Amorphous Alloy Transformers Remains Bright Outlook

2010-11-15 China Power Transformer IT NEWS

China Power the designer, manufacturer, and distributor of a new generation of energy saving electric transformersand transformer cores in the People's Republic of China, today reported higher revenues and net income for the three months ended September 30, 2010.

Third quarter 2010 highlights

-- Net revenues increased 9.6% to $8.65 million in the third quarter 2010 from $7.89 million in the third quarter 2009.

-- Gross profit increased 22.2% to $2.40 million in the third quarter 2010 from $1.96 million in the third quarter 2009.

-- Net income increased 17.8% to $1.66 million in the third quarter 2010 from $1.41 million in the third quarter 2009.

-- Basic earnings per share remained even at $0.09 per share in the third quarter 2010 from $0.09 per share in the third quarter 2009 on 29.9% higher weighted average basic shares outstanding in the third quarter 2010 than in the third quarter 2009.

-- Diluted earnings per share decreased 22.2% to $ 0.07 per share in the third quarter 2010 from $0.09 per share in the third quarter 2009 on 59.4% higher weighted average diluted shares outstanding in the third quarter 2010 than in the third quarter 2009.

Mr. Young Xing Sung, Chairman of the Board of China Power, said, "Our first nine months of this year give us confidence that 2010 will be a very good year for both operating advances and financial performance at China Power."During the first nine months, we have added two independent directors, expanded by tripling capacity for transformer cores, gained the ability to attract and win larger production contracts for both cores and transformers, added a second amorphous alloy raw material source, experienced reductions in raw material pricing that are likely to further accelerate the use of our cores and transformers, achieved higher production tonnage in both cores and transformers,were granted three new patents in China, and have been planning our new production line for amorphous alloy transformers.

"Our increase in net revenues of 9.6% came mainly from higher tonnage of amorphous alloy cores and more high-capacity transformers sold, with some offset due to raw material price reductions, most of which we passed along in pricing to our customers.

"In the third quarter we saw a significant change in our cost of goods sold, with the primary supplier of amorphous alloy strip, our main raw material, reducing prices to encourage more rapid adoption of amorphous alloy transformers. We passed most of that cost reduction to our customers through lower average prices to customers. As a result, the average prices for our amorphous alloy cores were 10.6% lower in the third quarter 2010 than in last year's third quarter.

"With the higher gross profit margin and expenses under good control and consistent with our rapid rate of expansion, partly offset by higher taxes, our net income increased 17.8% to $1.66 million in the third quarter 2010 from the

prior third quarter.

China Power is starting to see further strengthening in the robust growth trend it expects for energy-efficient amorphous alloy electric transformers. These energy efficient transformers are being demanded in China, based on the country's mandated policy and actions to increase energy efficiency and reduce emissions. The Company believes the dramatic upward trend in demand is very likely to continue for the next several years, assuming that China's energy and industrial policies continue to be favorable toward its products.