Lizhan Environmental Corporation ("Lizhan" or the "Company")
(NASDAQ: LZEN), a China-based supplier of synthetic leather and
other fabrics manufactured from recycled leather waste, among other
materials, announced today its fiscal year 2010 results for the
year ended September 30, 2010 and filed its annual report on Form
20-F with the U.S. Securities and Exchange Commission.
2010 Financial Highlights
-- 2010 net income increased 199.7% to $8.2 million from $2.7 million
in 2009 and revenue increased 114.3% to $46.3 million from
$21.6 million
-- 2010 gross profit increased 201.2% to $11.3 million
-- 2010 operating income increased 264.6% to $8.4 million
-- 2010 basic and fully diluted earnings per share increased to $0.74
Full Year Ended September 30, 2010 Financial
Results
Revenue and Net Income
The revenue in fiscal year 2010 was $46.3 million, up $24.7
million from $21.6 million in 2009, representing a significant
improvement of 114.3% and net income increased 199.7% from $2.7
million to $8.2 million. The Company has experienced substantial
growth since it launched commercial production in November 2007. In
2009, the Company launched the production and sales of recycled
leather flocked fabric products, which are higher margin and
environmentally friendly products that are consist of fabrics that
are flocked with recycled leather powder to improve the texture of
the fabric. This product accounted for 54.3% and 73.9% of our
overall revenue in fiscal years 2009 and 2010, respectively, and
the gross margin of this product has increased to 28% from 19%. The
Company recently completed the construction of its Evergreen
Product facility, which has the design capacity to produce 6.4
million meters of fabrics annually. As of September 30, 2010, the
original facility had the design capacity to produce 15 million
meters of fabrics annually.
The Company recently completed the testing of a new "Green"
product line which uses a new leather processing technology
utilizing leather scrapes to generate a new class of reconstituted
leather derived from natural fibers, which we refer to as Evergreen
Products. The Evergreen Products do not contain any adhesive and
are resistant to fire, tearing and cracking and have better vapor
permeability and handling. Pre-sale orders have been received for
yards of material from 5 customers, which orders are subject to the
customers' inspection of and the satisfaction with the quality of
the products and other customary conditions. The Company expects to
begin mass production in mid-February. In addition, the Company
plans to launch mass production of the second of its Evergreen
Product production lines by May 2011, provided that there is
sufficient demand for our Evergreen Products at that time and there
are no delays in the installation of the production line or the
testing or mass production.
Lizhan expects its new Evergreen Products will generate even
higher selling prices and profit margins than its current product
offerings.
Gross Profit and Gross Profit Margin
Gross profit for the year ended September 30, 2010 increased
201.2% to $11.3 million, from $3.7 million for the same period in
2009. The increase was primarily attributable to increased sales
and change of product mix. For the year ended September 30, 2010
and 2009, the Company's gross profit margin was 24.3% and 17.3%,
respectively. The rise of gross profit margin in 2010 is due to the
maturity of production technique for recycled leather flocked
product, which resulted in increased product yield and decreased
costs.
Research and Development Expenses
Research and development expenses totaled $136,398 for the year
ended September 30, 2010, as compared to $64,991 for 2009, an
increase of 109.9%. This increase was attributable to the payment
of salaries and related expenses to additional employees during the
year ended September 30, 2010, as the Company expanded the size of
its research and development staff efforts during that time.
Selling and Marketing Expenses
Selling and marketing expenses totaled $634,544 for the year
ended September 30, 2010, as compared to $322,133 for the year
ended September 30, 2009, an increase of 97.0%. This increase was
attributable primarily to increased advertising and promotion
activities, staffing costs and other costs relating to selling and
marketing activities.
Balance Sheet and Cash Flow Statement
As of September 30, 2010, the Company had $2.6 million in cash
and cash equivalents and stockholder's equity was $18.3 million.
The Company generated $7.6 million in cash, from operating
activities in 2010, compared to $474K in 2009. Cash used in
investing activities was $15.7 million in 2010, up $13.5 million
from $2.2 million in 2009 primarily because of costs related to the
construction of our recently completed Evergreen Product facility
and purchase of equipment for Evergreen Products. Cash from
financing activities was $9.9 million in 2010. As of September 30,
2010, the Company maintained short-term working capital facilities
of $14.7 million with various banks in China.
CEO Comments
In commenting on the 2010 results, Mr. Jianfeng Liu, Chief
Executive Officer of Lizhan commented, "The momentum that we have
achieved in driving our business model is clearly a reflection of
the exceptional year experienced operationally and financially by
the Company in 2010. Major initiatives were also taken during the
year that will lay the foundation for significant expected growth
in 2011 and beyond."
"Our record revenues in 2010, outstanding margins and profit,
all are reflections of our success in addressing our customers'
needs, making the necessary investment in our research and
development, increasing market penetration both domestically and
internationally, and most importantly, enhancing the quality of our
products."
Mr. Liu added, "We are gratified to see the continued sales
growth of our recycled leather flocked fabric products. Our present
efforts to complete the preparation of the production process for
our new Evergreen product line expands our commitment to provide
'cutting-edge,' environmentally-friendly product innovations that
provide value and quality to our customers. In order to ensure the
necessary resources for our growth, the Company proudly became a
publicly listed Company on Nasdaq in November of 2010, subsequent
to our 2010 year end. This listing enabled the Company to raise
funds in the U.S. capital markets which we intend to use for a
portion of the financing of our second Evergreen Product production
line by May 2011, and to establish a diverse base of investors in
the Company. We have initiated an investor relations program in
order to make the Company more known in the U.S. market in the
coming months."
"I want to personally wish our employees, their families, and
our shareholders much health and prosperity in the coming New Year
and thank you all for your support."
FINANCIAL INFORMATION 2010 AND 2009
For the Year Ended
September 30,
--------------------------
2010 2009
(Audited) (Audited)
------------ ------------
Net Sales $ 46,321,225 $ 21,612,541
Cost of sales (35,042,898) (17,868,408)
------------ ------------
Gross profit 11,278,327 3,744,133
------------ ------------
Operating expenses
General and administrative expenses (2,110,506) (1,053,752)
Research and development expenses (136,398) (64,991)
Selling and marketing expenses (634,544) (322,133)
------------ ------------
Total Operating Expenses (2,881,448) (1,440,876)
------------ ------------
Operating income 8,396,879 2,303,257
------------ ------------
Other income and (expense):
Other income 1,139,445 610,548
Exchange loss (49,788) (24,963)
Interest income 26,721 19,972
Interest expense (300,609) (166,186)
Other expenses, net (142,419) (11,330)
------------ ------------
Total other income (expenses), net 673,350 428,041
------------ ------------
Income/before income taxes 9,070,229 2,731,298
Income tax expenses (912,249) --
------------ ------------
Net income 8,157,980 2,731,298
------------ ------------
Net loss attributable to non--controlling
interest 28,127 --
------------ ------------
Net income attributable to the Company 8,186,107 2,731,298
Other comprehensive income (loss)
Foreign currency translation adjustment 422,497 (6,026)
------------ ------------
Less: Foreign currency translation adjustments
attributable to non--controlling interest (1,906) --
------------ ------------
Comprehensive Income $ 8,606,698 $ 2,725,272
------------ ------------
Earnings per common share
-- Basic and fully diluted $ 0.74 $ 0.25
------------ ------------
Balance Sheet Data (at end of year) September 30,
(in U.S. Dollars) 2010 2009
------------ ------------
Audited Audited
------------ ------------
Cash and cash equivalents $ 2,597,366 $ 864,162
------------ ------------
Total current assets 18,127,675 11,400,067
Total other assets 26,558,839 9,526,249
------------ ------------
Total assets 44,686,514 20,926,316
------------ ------------
Total liabilities 26,341,222 12,803,407
------------ ------------
Total stockholders' equity 18,345,292 8,122,909
------------ ------------
Total liabilities and stockholders' equity $ 44,686,514 $ 20,926,316
------------ ------------
About Lizhan Environmental Corporation
Lizhan Environmental Corporation manufactures, distributes and
markets environmentally-friendly synthetic leather and other
fabrics from recycled leather waste, among other materials. The
Company's products are mainly used in furniture, garments and other
consumer applications.
Safe Harbor Statements
This press release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and as defined in the U.S. Private Securities Litigation
Reform Act of 1995. These forward-looking statements involve
inherent risks and uncertainties that could cause actual results to
differ materially from those projected or anticipated, including
risks outlined in the Company's public filings with the Securities
and Exchange Commission, including the Company's registration
statement on Form F-1, as amended. Some of risks inherent in an
investment in our company include, but are not limited to, our
limited operation history, our need to maintain sufficient levels
of liquidity and working capitals, the potential need to reduce our
expansion plans, price inflation in the PRC, difficulties in
developing and selling our new Evergreen Products, seasonal
patterns in our business, protection of our intellectual property
and the risk of infringing the intellectual property of others,
customer decisions to discontinue purchasing our products, and
restrictions imposed by Chinese regulations, including every
policies. All information provided in this press release is as of
February 1 2011. Except as required by law, the Company undertakes
no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, after the date on which the statements are made or to
reflect the occurrence of unanticipated events.
For more information, please contact: Corporate Contact: Lizhan
Environmental Corporation Angell Chang Chief Financial Officer
Silvia Liu Secretary of the Board Phone: +86 573 8862 268 Email:
ir@lzencorp.com Web: http://www.lzencorp.com Investor Relations
Contact: Cooper Global Communications Richard Cooper Email:
rcooper@cgc-us.com Sabrina Zhang Email: szhang@cgc-us.com Phone:
(212) 317-1400
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