Exhibit 99.1
Company Contact:
|
Investor Relations Contact: | |
Lian Xin, Senior Manager
|
David Rudnick, Account Manager | |
China GrenTech Corp. Ltd.
|
CCG Investor Relations | |
Tel: +86 755 2650 3007
|
Tel: + (1) 646-626-4172 (New York) | |
E-mail: investor@powercn.com
|
E-mail: david.rudnick@ccgir.com |
China GrenTech Announces First Quarter 2011 Financial Results
SHENZHEN, CHINA – May 12, 2011 – China GrenTech Corporation Limited (NASDAQ: GRRF, “GrenTech”, or
“the Company”), a leading China-based provider of radio frequency (“RF”) and wireless coverage
products and services, today announced its unaudited financial results for the first quarter ended
March 31, 2011.
First Quarter 2011 Financial Highlights
| • | Total revenue was RMB177.6 million (US$27.1 million)(1), an increase of 11.5% year-over-year | |
| • | Gross profit was RMB45.2 million (US$6.9 million), an increase of 16.8% year-over-year | |
| • | Operating loss was RMB18.6 million (US$2.8 million), compared to a loss of RMB20.3 million during the first quarter of 2010 | |
| • | Net loss attributable to the equity shareholders of GrenTech was RMB23.3 million (US$3.6 million), compared to a loss of RMB22.9 million during the first quarter of 2010 | |
| • | Diluted loss per ADS(2) was RMB1.03 (US$0.16), compared to a loss of RMB0.95 per ADS during the first quarter of 2010 |
“Although the first quarter was affected by the typical seasonality factors in our industry, we are
pleased to report some positive changes in the first quarter 2011 compared to the same period last
year: Our new products started the year with positive developments in their respective industries,
especially WLAN as a result of increased investment by each of the three major operators. China
Mobile significantly increased its capital expenditures on WLAN in 2011, which makes WLAN one of
the investment highlights in 2011 in the telecommunications industry. China Unicom and China
Telecom have followed suit and increased their capital expenditure budgets on WLAN, ” said Mr.
Yingjie Gao, Chairman and CEO of GrenTech.
“Our other business highlights for the first quarter include the CMMB project. Under this project,
each province has started its individual bidding process, and we have successfully won bids for
five provinces thus far. In addition, we are hopeful that our bid for network coverage for subways
will be successful, and we have already been selected as one of four bid winners for China Unicom’s
headquarters’ newly-designed antenna for indoor coverage system.” Mr. Gao added.
| (1) | The Company’s reporting currency is Renminbi (“RMB”). The translation of amounts from RMB to United States dollars is solely for the convenience of the reader. RMB numbers included in this press release have been translated into U.S. dollars at the noon buying rate for U.S. dollars in effect on March 31, 2011 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board, which was US$1.00=RMB6.5483. No representation is made that RMB amounts could have been, or could be, converted into U.S. dollars at that rate or at any other rate on March 31, 2011. | |
| (2) | Each ADS represents 25 of the Company’s ordinary shares. |
1
“We are also pleased to report an 11.5% increase in revenue in the first quarter 2011 compared
to the same period last year. The Company will continue to focus on optimizing our product mix and
increasing profitability by seizing new market opportunities and capitalizing upon the growing
potential in the telecommunications industry. As we strive to maintain market leadership in the traditional wireless coverage business
and base station RF business, we will concentrate on the development of new business including
WLAN, CMMB, network coverage for subways and newly-designed and aesthetic antenna. We believe that
with the increased investment by telecommunication operators, new product development and new
customer marketing, we will be able to expand our business, increase our market share and improve
our profitability in 2011.”
First Quarter 2011 Financial Results
Revenue
Revenue for the first quarter 2011 was RMB177.6 million (US$27.1 million), representing a RMB18.3
million (US$2.8 million) or 11.5% increase compared to the same period of 2010. The primary driver
was the increased revenue of RMB31.2 million (US$4.8 million) generated from China Mobile in the
first quarter, representing an increase of 102.3% from 2010. Revenue generated from China Unicom
and China Telecom decreased by RMB11.0 million (US$1.7 million) and RMB1.1 million (US$0.2
million), respectively. Revenue generated from base station RF products also decreased by RMB7.1
million (US$1.1 million) compared to the same period of 2010.
| Three Months Ended March 31 | ||||||||||||||||
| 2010 | 2011 | |||||||||||||||
| Revenues | Revenues | Revenues | % of Total | |||||||||||||
| (RMB’000) | (RMB’000) | (US$’000) | Revenues | |||||||||||||
| Wireless Coverage Products and Services | ||||||||||||||||
China Mobile |
30,440 | 61,594 | 9,406 | 34.7 | % | |||||||||||
China Unicom |
68,595 | 57,621 | 8,799 | 32.4 | % | |||||||||||
China Telecom |
14,038 | 12,963 | 1,980 | 7.3 | % | |||||||||||
Overseas |
1,269 | 105 | 16 | 0.1 | % | |||||||||||
Non-operators |
379 | 7,828 | 1,195 | 4.4 | % | |||||||||||
Subtotal |
114,721 | 140,111 | 21,396 | 78.9 | % | |||||||||||
| Base Station RF Products | ||||||||||||||||
OEMs |
44,643 | 37,514 | 5,729 | 21.1 | % | |||||||||||
Total |
159,364 | 177,625 | 27,125 | 100.0 | % | |||||||||||
Cost of Revenues
Cost of revenues in the first quarter of 2011 was RMB132.4 million (US$20.2 million), representing
a 9.8% year-over-year increase from RMB120.6 million. The increase was driven primarily by the
increased sales volume.
2
Gross Profit and Gross Margin
Gross profit for the first quarter of 2011 was RMB45.2 million (US$6.9 million), representing an
increase of 16.8%, or RMB6.5 million (US$1.0 million) from RMB38.8 million in 2010. Gross margin
for the first quarter of 2011 was 25.5%, compared to 24.3% in the comparable period of 2010. Such increase in gross
margin was a result of an increased portion of sales related to higher margin integrated services
compared to the same period of 2010.
Other Revenue
During the first quarter of 2011, other revenue was RMB3.4 million (US$0.5 million), compared to
RMB3.1 million in the same period of 2010. The slight increase was attributable to an increased
rental rate from the area of the Company’s headquarters which are leased to third parties.
Operating Expenses
Total operating expenses for the first quarter of 2011 were RMB67.2 million (US$10.3 million),
representing a 8.0% increase from RMB62.2 million in the first quarter of 2010.
Research and Development Costs
Research and development costs for the first quarter of 2011 were RMB18.3 million (US$2.8 million),
an increase of 33.3% compared to RMB13.7 million of the corresponding period in 2010. The increase
was attributable to increased spending on research and development materials for more projects and
equipment depreciation expenses.
Sales and Distribution Expenses
Sales and distribution expenses for the first quarter 2011 were RMB29.5 million (US$4.5 million), a
slight decrease of 3.3% compared to RMB30.4 million of the corresponding period in 2010. The
decrease was attributable to the Company’s more stringent spending controls and improved
operational efficiencies.
General and Administrative Expenses
General and administrative expenses for the first quarter of 2011 were RMB19.5 million (US$3.0
million), representing an increase of 7.9% compared to RMB18.1 million of the corresponding period
last year. The increase was mainly attributable to the increase of Company’s legal and audit fees
incurred in the first quarter.
Operating Loss
During the first quarter of 2011, operating losses were RMB18.6 million (US$2.8 million), compared
to operating losses of RMB20.3 million in the same period in 2010. The Company has typically
reported an operating loss in the first quarter of each year due to seasonality in wireless
coverage spending trends among Chinese telecom operators. The decrease in operating losses for the
first quarter of 2011 was mainly attributable to increased sales volume and an improvement in gross
margin.
3
Other Income/Expense
Interest income during the first quarter of 2011 was RMB5.0 million (US$0.8 million), similar to
the corresponding period in 2010 of RMB4.8 million.
Interest expense during the first quarter of 2011 was RMB16.0 million (US$2.4 million), which
increased by 21.2% from RMB13.2 million during the corresponding period in 2010. The increase in
interest expense was primarily due to an increase in short-term bank loans and an increase in the
effective interest rate.
Earnings
Net loss for the first quarter of 2011 was RMB23.3 million (US$3.6 million), an increase of RMB0.4
million compared to a net loss of RMB22.9 million in the same period of 2010.
Diluted loss per ADS for the first quarter of 2011 were RMB1.03 (US$0.16), compared to diluted loss
per ADS of RMB0.95 in the same period of 2010.
Balance Sheet
Cash, cash equivalents and pledged time deposits were RMB178.7 million (US$27.3 million) as of
March 31, 2011, representing a decrease of 62.0% as compared to December 31, 2010. This is
primarily attributable to additional cash spending on raw material procurement, research and
development, as well as the enhancement of production facilities.
Total accounts receivable including long-term accounts receivable as of March 31, 2011 was
RMB1,633.6 million (US$249.5 million), representing an increase of 1.0% as compared to December 31,
2010. This is primarily due to increased revenue in the first quarter of 2011 for which most
accounts receivable have not entered into the collection period.
Inventories as of March 31, 2011 increased by 8.9% to RMB700.3 million (US$106.9 million) compared
to December 31, 2010. The increase in inventories was in line with that in sales as a result of the
business growth.
Total assets as of March 31, 2011 were RMB3,342.5 million (US$510.4 million), a decrease of 2.2%
from December 31, 2010.
Total liabilities as of March 31, 2011 were RMB 1,813.9 million (US$277.0 million), a decrease of
2.8% from December 31, 2010.
Business Outlook
Wireless Coverage Products and Services
China Mobile significantly raised its capital expenditure program on building the WLAN, which was
followed by a new round of WLAN investment by China Unicom and China Telecom. As a result, the
Company expects
4
to benefit from the peak of WLAN capital expenditure in 2011. Meanwhile, the
Chinese telecom operators have already started construction on wireless coverage, which was earlier
than last year, and we expect to witness more revenue from the wireless coverage business segment
in the second quarter of 2011 compared to the same period a year ago. Projects for other business
areas will also commence including CMMB business, network coverage for subways, and antenna in the
second quarter of 2011.
Base Station RF Products
The need for base station RF products is expected to rise as telecom operators start their wireless
network construction. As a result, we expect to see an increase in shipments of base station RF
parts and components to base station manufacturers. In addition, after the initial round of
successful trials of our VHF/SHF RRU (RF Subsystem) products in multiple provinces in China, we
expect to begin sales of these products in bulk to domestic telecom operators in the second quarter
of 2011. Also, product tests of Tower-Mount-Amplifier (TMA) products and other related RF products
by overseas operators are progressing as planned, which may become an additional revenue
contributor to the RF business segment in upcoming quarters.
Guidance for Second Quarter 2011
For the second quarter of 2011, GrenTech forecasts revenue to be in the range of RMB380.0 million
to RMB425.0 million.
Conference Call
The Company will host a conference call at 8:00 a.m. ET or 8:00 p.m. Beijing/Hong Kong time on May
13, 2011, to discuss the results for the first quarter 2011. To participate in the live conference
call, please dial the following number five to ten minutes prior to the scheduled conference call
time: +1-866-578-5788. International callers should dial +1-617-213-8057 and Hong Kong callers
should dial ###-##-####. When prompted by the operator, mention conference pass code GRENTECHCALL.
If you are unable to participate in the call at this time, a replay will be available for 7 days
starting on May 13, 2011. To access the replay, please dial +1-888-286-8010, international callers
dial +1-617-801-6888, and enter the pass code 24235917. A live webcast of the conference call and
replay will also be available on the investor relations page of GrenTech’s website at:
http://www.GrenTech.cn/Catalog_209.aspx.
About China GrenTech
GrenTech is a leading developer of radio frequency (“RF”) technology in China and a leading
provider of wireless coverage products and services in China. The Company uses RF technology to
design and manufacture wireless coverage products, which his enable telecommunication operators to
expand the reach of their wireless communication networks to indoor and outdoor areas such as
buildings, highways, subways, tunnels and remote regions. GrenTech’s wireless coverage services
include design, installation and project warranty services. The Company also tailors the design and
configuration of its wireless coverage products to the specific requirements of its customers.
Based on its in-house RF technology platform, the Company also develops and produces base station
RF parts and components sold to base station manufacturers. GrenTech is a qualified supplier of RF
parts and components to major global and domestic base station manufacturers. For more information,
please visit www.GrenTech.com.cn.
5
Safe Harbor Statement
Statements contained in this press release that are not historical facts are forward-looking
statements, as that term is defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements, including financial projections and forecasts, involve risks and
uncertainties that could cause the Company’s actual results to differ materially from its current
expectations. Factors that could cause the Company’s results to differ materially from those set
forth in these forward-looking statements include: the Company’s reliance on business relationships
with the Chinese telecommunications operators and base station equipment manufacturers; the risk
that the Company will continue to experience downward pressure on the pricing of its products and
services due to the telecommunications operators’ bidding policies or other factors, which could adversely
affect the Company’s business and margins; the risk that the telecommunications operators in China
will not expand or maintain their spending on 2G, 3G, WLAN or other network projects or that the
Company will not be successful in future bids for tenders held by the operators (including the
Company’s bids for the CMMB project); uncertainty as to the future demand for base station RF
products by domestic or international base station equipment manufacturers, including the risk that
demand in China or elsewhere for base stations may not grow as the Company’s management anticipates
due to factors beyond the Company’s control; risks associated with large accounts receivable, long
collection periods and accounts receivable cycles and the Company’s ability to maintain or improve
its recently decreasing collection periods; fierce competition in the wireless communication
industry; growth of, and risks inherent in, the wireless communication industry in China, including
uncertainty regarding the planned integration of telecom, broadcast TV and Internet networks in
China and how such convergence, if it happens, may affect the Company’s business; uncertainty as to
future profitability and the Company’s ability to obtain adequate financing for its planned capital
expenditure requirements; uncertainty as to its ability to continuously develop and manufacture new
RF technologies and keep up with changes in RF technologies or to develop new markets for wireless
coverage products and services such as industrial users; risks associated with possible defects and
errors in its wireless coverage products or base station RF products; uncertainty as to the
Company’s ability to protect and enforce its intellectual property rights; and uncertainty as to
the Company’s ability to attract and retain qualified executives and personnel, particularly in its
research and development department. Other factors that may causes the Company’s actual results to
differ from those set forth in the forward-looking statements contained in this press release and
that may affect its prospects in general are described in the Company’s filings with the Securities
and Exchange Commission, including its Registration Statement on Form F-1 related to its initial
public offering and its annual reports on Form 20-F. The Company undertakes no obligation to update
or revise forward-looking statements to reflect subsequent events or changed assumptions or
circumstances.
- Financial Tables Follow-
6
China GrenTech Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets*
(RMB and US$ expressed in thousands)
Unaudited Condensed Consolidated Balance Sheets*
(RMB and US$ expressed in thousands)
| December 31, | March 31, | March 31, | ||||||||||
| 2010 | 2011 | 2011 | ||||||||||
| RMB | RMB | US$ | ||||||||||
Assets |
||||||||||||
Cash and cash equivalents |
380,098 | 107,760 | 16,456 | |||||||||
Pledged time deposits |
90,132 | 70,968 | 10,838 | |||||||||
Accounts receivable, net |
1,154,540 | 1,178,690 | 179,999 | |||||||||
Inventories |
643,265 | 700,275 | 106,940 | |||||||||
Other current assets |
106,953 | 203,920 | 31,141 | |||||||||
Total current assets |
2,374,988 | 2,261,613 | 345,374 | |||||||||
Long-term accounts receivable |
462,521 | 454,921 | 69,472 | |||||||||
Other non-current assets |
581,494 | 625,921 | 95,586 | |||||||||
Total assets |
3,419,003 | 3,342,455 | 510,432 | |||||||||
Liabilities |
||||||||||||
Short-term bank loans |
638,229 | 746,917 | 114,063 | |||||||||
Other current liabilities |
1,133,772 | 972,363 | 148,491 | |||||||||
Total current liabilities |
1,772,001 | 1,719,280 | 262,554 | |||||||||
Long-term debt |
90,000 | 90,000 | 13,744 | |||||||||
Other non-current liabilities |
4,598 | 4,576 | 699 | |||||||||
Total liabilities |
1,866,599 | 1,813,856 | 276,997 | |||||||||
Equity |
||||||||||||
Non-controlling interests |
6,335 | 5,839 | 892 | |||||||||
Total shareholders’ equity |
1,546,069 | 1,522,760 | 232,543 | |||||||||
Total liabilities and equity |
3,419,003 | 3,342,455 | 510,432 | |||||||||
| * | Subsequent to the announcement of the Company’s unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010, management of the Company has determined to make an adjustment to reallocate certain receivables from cash and cash equivalents to accounts receivable, net in accordance with applicable accounting standards, In addition, an adjustment was made to other current assets and total shareholders’ equity due to a revision in the number of shares repurchased as of December 31, 2010. |
7
China GrenTech Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(RMB and US$ expressed in thousands)
Unaudited Condensed Consolidated Statements of Operations
(RMB and US$ expressed in thousands)
| For Three Months Ended March 31, | ||||||||||||
| 2010 | 2011 | 2011 | ||||||||||
| RMB | RMB | US$ | ||||||||||
Revenues |
159,364 | 177,625 | 27,125 | |||||||||
Cost of revenues |
-120,608 | -132,376 | -20,215 | |||||||||
Gross profit |
38,756 | 45,249 | 6,910 | |||||||||
Other revenue |
3,131 | 3,423 | 523 | |||||||||
Operating expenses |
||||||||||||
Research and development costs |
-13,713 | -18,278 | -2,791 | |||||||||
Sales and distribution expenses |
-30,441 | -29,451 | -4,498 | |||||||||
General and administrative expenses |
-18,080 | -19,504 | -2,978 | |||||||||
Total operating expenses |
-62,234 | -67,233 | -10,267 | |||||||||
Operating (loss)/income |
-20,347 | -18,561 | -2,834 | |||||||||
Other (expense)/income |
||||||||||||
Interest income |
4,777 | 4,989 | 762 | |||||||||
Interest expense |
-13,211 | -16,015 | -2,446 | |||||||||
Investment income |
0 | 9 | 1 | |||||||||
Foreign currency exchange loss |
-43 | -544 | -83 | |||||||||
Grant income |
2,092 | 100 | 15 | |||||||||
Total other expense |
-6,385 | -11,461 | -1,751 | |||||||||
(Loss)/income before income tax
benefit and non-controlling interests |
-26,732 | -30,022 | -4,585 | |||||||||
Income tax benefit/(expense) |
3,798 | 6,217 | 949 | |||||||||
(Loss)/income before non-controlling
interests |
-22,934 | -23,805 | -3,636 | |||||||||
Non-controlling interests, net of tax |
19 | 497 | 76 | |||||||||
Net (loss)/income |
-22,915 | -23,308 | -3,560 | |||||||||
Net (loss)/income attributable to
equity shareholders of the
Company |
-22,915 | -23,308 | -3,560 | |||||||||
Net (loss)/income per share
attributable to equity
shareholders of the Company: |
||||||||||||
– Basic |
-0.04 | -0.04 | -0.006 | |||||||||
– Diluted |
-0.04 | -0.04 | -0.006 | |||||||||
Weighted average number of ordinary
shares outstanding: |
||||||||||||
– Basic |
589,932,958 | 563,244,750 | 563,244,750 | |||||||||
– Diluted |
605,902,514 | 563,244,750 | 563,244,750 | |||||||||
8
China GrenTech Corporation and Subsidiaries
Unaudited Condensed Consolidated Statement of Cash Flows
(RMB and US$ expressed in thousands)
Unaudited Condensed Consolidated Statement of Cash Flows
(RMB and US$ expressed in thousands)
| For Three Months Ended March 31, | ||||||||||||
| 2010 | 2011 | 2011 | ||||||||||
| RMB | RMB | US$ | ||||||||||
Net cash used in operating activities |
-250,470 | -176,535 | -26,959 | |||||||||
Net cash used in investing activities |
-11,905 | -44,987 | -6,870 | |||||||||
Net cash used in financing activities |
-75,424 | -50,272 | -7,677 | |||||||||
Effect of exchange rate changes on cash and
cash equivalents |
-43 | -544 | -83 | |||||||||
Net decrease in cash and cash equivalents |
-337,842 | -272,338 | -41,589 | |||||||||
Cash and cash equivalents at beginning of the year |
469,454 | 380,098 | 58,045 | |||||||||
Cash and cash equivalents at end of the year |
131,612 | 107,760 | 16,456 | |||||||||
###
9