China GrenTech Corporation Limited Announces First Quarter 2006 Financial Results; Revenue and Gross Profit Increase Strongly from 1Q2005.SHENZHEN, China -- China GrenTech Corporation Limited (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : GRRF GRRF Groupe de Travail en Matière de Roulement et de Freinage (Working Group on Brakes and Running Gear) ): Summary of First Quarter 2006 Results --Revenue increased 78.9% YoY to RMB RMB Right Mouse Button RMB Regional Management Board (USACE) RMB Rolf Maier Bode (musician, band) RMB Ren Min Bi (currency of People's Republic of China) 14.8 million (US$1.8million)(1). --Gross profit increased 82.0% YoY to RMB8.0 million (US$1.0million). --Diluted net loss per share ("LPS LPS - Sets with restricted universal quantifiers. ["Logic Programming with Sets", G. Kuper, J Computer Sys Sci 41:44-64 (1990)]. ") was RMB0.07 (US$0.01) compared to the diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. LPS of RMB0.06 in 1Q2005. China GrenTech Corporation Limited (NASDAQ: GRRF; "China GrenTech" or "the Company"), a leading provider of wireless coverage products and services and a leading developer of radio frequency ("RF") technology in the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China ("PRC"), today announced its first quarter 2006 results. "We are pleased to report our first quarterly results as a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. ," said Yingjie Gao, China GrenTech Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Our initial public offering ("the IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. ") was tremendously successful. Our American Depositary Shares American Depositary Share (ADS) Foreign stock issued in the US and registered in the ADR system. ("ADS") started to trade on NASDAQ on March 30, 2006 and the IPO closed on April 4, 2006. Although the first quarter typically tends to be the slowest of the year due to the seasonal spending patterns of our customers in China, we posted solid top-line growth on a year-over-year basis. Increased demand for wireless coverage equipment was the key driver of the growth. As a result, our first quarter of 2006("1Q06") revenue grew 78.9% and gross profit increased 82.0% compared to the same period last year. Historically, our first quarter revenue has accounted for less than 2% of our annual revenue, while our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. have been evenly distributed throughout the year. As a result, we posted a net loss of RMB35.7 million(US$4.5million) in 1Q06. We are confident that revenues will increase over the remainder of 2006 and we believe that both the revenue and net profit for 2006 will increase compared to 2005." Under United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), diluted LPS was RMB0.07 (US$0.01) in 1Q06, which was a slight decline from diluted LPS of RMB0.06 in the same period of the previous year ("1Q05"). The diluted LPS was calculated based on 466,365,500 ordinary shares that were issued and outstanding along with the 33,634,500 ordinary shares arising from the conversion of mandatorily redeemable Redeemable Eligible for redemption under the terms of an indenture. convertible preference shares into the same number of ordinary shares upon the completion of the IPO on April 4, 2006. The net loss for 1Q06 was RMB35.7 million (US$4.5 million), compared to the net loss of RMB32.3 million in 1Q05. Business Highlights Summary of the IPO In our offering, the Company and the selling shareholders sold 5,000,000 ADSs and 1,250,000 ADSs, respectively, to the public at US$18.00 per ADS. Each ADS represents 25 ordinary shares of the Company. The Company subsequently received US$83,700,000 of the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the IPO on April 4, 2006. Wireless Network Coverage Business --The domestic wireless network coverage business in the PRC continued to grow. The number of new contracts entered into in 1Q06 also increased compared to 1Q05. --We signed a number of new contracts with several overseas operators in 1Q06. The contracts are expected to contribute to the overall revenue growth in 2Q06. RF Products China GrenTech became a qualified supplier of RF parts and components for two major domestic base station manufacturers last year, ZTE ZTE Zalaegerszegi Torna Egylet (Hungarian sports club) Corporation and Datang Mobile Communications Equipment Co., Ltd. The Company is adding headcount to enhance its RF technology research and development capabilities. The Company is happy to announce two major wins in its RF business: --The Company won a bid from Siemens Aktiengesellschaft to supply TD-SCDMA TD-SCDMA Time Division Synchronous Code Division Multiple Access filters for its TD-SCDMA base station manufacturing. --The Company won a number of bids from ZTE Corporation, a major telecommunication telecommunication Communication between parties at a distance from one another. Modern telecommunication systems—capable of transmitting telephone, fax, data, radio, or television signals—can transmit large volumes of information over long distances. manufacturer in China, to supply five specified RF passive modules for its base station manufacturing. Revenue Revenues in 1Q06 were RMB14.8 million (US$1.8 million), an increase of 78.9% from 1Q05. The increase in revenues was mainly due to the increase in revenue from the Company's four major customers, namely China Mobile, China Unicom China Unicom, full name China United Telecommunications Corporation, 中国联通, HKSE: 0762 NYSE: CHU, is a telecommunication operator in the People's Republic of China. 52. , China Telecom and China Netcom China Netcom, full name China Netcom Group Corporation (Hong Kong) Limited, abbreviated CNC, was originally formed in August 1999 by the People's Republic of China government to enable inward investments to build high speed Internet communications in the country. . However, revenue from the first quarter of the Company's fiscal year is typically much lower than the remaining three quarters due to the seasonal corporate spending patterns of major telecommunication companies in China. As such, the level of revenue in 1Q06 is not expected to be reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of revenues for the remaining three quarters of the year. Cost of revenues The cost of revenues in 1Q06 was RMB6.8 million (US$0.8 million), representing an increase of 75.3% from 1Q05. The year-over-year increase was driven primarily by an increase in total revenues. The gross margin for the quarter was 54.1%, which was up slightly from 53.2% in 1Q05. Operating expenses Total operating expenses in 1Q06, which include sales and distribution expenses, general and administrative ("G&A") expenses and research and development ("R&D") costs, were RMB43.6 million (US$5.4 million), an increase of 23.9% from 1Q05. As a result, the total operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. increased by RMB4.8 million (US$0.6 million) in 1Q06. Sales and distribution expenses were RMB24.1 million (US$3.0 million) in 1Q06, an increase of 23.4% from 1Q05. The year-over-year increase was driven primarily by higher salary and benefits that were associated with increased headcount, higher transportation expenses, and higher communication costs. The higher headcount was primarily due to an increase of sales and marketing staff that were hired as part of the Company's efforts to better prepare for the development of the 3G market. G&A expenses were RMB11.1million (US$1.4million) in 1Q06, an increase of 12.8% from 1Q05. The year-over-year increase was primarily due to higher salary and benefits from the higher headcount. R&D costs were RMB8.4 million (US$1.0 million) in 1Q06, an increase of 44.2% from 1Q05. The year-over-year increase was driven by higher salary and benefits arising from higher R&D headcount, as well as higher project and material costs. The project costs rose due to higher investment spending on the development of RF products for stations and 3G wireless network coverage products. Earnings The gross profit for the quarter increased by RMB3.6 million(US$0.4million) to RMB8.0 million (US$1.0 million). The operating loss increased by RMB4.8 million (US$0.6 million) from 1Q05 to RMB35.6 million (US$4.4million), mainly due to the increases in R&D costs, sales and distribution expenses, and the management expenses mentioned above. The net loss was RMB35.7 million (US$4.5 million) in 1Q06, an increase of 10.6% from RMB32.3 million in 1Q05. Diluted LPS was RMB0.07 (US$0.01), a slight increase from diluted LPS of RMB0.06 in 1Q05. Balance Sheet At the end of 1Q06, the Company had RMB36.1 million (US$4.5 million) in cash and cash equivalent funds. This does not include the proceeds from the IPO since the cash was received on April 4, 2006, which was four days after the close of the quarter. Net accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. accounts receivable were RMB461.4 million (US$57.5 million) and RMB176.4 million (US$22.0 million) respectively, therefore the total accounts receivable decreased from RMB699.4 million at the end of 4Q05 to RMB637.7 million (US$79.5 million) at the end of 1Q06. Inventory increased from RMB370.1 million at the end of 4Q05 to RMB416.8 million (US$52.0 million) at the end of 1Q06. Total current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. decreased from RMB1,172.1 million at the end of 4Q05 to RMB1,068.7 million (US$133.3million) at the end of 1Q06. Total assets were RMB1,395.6 million (US$174.1 million), a 5.4% decrease from the end of 4Q05. Current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. decreased from RMB738.6 million at the end of 4Q05 to RMB687.7 million (US$85.8 million) at the end of 1Q06, primarily due to a reduction in accrued expenses Accrued Expense An accounting expense recognized in the books before it is paid for. It is a liability, usually current. These expenses are typically periodic and documented upon a company's balance sheet due to the high probability of collection. . There was no material change in the Company's long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . Total liabilities were RMB853.7 million (US$106.5 million), a 5.7% decrease from the end of 4Q05. Shares Outstanding Following the IPO As of March 31, 2006, the company had 466,365,500 ordinary shares and 33,634,500 mandatorily redeemable preference shares outstanding. Immediately prior to the completion of the IPO on April 4, 2006, the mandatorily redeemable convertible preference shares and the exchangeable bonds exchangeable bond A special type of convertible security that permits the holder to exchange the bond for shares of a company in which the issuer has an ownership position. issued by the ordinary shareholders were converted into 33,634,500 ordinary shares newly issued by the Company and 131,365,500 ordinary shares originally held by the shareholders of the Company, respectively. In connection with the IPO, the Company also issued 125,000,000 ordinary shares newly (5,000,000 ADSs) to the public. As a result, the total number of ordinary shares outstanding of the company increased to 625,000,000 upon completion of the IPO on April 4, 2006. Accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of the dividend for preference shares and accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of the interest payable on the exchangeable bonds ceased after the conversions. Business Outlook: The wireless network coverage business in China has been stable. The company expects a steady growth of revenue from the Chinese wireless network coverage markets in 2006. The Company has also been successful in obtaining a number of new contracts from the overseas wireless network coverage markets. Moreover, the Company will continue to expand its RF product offerings by building its RF platform. This segment is expected to be a near-term driver of revenue growth for China GrenTech. "We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that mobile operators in China will continue to improve the quality and breadth of their existing wireless networks," concluded Chairman Yingjie Gao. "We also think that the operators will increasingly demand more wireless coverage products as they offer a higher number of value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. to their customers. As a result of these developments, we are enthusiastic about the growing demand for wireless network coverage products and services. We continue to make progress in 3G wireless coverage products and base station RF module development for enhancing the product line. Towards that end, we will be strengthening our research and development capabilities to drive innovation and growth in the coming period." Conference Call and Webcast: The Company's management team will conduct a conference call at 08:00am Eastern Time on Monday, May 15, 2006. If you would like to participate in this conference, please call +866-700-6067 (international callers use +1-617-213-8834), passcode: GRENTECHCALL. A webcast of the conference call will also be accessible on the Company's web site at www.grentech.com.cn. About China GrenTech China GrenTech is a leading developer of RF technology in China and a leading provider of wireless coverage products and services to telecommunication operators in China. The Company uses radio frequency (RF) technology to design and manufacture wireless coverage products, which enable telecommunication operators to expand the reach of their wireless communication networks to indoor area and outdoor area, such as such as buildings, highways, railways, tunnels and remote regions. The Company's wireless coverage services include design, development, installation and project warranty services. The Company tailors the design and configuration of its wireless coverage products to the specific requirements of its customers. The company also develop and produce a portion of RF parts and components to be sold to major base station manufactures. In 2005, China GrenTech also became a qualified supplier of RF parts and components to two major domestic base station manufactures. For more information, please visit our website at www.grentech.com.cn "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 Statements contained in this press release that are not historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including financial projections and forecasts, involve risks and uncertainties that could cause the Company's actual results to differ materially from its current expectations. Factors that could cause the Company's results to differ materially from those set forth in these forward-looking statements include the Company's reliance on business relationships with the China Unicom group and the China Mobile group; risks associated with large accounts receivable, long collection periods and accounts receivable cycles; fierce competition in the wireless communication industry; growth of, and risks inherent in, the wireless communication industry in China; uncertainty as to future profitability and the Company's ability to obtain adequate financing for its planned capital expenditure requirements; its reliance on third parties to carry out the installation of its wireless coverage products; uncertainty as to its ability to continuously develop new RF technology and keep up with changes in RF technology; risks associated with possible defects and errors in its wireless coverage products; uncertainty as to the Company's ability to protect and enforce its intellectual property rights; and uncertainty as to the Company's ability to attract and retain qualified executives and personnel, particularly in its research and development department. Other factors that may cause the Company's actual results to differ from those set forth in the forward-looking statements contained in this press release and that may affect its prospects in general are described in the Company's filings with the Securities and Exchange Commission, including its Registration Statement on Form F-1 related to its initial public offering. The Company undertakes no obligation to update or revise forward-looking statements to reflect subsequent events or changed assumptions or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . (1) The Company's functional and reporting currency Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. is Renminbi ("RMB"). The translation of amounts from RMB to United States Dollars (''U.S. dollars'') is solely for the convenience of the reader. The March 31, 2006 RMB amounts included in the press release have been translated into U.S. dollars at the rate of US$1.00=RMB8.0170, which was the rate quoted by the People's Bank of China The People's Bank of China (PBC or PBOC) (Simplified Chinese: 中国人民银行; Traditional Chinese: at the close of business on March 31, 2006. No representation is made that RMB amounts could have been, or could be, converted into U.S. dollars at that rate or at any other certain rate on March 31, 2006, or at any other date.
China GrenTech Corporation Limited and subsidiaries
Selected Unaudited Consolidated Statement of Balance Sheets Items
as of December 31, 2005 and March 31, 2006
(RMB and US$ expressed in thousands)
December 31, March 31, March 31,
2005 2006 2006
----------- ---------- ---------
RMB RMB US$
Assets
Cash and cash equivalents(1) 128,608 36,064 4,498
Accounts receivable, net 537,321 461,360 57,548
Inventories 370,136 416,832 51,994
Total current assets 1,172,072 1,068,654 133,298
Long-term accounts receivable 162,032 176,387 22,002
Total assets 1,475,469 1,395,594 174,079
Liabilities
Short-term bank loans 160,614 183,990 22,950
Total current liabilities 738,551 687,701 85,780
Long-term debt 167,053 165,952 20,700
Total liabilities 905,604 853,653 106,480
Total shareholders' equity 506,720 478,421 59,676
Total liabilities and shareholders'
equity 1,475,469 1,395,594 174,079
(1) The proceeds from the IPO are not reflected in the balance sheet
as of March 31, 2006 since the cash was received on April 4, 2006. It
will be reflected in the 2Q06 financial statements.
China GrenTech Corporation Limited and subsidiaries
Selected Unaudited Consolidated Statement of Income Items
For the three months ended March 31, 2005 and 2006
(RMB and US$ expressed in thousands)
Three Months Ended March 31,
2005 2006 2006
RMB RMB US$
Revenues 8,272 14,796 1,846
Cost of revenues (3,871) (6,787) (847)
Gross profit 4,401 8,009 999
Research and development costs (5,820) (8,393) (1,047)
Sales and distribution expenses (19,566) (24,138) (3,011)
General and administrative
expenses (9,846) (11,109) (1,386)
Total operating expenses (35,232) (43,640) (5,443)
Operating loss (30,831) (35,631) (4,444)
Net loss (32,303) (35,738) (4,458)
Net loss per share available to
ordinary shareholders:
- Basic (0.07) (0.08) (0.01)
- Diluted (0.06) (0.07) (0.01)
Weighted average number of
ordinary shares:
- Basic 466,365,500 466,365,500 466,365,500
- Diluted 500,000,000 500,000,000 500,000,000
China GrenTech Corporation Limited and subsidiaries
Selected Unaudited Consolidated Statement of Cash Flows Items
For the three months ended March 31, 2005 and 2006
(RMB and US$ expressed in thousands)
Three Months Ended March 31,
2005 2006 2006
RMB RMB US$
Net cash(used in)/provided by operating
activities (130,120) (61,940) (7,726)
Net cash provided by/(used in)investing
activities 24,577 (1,782) (222)
Net cash used in financing activities (84,760) (28,823) (3,595)
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion