2006.
Balance Sheet
As of June 30, 2007, the Company had $7.6 million of cash and cash equivalents on hand compared to $6.7 million as of March 31, 2007. The Company also raised net proceeds of $13.9 million on August 3, 2007 via a private placement of stock and warrants with institutional investors.
Guidance
Today the Company is reiterating its previously stated revenue and net income guidance for 2007 and 2008. For the year 2007, the Company continues to expect revenue to increase 70% to $32.0 million from $18.8 million in 2006. The Company continues to expect net income to increase 70% to $9.3 million in 2007 from $5.5 million in 2006. For the year 2008, the Company continues to anticipate revenue and net income growth of at least 70%.
“We are reiterating our existing financial guidance today, which primarily reflects performance from and growth of our retail CNG business and is based on operating 23 revenue generating retail CNG filling stations by the end of 2007 and 42 revenue generating retail CNG stations by the end of 2008. At this time, we are not accounting for the potential sale of Liquefied Natural Gas (LNG) in our financial guidance, although we continue to actively explore this compelling opportunity.”
“Today, we also are announcing that we are working with a Thai government agency, PTT Public Company Limited, to evaluate placing retail CNG stations throughout Thailand, as well as offering consulting services regarding the use of CNG in the public transportation system. This is a potential revenue opportunity that we have not yet factored into our 2007 and 2008 financial guidance and we look forward to updating shareholders about our progress,” concluded Mr. Qinan Ji.
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