Harbin Electric Announces Fourth Quarter and 2008 Annual Results
Annual Net Income up Fifty Percent on Eighty-Five Percent Rise in Sales Fiscal Year 2008 Financial Highlights -- Total revenues were $120.8 million, up 84.7% from $65.4 million in 2007 -- Net income was $25.4 million, up 50.2% from $16.9 million in 2007 -- Cash and cash equivalents were $48.4 million up from $45.5 million in 2007 -- Basic and diluted earnings per share were $1.25 and $1.19, respectively, up from $0.99 and $0.91 in 2007 Fourth Quarter 2008 Financial Highlights -- Total revenues were $34.7 million, up 80.1% from $19.3 million in the fourth quarter of 2007 -- Net income was $6.0 million, up 44.6% from $4.2 million in the fourth quarter of 2007 -- Basic and diluted earnings per share were $0.28 and $0.27, respectively, up from $0.23 and $0.22 in the fourth quarter of 2007
HARBIN, China, March 13 /PRNewswire-Asia-FirstCall/ --Harbin Electric, Inc. (''Harbin Electric'' or the ''Company''), a leading Chinese developer and manufacturer of a wide array of electric motors, today announced its fourth quarter and full year 2008 financial results.
For the 2008 full year, revenues increased 85% to $120.8 million from $65.4 million in 2007. Excluding the acquisition of Weihai Hengda Electric Motor (Group) Co., Ltd. (''Hengda'') in July 2008, organic revenue increased to $93.2 million, a 43% increase from 2007. Strong sales growth also consisted of significant contribution from linear motors and its integrated application systems with sales up 36%, and automobile specialty micro-motors with an 87% sales increase year-over-year. The Company delivered 214 units of the tower-type oil pump, compared to 13 units in 2007, exceeding its target of 200 units for 2008.
Direct sales to international markets totaled $20.2 million in 2008, up 149% from the prior year and accounted for 17% of total sales in 2008, compared to 12% of total sales in 2007.
Total gross profit was $47.5 million in 2008 compared to $32.4 million in 2007, a 46% year-over-year increase due primarily to higher sales from existing products which generated 94% of total gross profit. Sales of rotary motors (Hengda, acquired in July 2008) contributed the rest.
Gross profit margin declined to 39.3% in 2008 from 49.6% in 2007 as a result of changes in the product mix as sales of lower-margin products, including industrial rotary motors and auto specialty micro-motors, increased. The gross margin for industrial rotary motor was negatively impacted by higher raw material prices in 2008 compared to 2007. Excluding the acquired business, the average gross profit margin was 47.8% for 2008.
Operating profit of $34.4 million was $10.7 million higher in 2008 than in 2007, with operating margins at 28.5% and 36.3%, respectively, for 2008 and 2007. The decline in operating margins was primarily driven by changes in product mix. Excluding the acquired business ($1.7 million), operating profit was $32.7 million with a 35.1% margin in 2008.
Selling, general and administrative expenses (SG&A) for the year-end 2008 totaled $11.9 million, up from $7.7 million in 2007. The overall increase on a year-to-year basis was the result of higher costs associated with increased sales activities and the addition of administrative costs from the newly acquired business (Hengda). Higher depreciation expense and increased auditing, consulting, and legal expense related to the acquisition and Sabanes-Oxley 404 compliance work as well as higher stock-based compensation expense also contributed to the increase. However, as a percentage of total sales, operating expenses declined year-over-year to 9.9% in 2008 from 11.7% in 2007.
The Company generated a record $25.4 million net income in 2008, compared to net income of $16.9 million in 2007. The acquisition of Hengda contributed $1.7 million to total net income. The income tax provision was $4.5 million in 2008 versus none in 2007, which has resulted in lower growth in net earnings in 2008 compared to previous periods. Diluted earnings per share were $1.19 for 2008, compared to $0.91 for 2007. Total weighted average diluted share count at the end of 2008 was 21.3 million compared to 18.6 million at the end of 2007 as 3.5 million common shares were issued in June 2008 to raise $49 million in additional capital.
Our liquidity position remains strong with $48.4 million in cash at the end of 2008, compared to $45.5 million at the end of 2007. Operating cash flow generated for the year was an all-time record $42.3 million.
In the fourth quarter, total revenue increased 80% to $34.7 million compared to $19.3 million the year before, primarily as a result of the acquisition of the industrial rotary motor business in July 2008. Net income totaled $6.0 million ($0.27 per diluted share) in the quarter, up 45% from the net income of $4.2 million ($0.22 per diluted share) in 4Q2007. The higher net income was primarily attributable to the benefits of overall sales growth as well as lower interest expense and higher other income, partially offset by higher SG&A costs and the provision for income taxes that the Company began to pay in 2008.
Tianfu Yang, Harbin Electric Chairman and CEO, commented, ''While the global economic meltdown negatively impacted our fourth quarter performance, 2008 was a successful year for the Company as demonstrated by our robust growth in revenues and net income, and strong liquidity position. Our strong results for the year testify to our strategic vision over the past years and reflect the resilience of our business model. The successful completion of Hengda acquisition broadened our product portfolio and increased our competitive advantage. We believe that it also paved the way for substantial market opportunities in the long-term."
Looking ahead, Mr. Yang commented, ''We continue to experience softer demand in some areas, particularly in the automobile specialty micro-motor business. We have also begun to see some demand improvement in our rotary motor products for agricultural applications, reflecting the impact of the initial phase of the Chinese government's stimulus package. Overall in 2009, we expect that our linear motors for subway train cars, the start-up of the Shanghai facility, and volume growth in oil pumps as well as the government's stimulus package, will drive sales and earnings growth over 2008. However, the size of this projected growth remains uncertain. We expect that these positive factors will begin to impact our business in the second half of the year.''
''Given the continued uncertainty associated with a possible further deterioration of global economic conditions, our priority is to maintain and strengthen our existing business and client base while we continue to pursue growth opportunities. Despite unprecedented economic uncertainty and the many challenges we are facing, we believe that we are well positioned to navigate these turbulent times and to achieve growth and build long-term value for our shareholders.''
Conference Call Details
The Company will host a conference call to discuss the fourth quarter and fiscal year 2008 financial results at 8:30 a.m. ET on Friday, March 13, 2009.
To participate in the conference call, please dial any of the following numbers:
USA: 1-800-603-1779 International: +1-706-643-7429 North China: 10-800-713-0924 South China: 10-800-130-0748 The conference ID for the call is 88782128.
A replay of the call will be available beginning at 10:00 a.m. ET on March 13, 2009 and will remain available through midnight on March 19, 2009.
To access the replay, please dial any of the following numbers: USA:1-800-642-1687 International: +1-706-645-9291 Passcode is: 88782128.
This conference call will be broadcast live over the Internet. To listen to the live webcast, please go to HARBIN and click on ''Harbin Electric Q4 and Fiscal Year 2008 Financial Results Conference Call''. The replay of the webcast will be available for 30 days and will be archived on the Investor Kits page of the website after 30 days.