Business Model Focus While Chips Are Down
China Solar & Clean Energy
Solutions, a manufacturer and distributor of solar water heaters, renewable
energy solutions, and space heating devices in the People's Republic of China,
last Thursday reported its financial results for the first quarter ended March
31, 2009.
Mr. Deli Du, Chief Executive Officer
and President of CSOL, commented, "As the first quarter is the solar industry's
seasonally slowest in terms of manufacturing and sales, we focused our corporate
efforts on completing our planned business transition. We undertook company-wide
efforts to improve our operating efficiency and internal controls. We began to
implement a company-wide ERP system as part of our accounting systems upgrade to
ensure CSOL will be fully compliant with strict requirements by the
Sarbanes-Oxley Act ("SOX") and other pertinent financial regulations. We engaged
our staff in ongoing training led by experienced consultants to help standardize
our financial reporting. We hired an excellent financial executive, as we are
very pleased with the arrival of Ms. Yinan Zhao as our Acting Chief Financial Officer.
We welcome her solid knowledge of financial systems and markets, extensive
experience in accounting, taxation, and asset valuation functions, and
impressive professional certifications including Certified Public Accountant
(CPA), Certified Tax Administrator (CTA) and Certified Valuation Analyst (CVA).
To that extent, although our broad efforts to upgrade our systems and internal
controls caused our delayed quarterly filing, I am satisfied with our visible
progress during the first quarter, as we continue to lay a strong foundation for
the remainder of 2009 and beyond."
First quarter 2009 revenue of $6.2
million decreased by $2.1 million, or 25.4%, from $8.3 million in the first
quarter of 2008, primarily due to lower sales from the Solar Heater and Heat
Pipe segments. Revenues for the Solar Heater/Boiler Related Products segment
decreased by $1.2 million, or 45.3%, to $1.5 million, due to deeper price
competition and fewer units shipped. Heat Pipe revenues decreased by $1.9
million, or 34.8%, to $3.6 million, as the Company shifted its focus on winning
large energy projects which typically require longer completion terms.
Energy-saving revenues and Solar Heat Collector revenues were $0.4 million and
$0.7 million, respectively, versus zero revenue in the first quarter of 2008, as
the Company completed its acquisition of Shenzhen Peng Sang Pu ("SZPSP") at the end of March
2008.
Gross profit in the first quarter of
2009 decreased by $1.3 million, to $1.2 million, as compared to $2.5 million for
the same period last year. Correspondingly, gross margin decreased to 19.4% from
29.6% in the prior year's first quarter, mainly due to a combination of lower
prices and higher costs of key raw materials, such as stainless steel. Operating
expenses increased to $2.1 million for the first quarter of 2009, as compared to
$1.3 million a year ago, primarily due to the subsequent increase in
administrative, sales, depreciation and amortization expenses related to the
acquisition of SZPSP.
Operating loss was ($0.9) million in
the first quarter 2009, as compared to income from operations of $1.2 million a
year ago. Similarly, first quarter 2009 net loss was ($0.9) million, versus net
income of $0.4 million in the same period of 2008. Consequently, net loss per
share was ($0.07) in the first quarter of 2009, as compared to diluted net
income per share of $0.03 in the first quarter of
2008.
"While we continue to invest into
our corporate infrastructures in preparation for our return to revenue growth
and profitability, we have yet to realize immediate benefits from these
investments, and therefore, our first quarter 2009 revenue and profits declined
accordingly. However, I remain optimistic in China Solar's valuable assets and franchises. I am energized by
our solid management team and our disciplined efforts to streamline operations
and enhance systems to ensure timely financial reporting and regulatory
compliance. I believe that once we complete our transition, we can maintain a
solid financial team and system, improve internal controls, and enhance
corporate transparency. We aim to utilize these improvements for the full
benefit of our shareholders.
"In addition, we continue to expand
our nation-wide distribution channels and integrate our diverse resources to
achieve greater synergies across our product and service offerings, as well as
our various subsidiaries. We seek to leverage our marketing and promotion
efforts to enhance our brand awareness across both the consumer and government
sectors. We are expanding our partnerships and innovating joint-capabilities
with leading clean energy institutions as we bid for key wins in new
State-sponsored energy projects.
"Looking ahead, I am confident in
our management team and in our competitive advantages, and I believe China Solar
will emerge from the currently challenging economic cycle a strong and
profitable industry leader. I am optimistic about our solid portfolio of
technologies and products in development. I remain encouraged by the
government's initiatives to expand the availability of and access to electricity
in China's immense rural areas, which
will create substantially higher demand for our products and solutions. I am
excited by our unique business model and pioneering solutions for solar projects
in hot water systems throughout China's numerous
Universities.
"As
we near the completion of our business transition, I firmly believe that CSOL
will eventually achieve strong revenue growth, margin expansions, and solid
profits and cash flows in the near future. We are dedicated to growing a strong,
profitable and responsive enterprise at China Solar, and importantly, to serving
the best interests of our supportive shareholders and to maximizing our
shareholders' value," concluded Mr. Du