China Recycling Energy Corporation Reports Fourth Quarter and Full Year 2014 Financial Results

XI'AN, China, March 23, 2015 /PRNewswire/ -- China Recycling Energy Corp. CREG ("CREG" or "the Company"), a leading industrial waste-to-energy solution provider in China, today announced its financial results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter 2014 Unaudited Financial Highlights

• Interest income on sales-type leases increased 24.9% to US$6.98 million from US$5.59 million for the fourth quarter of 2013.
• Total sales were US$0.12 million, compared with US$13.20 million for the fourth quarter of 2013 as no power generation system was completed and sold in the fourth quarter of 2014.
• Net income was US$5.33 million, up 26.8% from US$4.20 million for the fourth quarter of 2013.
• Basic and fully diluted earnings per share (EPS) was US$0.06, as compared with US$0.07 for the fourth quarter of 2013.

Full Year 2014 Audited Financial Highlights

• Interest income on sales-type leases increased 36.8% to US$26.46 million from US$19.34 million in 2013.
• Total sales were US$19.66 million, compared with US$63.19 million in 2013.
• Net income was US$19.81 million, up 26.8% from US$15.63 million in 2013.
• Basic and fully diluted earnings per share (EPS) was US$0.28, as compared with US$0.29 in 2013.

Summary of Financial Results:

Mr. Guohua Ku, Chairman and CEO of CREG commented, "We are very happy to report solid growth in our interest income on sales-type leases and net income for the fourth quarter of 2014. On a yearly basis, interest income on sales-type leases, the major and consistent regular revenue for the Company, increased 36.8% while net income increased 26.8%. With six projects under construction for a total capacity of 135MW, we look confidently to our future. We expect that a WGPG system to Shanxi Datong Coal Group and a CDQ system to Shandong Boxing will be completed in the second quarter of 2015. These two systems have a total capacity of 40MW. Given continued favorable government policies, more stringent environmental protection requirements from the government and rising awareness for energy recovery in energy-intensive industries, we continue to see strong market demand for our waste energy recycling systems."

Full Year 2014 Audited Financial Results

SALES. Total sales, including sales of systems and contingent rental income, were US$19.66 million for the full year of 2014, a decrease of US$43.53 million as compared with US$63.19 million in 2013, mainly due to fewer systems completed and sold in 2014.

Sales of systems for the full year of 2014 were US$18.87, as compared with US$62.01 million in 2013. In 2014, the Yida system was completed and sold, while the Shenqiu Phase II system, the Shanxi Datong Phase I system, the Pucheng Biomass Phase II system and the Jitie system were completed and sold in 2013. For the full year of 2014, the Company received contingent rental income of US$0.79 million from the usage of electricity in addition to the minimum lease payments, compared to US$1.18 million in 2013. For sales-type leases, sales and cost of sales are recorded at the time of the lease commencement; in addition to systems sales revenue, CREG's other major source of revenues is interest income from sales-type leases.

COST OF SALES. Cost of sales for the full year of 2014 was US$14.59 million, as compared with US$47.85 million in 2013. The decrease was mainly due to fewer systems completed and sold in 2014.

GROSS PROFIT and GROSS MARGIN. Gross profit was US$5.07 million for the full year of 2014, as compared with US$15.35 million in 2013. Blended gross margin for the full year of 2014 was 26%, compared with 24% in 2013.

INTEREST INCOME ON SALES TYPE LEASES. Interest income on sales-type leases, which is a major and consistent regular revenue for the Company, was US$26.46 million for the full year of 2014, an increase of 36.8% from US$19.34 million in 2013. In 2014, interest income was derived from sixteen sales-type leases, including the CHPG system at Jing Yang Shengwei (5 year term, expired on June 30, 2014), the TRT system at Zhangzhi (13 year term originally but terminated early on September 24, 2014), the BMPG systems at Pucheng Phase I and II (15 year and 11.9 year term, respectively), the BMPG systems at Shenqiu Phase I and II (11 year and 9.5 year term, respectively), five power and steam generating systems at Erdos (20 year term), the WHPG system at Zhong Gang (9 year term originally but terminated early on December 22, 2014), the WHPG systems at Jitie (24 year term), two BPRT systems at Datong (30 year term), and the WGPG system at Yida (15 years). In comparison, interest income on sales-type leases was derived from fifteen systems in 2013.

OPERATING EXPENSES. Operating expenses totaled US$3.49 million for the full year of 2014, a decrease of 16.0% as compared with US$4.16 million in 2013, mainly due to a US$0.59 million decrease in consulting expenses compared to 2013.

NON-OPERATING INCOME (EXPENSES). Non-operating expenses consisted of non-sales-type lease interest income, interest expenses, bank charges and miscellaneous expenses. For the full year of 2014, net non-operating expenses were US$2.20 million, compared with US$7.83 million in 2013. For the full year of 2014, the Company had US$3.43 million in interest expense on loans, and US$1.02 million in other income consisting mainly of US$0.93 million in income from the sale of a TRT system to Zhangzhi and US$1.76 million in income from the sale of a WHPG system to Zhong Gang, but offset by US$1.58 million in financial expenses. In addition, the Company had US$0.19 million in interest income in 2014. For the full year of 2013, the Company had US$6.72 million in interest expense on loans, a US$1.29 million one-time commission to the fund management company for initiating and completing a RMB460 million (US$75.0 million) financing for the Company, and US$0.23 million in interest income.

INCOME TAX EXPENSE. Income tax expense was US$6.11 million for the full year of 2014, decreased by 11.3% as compared with US$6.89 million in 2013. The decrease in income tax expense was mainly due to a decrease in the consolidated effective income tax rate, which was 23.7% in 2014, compared with 30.3% in 2013. This is mainly due to the 15% preferential income tax rate of the Company's wholly owned subsidiary Xi'an TCH in 2014, and income tax rate of Xi'an TCH for the year of 2013 was 25%. In July 2013, Xi'an TCH was re-approved for high-tech enterprise status and enjoyed a 15% preferential income tax rate effective January 1, 2013.

NET INCOME. Net income for the full year of 2014 was US$19.81 million, an increase of 26.8% as compared with US$15.63 million in 2013. This increase in net income was mainly due to the increased interest income on sales-type leases and lower non-operating expenses in 2014 compared to 2013.

For the full year of 2014, basic and fully diluted EPS was US$0.28, compared with US$0.29 in 2013.

Financial Position as of December 31, 2014

As of December 31, 2014, the Company had cash and cash equivalents of US$35.87 million compared with US$7.70 million as of December 31, 2013. Other current assets were US$9.70 million and current liabilities were US$26.66 million. Total shareholders' equity was US$207.86 million compared with US$154.68 million as of December 31, 2013.The net tangible asset per share was US$2.50 as of December 31, 2014.

Net Investment in Sales-Type Leases as of December 31, 2014

The components of the net investment in sales-type leases as of December 31, 2014 and December 31, 2013 are as follows:

As of December 31, 2014, the future minimum rentals to be received on non-cancelable sales-type leases by years were as follows: 

Recent Business Development

At the end of December, 2014, the Company transferred its Waste Heat Power Generation System ("WHPG System") system originally leased to Zhong Gang Group Bin Hai Industry Co., Ltd. ("Zhong Gang") to Zhong Gang for a price of about US$9.8 million (RMB60.0 million). Under the original lease contract, CREG was leasing the WHPG System to Zhong Gang for 9 years from the day the system became operational in October 2010 until September 2019. According to Company's estimates,the system transfer price is fairly close to the discounted cash flow value of the total principal repayment and interest income on sales-type leases of US$11.3 million (RMB69.3 million) receivable by the Company during the period from January 1, 2015 to September 30, 2019.

Financial Results Conference Call

The Company will host a conference call at 8:00 a.m. EST on Tuesday, March 24, 2015, to discuss the Company's fourth quarter and full year 2014 financial results. Mr. Guohua Ku, Chief Executive Officer, and Mr. David Chong, Chief Financial Officer, will be hosting the call.

Listeners may access the call by dialing:

A telephone replay will be available shortly after the call until March 31, 2015 by dialing the following numbers:

10K Filing

For more information regarding China Recycling Energy Corp.'s financial performance during the full year ended December 31, 2014, please refer to the Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 23, 2015.

About China Recycling Energy Corp.

China Recycling Energy Corp. CREG ("CREG" or "the Company") is based in Xi'an, China and provides environmentally friendly waste-to-energy technologies to recycle industrial byproducts for steel mills, cement factories and coke plants in China. Byproducts include heat, steam, pressure, and exhaust to generate large amounts of lower-cost electricity and reduce the need for outside electrical sources. The Chinese government has adopted policies to encourage the use of recycling technologies to optimize resource allocation and reduce pollution. Currently, recycled energy represents only an estimated 1 percent of total energy consumption and this renewable energy resource is viewed as a growth market due to intensified environmental concerns and rising energy costs as the Chinese economy continues to expand. The management and engineering teams have over 20 years of experience in industrial energy recovery in China. For more information about CREG, please visit http://www.creg-cn.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China Recycling Energy Corp. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

Mr. David Chong, Chief Financial Officer
China Recycling Energy Corp.
Tel: +86-1370-1813139; +65-9721 6163
Email: chongscd@creg-cn.com

Christensen

Ms. Xiaoyan Su (China)
Vice President
Tel: +86-10-5900-3429
Email: xsu@christensenir.com

Mr. Christian Arnell (China)
Vice President
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com

 

 

 

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SOURCE China Recycling Energy Corp.