China Solar & Clean Energy Solutions, Inc. (China Solar & Clean Energy) has reported net revenues of $6.2 million for the first quarter of 2009, down 25.4%, compared with the net revenues of $8.3 million in the year-ago quarter. It has also reported a net loss of $940,548, or $0.07 loss per diluted share, for the first quarter of 2009, up 41.5%, compared with the net income $389,651, or $0.03 per diluted share, in the year-ago quarter.
Deli Du, chief executive officer and president of China Solar & Clean Energy, commented, ‘As the first quarter is the solar industry’s seasonally slowest in terms of manufacturing and sales, we focused our corporate efforts on completing our planned business transition. We undertook company-wide efforts to improve our operating efficiency and internal controls. We began to implement a company-wide ERP system as part of our accounting systems upgrade to ensure China Solar & Clean Energy will be fully compliant with strict requirements by the Sarbanes-Oxley Act (‘SOX’) and other pertinent financial regulations. We engaged our staff in ongoing training led by experienced consultants to help standardize our financial reporting. We hired an excellent financial executive, as we are very pleased with the arrival of Yinan Zhao as our acting chief financial officer. We welcome her solid knowledge of financial systems and markets, extensive experience in accounting, taxation, and asset valuation functions, and impressive professional certifications including certified public accountant (CPA), certified tax administrator (CTA) and certified valuation analyst (CVA). To that extent, although our broad efforts to upgrade our systems and internal controls caused our delayed quarterly filing, I am satisfied with our visible progress during the first quarter, as we continue to lay a strong foundation for the remainder of 2009 and beyond.’
First Quarter 2009 Results
The decrease in revenues of $2.1 million is primarily due to lower sales from the Solar Heater and Heat Pipe segments. Revenues for the Solar Heater/Boiler Related Products segment decreased by $1.2 million, or 45.3%, to $1.5 million, due to deeper price competition and fewer units shipped. Heat Pipe revenues decreased by $1.9 million, or 34.8%, to $3.6 million, as the company shifted its focus on winning large energy projects which typically require longer completion terms. Energy-saving revenues and Solar Heat Collector revenues were $0.4 million and $0.7 million, respectively, versus zero revenue in the first quarter of 2008, as the company completed its acquisition of Shenzhen Peng Sang Pu (‘SZPSP’) at the end of March 2008.
Gross profit in the first quarter of 2009 decreased by $1.3 million, to $1.2 million, as compared to $2.5 million for the same period last year. Correspondingly, gross margin decreased to 19.4% from 29.6% in the prior year’s first quarter, mainly due to a combination of lower prices and higher costs of key raw materials, such as stainless steel. Operating expenses increased to $2.1 million for the first quarter of 2009, as compared to $1.3 million a year ago, primarily due to the subsequent increase in administrative, sales, depreciation and amortization expenses related to the acquisition of SZPSP.
Operating loss was ($0.9) million in the first quarter 2009, as compared to income from operations of $1.2 million a year ago.
Cash and cash equivalents decreased to $1.4 million as of March 31, 2009, compared to $2.4 million as of December 31, 2008, due to net operating loss and net increase in working capital during the quarter. Net cash used in operating activities was $0.8 million for the first quarter of 2009, as compared to net cash used in operating activities of $4.1 million for the first quarter of prior year. While accounts receivable decreased to $6.7 million from $7.3 million as of December 31, 2008, inventories increased to $7.2 million from $6.9 million. Accounts payable decreased to $4.7 million from $5.3 million, and other payables and accrued liabilities decreased by approximately $1.0 million to $7.3 million from $8.4 million. The net increase in working capital was partially due to the consolidation of SZPSP.
‘While we continue to invest into our corporate infrastructures in preparation for our return to revenue growth and profitability, we have yet to realize immediate benefits from these investments, and therefore, our first quarter 2009 revenue and profits declined accordingly. However, I remain optimistic in China Solar & Clean Energy’s valuable assets and franchises. I am energized by our solid management team and our disciplined efforts to streamline operations and enhance systems to ensure timely financial reporting and regulatory compliance. I believe that once we complete our transition, we can maintain a solid financial team and system, improve internal controls, and enhance corporate transparency. We aim to utilize these improvements for the full benefit of our shareholders.
‘In addition, we continue to expand our nation-wide distribution channels and integrate our diverse resources to achieve greater synergies across our product and service offerings, as well as our various subsidiaries. We seek to leverage our marketing and promotion efforts to enhance our brand awareness across both the consumer and government sectors. We are expanding our partnerships and joint-capabilities with clean energy institutions as we bid for key wins in new State-sponsored energy projects.
‘Looking ahead, I am confident in our management team and in our competitive advantages, and I believe China Solar & Clean Energy’s will emerge from the currently challenging economic cycle a strong and profitable industry leader. I am optimistic about our solid portfolio of technologies and products in development. I remain encouraged by the government’s initiatives to expand the availability of and access to electricity in China’s immense rural areas, which will create substantially higher demand for our products and solutions. I am excited by our unique business model and pioneering solutions for solar projects in hot water systems throughout China’s numerous Universities.
‘As we near the completion of our business transition, I firmly believe that China Solar & Clean Energy will eventually achieve strong revenue growth, margin expansions, and solid profits and cash flows in the near future. We are dedicated to growing a strong, profitable and responsive enterprise at China Solar & Clean Energy, and importantly, to serving the best interests of our supportive shareholders and to maximizing our shareholders’ value,’ concluded Du.