Hanwei Energy Services Reports Third Quarter Fiscal 2011 Financial and Operational Results


VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 9, 2011) - Hanwei Energy Services Corp. (TSX:HE) -

– FRP Pipe Sales beginning to rebound –
 – Partial payment from wind customer received –

Hanwei Energy Services Corp. ("Hanwei" or the "Company") today reported its financial results for the three and nine-month periods ended December 31, 2010 (the "Reporting Period"). Hanwei reports in Canadian Dollars.

Financial Highlights

For the three months ended December 31, 2010:

  • Revenues from continuing operations were $12.0 million representing an increase of 17 percent as compared to the same period of 2009.

  • Increase driven by improvements in the FRP pipe business from a combination of new projects and completion of existing projects:

    • Revenues of $12.0 million representing a 203 percent increase over the same period of 2009
    • Gross profit of $2.8 million representing a 493 percent increase over the same period of 2009

  • Income from continuing operations was $4.4 million as compared to a loss of $7.5 million for the same period of 2009, representing an improvement of $11.9 million on a year over year basis.

  • Basic and diluted earnings per share from continuing operations of $0.06 for the three months ended December 31, 2010 (compared to basic and diluted loss per share from continuing operations of $0.12 for the same period of 2009).

For the nine months ended December 31, 2010:

  • Revenues from continuing operations were $23.4 million representing a decline of 40 percent as compared to the same period of 2009 (in 2009 the Company's wind power business contributed revenues of $9.4 million in the nine month period versus nil in the 2010 due to the ongoing restructuring efforts).

  • Loss from continuing operations of $3.5 million as compared to a loss of $7.8 million for the same period of 2009 (representing an improvement of $4.3 million on a year over year basis for the period).

  • Basic and diluted loss per share from continuing operations of $0.05 for the nine months ended December 31, 2010 (compared to basic and diluted loss per share from continuing operations of $0.13 for the same period of 2009).

The financial results included the following unusual items representing a net amount of $5.5 million:

  • The Company received a payment of $12.0 million from its wind power customers as a partial payment of a $27.0 million outstanding receivable for which an allowance was provided during the fiscal period ended March 31, 2010.

  • An impairment charge of $6.5 million based on the current estimated market value of the Company's manufacturing facility in Tianjin, China for the wind power business which is currently idle due to the restructuring of this business.

Excluding these unusual items, results from continuing operations were: a net loss of $1.1 million (or basic and diluted loss per share from continuing operations of $0.01) for the three months ended December 31, 2010; and a net loss of $9.0 million (or basic and diluted loss per share from continuing operations of $0.12) for the nine months ended December 31, 2010 (primarily due to the reduction of revenues in the wind power business).

Major Corporate Developments

Update on International Sales Accounts

As of December 31, 2010 the Company has recorded revenue of approximately $7.7 million on a $9.8 million order from the Kuwait Oil Company ("KOC"), with the remaining balance expected to be realized in the fourth quarter of fiscal 2011. State owned KOC is a subsidiary of the Kuwait Petroleum Corporation.

On December 10, 2010 the Company announced that it had entered into an Advisory Services Agreement with Envoy Energy Partners Inc. ("Envoy") under which Envoy will provide certain advisory services to Hanwei to facilitate increased international sales for the Company's core FRP pipe business products and services, including negotiating and completing strategic business transactions. As part of those services the Company is working closely with Envoy to facilitate additional orders and establish Hanwei's qualifications for FRP pipe supply to other major end users in the Middle East and elsewhere.

Update on Outstanding Accounts Receivable of the Wind Power Business

On December 22, 2010 the Company announced that it has received a payment of RMB79 million ($12.0 million) as partial payment of an outstanding receivable of RMB180 million ($27.0 million) due from its wind farm customers. The full amount of this outstanding receivable of RMB180 million ($27.0 million) was previously provided for. The Company has been vigorously pursuing collection of the outstanding amount. With the receipt of this payment, the outstanding balance of accounts receivable from the Company's wind farm customers as of February 8, 2010 is RMB101 million ($15.2 million). Hanwei is continuing its efforts to collect the remainder of the outstanding receivable from the wind farm customers.

Repayment of Bank Loans

An amount of RMB50million ($7.5 million) of the proceeds from the abovementioned wind farm customers payment was used for partial repayment of a RMB100 million loan ($15 million) with the Agricultural Development Bank of China maturing on February 7, 2011. The remaining amount of RMB50 million ($7.5 million) will be due on February 10, 2011 because the date of February 7, 2011 falls within the national holidays in China for Chinese New Year. The Company is currently making arrangements for collection of accounts receivable from customers, including further repayments from its wind farm customers for the outstanding accounts receivable, to enable the Company to repay this bank loan. In the event that such payments are not sufficient, the Company will arrange for loans from related parties to repay this bank loan.

Update on Repositioning of Wind Power Business

The Company is continuing its discussions with a major Chinese, state-owned enterprise on a potential repositioning of its wind power business. While discussions are ongoing and no agreement in principle has been reached such an arrangement aims at leveraging the significant influence and market stature of a major local partner where Hanwei becomes a direct financial beneficiary, while minimizing its management resource requirements and maintaining focus on its core FRP pipe business.

Hanwei will host a conference call to discuss its third quarter fiscal 2011 operational and financial results. Graham Kwan, Executive Vice President and Rick Huang, Chief Financial Officer of Hanwei will host the call.

Management invites analysts and investors to participate on the conference call:

Date: Wednesday, February 9th, 2011
   
Time: 11:00 a.m. Eastern Standard Time
   
Dial in number: 1-877-879-6174 or 1-719-325-4788
   
Taped Replay: 1-877-870-5176 or 1-858-384-5517 (available for 14 days)
   
Taped Replay Pass Code: 5252289
   
Live Webcast Link: http://viavid.net/dce.aspx?sid=0000814B

About Hanwei Energy Services Corp.

Hanwei Energy Services Corp. is the leading Chinese manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies and services for the international oil and gas sector. Hanwei serves major energy customers in the Chinese and global energy markets.

www.hanweienergy.com

FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

Certain information in this press release is forward-looking within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions, a description of which is set out in the risk factors section of the Company's Annual Information Form dated June 29, 2010 and Management Discussion and Analysis for the period ending December 31, 2010, both of which are filed with Canadian securities regulators and available on SEDAR at www.sedar.com. The forward-looking information in this press release describes the Company's expectations as of the date of this press release.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.

The Company has included in this press release figures based on unusual items, gross profit and working capital which are non-GAAP measures. Readers are cautioned that such measures are not recognized under Canadian GAAP and should not be construed to be an indicator of performance or liquidity or cash flows. The Company's method of calculating this measure may differ from the method used by other entities and accordingly the Company's measure may not be comparable to the measure used by other entities.

Contact Information: Graham Kwan
Executive Vice President,
Strategic Development and Corporate Affairs
604-685-2239
gkwan@hanweienergy.com
or
Yucai (Rick) Huang
Chief Financial Officer
604-685-2239
yhuang@hanweienergy.com
or
Kevin O'Connor
Investor Relations
416-962-3300
ko@spinnakercmi.com