Advertisement
Company Overview and First Quarter 2010 Results
China Ruitai is one of the largest manufactures of non-ionic celluloseether products in China. Specifically, cellulose either is an organic chemicalderived from cotton that serves as a thickener and stabilizer for a widevariety of commercial industries and products, including pharmaceuticals,construction materials, petrochemicals, food and beverage products, inaddition to cosmetics. Specifically, the Company's cellulose ether is astabilizer and thickener in latex paint and dry mix for concrete mortar and,used as a membrane reagent in pharmaceuticals, and a thickener and bindingagent for foods and cosmetics, including fruit preserves, ice cream,toothpaste and lipsticks. The Company produces twelve, industry-specificproducts under its "RuiTai" brand, which are sold through a network ofdomestic and international distributors to Asia, Europe, the Middle East andNorth America.
Advertisement
During the three month period ended March 31, 2010, the Company postedrevenues of $10.2 million, a 24.4% increase from $8.2 million in the same yearago period, which benefited from higher sales volumes to customers as theglobal economy recovered. International sales in the first quarter of 2010contributed 30.7% of revenues versus 36.8% in the same period in 2009, whilesales to Chinese customers accounted for approximately 69.3% compared to 63.2% in each respective period. Primary export products from the Company include;Hydroxypropyl Methyl Cellulose (known as "HPMC") which is used in theconstruction industry, PVC used in the petrochemical industry and for variousproducts in the pharmaceutical industry. 27.6% of overall sales for the firstquarter emanated from customers, which produce premium pharmaceutical, foodand cosmetic products. China Ruitai has sales agents located in thirty officesthroughout the PRC, including Beijing and Shanghai, with branch offices inseven other tier two cities. Capacity utilization during the first quarter of2010 was 83% vs. 70% in the year ago period, as the Company produced 1,700tons compared to 1,430 tons.
During the three month period ended March 31, 2010, the Company's cost ofsales increased 39.3% to $6.9 million over the same year ago period. Thisincrease was driven by higher sales volumes accompanied by increased pricesfor specialty cotton, which doubled during the first quarter of 2010 to $1631per ton compared to the year ago period. The two key raw materials requiredfor the production of cellulose ether products are purified cotton andetherifying epoxy propane. The Company is based in Feicheng City, which islocated in the Shandong Province, a region known for its cotton production,and also home to a number of large etherifying epoxy propane producers.Corresponding gross profits for the quarter were 32.3% compared to 39.5% forthe first quarter of 2009. The fluctuation of the cotton price is primarilydue to the severe drought in China which has led to decreased supply. Whilecotton prices during the first quarter reached historical highs, managementdecided to maintain selling prices, while the majority of our competitorsincreased selling prices to match costs. Several small competitors exited themarket as result of the Company's strategy. As cotton prices have remainedelevated during the second quarter, China Ruitai increased selling prices tomore adequately reflect production costs, with the goal of achieving grossmargins close to historical levels.
Selling expenses which consist of sales commissions, freight charges, andtravel were $0.4 million for the three month period ended March 31, 2010 anincrease of approximately 24.3% compared to the first quarter of 2009. Thisincrease was due to increased transportation costs and increased salescommissions associated with increased sales.
General and administrative expenses totaled $0.3 million for the threemonth period ended March 31, 2010 compared to $0.8 million for the same yearago period, a decrease of approximately 65.1%, which was associated with lowerresearch and development costs and the elimination of non-cash equitycompensation expenses associated with consultant warrants.
For the three month period ended March 31, 2010, income from operationsincreased 28.1% to $2.7 million from the year ago period, as a result ofdecreased operating expenses and rental income of $0.3 million from a newlyacquired commercial property in Beijing.
On December 30, 2009, the Company allowed its related party "ShandongRuitai Chemicals Co., Ltd." to satisfy a total of $31.7 million in debt owedin return for Shandong Ruitai's transfer of 100% of its ownership interest inreal estate property located in Beijing, China, commonly known as the "TaishanBuilding." As a result, starting from the first quarter of 2010, the 130,125square foot "Taishan Building" started generating quarterly rental income of$0.3 million which will positively impact future earnings.
Net income attributable to China Ruitai International Holding Co., Ltd.was $1.9 million for the three month period ended March 31, 2010, an increaseof approximately 38.6% over the year ago period. Earnings per share for thequarter ended March 31, 2010 increased 40.0% to $0.07 versus $0.05 in the sameperiod 2009, based on 26 million fully diluted shares outstanding.
"Our strategy to focus Company resources, production and sales efforts onhigher margin, higher growth industries in China, including pharmaceuticals,food and cosmetics, yielded strong growth in our first quarter earnings," saidMr. Ma, Chairman and CEO of China Ruitai. "We have continued to properlyposition and increase awareness of our "Ruitai" brand throughout the industry,while developing relationships with distributors and end customers who aresome of the fastest growing of the industries that we service."
Financial Condition
On March 31, 2010, current assets were $65.3 million while total assetswere $120.4 million. On March 31, 2010, cash and cash equivalents were $7.9million compared to $10.2 million as of December 31, 2009.
Accounts receivable were $7.7 million, an increase of approximately 87.0%compared to accounts receivable of $4.1 million as of December 31, 2009 withday sales outstanding of 69 compared to 50, respectively. As of March 31, 2010,accounts payable were $7.0 million, an increase of approximately 12.8%compared to accounts payable of $6.2 million as of December 31, 2009.
On March 31, 2010, current liabilities were $94.3 million, notes payablewere $48.6 million, and short-term bank loans were $25.4 million.
Cash flow from operations for the first quarter was $0.7 million comparedto $2.7 million in the year ago period. Total stockholder's equity was $24.1million in the first quarter of 2010, up 9.2% from $22.0 million as ofDecember 31, 2009.
2010 Business Outlook
"Our domestic industry consists of a number of fragmented suppliers. Withconsolidation underway and given the fact that a number of smaller firmsfailed during the recent economic downturn, we have experienced increasedsales opportunities for our higher-margin products. Our facility can produce10,000 metric tons per year, exceeding our closest competitor and making usthe largest in China," began Chairman Ma.
"We are well positioned to benefit from the overall economic recovery inmultiple industries, and plan to emphasize sales of our higher growth, highermargin products," concluded Mr. Ma.
About China Ruitai International Holdings Co.
China Ruitai, through its wholly-owned subsidiary, Pacific Capital Groupand its majority-owned subsidiary, TaiAn, is engaged in the production, sales,and exportation of deeply processed chemicals, with a primary focus on non-ionic cellulose ether products. Cellulose ether is an organic chemical thatdissolves in water and other organic solvents. Due to the surface-activeproperties of cellulose ether, it acts as a thickener and stabilizer inaqueous solutions, making it a beneficial additive in a wide variety ofcommercial industries and products, including, but not limited to thepharmaceutical industry, the construction industry, PVC products, food andbeverage products, petroleum, and cosmetics. Specific examples of applicationsin which cellulose ether products are used include: as a stabilizer andthickener in latex paint; in mortar dry mix for building materials; to improvethe performance of resin in PVC production; as a membrane reagent, stabilizer,and thickener in pharmaceuticals; and to improve jam, ice cream, toothpasteand lipsticks in the food and cosmetic industries. TaiAn is one of the largestnon-ionic cellulose ether producers in China.
Forward-Looking Statements
Certain statements in this release and other written or oral statementsmade by or on behalf of the Company are "forward-looking statements" withinthe meaning of the federal securities laws. Statements regarding future eventsand developments and our future performance, as well as management'sexpectations, beliefs, plans, estimates or projections relating to the futureare forward-looking statements within the meaning of these laws. Theforward-looking statements are subject to a number of risks and uncertaintiesincluding market acceptance of the Company's services and projects and theCompany's continued access to capital and other risks and uncertainties. Theactual results the Company achieves may differ materially from anyforward- looking statements due to such risks and uncertainties. Thesestatements are based on our current expectations and speak only as of the dateof such statements.First Quarter 2010 Highlights -- Q1 revenue increased 24.4% to $10.2 million -- Q1 net income increased 35.7% to $1.9 million -- Q1 EPS of $0.07 vs. $0.05 First Quarter 2010 Results Q1 2010 Q1 2009 CHANGE Net Sales $10.2 million $8.2 million +24.4% Gross Profit $3.30 million $3.25 million +1.7% Net Income attributable to China Ruitai International Holding Co., Ltd. $1.9 million $1.4 million +38.6% Earnings Per Share $0.07 $0.05 +40.0%
SOURCE China Ruitai International Holdings Co., Ltd.
