EX-99.1 2 v094343_ex99-1.htm
Exhibit 99.1

New Oriental Energy & Chemical Corporation Reports Record Revenue for the Second Quarter Fiscal 2008 on Increase in Alternative Energy Sales

·  
Second Quarter Revenue Rose 129.4% to $18.2 million while Net Income Increased 14.7% to $900,000
·  
A 790% Increase in DME Alternative Fuel Revenue to $12.2 million Contributed 67% of Total Revenue in the Quarter
·  
Revenue for the First Six Months Increased 91.4% to $32.9 million and Net Income Grew 26.2% to $1.9 million

New York, NY - November 14, 2007 -- New Oriental Energy & Chemical Corp. (NOEC; NASDAQ), a specialty chemical and emerging alternative fuel manufacturer in The People’s Republic of China (PRC), today announced second quarter and six month fiscal 2008 results for the period ending September 30, 2007.

Record Revenue

The Company reported record revenues in its fiscal second quarter of $18.2 million compared to $7.9 million in the same period from the prior year, representing an increase of 129.4 percent. Revenue growth was primarily a result of the Company’s 100,000 tons of new DME capacity which came on line in August as well as the continued year over year growth in the Company’s Urea business. DME revenues increased 790 percent to $12.2 million with alternative energy products comprising 67 percent of revenue as compared to 28.4 percent last year. The Company’s fertilizer business collectively increased 5.7 percent with the largest contributor, Urea, increasing 11.5 percent as compared to the same period last year. During the second quarter fertilizer revenue represented 33.0 percent of the Company’s total revenue.

Alternative Fuel Growth Drives Results

“The revenue growth that we experienced during the second quarter exceeded our initial guidance of $16.0 million as a result of our initiatives to increase our alternative fuel capacity, particularly DME, and our further capitalization on the growing demand in the market for cleaner, more efficient and cost effective fuel alternatives for home heating and cooking,” commented Mr. Chen Si Qiang, New Oriental Energy & Chemical Corporation’s Chief Executive Officer. “While the second quarter saw DME sales increase, there was a normal seasonal sequential decline in the production of several of our fertilizer products due to the transition from the stronger summer growing season to winter. Overall, the demand for our fertilizer products remains robust as available arable land in China continues to decrease driving a greater need to improve overall crop yields.”


Product Revenue Comparison:
 
(all numbers in thousands, revenues shown in USD)

   
2QFY08
 
Tons Sold
 
2QFY07
 
Tons Sold
 
 % Change
 
Urea
 
$
5,455
   
28,345
 
$
4,891
   
24,352
   
11.5
%
DME
 
$
12,206
   
25,426
 
$
1,372
   
2,960
   
789.9
%
Other
 
$
554
   
7,780
 
$
1,679
   
13,425
   
-67.0
%
Total Revenue
 
$
18,216
       
$
7,942
       
129.4
%

The average sales price of DME on a per ton basis was $474 during the second quarter, representing a 2.5 percent decrease versus last year and a 7.5 percent increase from the first fiscal quarter. This change was a result of an increase in price for DME in the international chemical and energy market as raw material prices increased. Urea was sold for $192 per ton during the quarter and decreased 9.0 percent from the second fiscal quarter 2007 due to increased production capacity by manufacturers across China.

Cost of goods sold for the second quarter increased 143.1 percent to $16.4 million due to the increase in total sales, especially for DME and an approximate $0.4 million expense related to a system upgrade for the Company’s production of fertilizer products which offset the benefits of the Company’s new coal stick production line. Excluding this one time cost, Urea gross margins were relatively unchanged versus last year at 12.2 percent. Additionally, because the Company only has 45,000 tons of annualized methanol capacity, the Company had to purchase approximately 25,396 tons of outside methanol to meet expanded DME production, which accounted for approximately $8.0 million in cost of goods sold and resulted in DME gross margins of 13.0 percent. Gross profit increased 52.5 percent to $1.8 million while overall gross margins declined from 15.2 percent last year to 10.1 percent in the second quarter fiscal 2008 due primarily to the aforementioned expenses.

“As our new 100,000 tons of DME capacity came on line we needed to purchase outside methanol to meet demand, which had a significant impact on our gross margins,” commented Mr. Ben Wang, New Oriental Energy & Chemical Corporation’s Chief Financial Officer. “Going forward we intend to expand our internal methanol capacity over the next year to meet this demand, which is expected to have a positive impact on our overall profitability.”

Operating expenses for the second quarter of fiscal 2008 increased by 113.0 percent to $0.8 million as the Company incurred higher selling and distribution expenses related to the increase in total sales and higher general and administrative expenses due to the expansion in operations. Operating income for the second quarter increased 27.5 percent to $1.1 million with operating margins for the period declining to 6.0 percent from 10.8 percent last year.

Net Income Advances

Net income for the quarter increased 14.7 percent to $0.9 million with earnings per weighted average fully diluted share of $0.07 as compared to $0.8 million and $0.10 per share respectively last year. During the second quarter the Company had a 16.0 percent tax rate as compared to 2.2 percent last year. The Company utilized 12.64 million weighted average diluted shares outstanding for the second fiscal quarter this year as compared to 7.5 million last year. It is important to note that, because the Company did not go public until October 2006, only a portion of the fully diluted shares outstanding were used in last year’s calculation. It should be noted further that if EPS in the second quarter of fiscal 2007 was calculated on the basis of 12.64 million shares outstanding, EPS would have been $0.06 per share compared to $0.07 per share in the second quarter of fiscal 2008.
 


For the six months ended September 30, 2007, total sales were $32.9 million, an increase of 91.4 percent compared to $17.2 million reported for the first six months of last year. Gross profit increased to $4.5 million from $2.9 million in 2006, reflecting gross margins of 13.5 percent and 16.8 percent respectively. Operating income increased 34.6 percent to $2.8 million. Net income for the period was $1.9 million, which represented a 26.2 percent increase over the $1.5 million reported for the previous period, with earnings per weighted average fully diluted share of $0.15 and $0.20 respectively.

Balance Sheet Highlights

The Company ended the second quarter of fiscal 2008 with $15.7 million in cash and restricted cash as compared to $8.0 million at the end of fiscal 2007. Cash flow from operations was $2.6 million for the first six months of 2008 as the Company made further improvements in working capital management. Accounts receivable and inventory both decreased from the end of last year and remain at adequate levels. The Company had a total of $18.2 million in short term debt and notes payable as compared to $7.9 million at the end of fiscal 2007.

Financial Guidance

“For the third quarter we anticipate revenue of $22 million which would represent over a 100 percent increase from the third quarter last year and a 21 percent increase over the second quarter of this year. Given our current visibility we expect fiscal 2008 to be another year of record revenue and net income with full year revenue of at least $75 million,” concluded Mr. Chen Si Qiang.
 
Teleconference Information:
 
The Company will conduct a conference call to discuss these results at 4:30 p.m. ET on November 14, 2007. Interested participants should call 866-328-4270 when calling within the United States or 480-629-9564 when calling internationally. There will be a playback available until November 28, 2007. To listen to the playback, please call 800-406-7325 when calling within the United States or 303-590-3030 when calling internationally. Please use pass code 3801115 for the replay.
 

 
This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=000047C4 or at ViaVid's website at www.viavid.net. The webcast can be accessed through December 14, 2007.
 
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.
 
Company Contact:

New Oriental Energy & Chemical Corp.
Mr. Wang Gui Quan, President
Xicheng Industrial Zone of Luoshan, Xinyang
Henan Province, The People's Republic of China
Tel: (011-86) 376-2169211
 
Investors Contact:
 
Matthew Hayden
HC International, Inc.
matt@haydenir.com
ph: (858) 704-5065

Mark Miller
East West Network Group
mmeastwest@hotmail.com
Ph: (770) 436-7429


 
ASSETS
 
   
September 30,
 
March 31,
 
   
2007
 
2007
 
   
(Unaudited)
     
CURRENT ASSETS
         
Cash and cash equivalents
 
$
7,456,591
 
$
2,616,149
 
               
Restricted cash
   
8,220,629
   
5,430,426
 
Notes receivable
   
1,344,730
   
1,395,858
 
Inventories
   
2,474,159
   
3,786,130
 
Prepayments for goods
   
2,095,836
   
383,639
 
Taxes receivable
   
-
   
155,863
 
 Due from employees
   
32,644
   
113,275
 
Other assets
   
537,577
   
204,508
 
Current assets of the discontinued operation
   
-
   
47,084
 
 Total current assets
   
22,162,166
   
14,132,932
 
               
Plant and equipment, net
   
15,433,734
   
11,571,652
 
Land use rights, net
   
1,534,329
   
1,510,695
 
Construction in progress
   
3,326,257
   
5,208,277
 
Deposits
   
1,091,234
   
267,757
 
Deferred taxes
   
244,619
   
646,331
 
Other long-term assets
   
30,787
   
39,745
 
Other assets of the discontinued operation
   
-
   
125,875
 
               
  TOTAL ASSETS
 
$
43,823,126
 
$
33,503,264
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES
             
Accounts payable
 
$
3,972,457
 
$
2,259,834
 
Other payables and accrued liabilities
   
409,402
   
409,025
 
Short term debt
   
17,693,654
   
7,356,933
 
 Notes payable
   
549,875
   
572,781
 
Customer deposits
   
3,509,118
   
5,385,425
 
Payable to contractors
   
62,717
   
96,861
 
Due to related parties
   
1,756,147
   
4,041,583
 
Taxes payable
   
781,637
   
25,063
 
Current liabilities of the discontinued operation
   
-
   
12,711
 
 Total current liabilities
   
28,735,007
   
20,160,216
 
               
LONG-TERM LIABILITIES
             
Deferred taxes
   
1,113,571
   
1,619,110
 
Due to employees
   
120,033
   
115,816
 
Total long-term liabilities
   
1,233,604
   
1,734,926
 
               
TOTAL LIABILITIES
   
29,968,611
   
21,895,142
 
               
SHAREHOLDERS’ EQUITY
             
Common stock, par value $0.001 per share; 30,000,000 shares authorized, 12,640,000 shares issued and outstanding as of September 30, 2007 and March 31, 2007, respectively
   
12,640
   
12,640
 
Additional paid-in capital
   
4,573,205
   
4,573,205
 
Retained earnings (restricted portion was $439,248 and $440,182 as of September 30, 2007 and March 31, 2007, respectively)
   
8,449,928
   
6,563,558
 
Accumulated other comprehensive income
   
818,742
   
458,719
 
               
Total Shareholders’ Equity
   
13,854,515
   
11,608,122
 
               
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
43,823,126
 
$
33,503,264
 


 
   
Three Months Ended
 
Six Months Ended
 
   
September 30,
 
September 30,
 
   
2007
 
2006
 
2007
 
2006
 
                   
REVENUES
 
$
18,215,622
 
$
7,942,195
 
$
32,902,228
 
$
17,189,339
 
                           
COST OF GOODS SOLD
   
(16,376,557
)
 
(6,735,973
)
 
(28,450,295
)
 
(14,306,635
)
                           
GROSS PROFIT
   
1,839,065
   
1,206,222
   
4,451,933
   
2,882,704
 
                           
Selling and distribution
   
208,584
   
135,497
   
644,997
   
373,087
 
                           
General and administrative
   
541,512
   
216,615
   
1,020,280
   
438,639
 
                           
INCOME FROM OPERATIONS
   
1,088,969
   
854,110
   
2,786,656
   
2,070,978
 
                           
OTHER INCOME (EXPENSES)
                         
                           
Interest expense, net
   
(161,789
)
 
(50,830
)
 
(261,049
)
 
(118,532
)
                           
Governments grants
   
79,332
   
-
   
78,714
   
-
 
                           
Other income (expenses), net
   
(2,644
)
 
(41,603
)
 
7,905
   
(61,713
)
                           
INCOME FROM OPERATIONS BEFORE INCOME TAXES
   
1,003,868
   
761,677
   
2,612,226
   
1,890,733
 
                           
INCOME TAXES
   
(160,976
)
 
(16,842
)
 
(747,548
)
 
(399,468
)
                           
INCOME FROM CONTINUING OPERATIONS
   
842,892
   
744,835
   
1,864,678
   
1,491,265
 
                           
DISCONTINUED OPERATION
                         
                           
Income (loss) from discontinued operation
   
1,761
   
8,356
   
1,761
   
3,591
 
Income from disposition of long term investment
   
19,359
   
-
   
19,931
   
-
 
NET INCOME
   
864,012
   
753,191
   
1,886,370
   
1,494,856
 
                           
OTHER COMPREHENSIVE INCOME
                         
                           
Foreign currency translation gain
   
145,816
   
30,059
   
537,348
   
50,452
 
Unrealized gain on marketable securities
   
-
   
2,561
   
-
   
5,043
 
OTHER COMPREHENSIVE INCOME BEFORE TAX
   
145,816
   
32,620
   
537,348
   
55,495
 


 
   
Three Months Ended
 
Six Months Ended
 
   
September 30,
 
September 30,
 
   
2007
 
2006
 
2007
 
2006
 
       
 
         
INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME
   
64,603
   
10,765
   
177,325
   
18,313
 
                           
OTHER COMPREHENSIVE INCOME, NET
   
81,213
   
21,855
   
360,023
   
37,182
 
                         
COMPREHENSIVE INCOME
 
$
945,225
   
775,046
   
2,246,393
 
$
1,532,038
 
                           
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
   
12,640,000
   
7,500,000
   
12,640,000
   
7,500,000
 
                           
INCOME PER SHARE FROM CONTINUING OPERATIONS, BASIC AND DILUTED
 
$
0.07
 
$
0.10
 
$
0.15
 
$
0.20
 
                           
INCOME (LOSS) PER SHARE FROM INCOME (LOSS) FROM DISCONTINUED OPERATION, BASIC AND DILUTED
 
$
-
 
$
0.00
 
$
-
 
$
0.00
 
                           
NET INCOME PER SHARE, BASIC AND DILUTED
 
$
0.07
 
$
0.10
 
$
0.15
 
$
0.20