NEW YORK, Nov. 14 /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 third quarter financial results for the
period ended September 30, 2007. Financial Highlights for the Third
Quarter 2007: -- Quarterly revenue increased 39% year over year to
$9.1 million. For the nine month period, revenue increased 100% to
$24.1 million. -- Quarterly gross profit increased 34% year over
year to $4.3 million. For the nine month period, gross profit
increased 107% to $12.0 million. -- For the quarter, gross margin
decreased year over year from 49.7% to 47.6%. For the nine month
period, gross margin increased from 48.2% to 49.7%. -- Income from
operations for the quarter decreased 9% year over year to $2.4
million. For the nine month period, income from operations
increased 93% to $8.1 million. -- Quarterly net income decreased
11% year over year to $2.0 million. For the nine month period, net
income increased 92% to $6.8 million. -- Quarterly net income per
share decreased 22% year over year to $0.07 per share. For the nine
month period, net income per share increased 81% to $0.27. "We are
very pleased with our performance through the third quarter of
2007. During the quarter, we completed the construction of 3
filling stations and exited the quarter with 20 filling stations
contributing to our revenue performance, including four in Henan
province as we expanded our presence outside of Xi'an. We are
confident we have established a solid foundation for our CNG
filling station business and will continue to build on that
foundation in the future via construction and acquisition of new
filling stations," stated Mr. Qinan Ji, Chairman and CEO of China
Natural Gas. Revenue for the third quarter was $9.1 million, an
increase of $2.6 million or 39% as compared to $6.5 million in the
third quarter of 2006. The increase in revenue was due in part to
the contribution of three new CNG filling stations that opened in
Q3 bringing the Company's total to 20 stations. Also contributing
to the revenue increase was the addition of 5,763 commercial and
residential customers during the quarter, bringing the total number
of customers to 83,979. Revenue from sales of natural gas increased
43% to $7.4 million from $5.2 million in the prior year period and
contributed approximately 82% of revenue in the third quarter of
2007. Construction and installation revenue increased 23% to $1.6
million from $1.3 million in the third quarter of 2006, generating
approximately 18% of revenue in the third quarter of 2007. Gross
profit increased 34% to $4.3 million in the third quarter of 2007
from $3.2 million in the third quarter of 2006. Gross margin of
47.6%, compared to 49.7% in the prior year's period, reflects lower
margins for the three new stations opened in Q3 as these stations
begin to attract customers and ramp sales. The sales ramp generally
takes six months, after which a new station attains, on average,
roughly the same revenue and margin levels as the Company's other
established stations. Over the nine month period, gross margin
increased from 48.2% to 49.7% year to year which reflects the fact
that, over longer time periods, the margin impact of new station
openings is minimal while economies of scale created by more
stations leads to margin improvement. In the third quarter of 2007
operating income decreased 9% to $2.4 million from $2.6 million in
the third quarter of 2006 and operating margin decreased to 25.9%
as compared to 39.9% in the prior year's period. The decrease in
operating income was the result of an increase in selling, general
and administrative expenses, the most significant of which was
$475,000 in costs related to the Company's financing activities.
Also contributing to the increase in SG&A were costs of
approximately $446,000 related to the addition of new employees,
the opening of new CNG filling stations, and consulting and initial
costs related to the Company's natural gas processing plant. For
the nine month period ending September 30, 2007, operating income
increased 93% as compared to the same period in 2006, from $4.2
million to $8.1 million. Operating margin was 33.4% over the first
nine months of 2007 as compared to 34.7% over the same period in
2007. Net income for the third quarter of 2007 decreased 11% to
$2.0 million, or $0.07 per share, compared to $2.2 million, or
$0.09 per share, in the third quarter of 2006. For the nine month
period, net income grew 92% to $6.8 million and $0.27 per share in
2007 versus $3.5 million and $0.15 per share in the prior year
period. During the third quarter of 2007, the Company enhanced six
of its existing CNG filling stations with the capability to sell
gasoline in addition to CNG. It is expected that gasoline sales
will begin to contribute to revenue in the fourth quarter of 2007.
Balance Sheet As of September 30, 2007, the Company had $20.7
million of cash and cash equivalents on hand compared to $7.6
million as of June 30, 2007. The increase was mainly the result of
the receipt of net proceeds of $13.9 million pursuant to a private
placement of the Company's common stock and warrants on August 3,
2007. Guidance Today the Company is increasing its revenue guidance
for 2007. For the year 2007, the Company expects revenue to
increase 76% to $33.1 million from $18.8 million in 2006. This is
up from the Company's prior revenue guidance of $32.0 million, up
70% from the year before. 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%. Recent Events The
Company today announced that an individual shareholder filed a
lawsuit at the Higher People's Court of Shaanxi Province against
Yangling Bodisen regarding the share transfer agreement between the
parties dated September 13th, 2005. The shareholder contends that
Bodisen did not perform according to the terms of the share
transfer agreement, and that Bodisen is therefore not legally
entitled to retain certain shares of the Company it received under
the agreement. The Company is informed that the Higher People's
Court of Shaanxi Province has accepted this case and ordered a
pretrial hearing for November 26th, 2007 (Beijing Time) at The
Higher People's Court of Shaanxi Province. The Company does not
expect this lawsuit to have any impact on its operations. 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. CONTACT In the U.S.: Ashley Ammon MacFarlane or
Bill Zima Integrated Corporate Relations 203-682-8200 In Asia:
Xuyang Zhang Integrated Corporate Relations, Inc. +86 10 8523 3087
CHINA NATURAL GAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2007 (unaudited) ASSETS CURRENT ASSETS: Cash
& cash equivalents $20,677,432 Accounts receivable 329,686
Other receivable 438,349 Inventory 70,314 Advances 1,213,868
Prepaid expense and other current assets 118,041 Total current
assets 22,847,690 PROPERTY AND EQUIPMENT, net 23,514,129
CONSTRUCTION IN PROGRESS 1,650,232 OTHER ASSETS 1,672,942 TOTAL
ASSETS $49,684,993 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable & accrued expense $622,482 Other
payables 82,033 Unearned revenue 487,324 Taxes Payable 901,608
Total current liabilities 2,093,447 STOCKHOLDERS' EQUITY: Preferred
stock, $0.0001 per share; authorized 5,000,000 shares; none issued
Common stock, $0.0001 per share; 30,000,000 authorized shares;
29,145,839 shares issued and outstanding 2,915 Additional paid-in
capital 32,046,884 Cumulative translation adjustment 2,160,330
Statutory reserve 1,477,671 Retained earnings 11,903,746 Total
stockholders' equity 47,591,546 TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $49,684,993 The accompanying notes are an integral part of
these consolidated financial statements CHINA NATURAL GAS, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2007 AND 2006 Three Months Ended Nine Months Ended September
30, September 30, 2007 2006 2007 2006 (unaudited) (unaudited)
(unaudited) (unaudited) Revenue Natural gas revenue $7,442,109
$5,210,834 $19,243,968 $8,580,236 Construction / installation and
other 1,635,979 1,303,457 4,851,006 3,445,452 Total revenue
9,078,088 6,514,291 24,094,974 12,025,688 Cost of revenue Natural
gas cost 4,020,039 2,752,594 9,975,932 4,862,202 Construction /
installation and other 738,211 526,292 2,138,734 1,368,825
4,758,250 3,278,886 12,114,666 6,231,027 Gross profit 4,319,838
3,235,405 11,980,308 5,794,661 Operating expenses Selling expenses
939,496 366,616 2,216,048 923,960 General and administrative
expenses 1,028,104 270,031 1,710,459 693,141 Total operating
expenses 1,967,600 636,647 3,926,507 1,617,101 Income from
operations 2,352,238 2,598,758 8,053,801 4,177,560 Non-operating
income (expense): Interest income 24,429 2,485 41,570 7,262 Other
income (expense) 30,458 (4,231) 39,504 (10,182) Total non-
operating income (expense) 54,887 (1,746) 81,074 (2,920) Income
before income tax 2,407,125 2,597,012 8,134,875 4,174,640 Provision
for income tax 445,463 393,226 1,317,878 633,005 Net income
1,961,662 2,203,786 6,816,997 3,541,635 Other comprehensive income
Foreign currency translation gain 584,166 258,640 1,320,878 291,857
Comprehensive Income $2,545,828 $2,462,426 $8,137,875 $3,833,492
Weighted average shares outstanding Basic 27,122,196 23,931,197
25,191,521 23,759,285 Diluted 27,286,286 23,931,197 25,223,465
23,759,285 Earnings per share Basic $0.07 $0.09 $0.27 $0.15 Diluted
$0.07 $0.09 $0.27 $0.15 The accompanying notes are an integral part
of these consolidated financial statements 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, for China
Natural Gas Web site: http://www.naturalgaschina.com/
Copyright