SmartHeat Inc. (SmartHeat), a China-based manufacturer of standard plate heat exchangers and custom plate heat exchanger units, has reported net sales of $6.2 million for the first quarter of 2009, up 102%, compared with the net sales of $3.1 million in the year-ago quarter. It has also reported a net income of $1 million, or $0.04 per share, for the first quarter of 2009, up 117%, compared with the net income of $471,263, or $0.03 per share, in the year-ago quarter.
SmartHeat’s products significantly reduce heating costs, increase energy efficiency and reduce air pollution.
Significant revenue increase was due to greater market expansion in a favorable market environment. Of the company’s three products lines, PHE Units generated revenues of $4.089 million, an increase of 106%; PHEs generated revenues of $2.02 million, an increase of 89%; heat meters, a recently launched product line, generated revenues of $0.098 million, an increase of 326%.
Net income was minimized by a one time accounting charge of about $110,000 associated to an equity financing finished in 2008. Without this charge, non-GAAP EPS would have been about $0.05 for the quarter, an increase of 67% compared to first quarter in 2008.
The significant increase in net income was primarily due to greater economies of scale in production costs combined with rapid growth in revenues and significantly improved operating efficiency. Gross profit for PHE Units was $1.569 million, an increase of 147%; gross profit for PHEs was $0.697 million, an increase of 115%, and gross profit for heat meters was $0.041 million, an increase of 486%.
SmartHeat Expects Earnings Growth to Continue in 2009:
The first quarter is typically the slowest quarter in the year due to the Chinese New Year when China’s business activities slow down for weeks. However, customer orders received during the first quarter for product delivery throughout 2009 were about five times as many as those in first quarter of 2008. The company directly benefits from China’s economic stimulus plan which not only has extended large bank credits to businesses but also given grants and funding to a variety of municipalities for the purpose of upgrading their municipal heat and power facilities for more efficient energy use thus decrease air pollution. From order growth currently experienced in second quarter of 2009, the company expects strong earnings growth to continue for the remainder of 2009.
Management Comments & Strategies, Organic Growth and Strategic Acquisitions:
James Jun Wang, chief executive officer of SmartHeat, said: Our first quarter financial results reflected management expectations and the execution of our growth plan as we laid out in early 2009. As a market leader in the rapidly expanding clean technology energy savings industry in China, SmartHeat intends to further expand our business through both organic growth and strategic acquisitions. SmartHeat is exploring synergistic benefits with several acquisition targets in our industry which may be immediately accretive to our 2009 earnings if we acquire them. Operating in a favorable market environment, SmartHeat is on track to achieve another year of record success in 2009.