Sino Gas announced financial results for the first quarter ended March 31, 2010.
First Quarter of 2010 Financial Highlights
First Quarter Ending March 31, 2010 Financial Results
Revenue in first quarter of 2010 was $6.96 million, up 38.11% from $5.04 million in the first quarter of 2009. The revenue from connection fees in the first quarter of 2010 was $2.75 million, an increased of 124.35% from the same period of 2009, representing 40% of the total revenue. The revenue from gas sales in the first quarter of 2010 was $4.21 million, up 10.44% from $3.81 million in the first quarter of 2009, representing 60% of the total revenue. 7,204 new households were connected in the first quarter of 2010, up from 2,878 new households connected in the first quarter of 2009.
Gross Profit and Gross Margin
Gross profit for the first quarter of 2010 increased 68.01% to $2.12 million from $1.26 million in the first quarter of 2009. The increase in gross profit was mainly driven by the increase of connection fee, which has a higher gross margin. Gross profit from connection fees is $1.97 million for the first quarter of 2010, accounted for 93% of total gross profit, compared to $1.09 million for the first quarter of 2009, accounted for 87% of total gross profit. Gross profit for the first quarter in 2010 from gas sales was $0.15 million, accounted for 7% of total gross profit, compared to $0.17 million for the first quarter of 2009, 13% of total gross profit in the same period.
Gross margin for the first quarter of 2010 was 30.53%, compared to 25.1% in the first quarter of 2009. Gross margin for connection fees for the first quarter of 2010 was 71.95%, in line with last year average of 72.30%. Gross margin of gas sales was 3.54% in the first quarter of 201, which was affected by the higher delivery cost resulting from the severe weather in this quarter.
Operating Income and Net Income
Operating income for the first quarter of 2010 was $0.95 million, a significant increase of 72.46% compared to $0.55 million for the same period of 2009. However, the significant improvement of operating income was negated by the additions of non-cash amortization cost of convertible bonds interest discount. Net loss for the first quarter of 2010 was $(0.21) million, compared with net income of $0.35 million for the same period of 2009. Excluding the non-cash, non-operational items of amortization expense of convertible bonds interest discount in the total of $0.68 million, our adjusted net income in the first quarter of 2010 would have been $0.48 million.
Balance Sheet and Cash Flow
As of March 31, 2010, the Company had $7.51 million in cash and cash equivalents and stockholders' equity was $63.08 million. The Company used $2.92 million in operating activities in the first quarter of 2010, compared to $0.55 million in the first quarter of 2009. The decrease was mainly due to the reduction of accounts and other payables. Cash used in investing activities was $1.61 million in the first quarter of 2010, a slight decrease from $1.64 million in the first quarter of 2009. Cash sourced from financing activities was $2.2 million in the first quarter of 2010. The Company borrowed $2.2 million from a major local bank in the first quarter of 2010. The Company has $2.93 million in short-term bank loans, $8.78 million in long-term bank loans, and $5.0 million convertible bonds as of March 31, 2010.
Mr. Yu-Chuan Liu, Chairman and CEO said, "We are pleased that we had a very strong quarter this year compared to the same period of last year, especially taking into account that due to seasonality effects, the first quarter is normally a slow season for the Company. The substantial improvement in both sales and operating results for the first quarter is a strong affirmation that Sino Gas should continue to benefit from the strong demand for natural gas in china and the continuing support of government in spending on new construction and in strongly promoting the use of clean energy, such as natural gas. To develop and expand its business in its existing distribution networks in 35 small and medium sized cities and to pursue new business opportunities will continue to be our company's priorities in the months ahead," concluded Mr. Liu.
Mr. Yugang Zhang, CFO of Sino Gas added, "The good results for the first quarter included solid additions made to our ongoing revenue base resulting from the building out of existing distribution networks through aggressively adding new customers. As this embedded base of customers continues to grow, we expect continuing commensurate growth in our gas sales over time. In targeting second and third tier cities for our future growth, it was always our belief that this sector would particularly benefit from the rapid urbanization and industrialization that China continues to experience."
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