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China GrenTech Corporation Limited Announces First Quarter 2010 Results

Sustained market leadership and solid revenue results in strong but moderated demand environment

SHENZHEN, China, May 18 /CHICAGOPRESSRELEASE.COM/ — China GrenTech
Corporation Limited ( GRRF, “the Company”, or “GrenTech”), a leading
China-based provider of radio frequency (“RF”) and wireless coverage products
and services, today announced its unaudited financial results for the first
quarter ended March 31, 2010.

    First Quarter 2010 Financial Highlights
    -- Total revenue was RMB159.4 million (US$23.3 million)(1)
       -- Revenue from wireless coverage products and services was
          RMB114.7 million (US$16.8 million)
       -- Revenue from base station RF products was RMB44.6 million
          (US$6.5 million)
    -- Gross profit was RMB38.8 million (US$5.7 million)
    -- Operating loss was RMB20.3 million (US$3.0 million)
    -- Net loss attributable to the equity shareholders of GrenTech was
       RMB22.9 million (US$3.4 million)
    -- Diluted net loss per ADS(2) was RMB0.95 (US$0.14)

    (1) The Company's reporting currency is Renminbi ("RMB"). The translation
        of amounts from RMB to United States dollars is solely for the
        convenience of the reader. RMB numbers included in this press release
        have been translated into U.S. dollars at the noon buying rate for U.S.
        dollars in effect on March 31, 2010 as set forth in the H.10
        statistical release of the U.S. Federal Reserve Board, which was
        US$1.00=RMB6.8258. 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 rate on March 31, 2010.
    (2) Each ADS represents 25 of the Company's ordinary shares.

    The following table sets forth certain unaudited consolidated statements
of operations data for the three-month periods ended March 31, 2008, 2009 and
2010:


                                     Three months ended       2010 Growth
                                          March 31,               Rate %
                                 2008       2009       2010    Against Against
                               (RMB'000)  (RMB'000)  (RMB'000)   2008   2009
    Revenue                     71,389     285,293    159,364   123.2%  (44.1%)
    Gross Profit                21,969      73,114     38,756    76.4%  (47.0%)
    Operating (Loss)/Income    (36,327)     10,995    (20,347)    N/A     N/A
    Net (Loss)/Income          (41,528)      6,305    (22,915)    N/A     N/A


Mr. Yingjie Gao, Chairman and Chief Executive Officer of GrenTech, said,
“We remain confident in our ability to continue to grow our business in 2010.
We achieved the upper end of our guidance for the first quarter 2010. In 2009,
we experienced extraordinary demand from each of the three telecommunications
operators in China following the completion of the industry restructuring and
the issuance of 3G licenses by the PRC government. In 2010, we expect that
demand from these operators will remain strong, however, we expect that the
pace of investments will be more moderate, and seasonal revenue patterns will
resemble 2008 patterns more closely than that of 2009.”

Mr. Gao continued, “During the first quarter this year, we successfully
delivered solid top-line results by continuing to expand the reach of our
business. GrenTech remains well positioned in the market, with solid momentum
in the operators’ bidding processes for new contracts. In order to further
enhance our business growth, we are implementing a plan to address three
strategic priorities: First, we will explore the emerging opportunities in the
industrial users, with a focus on civil railway wireless communications
coverage in 2010. Second, we will continue to commit resources to research and
development to solidify our market leadership positions and extend our
innovative product portfolio. Third, we will continue to reinforce our efforts
to improve our payment collections. We are confident that we will realize our
growth plan through successful execution of this business and operating
strategy.”

First Quarter 2010 Unaudited Financial Results

Revenue

Revenue for the first quarter of 2010 decreased by RMB125.9 million
(US$18.4 million), or 44.1%, to RMB159.4 million (US$23.3 million) from
RMB285.3 million in the first quarter of 2009. Revenue from wireless coverage
products and services decreased by RMB41.9 million (US$6.1 million)
year-over-year, or 26.8%. The decrease was primarily due to the more moderate
pace of investments by the three China telecommunications operators. Compared
to the first quarter of 2009, the revenue recorded in the first quarter of
2010 is in line with a more traditional seasonal patterns. Revenue from base
station RF products decreased by 65.3%, or RMB84.0 million (US$12.3 million),
year-over-year. This decrease was primarily due to the slowdown in base
station network construction in the first quarter of 2010 compared to the same
period last year, which resulted in a decline in demand for base station RF
products. In addition, a shortage of international electronic components
produced by third parties impacted the original equipment manufacturers’
(“OEM”) base station production, which in turn affected demand for GrenTech’s
base station RF products. This shortage primarily occurred at the beginning of
2010 and began to improve in May of 2010.


                                             Three Months Ended March 31
                                           2009             2010
                                         Revenues Revenues Revenues % of Total
                                        (RMB'000)(RMB'000)(US$'000)  Revenues
    Wireless Coverage Products and
     Services
    China Unicom                           45,011   68,595  10,049     43.1%
    China Mobile                           85,888   30,440   4,459     19.1%
    China Telecom                          22,203   14,038   2,057      8.8%
    Overseas                                   77    1,269     186      0.8%
    Non-operators                           3,475      379      56      0.2%
    Subtotal                              156,654  114,721  16,807     72.0%
    Base Station RF Products
    OEMs                                  128,639   44,643   6,540     28.0%
    Total                                 285,293  159,364  23,347    100.0%

Cost of Revenue

Cost of revenue in the first quarter of 2010 decreased by RMB91.6 million
(US$13.4 million), or 43.2%, year-over-year to RMB120.6 million (US$17.7
million), primarily due to the concurrent decrease in production volume.

Operating Expenses

Research and development (“R&D”) expenses increased by RMB0.4 million
(US$0.1 million), or 2.9%, year-over-year to RMB13.7 million (US$2.0 million)
from RMB13.3 million in the first quarter of 2009. In 2010, the Company will
expand R&D expenditure and investments in order to continue to add new
products to its offerings to drive revenue and earnings growth.

Sales and distribution (“S&D”) expenses decreased by RMB3.3 million
(US$0.5 million), or 9.7%, year-over-year to RMB30.4 million (US$4.5 million)
from RMB33.7 million in the first quarter of 2009, primarily due to decreases
in sales-related expenses proportionate to the revenue decrease.

General and administrative (“G&A”) expenses increased by RMB3.0 million
(US$0.4 million), or 20.0%, year-over-year to RMB18.1 million (US$2.6 million)
from RMB15.1 million in the first quarter of 2009. This increase was primarily
due to an increase in staff salary and a special 2009 year-end bonus, which is
a one-time expense for the first quarter 2010.

As a result, total operating expenses increased slightly by RMB0.1 million
(US$0.01 million) to RMB62.2 million (US$9.1 million) from RMB62.1 million in
the first quarter of 2009.

Other Expense/Income

Other revenue amounted to RMB3.1 million (US$0.5 million) in the first
quarter of 2010, mainly as a result of the leasing of property in GrenTech’s
headquarter to third parties. There was no such income generated in the first
quarter of 2009.

Interest income decreased by RMB5.2 million (US$0.8 million), or 52.3%, to
RMB4.8 million (US$0.7 million) in the first quarter of 2010 from RMB10.0
million in the first quarter of 2009, primarily due to a decrease in interest
rates.

Interest expense decreased by RMB0.8 million (US$0.1 million), or 5.5%, to
RMB13.2 million (US$1.9 million) in the first quarter of 2010 from RMB14.0
million in the first quarter of 2009, primarily due to a decrease in interest
rates.

As a result, total other expense increased by RMB2.7 million (US$0.4
million), or 74.6%, to RMB6.4 million (US$0.9 million) in the first quarter of
2010 from RMB3.7 million in the first quarter of 2009.

Earnings/(Loss)

Gross profit decreased by RMB34.4 million (US$5.0 million), or 47.0%, to
RMB38.8 million (US$5.7 million) in the first quarter of 2010 from RMB73.1
million in the first quarter of 2009.

Gross profit margin was 24.3% in the first quarter of 2010, compared to
25.6% in the first quarter of 2009. The decline in gross profit margin was
mainly due to the decrease in production scale.

Operating loss was RMB20.3 million (US$3.0 million) in the first quarter
of 2010, as compared to an operating income of RMB11.0 million in the first
quarter of 2009.

Net loss was RMB22.9 million (US$3.4 million) in the first quarter of 2010,
as compared to net income of RMB6.3 million in the first quarter of 2009,
mainly due to the revenue decline in line with seasonal patterns.

Diluted net loss per ADS was RMB0.95 (US$0.14) in the first quarter of
2010.

Balance Sheet

Cash, cash equivalents and pledged time deposits decreased by RMB341.7
million (US$50.1 million), or 59.7%, to RMB230.8 million (US$33.8 million) as
of March 31, 2010, from RMB572.5 million as of December 31, 2009. The decrease
was mainly attributable to working capital outflows, increases in raw material
procurement and operating expenses, as well as further investments in research
and development and production facilities.

Total accounts receivable (comprising accounts receivable, net and
long-term accounts receivable) decreased by RMB36.1 million (US$5.3 million),
or 2.7%, to RMB1,308.2 million (US$191.7 million) as of March 31, 2010, from
RMB1,344.3 million as of December 31, 2009. Payment collections continued to
improve in the first quarter of 2010. Total accounts receivable collected
amounted to RMB317.0 million in the first quarter of 2010, representing 44.4%
growth, compared to RMB219.5 million in the first quarter 2009.

Inventories increased by RMB134.3 million (US$19.7 million), or 17.4%, to
RMB905.5 million (US$132.7 million) as of March 31, 2010 from RMB771.2 million
as of December 31, 2009. The increase in inventories is related to the
Company’s initiative to improve future business growth by increasing the speed
with which it can fulfil customer orders.

Total assets decreased by RMB163.2 million (US$23.9 million), or 4.9%, to
RMB3,174.2 million (US$465.0 million) as of March 31, 2010 from RMB3,337.3
million as of December 31, 2009.

Total liabilities decreased by RMB143.9 million (US$21.1 million), or 7.7%,
to RMB1,726.6 million (US$253.0 million) as of March 31, 2010 from RMB1,870.5
million as of December 31, 2009. Current liabilities decreased by RMB143.9
million (US$21.1 million), or 8.2%, to RMB1,611.9 million (US$236.1 million)
as of March 31, 2010 from RMB1755.8 million as of December 31, 2009.

Business Outlook

Wireless Coverage Products and Services

China Mobile, China Unicom and China Telecom are expected to fully launch
their bidding processes for their 2010 wireless coverage product needs in the
second quarter of 2010. The Company expects that these operators will impose
more rigorous requirements with respect to the tendering companies’
comprehensive strengths, particularly with regard to aspects of their
products’ independent intellectual property rights, as well as their
independent research and development capability and production capacity. With
GrenTech’s leading technology, strong capacity supplement products, and
professional engineering service teams, the Company is looking forward to
these bidding processes and remains confident in its ability to build its
market share in 2010.

In 2010, the Company also plans to target industrial users, with a focus
on civil railway wireless network coverage. Railway transport industry’s
expenditure in this area will continue to increase in the next five to ten
years. The Company aims to achieve a leading role in this space. In addition,
the Company has plans in place to explore and develop new wireless coverage
solutions, to which it will apply its new products. The Company believes that
its revenue from wireless coverage business will continue to grow in 2010.

Base Station RF Products

With the deployment of base station network construction by the China
telecommunications operators in 2010, the Company expects that demand for base
station RF products will expand in the second quarter of 2010. In addition,
the Company expects that the temporary shortage of international electronic
components will be substantially alleviated in the second quarter of 2010. The
Company expects that sales from base station RF products will increase
compared to the first quarter of 2010.

Guidance for Second Quarter 2010

Management estimates that revenue for the second quarter of 2010 will be
in the range of RMB350 million and RMB380 million.

Conference Call and Webcast

The Company’s management team will conduct a conference call on Wednesday,
May 19, 2010 at 5:00 am (Pacific) / 8:00 am (Eastern) / 8:00 pm (Beijing/Hong
Kong). To access the live teleconference, please dial +1 800 798 2884 (US) or
+1 617 614 6207 (International), with passcode GRENTECHCALL. Please dial in
approximately 10 minutes before the scheduled time of the call. A webcast of
the conference call will be available on the Company’s website at:
http://www.GrenTech.com.cn .

A replay of the conference call will be available from 11:00 am (Eastern)
on Wednesday, May 19, 2010, by dialing +1 888 286 8010 (International callers
use +1 617 801 6888) and entering passcode 99960407.

About China GrenTech

GrenTech is a leading developer of radio frequency (“RF”) technology in
China and a leading provider of wireless coverage products and services in
China. The Company uses RF technology to design and manufacture wireless
coverage products, which enable telecommunication operators to expand the
reach of their wireless communication networks to indoor and outdoor areas,
such as buildings, highways, railways, tunnels and remote regions. GrenTech’s
wireless coverage services include design, installation and project warranty
services. The Company also tailors the design and configuration of its
wireless coverage products to the specific requirements of its customers.

Based on its in-house RF technology platform, the Company also develops
and produces base station RF products sold to base station equipment
manufacturers. GrenTech is a qualified supplier of base station RF products to
the global and domestic major base station equipment manufacturers including
Huawei Technologies and ZTE Corporation. For more information, please visit
http://www.GrenTech.com.cn .

“Safe Harbor” Statement under the Private Securities Litigation Reform Act
of 1995

Statements contained in this press release that are not historical facts
are forward-looking statements, 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 Chinese
telecommunications operators and base station equipment manufacturers; the
risk that the Company will continue to experience downward pressure on the
pricing of its products and services due to the telecommunications operators’
bidding policies or other factors; the risk that the telecommunications
operators in China will not expand or maintain their spending on 2G, 3G, WLAN
or other network projects or that the Company will not be successful in future
bids for tenders held by the operators; uncertainty as to the future demand
for base station RF products by domestic or international base station
equipment manufacturers, including the risk that demand in China or elsewhere
for base stations may not grow as the Company’s management anticipates due to
shortages of international components or other factors beyond the Company’s
control; risks associated with large accounts receivable, long collection
periods and accounts receivable cycles and the Company’s ability to maintain
or improve its recently decreasing collection periods; fierce competition in
the wireless communication industry; growth of, and risks inherent in, the
wireless communication industry in China, including uncertainties regarding
the timing and nature of any future restructuring of the telecommunications
operators in China; uncertainty as to future profitability and the Company’s
ability to obtain adequate financing for its planned capital expenditure
requirements; uncertainty as to its ability to continuously develop and
manufacture new RF technologies and keep up with changes in RF technologies or
to develop new markets for wireless coverage products and services such as
industrial users; risks associated with possible defects and errors in its
wireless coverage products or base station RF 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 causes 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 and its annual reports on Form 20-F. The Company undertakes no
obligation to update or revise forward-looking statements to reflect
subsequent events or changed assumptions or circumstances.

    For further information, please contact:

    Investor Contact:
     Cat Zhang, Investor Relations Manager
     China GrenTech Corp Ltd.
     Tel:   +86-755-2650-3007
     Email: investor@grentech.com.cn

    Investor Relations (US):
     Delia Cannan
     Taylor Rafferty
     Tel:   +1-212-889-4350
     Email: GrenTech@taylor-rafferty.com

    Investor Relations (HK):
     Ruby Yim
     Taylor Rafferty
     Tel:   +852-3196-3712
     Email: GrenTech@taylor-rafferty.com

    Media Contact:
     Jason Marshall
     Taylor Rafferty
     Tel:   +1-212-889-4350
     Email: GrenTech@taylor-rafferty.com



             China GrenTech Corporation Limited and Subsidiaries
               Unaudited Condensed Consolidated Balance Sheets
                  As of December 31, 2009 and March 31, 2010
                      (RMB and US$ expressed in thousands)


                                            December       March       March
                                            31, 2009      31, 2010   31, 2010
                                               RMB          RMB         US$
    Assets
    Current Assets
    Cash and cash equivalents                 469,454      131,612     19,282
    Pledged time deposits                     103,035       99,138     14,524
    Accounts receivable, net                  892,149      887,504    130,022
    Inventories                               771,236      905,486    132,656
    Other current assets                      116,793      202,082     29,606
    Total current assets                    2,352,667    2,225,822    326,090
    Long-term accounts receivable             452,191      420,678     61,631
    Other non-current assets                  532,489      527,661     77,304
    Total assets                            3,337,347    3,174,161    465,024

    Liabilities
    Current Liabilities
    Short-term bank loans                     613,378      532,586     78,025
    Other current liabilities               1,142,441    1,079,351    158,128
    Total current liabilities               1,755,819    1,611,937    236,153
    Long-term debt                            110,000      110,000     16,115
    Other non-current liabilities               4,679        4,659        683
    Total liabilities                       1,870,498    1,726,596    252,951
    Total GrenTech's shareholders equity    1,462,509    1,440,244    211,000
    Non controlling interest                    4,340        7,321      1,073
    Total liabilities and equity            3,337,347    3,174,161    465,024



               China GrenTech Corporation Limited and Subsidiaries
           Unaudited Condensed Consolidated Statements of Operations
             for Three-month Periods Ended March 31, 2009 and 2010
     (RMB and US$ expressed in thousands, except share and per share data)


                                             For Three Months Ended March 31
                                             2009         2010         2010
                                              RMB          RMB          US$
    Revenues                                285,293      159,364       23,347
    Cost of revenues                       (212,179)    (120,608)     (17,669)
    Gross profit                             73,114       38,756        5,678
    Other revenue                                --        3,131          459
    Operating expenses:
    Research and development costs          (13,333)     (13,713)      (2,009)
    Sales and distribution expenses         (33,715)     (30,441)      (4,460)
    General and administrative expenses     (15,071)     (18,080)      (2,649)
    Total operating expenses                (62,119)     (62,234)      (9,118)
    Operating income/(loss)                  10,995      (20,347)      (2,981)
    Other (expense)/income
    Interest income                          10,024        4,777          700
    Interest expense                        (13,978)     (13,211)      (1,935)
    Foreign currency exchange loss              (27)         (43)          (6)
    Grant income                                324        2,092          306
    Total other expense                      (3,657)      (6,385)        (935)
    Earnings/(loss) before income tax
     (expense)/benefit                        7,338      (26,732)      (3,916)
    Income tax (expense)/benefit             (1,030)       3,798          556
    Net income/(loss)                         6,308      (22,934)      (3,360)
    Less net income/(loss) attributable
     to non-controlling interests                (3)          19            3
    Net income/(loss) attributable to
     the equity shareholders of
     GrenTech                                 6,305      (22,915)      (3,357)
    Earnings/(loss) per share available
     to equity shareholders of
     GrenTech:
     - Basic                                   0.01        (0.04)      (0.006)
     - Diluted                                 0.01        (0.04)      (0.006)
    Weighted average number of ordinary
     shares outstanding:
     - Basic                            601,978,775  589,932,958  589,932,958
     - Diluted                          601,978,775  605,902,514  605,902,514



            China GrenTech Corporation Limited and Subsidiaries
         Unaudited Condensed Consolidated Statements of Cash Flows
           For Three-Month Periods ended March 31, 2009 and 2010
                   (RMB and US$ expressed in thousands)

                                           For Three Months Ended March 31
                                              2009        2010       2010
                                              RMB         RMB         US$
    Net cash used in operating activities   (103,327)   (250,470)   (36,695)
    Net cash used in investing activities    (26,358)    (11,905)    (1,744)
    Net cash used in financing activities    (46,908)    (75,424)   (11,050)
    Effect of exchange rate changes on
     cash                                        (27)        (43)        (6)
    Net decrease in cash and cash
     equivalents                            (176,620)   (337,842)   (49,495)
    Cash at beginning of the period          293,353     469,454     68,776
    Cash at end of the period                116,733     131,612     19,281

SOURCE China GrenTech Corporation Limited

http://www.GrenTech.com.cn

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