NEW YORK, Aug. 15 /PRNewswire-FirstCall/ -- China Natural Gas, Inc.
(OTC:CHNG) (BULLETIN BOARD: 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 second quarter financial results for the
period ended June 30, 2007. Financial Highlights for the Second
Quarter 2007: -- Revenue increased 122% year over year to $8.3
million -- Gross profit increased 157% year over year to $4.1
million -- Gross margin increased year over year to 50.1% -- Income
from operations increased 191% year over year to $3.2 million --
Net income increased 196% year over year to $2.7 million -- Net
income per share increased 192% year over year to $0.11 per share
"We are very pleased with our performance through the second
quarter of 2007. Approximately 17 filling stations contributed to
our revenue performance, including four in the Henan province as we
expanded our presence outside of Xi'an. Additionally, we completed
the construction of 3 filling stations during the second quarter of
2007, and we expect to have a total of 20 filling stations
contributing to our third quarter 2007 revenue, which is ahead of
our previous expectation as we have ramped up several new stations
faster than anticipated," stated Mr. Qinan Ji, Chairman and CEO of
China Natural Gas. Revenue for the second quarter was $8.3 million,
an increase of $4.6 million or 122% compared to $3.7 million in the
second quarter of 2006. The significant increase in revenue was due
primarily to additional CNG filling stations contributing to
revenue, and the year over year increase in residential, industrial
and commercial pipeline customers to approximately 78,216 from
62,555 in the second quarter of 2006. Revenue from sales of natural
gas increased 170% to $6.8 million from $2.5 million in the prior
year period and contributed approximately 82% of revenue
performance in the second quarter of 2007. As a percentage of
revenue, this is up substantially from 67% of revenue in the second
quarter of 2006, and compares to 73% in the first quarter of 2007.
Construction and installation revenue increased 24% to $1.5 million
from $1.2 million in the second quarter of 2006, generating
approximately 18% of revenue performance in the second quarter of
2007. Gross profit increased 157% to $4.1 million in the second
quarter of 2007 from $1.6 million in the second quarter of 2006.
Gross margin of 50.1%, compared to 43.2% in the prior year's
period, reflects the significant increase in revenues generated
from company-owned CNG filling stations. Management believes that
sales of CNG through its filling stations provide the best
opportunity for future revenue and profit growth. In fact, gross
margin attributable to the retail CNG business alone was 48.8% in
the second quarter of 2007, up substantially from 36.0% in the
second quarter of 2006, and down from 49.4% in the first quarter of
2007. In the second quarter of 2007, operating income increased
191% to $3.2 million from $1.1 million in the second quarter of
2006 and operating margin increased substantially to 38.7% compared
to 29.7% in the prior year's period. Operating expenses in the
second quarter of 2007 increased 83% to $943,306 from $516,018 the
year before, reflecting the construction and operation of 3 new
natural gas filling stations during the second 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 was $682,423, up 118% from $312,610 compared to the same
period last year, and reflects the Company's increased efforts to
attract new customers to the filling stations and obtain new
residential and commercial customers. General and administrative
expense was $260,883, roughly flat to the second quarter of 2006,
demonstrating the Company's fixed administrative cost structure
despite significant build out of the retail CNG business. As a
percentage of revenue, operating expenses decreased to 11% in the
second quarter of 2007 from 14% in the second quarter of 2006. Net
income for the second quarter of 2007 increased 196% to $2.7
million, or $0.11 per share, compared to $927,269, or $0.04 per
share, in the second quarter of 2006. Balance Sheet As of June 30,
2007, the Company had $7.6 million of cash and cash equivalents on
hand compared to $6.7 million as of March 31, 2007. The Company
also raised net proceeds of $13.9 million on August 3, 2007 via a
private placement of stock and warrants with institutional
investors. Guidance Today the Company is reiterating its previously
stated revenue and net income guidance for 2007 and 2008. For the
year 2007, the Company continues to expect revenue to increase 70%
to $32.0 million from $18.8 million in 2006. The Company continues
to expect net income to increase 70% to $9.3 million in 2007 from
$5.5 million in 2006. For the year 2008, the Company continues to
anticipate revenue and net income growth of at least 70%. "We are
reiterating our existing financial guidance today, which primarily
reflects performance from and growth of our retail CNG business and
is based on operating 23 revenue generating retail CNG filling
stations by the end of 2007 and 42 revenue generating retail CNG
stations by the end of 2008. At this time, we are not accounting
for the potential sale of Liquefied Natural Gas (LNG) in our
financial guidance, although we continue to actively explore this
compelling opportunity." "Today, we also are announcing that we are
working with a Thai government agency, PTT Public Company Limited,
to evaluate placing retail CNG stations throughout Thailand, as
well as offering consulting services regarding the use of CNG in
the public transportation system. This is a potential revenue
opportunity that we have not yet factored into our 2007 and 2008
financial guidance and we look forward to updating shareholders
about our progress," concluded Mr. Qinan Ji. Status of Form 10Q The
Company's Quarterly Report on Form 10-QSB for the six-month period
ended June 30, 2007 is not able to be filed within the prescribed
time period because the Company requires additional time to ensure
adequate disclosure of information required to be included in the
Form 10-QSB. Therefore, the Company has filed a Form 12B-25 with
the Securities and Exchange Commission that provides the Company
with five additional calendar days (until August 19, 2007) to file
its Form 10-QSB for the period ended 6/30/2007. 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 STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
(UNAUDITED) Three Months Ended June 30 Six months Ended June 30
2007 2006 2007 2006 REVENUES Natural gas revenue $6,765,265
$2,504,449 $11,688,837 $3,369,402 Construction/ installation
revenue 1,508,044 1,219,734 3,328,048 2,141,995 Total revenue
8,273,309 3,724,183 15,016,885 5,511,397 COST OF GOODS SOLD Natural
gas revenue 3,463,242 1,603,745 5,955,893 2,109,608 Construction/
installation revenue 666,957 505,884 1,400,523 842,533 Total Cost
goods sold 4,130,199 2,109,629 7,356,416 2,952,141 GROSS PROFIT
4,143,110 1,614,554 7,660,469 2,559,256 OPERATING EXPENSE Selling
expenses 682,423 312,610 1,276,552 557,344 General and
administrative expenses 260,883 203,408 682,262 423,110 Total
operating expense 943,306 516,018 1,958,814 980,454 INCOME FROM
OPERATIONS 3,199,804 1,098,536 5,701,655 1,578,802 OTHER INCOME
(EXPENSE) Interest income 8,330 2,033 17,739 4,777 Other income
(expense) 7,973 (5,977) 8,356 (5,951) Total other income (expense)
16,303 (3,944) 26,095 (1,174) INCOME BEFORE INCOME TAXES 3,216,107
1,094,592 5,727,750 1,577,628 PROVISION FOR INCOME TAXES 471,098
167,323 872,415 239,779 NET INCOME 2,745,009 927,269 4,855,335
1,337,849 OTHER COMPREHENSIVE INCOME Foreign currency translation
gain (loss) 455,308 (29,439) 736,712 33,217 COMPREHENSIVE INCOME
$3,200,317 $897,830 $5,592,047 $1,371,066 NET INCOME PER SHARE-
BASIC $0.11 $0.04 $0.20 $0.06 BASIC WEIGHTED AVERAGE NUMBER OF
SHARES 24,210,183 23,918,956 24,210,183 23,671,904 NET INCOME PER
SHARE- DILUTED $0.11 $0.04 $0.20 $0.06 DILUTED WEIGHTED AVERAGE
NUMBER OF SHARES 24,210,183 23,918,956 24,210,183 23,776,062 CHINA
NATURAL GAS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF
JUNE 30, 2007 A S S E T S June 30, 2007 (Unaudited) CURRENT ASSETS:
Cash & cash equivalents $7,601,358 Accounts receivable, trade
709,328 Other receivables 1,433,695 Inventories 133,962 Advances to
suppliers 1,493,755 Prepaid expense and other current assets
111,477 Total current assets 11,483,575 PLANT AND EQUIPMENT, net
20,164,004 CONSTRUCTION IN PROGRESS 2,396,447 Total assets
$34,044,026 L I A B I L I T I E S A N D S H A R E H O L D E R S' E
Q U I T Y CURRENT LIABILITIES: Accounts payable and accrued expense
$795,359 Other payables 107,741 Unearned revenue 350,672 Taxes
payable 1,568,003 Total current liabilities 2,821,775 SHAREHOLDERS'
EQUITY: Preferred stock, $0.0001 par value, 5,000,000 shares
authorized, none outstanding as of June 30, 2007 - Common stock,
$0.0001 par value, 30,000,000 shares authorized, 24,210,183 shares
issued and outstanding as of June 30, 2007 2,421 Additional paid in
capital 18,223,911 Statutory reserves 1,245,269 Retained earnings
10,174,486 Accumulated other comprehensive income 1,576,164 Total
shareholders' equity 31,222,251 Total liabilities and shareholders'
equity $34,044,026 CHINA NATURAL GAS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE
30, 2007 AND 2006 2007 2006 (Unaudited) (Unaudited) CASH FLOWS FROM
OPERATING ACTIVITIES: Net income $4,855,335 $1,337,849 Adjustments
to reconcile net income to cash provided by (used in) operating
activities: Depreciation and amortization 726,256 312,407 Exchange
gains (102,032) Change in operating assets and liabilities:
(Increase) decrease in assets: Accounts receivable (123,663)
(317,954) Other receivables (608,070) (634,763) Inventories 156,897
(82,697) Advance to suppliers 207,903 (430,503) Prepaid expense
199,307 (263,019) Increase (decrease) in liabilities: Accounts
payable 358,550 15,914 Other payables (161,022) (292,443) Taxes
payables (343,379) 215,269 Unearned revenue 58,409 (55,975) Net
cash provided by (used in) operating activities 5,326,523 (297,947)
CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and
equipment (3,203,009) (2,113,842) Net cash used in investing
activities (3,203,009) (2,113,842) CASH FLOWS FROM FINANCING
ACTIVITIES: Issuance of common stock - 10,400,000 Payment of
offering costs - (1,557,147) Net cash provided by financing
activities - 8,842,853 EFFECT OF EXCHANGE RATE ON CASH 183,631
36,164 INCREASE IN CASH 2,307,145 6,467,228 CASH, beginning of
period 5,294,213 675,624 CASH, end of period $7,601,358 $7,142,852
DATASOURCE: China Natural Gas, Inc. CONTACT: In the U.S., Ashley
Ammon MacFarlane or Bill Zima, +1-203-682-8200, or In Asia, Xuyang
Zhang, +86 10 8523 3087, all of Integrated Corporate Relations,
Inc. for China Natural Gas, Inc.
Copyright