KHDH Khd Humboldt Wedag International Ltd. (MM)

- Awarded US$50 Million Contract in Romania - HONG KONG, May 15 /PRNewswire-FirstCall/ -- KHD Humboldt Wedag International Ltd. ("KHD") (NASDAQ:KHDH) announces that it is completing the final phase of our transition from a financial services company to an industrial plant engineering and equipment supply company. For the first quarter of 2006, our financial results are still mixed with our previous financial service business. The period ended March 31, 2006 included our industrial plant engineering and equipment supply segment and a one-month period of the financial service business to January 31, 2006. Our consolidated balance sheet reflects only the industrial plant engineering and equipment supply segment at March 31, 2006, with a comparison to our December 31, 2005 consolidated balance sheet which includes both the industrial and engineering and financial services segments. With the next quarter ending June 30, 2006, we will be entirely separated and our financial position will be easier to review. To assist in understanding the transformed company, we are providing limited guidance for the year 2006. It is important to recognize that our revenues include both engineering services and equipment supply. Some of the equipment included in our scope of supply may be purchased. The engineering services portion of our contracts precedes the equipment supply portion. The engineering services typically have a higher margin and lower revenue, while the equipment supply brings in higher revenue and lower margin. Consequently, quarterly results may not necessarily represent a proportionate share of our annual result as different portions of contracts start at different times and are dependent on phased completion. To help investors better understand the fluctuation of the activities of our industrial plant engineering and equipment supply business, we provide the following forecast (FC) to illustrate the movement of the revenues and earnings before taxes (EBT) for each quarter of 2006 and the full year 2006. The revenues and EBT are not evenly spread among all quarters. The following information and other statements in this release are forward-looking and are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially. See the section entitled "Disclaimer for Forward Looking Information" at the end of this release for a description of those risks and uncertainties. INDUSTRIAL PLANT ENGINEERING AND EQUIPMENT SUPPLY March 31, June 30, September December Full Year 2006 2006 30, 2006 31, 2006 2006 (United States dollars in millions) (Unaudited) Actual FC FC FC FC Revenues $63.3 $100.8 $115.6 $144.9 $424.6 EBT 4.5 7.2 10.7 12.5 34.9 Includes all operating companies active in cement, coal and minerals technology and their real estate operations, but not corporate expenses. For the quarter ended March 31, 2006 (all figures are in US dollars and earnings per share amounts are on a diluted basis), KHD's industrial plant engineering and equipment supply services revenue was $63.3 million, compared to $56.1 million in the year-earlier period, primarily as a result of the separation of our financial services into a separate company on January 31, 2006. Income before tax increased to $5.1 million, compared to $4.3 million in the first quarter of 2005. Net income in the first quarter of 2006 was $2.8 million or $0.19 per share, compared to $4.9 million or $0.36 per share in the first quarter of last year. We had a tax expense of $1.8 million in the current quarter ended March 31, 2006, compared to a tax benefit of $1.7 million in the comparative quarter in 2005. We paid $0.9 million in income taxes in the current quarter of 2006. Upon the anticipated completion of our organization restructuring in June 2006, we expect that our effective income tax rate will be reduced. The weighted average number of shares increased to 14.7 million on a diluted basis from 13.7 million in the first quarter of 2005. During the current quarter, the Euro depreciated by approximately 8 percent against the U.S. dollar and 14 percent against the Canadian dollar, compared to the same quarter in 2005. The depreciation of the Euro against U.S. and Canadian dollars reduced our revenue and net income. The consolidated balance sheet and income statement for March 31, 2006 were translated from Canadian dollars into U.S. dollars at U.S. dollar 1 = Canadian dollars 1.1671 (equivalent to Euro 1 = U.S. dollars 1.2140) For the current period, the revenues for our industrial plant engineering and equipment supply services was up 13 percent, although overall revenues declined, due largely to the restructuring that resulted in the distribution of our financial services business to shareholders during the quarter. Order intake during the first quarter increased to $95.4 million, compared to $79.9 million in the first quarter of 2005. Backlog increased by 36 percent to $352.4 million, compared to $258.7 million a year earlier. Order intake is defined as the total of all orders received during the respective period, while order backlog is defined as the amount of orders received but not yet fulfilled (for easy comparison, all amounts for order intake and backlog were translated from Euros to Dollars at 1.1841, the exchange rate prevailing on December 31, 2005). CEO Jim Busche commented, "The first quarter order intake was well balanced geographically, and came from the Middle East 29 percent, Asia 27 percent, Europe 27 percent, the Americas 6 percent and the remaining 11 percent from other areas. Our strategy is to concentrate on our core strengths -- equipment design and supply contracts -- as opposed to turnkey contracts. We are strongest in areas where infrastructure is growing rapidly, such as Asia and the Middle East, and our long history and respected standing in those regions stands us in good stead. Our internal goals for the year are to implement a plan to increase margins in all our product lines, strategic alliances and acquire companies to enhance our growth." Chairman Michael Smith commented, "At the end of the first quarter, KHD has $228.5 million in cash, cash equivalents and short-term securities. The current working capital ratio was 1.91. Shareholders' equity rose to $256.7 million and the long-term debt to equity ratio was .08. We encourage our shareholders to read our SEC Form 6-K filing, now available on our website, for a greater understanding of our industrial engineering prospects, as well as the distribution of the financial services business." KHD is also pleased to announce that it has been awarded the contract, worth approximately US$50 million, as the leader of a consortium for engineering and supply of a 4,000 t/d clinker production plant ranging from raw material feeding system to clinker storage. The plant will be erected in Campulung, Romania. KHD's scope of supply includes the pyroprocess including Humboldt 5-stage preheater with combustion chamber, rotary kiln with PYRO-JET(R) kiln burner and PYROFLOOR clinker cooler with roll crusher. About KHD Humboldt Wedag International Ltd. KHD Humboldt Wedag International Ltd. (the "Company") owns companies that operate internationally in the industrial plant engineering and equipment supply industry, and specializes in the cement, coal and mineral industries. To obtain further information on the Company, please visit our website at http://www.khdhumboldt.com/ Revenues and Earnings Before Taxes (EBT) Forecast 2006 Revenues and EBT forecasts are based on KHD's order backlog, order intake and sales pipeline. We estimate on a project by project basis which revenues and earnings our current order backlog will generate, based on the percentage of completion for each individual project. For our order intake, we assess when each new project will start to deliver revenues and earnings. We also take into consideration our sales pipeline to determine the probability that our proposals will be successful, and when new projects may commence. In the second quarter, we anticipate an increase in revenues to $100.8 million. This is based on an increase to $21.6 million in Q2 (Q1: $1.9 million) at our ZABIS unit mainly in relation to a project in Russia, and higher levels of activity in the US and Indian cement operations. Earnings before tax and minorities increase in line with higher revenues. For the third quarter, we forecast a further increase in revenues to $115.6 million, and EBT of $10.7 million. Key assumptions are higher revenues for our Indian (+$4.2 million) and German cement operations (+$3.6 million), and our coal and minerals business. We anticipate higher margins in Q3 as a result of the overall mix of projects handled in Q3, with a strong contribution to earnings from one specific minerals project in South America. In Q4 we forecast revenues of $144.9 million and EBT of $12.5 million. This is based on increase in revenues for projects in the Middle East, India and the US. Our profit margins in Q4 will decrease slightly compared to Q3, driven in part by higher sales of equipment which we buy in from other vendors, and which carry lower margins. Disclaimer for Forward-Looking Information Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company's future growth, results of operations, performance and business prospects and opportunities. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management's current views and are based on certain assumptions and speak as of only March 31, 2006. These assumptions, which include, management's current expectations, estimates and assumptions about certain projects and the markets the Company operates in, the global economic environment, interest rates, exchange rates and the Company's ability to attract and retain customers and to manage its assets and operating costs, may prove to be incorrect. A number of risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to: (1) a downturn in general economic conditions in Asia, Europe, the United States and internationally, (2) a decreased demand for the Company's products, (3) a decrease in the demand for cement, minerals and related products, (4) the number of competitors with competitively priced products and services, (5) product development or other initiatives by the Company's competitors, (6) shifts in industry capacity, (7) fluctuations in foreign exchange and interest rates, (8) fluctuations in availability and cost of raw materials or energy, (9) delays in the start of projects included in our forecasts, (10) delays in the implementation of projects included in our forecasts, disputes regarding the performance of our services, (11) the uncertainty of government regulation and politics in Asia and the Middle East and other markets, (12) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges, and (13) other factors beyond the Company's control. Additional information about these and other assumptions, risks and uncertainties are set out in the "Risks and Uncertainties" section in our Form 6-K filed with the Securities and Exchange Commission on May 16, 2006 and our MD&A filed with Canadian securities regulators. Contact Information: Allen & Caron Inc Joseph Allen (investors) (212) 691-8087 or Len Hall (media) (949) 474-4300 Rene Randall KHD Humboldt Wedag International Ltd (604) 683-8286 -FINANCIAL TABLES FOLLOW- KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS As of March 31, 2006 and December 31, 2005 (Unaudited) (amounts in U.S. dollars; in thousands) ASSETS 2006 2005 Current assets Cash and cash equivalents $212,360 $194,313 Restricted cash 21,158 22,016 Securities 16,188 16,265 Loans 2,207 10,638 Receivables, commodities transactions 0 10,450 Receivables, industrial and engineering services 37,022 34,588 Receivables 15,810 25,533 Commodity inventories 0 24,356 Inventories 34,217 38,641 Real estate held for sale 27,428 27,479 Contract deposits, prepaid and other 17,804 11,201 Future income tax assets 6,616 7,594 390,810 423,074 Non-current assets Securities 739 7,893 Loans 9,763 9,436 Properties, plant and equipment 10,609 10,835 Investment in resource property 30,281 30,312 Goodwill 9,221 12,987 Equity method investments 867 16,021 Future income tax assets 12,792 12,496 Investment in preferred shares of a former subsidiary 76,281 0 150,553 99,980 $541,363 $523,054 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS (con't) As of March 31, 2006 and December 31, 2005 (Unaudited) (amounts in U.S. dollars; in thousands) 2006 2005 LIABILITIES Current liabilities Accounts payable and accrued expenses $143,253 $159,628 Notes payable, commodities transactions 0 9,890 Notes payable, industrial and engineering services 14,476 2,944 Long-term debt, current portion 0 1,606 Pension liabilities 1,336 1,489 Deposits 20,803 17,327 Provision for warranty costs 25,075 20,527 Future income tax liability 0 303 204,943 213,714 Long-term liabilities Long-term debt, less current portion 20,445 6,253 Pension liabilities 26,442 25,584 Provision for warranty costs 6,426 4,427 Future income tax liability 8,311 10,154 Other long-term liabilities 530 575 62,154 46,993 Total liabilities 267,097 260,707 Minority interests 17,567 18,088 SHAREHOLDERS' EQUITY Common stock 71,738 62,481 Equity component of convertible debt 125 125 Retained earnings 211,996 209,416 Cumulative translation adjustment (27,160) (27,763) 256,699 244,259 $541,363 $523,054 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March 31, 2006 and 2005 (Unaudited) (amounts in U.S. dollars; in thousands, except per share data) 2006 2005 Revenue Industrial and engineering services $63,318 $56,065 Financial services 35,536 119,323 98,854 175,388 Expenses Industrial and engineering services 51,037 41,731 Financial services 30,613 109,468 General and administrative 10,880 17,920 Interest 1,238 1,920 93,768 171,039 Income before income taxes 5,086 4,349 Recovery of (provision for) income taxes (1,762) 1,720 3,324 6,069 Minority interests (528) (1,122) Net income $2,796 $4,947 Earnings per share Basic $0.19 $0.36 Diluted $0.19 $0.36 Weighted average shares outstanding Basic 14,665,346 13,577,146 Diluted 14,665,346 13,722,491 KHD HUMBOLDT WEDAG INTERNATIONAL LTD. FINANCIAL SUMMARY As of March 31, 2006 (Unaudited) (amounts in U.S. dollars; in thousands, except per share data and ratios) Cash and cash equivalents $212,360 Short-term securities 16,188 Working capital 185,867 Total assets 541,363 Shareholders' equity 256,699 Book value per share 16.88 Current ratio 1.91 Long-term debt to equity ratio 0.08 DATASOURCE: KHD Humboldt Wedag International Ltd. CONTACT: Investors, Joseph Allen, +1-212-691-8087, , or Media, Len Hall, +1-949-474-4300, , both of Allen & Caron Inc, for KHD Humboldt Wedag International Ltd.; or Rene Randall of KHD Humboldt Wedag International Ltd, +1-604-683-8286, Web site: http://www.khdhumboldt.com/

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