FOR: CHINA BIODIESEL INTERNATIONAL HOLDING CO LTD
April 21, 2008
Preliminary Results
China Biodiesel International Holding Co., Ltd.('China Biodiesel', 'CBI' or 'the Company')
Preliminary Results
China Biodiesel International Holding Co., Ltd (AIM:CBI), one of China's leading renewable energy companies,
focused on research and development, production, and marketing of biodiesel as a substitute for diesel or
petrochemical materials, announces its preliminary results for the year ended 31 December 2007.
/T/
Key financials
2007 (RMB) 2006 (RMB)
Turnover from sales of biodiesel 124.6 m 101.1 m
Profit before tax 16.79 m 38.84 m
Earning per share (basic) 0.365 0.910
Cash generated from operations 33.0 m 30.2 m
Proposed final dividend per share 0.0365 0.0816
/T/
Highlights
- Turnover from biodiesel up 23.24% to RMB124.59 million (2006: RMB 101.10 million)
- Construction of two new plants; start of production at Longyan
- International trade increased with countries such as Philippines and South Korea
- Shift towards the production of higher margin products
- More protection on proprietary production techniques following approval of 5 new patents
- The Longyan subsidiary recognised in the Chinese 11th Five-year Plan as the only 'Technologically Supporting
Enterprise' in China's biodiesel industry
Commenting on the Final Results, Executive Chairman Huodong Ye said: "I am pleased to report that the
management of CBI has successfully handled the tough market challenges faced by the Company, and has acquired
much useful experience that will stand us in good stead as we continue to grow. Based on our successes during
2007, we believe that CBI is well placed to achieve further success in the period ahead."
Enquiries:
/T/
Gloria He, CFO, China Biodiesel: +86 (592) 719 1103
James King Wang, Company Secretary, China Biodiesel: +86 (597) 228 3825
Tom Price or Bobbie Hilliam, Evolution Securities: +44 20 7071 4300
Allan Piper, First City Financial Public Relations: +44 20 7242 2666
Jiang Lei, First City (China) Public Relations: + 852 2854 2666
/T/
Chairman's Statement
Although 2007 was a difficult year for the biodiesel industry, due to increased global feedstock prices, I am
pleased to report that the strong management team and advanced technology developed by CBI have once again
delivered profit for shareholders.
The price of virgin vegetable oils continued to increase throughout the year. As a result, most western
biodiesel manufacturers using virgin vegetable oils as feedstock have survived on government subsidies. Thanks
to the competitive advantages in CBI's proprietary technology, which has enabled us to use lower-grade waste
animal or vegetable oils rather than virgin oils as raw material, CBI has managed to keep its costs lower than
its main competitors in Europe and America, despite that profit is lower than in the previous financial year.
Our unique production techniques are protected by patents on facilities and are hard to duplicate, which we
believe will help the Company maintain its competitive advantage in the industry.
In 2007, CBI focused on the construction of two new plants in Longyan and Xiamen, capable of producing 30,000
tons and 50,000 tons of biodiesel per annum respectively. The new Longyan plant started production in August
2007, while the plant at Xiamen is now in preparation for trial production. Following this, CBI's total annual
production capacity will increase to 100,000 tons, five times the annual capacity when the Company floated on
AIM in June 2006. Against that background, we are confident that CBI will continue to deliver increasing
returns for shareholders in the future.
CBI has continued to work hard to meet the targets of its corporate philosophy: "To pursue greatest efficiency
in our work, dedication in our execution, creativity in our thinking and the best strategies for success".
During the past year, we have continued with an innovative approach towards our further development in the face
of difficult market conditions. We have worked to keep operational costs low, and to boost production levels
and improve management efficiency. We have achieved higher sales revenues by improving our production
techniques, product quality and understanding of the market, and minimised the impact of higher feedstock
prices by introducing a higher margin production mix and increasing our output of products used as chemical
feedstocks, which have a higher value and price in the market.
Our technological advancements have also secured prestigious honours for the Company in 2007. Our wholly-owned
subsidiary, Longyan Zhuoyue New Energy Development Co., Ltd. (LZNE) was recognised in the Chinese National 11th
Five-year Plan as the 'Technologically Supporting Enterprise' in the biodiesel industry, and is expected to
continue receiving government financial support. It has also enabled CBI to continue as a leader within the
Chinese biodiesel industry.
Our success in remaining profitable in current market conditions has made us more confident about future
developments. China has not yet required a compulsory mix of biodiesel in diesel for sale in petrol stations,
maintaining a link between the price of biodiesel sold to gas stations and the government-controlled price of
diesel, which is well below the international diesel price. But with China's rapid economic development and
continuing growth in demand for energy, we believe biodiesel prices will have room to increase. The Chinese
Government implemented the "Renewable Energy Law" in 2006, and the development of biomass fuel was listed
within the "National Mid-term and Long-term Programming of Renewable Energy" in 2007, which means that this
industry has become strategically positioned for development." As a leading researcher and producer, CBI is
well placed to benefit from further national energy reform and preferential policies.
In summary, it is pleasing to report that the management of CBI has successfully handled the tough market
challenges faced by the Company, and has acquired much useful experience that will stand us in good stead as we
continue to grow. Based on our successes during 2007, we believe that CBI is well placed to achieve further
success in the period ahead.
Operational Review
CBI has maintained its competitive advantage with its proprietary technology, which enables the Company to
utilise lower-grade waste animal or vegetable oils as feedstock. In 2007, the Company focused on the
construction of two new plants and on growing its distribution network. Despite the fact that the rise in the
price of raw material has brought much pressure to the biodiesel industry, the Company has been able to
strengthen its position for further growth.
The Company has also continued to improve management efficiency and technological processes. Since the
commencement of production at the new plant in Longyan in August 2007, the Company has improved production
efficiency through the successful switch from old manual techniques to new automatic ones. Energy consumption
has been reduced along with production costs. Furthermore, due to improved product quality and brand
recognition, the Company benefited from increasing demand among customers. Total production during 2007 was
26,095 tonnes, an increase of 14.12 per cent over 2006.
CBI achieved several key advances in 2007. It obtained approval for two new patents in the second half of 2007,
making a total of five patents approved during the year. The biodiesel logo "ZHUONENG" was officially
recognised as a "Provincial Famous Trademark" in November, enhancing brand awareness of the Group. As a leading
player in the biodiesel sector, the Company has also been involved in various national scientific projects in
China, and therefore will continue to receive grants and other governmental support. A total of RMB 8.58
million in government grants was received relating to the Company's achievements in biodiesel production.
Furthermore, the following accolades were awarded to the Company during 2007: National Key High-Tech
Enterprise; Provincial High-Tech Enterprise; Provincial Experimental Innovative Enterprise; One of the Thirty
Best Enterprises in Western Fujian Province; Enterprise of Observing Contract and Valuing Credit in Longyan.
During 2007, much work was done to prepare for the expansion of capacity. The market consciousness was
strengthened and market channels were greatly expanded. The domestic supply network was expanded and has been
providing more feedstock. Moves to secure more raw materials internationally were also achieved. In particular
new supplies of high-quality feedstock oil were purchased from Southeast Asia in recent months. With the
impending start of production in the new plant in Xiamen, adjacent to nearby port facilities, the Company
intends to keep purchase cost down through economies of scale and reduced transportation distance. Currently,
we are recruiting employees and purchasing feedstock for Xiamen Plant, which will commence trial production in
a few weeks.
Despite the decline in profits arising from increased raw material prices and the weather-induced delays to the
construction of the new production facilities in Longyan and Xiamen, the profit margins were maintained at a
stable level during the second half of the year. In response to increased market demand, the Company increased
the percentage of products (B1 and B2) sold for chemical uses, which have higher value and prices than B3 sold
for gas stations, and are therefore higher margin, and not subject to the government control. For example the
proportion of B2 production increased from 13.6 per cent. in 2006 to 37.8 per cent. in 2007, and the level is
expected to rise in the coming year, having already risen to over 60 per cent. in December 2007. Although the
raw material price is not expected to drop in 2008, we are still confident that the Company will achieve
financial and operational growth, especially with the contribution of the two new plants.
Financial Review
/T/
Key financials
2005 (RMB) 2006 (RMB) 2007(RMB)
Turnover from sales of biodiesel 69.7 m 101.1 m 124.6 m
Profit before tax 28.2 m 38.84 m 16.79 m
Earning per share (basic) 0.747 0.910 0.365
Cash generated from operations 14.6 m 30.2 m 33m
Proposed final dividend per share Nil 0.0816 0.0365
/T/
Revenues
China Biodiesel's revenues increased by 23.24 per cent. to RMB 124.59 million (2006: RMB 101.1 million). With
the second Longyan plant commencing production in the third quarter, sales volumes for the year increased by
14.12 per cent to 26,095 tons (2006: RMB 22,866 tons).
Meanwhile the new technology employed in the new Longyan plant enabled the Company to increase its output of
higher value and non-capped B1 and B2 biodiesel products, effectively increasing average selling prices by 8.56
per cent to RMB 4,770.65 per ton (2006: RMB 4,394.28 per ton).
Costs and expenses
As a result of global inflation in farm product prices, especially edible oils and waste oil, production costs
increased significantly during the year by 36.43 per cent to RMB 4,247.60 per ton (2006: RMB 3,113.41 per ton).
Distribution costs and administration expenses, as a proportion of revenue, were 0.82 per cent and 6.49 per
cent, respectively. As demand for biodiesel substantially exceeded supply, the Company was able to sell its
product with minimal promotional spending. With little gain from exchange rate movements in 2007 (RMB 3 million
in FY 2006) and more spending on listing requirements, administration expenses increased by 215.88 percent to
RMB 8.087 million.
Results for the year
Profit before tax fell 56.77 per cent to RMB 16.79 million (2006: RMB 38.84 million) due to increased raw
material cost.
Income from sales of package barrels, which comprised part of Other Income, contributed RMB 3.95 million (2006:
RMB 4.32 million).
The Company received RMB 8.58 million (2006: RMB 7.75 million) in Government grants relating to China
Biodiesel's achievements in development of renewable energy and energy saving. Finance expenses of RMB 0.52
million in 2007 (2006: RMB 0.625 million) related to bank debt.
Taxation
No income tax was incurred in 2007 for any of the Company's three wholly owned subsidies LZNE (Longyan Zhuoyue
New Energy Co., Ltd), XZBM (Xiamen Zhuoyue Bio-mass Energy Co., Ltd), LZBM (Longyan Zhuoyue Bio-mass Energy
Co., Ltd), or their subsidiaries. However, the procurement business of LZNE was subject to income tax at the
rate of 33 per cent.
According to the relevant PRC tax rules, as a wholly owned foreign enterprise engaged in production and in
operation for more than 10 years, LZNE was exempt from an Enterprise Income Tax ("EIT") for the two fiscal
years 2006 and 2007 and will enjoy a 50 per cent reduction in EIT for three fiscal years 2008, 2009 and 2010.
For this preferential tax treatment, XZBM and LZMB will also be exempt from EIT for the two fiscal years 2008
and 2009 and enjoy a 50% reduction in EIT for the following three fiscal years 2010, 2011 and 2012.
Cash flow
The Company has applied stricter controls over accounts receivable and by the year-end successfully reduced the
balance outstanding by RMB 12.94 million to RMB 12.60 million. As a result, net cash flow from operating
activities increased 11.51 percent to RMB 33 million (2006: RMB 29.59m).
Capital expenditure
During the year, capital expenditure rose to RMB 90.71 million (2006: RMB 60.65 million), mainly attributable
to the construction, equipment purchasing and installation of the two new biodiesel plants in Longyan and
Xiamen.
Balance sheet
With the second production line at the Longyan plant commencing production in late 2007 and the Xiamen plant
now almost complete, the Company's value generating property, plant and equipment increased by RMB113.74m to
RMB 157.36 million at the end of 2007 (2006: RMB 43.62 million).
Meanwhile, trade and other receivables decreased by 46.95% to RMB 14.47 million (2006: RMB 27.28 million), due
to the introduction of stricter controls over business credit.
Inventory increased by 36.83 percent to RMB 8.44 million (2006: RMB 6.17 million), mainly due to the increase
in finished goods and semi-manufactured products caused by higher output volume.
Total Liabilities at the end of 2007 were RMB 27.25 million (2006: RMB 14.50 million). Of the RMB 12.75 million
rise in liabilities, RMB 1.85 million was due to increased bank borrowings. The remainder arose from mainly
construction or equipment contracts attributable to construction of the two plants.
Dividend
The directors propose a final dividend for 2007 of RMB0.0365 per share which, if approved by shareholders at
the Company's annual general meeting on 4 June 2007, will be paid on 4 July 2008 to shareholders on the
register at 20 June 2008. The Chairman, Huodong Ye, has waived his dividend entitlement for the year to 31
December 2007. (2006: RMB0.0816 per share).
/T/
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
Notes 2007 2006
RMB RMB
Revenue 6 124,590,090 101,098,548
Cost of sales (110,841,077) (71,191,170)
------------- -------------
Gross profit 13,749,013 29,907,378
Other income 7 12,529,106 12,068,572
Distribution costs (1,015,597) (625,462)
Administrative expenses (8,087,065) (2,560,187)
Other operating expenses (144,882) (22,658)
------------- -------------
Profit from operations 9 17,030,575 38,767,643
Finance income 10 282,217 246,310
Finance costs 10 (520,705) (624,895)
Gain on disposal of an associate 17 - 450,000
------------- -------------
Profit before income tax expense 16,792,087 38,839,058
Income tax expense 12 (237,825) (1,719,826)
------------- -------------
Profit for the year 16,554,262 37,119,232
------------- -------------
------------- -------------
Attributable to:
- Equity holders of the Company 16,569,774 37,057,373
- Minority interests (15,512) 61,859
------------- -------------
16,554,262 37,119,232
------------- -------------
------------- -------------
Dividends 32 - 1,020,019
------------- -------------
------------- -------------
Earnings per share 13
Basic 0.365 0.910
------------- -------------
------------- -------------
Diluted 0.365 0.909
------------- -------------
------------- -------------
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007
Notes 2007 2006
RMB RMB
Assets
Non-current assets
Property, plant and equipment 14 157,359,553 43,617,764
Deposits for acquisition of
property, plant and
equipment 14 4,649,915 23,194,250
Payments for leasehold land held
for own use under operating
leases 15 8,853,858 8,836,715
Other intangible assets 2,787 3,233
Deferred tax assets 25 162,500 207,149
------------- -------------
Total non-current assets 171,028,613 75,859,111
------------- -------------
Current assets
Inventories 18 8,443,232 6,170,567
Trade and other receivables 19 14,469,918 27,276,313
Cash and cash equivalents 12,462,094 69,326,379
------------- -------------
Total current assets 35,375,244 102,773,259
------------- -------------
Total assets 206,403,857 178,632,370
------------- -------------
------------- -------------
Liabilities
Current liabilities
Trade and other payables 20 17,067,159 5,970,095
Current tax liabilities 1,567,078 1,590,471
Other financial liabilities 21 8,115,859 6,323,324
------------- -------------
Total current liabilities 26,750,096 13,883,890
------------- -------------
Non-current liabilities
Other financial liabilities 22 500,000 617,924
------------- -------------
Total liabilities 27,250,096 14,501,814
------------- -------------
------------- -------------
NET ASSETS 179,153,761 164,130,556
------------- -------------
------------- -------------
Capital and reserves attributable
to equity holders of the Company
Share capital 26 3,632,941 3,632,941
Reserves 28 175,216,300 160,177,583
------------- -------------
Equity attributable to equity
holders of the Company 178,849,241 163,810,524
28 304,520 320,032
Minority interests
------------- -------------
179,153,761 164,130,556
TOTAL EQUITY
------------- -------------
------------- -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2007
Equity attributable to equity holders of the Company
-----------------------------------------------------
Foreign
Share Share Contributed exchange
capital premium surplus reserve
RMB RMB RMB RMB
(note 26) (note 28) (note 28) (note 28)
At 1 January 2006 8 - 4,927,808 -
Effect from
translation of
functional currency
to presentation
currency - - - (1,307,048)
---------- ------------ ------------ ------------
Net loss recognised
directly in equity - - - (1,307,048)
Profit for the year - - - -
---------- ------------ ------------ ------------
Total recognised
income and expense - - - (1,307,048)
---------- ------------ ------------ ------------
Issuance of bonus
shares 2,879,992 - (2,879,992) -
Issuance of shares
for placing 752,941 116,312,901 - -
Share issue costs - (20,510,851) - -
Settlement of
share issue costs
by share-based
payments paid by
equity holder - (3,000,000) 3,000,000 -
Issuance of
share options - (2,229,427) - -
Provision for
general reserve - - - -
2006 proposed
dividends (note 32) - - - -
---------- ------------ ------------ ------------
At 31 December
2006 and 1
January 2007 3,632,941 90,572,623 5,047,816 (1,307,048)
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
Effect from
translation of
functional
currency to
presentation
currency - - - (511,038)
---------- ------------ ------------ ------------
Net loss
recognised
directly in
equity - - - (511,038)
Profit for
the year - - - -
---------- ------------ ------------ ------------
Total recognised
income and expense - - - (511,038)
---------- ------------ ------------ ------------
Dividends paid - - - -
Provision for
general reserve - - - -
2007 proposed
dividends (note 32) - - - -
---------- ------------ ------------ ------------
At 31 December 2007 3,632,941 90,572,623 5,047,816 (1,818,086)
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
Share
option Merger General Proposed
reserve reserve reserve dividend
RMB RMB RMB RMB
(note 28) (note 28) (note 28) (note 28)
At 1 January 2006 - (121,330) 2,529,491 -
Effect from
translation of
functional currency
to presentation
currency - - - -
---------- ------------ ------------ ------------
Net loss recognised
directly in equity - - - -
Profit for the year - - - -
---------- ------------ ------------ ------------
Total recognised
income and expense - - - -
---------- ------------ ------------ ------------
Issuance of bonus
shares - - - -
Issuance of shares
for placing - - - -
Share issue costs - - - -
Settlement of share
issue costs by
share-based
payments paid by
equity holder - - - -
Issuance of share
options 2,229,427 - - -
Provision for
general reserve - - 3,744,049
2006 proposed
dividends (note 32) - - - 1,020,019
---------- ------------ ------------ ------------
At 31 December 2006
and 1 January 2007 2,229,427 (121,330) 6,273,540 1,020,019
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
Effect from
translation of
functional currency
to presentation
currency - - - -
---------- ------------ ------------ ------------
Net loss recognised
directly in equity - - - -
Profit for the year - - - -
---------- ------------ ------------ ------------
Total recognised
income and expense - - - -
---------- ------------ ------------ ------------
Dividends paid - - - (1,020,019)
Provision for
general reserve - - 2,245,169 -
2007 proposed
dividends (note 32) - - - 456,089
---------- ------------ ------------ ------------
At 31 December 2007 2,229,427 (121,330) 8,518,709 456,089
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
Retained Minority
earnings Sub-total interests Total
RMB RMB RMB RMB
(note 28) (note 28)
At 1 January 2006 24,169,231 31,505,208 258,173 31,763,381
Effect from
translation of
functional currency
to presentation
currency - (1,307,048) - (1,307,048)
---------- ------------ ------------ ------------
Net loss recognised
directly in equity - (1,307,048) - (1,307,048)
Profit for the year 37,057,373 37,057,373 61,859 37,119,232
---------- ------------ ------------ ------------
Total recognised
income and expense 37,057,373 35,750,325 61,859 35,812,184
---------- ------------ ------------ ------------
Issuance of bonus
shares - - - -
Issuance of shares
for placing - 117,065,842 - 117,065,842
Share issue costs - (20,510,851) - (20,510,851)
Settlement of share
issue costs by
share-based
payments paid by
equity holder - - - -
Issuance of share
options - - - -
Provision for
general reserve (3,744,049) - - -
2006 proposed
dividends (note 32) (1,020,019) - - -
---------- ------------ ------------ ------------
At 31 December 2006
and 1 January 2007 56,462,536 163,810,524 320,032 164,130,556
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
Effect from
translation of
functional currency
to presentation
currency - (511,038) - (511,038)
---------- ------------ ------------ ------------
Net loss recognised
directly in equity - (511,038) - (511,038)
Profit for the year 16,569,774 16,569,774 (15,512) 16,554,262
---------- ------------ ------------ ------------
Total recognised
income and expense 16,569,774 16,058,736 (15,512) 16,043,224
---------- ------------ ------------ ------------
Dividends paid - (1,020,019) - (1,020,019)
Provision for general
reserve (2,245,169) - - -
2007 proposed
dividends (note 32) (456,089) - - -
---------- ------------ ------------ ------------
At 31 December 2007 70,331,052 178,849,241 304,520 179,153,761
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
Notes 2007 2006
RMB RMB
Cash flows from operating
Activities
Profit before income tax expense 16,792,087 38,839,058
Adjustments for:
Interest income (282,217) (246,310)
Depreciation of property, plant
and equipment 4,230,968 1,552,422
Amortisation of land lease
payments 167,717 12,317
Amortisation of other intangible
assets 446 446
Interest expense 520,705 624,895
Gain on disposal of an associate - (450,000)
------------- -------------
Cash flow from operating activities
before working capital changes 21,429,706 40,332,828
Increase in inventories (2,272,665) (3,361,299)
Decrease/(increase) in trade and
other receivables 11,866,395 (6,611,976)
Increase/(decrease) in trade and
other payables 2,189,828 (155,297)
------------- -------------
33,213,264 30,204,256
Cash generated from operations
Income tax paid (216,569) (612,844)
------------- -------------
32,996,695 29,591,412
Net cash flows from operating activities
------------- -------------
Cash flows from investing activities
Acquisition of property, plant and
equipment (90,521,186) (52,561,835)
Land lease payments (184,860) (8,091,770)
Proceeds from disposal of an
associate - 2,000,000
Advances to/(Repayments from)
related companies 940,000 (1,000,000)
Interest received 282,217 246,310
------------- -------------
(89,483,829) (59,407,295)
Net cash used in investing
Activities
------------- -------------
Cash flows from financing activities
Repayment of bank loans (6,300,000) (5,000,000)
Proceeds from bank loans 7,850,000 -
(Repayment to)/Advance from equity
holders (23,347) 18,810
Proceeds from shares placing - 117,065,842
Payments for share issue costs (20,510,851)
Interest paid (432,747) (583,517)
Dividend paid to equity
shareholders (1,020,019) -
Advance from a related company 60,000 -
------------- -------------
Net cash flows from financing
activities 133,887 90,990,284
------------- -------------
Net (decrease)/increase in cash and
cash equivalents equivalents (56,353,247) 61,174,401
Cash and cash equivalents at
beginning of year 69,326,379 9,459,026
Effect of foreign exchange rate
changes (511,038) (1,307,048)
------------- -------------
Cash and cash equivalents at end of
year 12,462,094 69,326,379
------------- -------------
------------- -------------
Cash and cash equivalents
comprises:
Cash and bank balances 12,462,094 69,326,379
------------- -------------
------------- -------------
/T/
-30-
China Biodiesel International Holding Co LTD
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