Net Income Up 414% to $2.1 Million NEW YORK, May 15
/PRNewswire-FirstCall/ -- China Natural Gas, Inc. (OTC BB: CHNG),
one of the leading providers of pipeline natural gas for
industrial, commercial and residential use and compressed natural
gas (CNG) for vehicular fuel in Xi'an, China, today announced its
first quarter financial results for the period ended March 31,
2007. Financial Highlights for the First Quarter 2007: - Revenue
increased 277% year over year to $6.7 million - Gross profit
increased 272% year over year to $3.5 million - Income from
operations increased 421% year over year to $2.5 million - Net
income increased 414% year over year to $2.1 million - Net income
per share increased to $0.09 per share compared to $0.02 in the
prior year period "We are very pleased with our performance through
the first quarter of 2007. Approximately 14 filling stations
contributed to our revenue performance in the first quarter of
2007. Additionally, we are completing construction of 3 new filling
stations in the second quarter of 2007, and will have a total of 17
filling stations contributing to our third quarter 2007 revenue,"
stated Mr. Qinan Ji, Chairman and CEO of China Natural Gas. Revenue
for the first quarter was $6.7 million, an increase of 277%
compared to $1.8 million in the first quarter of 2006. The sharp
increase in revenue was due primarily to contributions from
additional CNG filling stations which were not built or generating
revenue in the first quarter of 2006, as well as the year over year
increase in residential, industrial and commercial pipeline
customers to approximately 75,000 from 58,200 in the first quarter
of 2006. Revenue from sales of natural gas increased 469% to $4.9
million from $0.86 million in the prior year period, generating 73%
of total revenue in the first quarter of 2007. Construction and
installation revenue increased 97% to $1.8 million from $0.92
million in the first quarter of 2006, generating 27% of total
revenue in the first quarter of 2007. Gross profit increased 272%
to $3.5 million in the first quarter of 2007 from $0.94 million in
the first quarter of 2006. Gross margin of 52.2%, compared to 52.9%
in the prior year's period, reflects an increase in revenues
generated from company-owned CNG filling stations, which generate a
slightly lower gross margin than installation and construction
revenue. Management believes that sales of CNG through its filling
stations provide the best opportunity for future revenue and profit
growth. In the first quarter of 2007, operating income increased
421% to $2.5 million from $0.48 million in the first quarter of
2006. Operating margin increased to 37.1% compared to 26.9% in the
prior year's period. Operating expenses in the first quarter of
2007 increased 119% to $1.0 million from $0.46 million the year
before, reflecting the construction and operation of 3 new natural
gas filling stations during the first quarter of 2007, as well as
continued expenses related to the identification of future natural
gas filling station locations and costs associated with the
government licensing and approval process. Selling and marketing
expense increased to $0.59 million from $0.24 million compared to
the same period last year, reflecting the Company's increased
efforts to obtain new residential and commercial customers and
attract new customers to its filling stations. General and
administrative expense increased to $0.42 million from $0.22
million from the first quarter of 2006, primarily due to the
increase in personnel cost as the Company continues to grow. As a
percent of revenue, operating expenses decreased to 15.1% in the
first quarter of 2007 from 26.0% in the first quarter of 2006. Net
income for first quarter of 2007 increased 414% to $2.1 million, or
$0.09 per share, compared to $0.41 million, or $0.02 per share, in
the first quarter of 2006. Balance Sheet As of March 31, 2007, the
Company had $6.7 million cash and cash equivalents on hand compared
to $5.3 million as of December 31, 2006. Fiscal Year 2007 Update
The Company expects to add up to 30,000 new pipeline customers by
the end of 2007. Additionally, the Company expects to start
construction on an additional 12 CNG filling stations through the
remainder of the year. About China Natural Gas, Inc. China Natural
Gas, Inc., ("CHNG"), is the first China-based natural gas company
publicly traded in the US. It currently owns and operates a 120
kilometer long compressed natural gas pipeline in Xi'an, China, a
fast growing Chinese city supported by a population of
approximately eight million and is the "gateway" to the broad
Western regions of China. CHNG has three profitable business
segments: end user delivery of natural gas services to residential,
commercial and industrial customers; wholesale natural gas to
retail natural gas filling stations; and retail natural gas at
company-owned natural gas filling stations. The city of Xi'an has
approximately 20,000 taxis, 3,000 buses and 2,000 special purpose
vehicles that are powered by compressed natural gas. This press
release may contain forward-looking statements. These statements
are based on the current expectations or beliefs of China Natural
Gas, Inc. management and are subject to a number of factors and
uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements, including
the fluctuation of natural gas prices, the availability of natural
gas supplies, changes in governmental regulations and/or economic
policies. CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 2007 (UNAUDITED) ASSETS CURRENT
ASSETS: Cash & cash equivalents $6,726,294 Accounts receivable
634,935 Other receivable 1,016,116 Inventory 114,902 Advances
1,431,097 Prepaid expense and other current assets 110,062 Total
current assets 10,033,406 PROPERTY AND EQUIPMENT, net 17,213,323
CONSTRUCTION IN PROGRESS 2,747,472 TOTAL ASSETS $29,994,201
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts
payable & accrued expense $432,321 Other payables 1,252,482
Unearned revenue 287,464 Total current liabilities 1,972,267
STOCKHOLDERS' EQUITY: Preferred stock, $0.0001 per share;
authorized 5,000,000 shares; none issued - Common stock, $0.0001
per share; authorized 30,000,000 shares; issued and outstanding
24,210,183 2,421 Additional paid-in capital 18,223,911 Cumulative
translation adjustment 1,120,856 Statutory reserve 1,092,746
Retained earnings 7,582,000 Total stockholders' equity 28,021,934
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $29,994,201 CHINA
NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
INCOME AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTH PERIODS
ENDED MARCH 31, 2007 AND 2006 (UNAUDITED) 2007 2006 Revenue Natural
gas revenue $4,923,572 $864,953 Construction / installation revenue
1,820,004 922,261 Total revenue 6,743,576 1,787,214 Cost of revenue
Natural gas cost 2,492,651 505,863 Construction / installation cost
733,566 336,649 3,226,217 842,512 Gross profit 3,517,359 944,702
Operating expenses Selling expenses 594,129 244,734 General and
administrative expenses 421,379 219,702 Total operating expenses
1,015,508 464,436 Income from operations 2,501,851 480,266
Non-operating income (expense): Interest income 9,409 2,744 Other
income (expense) 383 26 Total non-operating income (expense) 9,792
2,770 Income before income tax 2,511,643 483,036 Income tax 401,317
72,456 Net income 2,110,326 410,580 Other comprehensive income
Foreign currency translation gain 281,404 62,656 Comprehensive
Income $2,391,730 $473,236 Weighted average shares outstanding
Basic 24,210,183 23,422,553 Diluted 24,210,183 23,685,565 Earnings
per share Basic $0.09 $0.02 Diluted $0.09 $0.02 Basic and diluted
are the same because there is not anti-diluted effect CHINA NATURAL
GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE THREE MONTH PERIODS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED)
2007 2006 CASH FLOWS FROM OPERATING ACTIVITIES: Net income
$2,110,326 $410,580 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
352,685 163,738 (Increase) / decrease in assets: Accounts
receivable (59,700) (145,086) Other receivable (197,081) (423,129)
Inventory 172,905 (1,478) Advances 172,660 (107,933) Prepaid
expense 270,497 (218,281) Contract in progress - (161,850) Increase
/ (decrease) in current liabilities: Accounts payable & accrued
expense 21,770 254,029 Other payables (912,068) 148,003 Unearned
revenue 482 (56,020) Net cash provided by(used in) operating
activities 1,932,476 (137,427) CASH FLOWS FROM INVESTING ACTIVITIES
Payment on purchase of property and equipment (192,232) (1,121,178)
Additions to construction in progress (377,901) 5,684 Net cash used
in investing activities (570,133) (1,115,494) CASH FLOWS FROM
FINANCING ACTIVITIES: Stock issued for cash - 10,400,000 Payment of
offering costs - (1,557,147) Net cash provided by in financing
activities - 8,842,853 Effect of exchange rate changes on cash and
cash equivalents 69,738 (2,916) NET INCREASE IN CASH & CASH
EQUIVALENTS 1,432,081 7,587,016 CASH & CASH EQUIVALENTS,
BEGINNING OF YEAR 5,294,213 675,624 CASH & CASH EQUIVALENTS,
END OF YEAR $6,726,294 $8,262,640 SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION: Interest paid $- $- Income taxes paid $- $-
DATASOURCE: China Natural Gas, Inc. CONTACT: Ashley Ammon
MacFarlane or Bill Zima, both of Integrated Corporate Relations,
+1-203-682-8200, Investor Relations
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