CHINA GRENTECH CORP LTD (ADR) 
By SHENZHEN, China, Nov. 8, 2011 /PRNewswire-Asia-FirstCall/ -- China GrenTech Corporation Limited (NASDAQ: GRRF, "GrenTech", or "the Company"), a leading China-based provider of radio frequency ("RF") and wireless coverage products and services, today announced its unaudited financial results for the third quarter ended September 30, 2011.
Third Quarter 2011 Financial Highlights
-- Total revenue was RMB406.2 million (US$63.7 million)(1), an increase of
2.4% year-over-year compared to RMB396.9 million during the third
quarter of 2010
-- Gross profit was RMB111.2 million (US$17.4 million), an increase of 7.2%
year-over-year compared to RMB103.8 million during the third quarter of
2010
-- Operating income was RMB25.6 million (US$4.0 million), an increase of
1.0% year-over-year compared to RMB 25.3 million during the third
quarter of 2010
-- Net income attributable to shareholders was RMB9.1 million (US$1.4
million), a decrease of 29.8% year-over-year compared to RMB12.9 million
during the third quarter of 2010
-- Diluted earnings per ADS(2)( )was RMB0.39 (US$0.06), compared to RMB0.54
per ADS during the third quarter of 2010
"We are pleased to report solid revenues in the third quarter of RMB406.2 million, or US$63.7 million, an increase of 2.4% over the comparable period in 2010. Gross profit increased by 7.2% year-over-year and gross margin increased to 27.4%. Importantly, in 2011, we are placing a strong emphasis on the promotion of new products and our ability to capitalize upon breakthroughs in new technology so as to develop new products and enter new businesses," said Mr. Yingjie Gao, Chairman and CEO of GrenTech.
"Our WLAN business has experienced healthy growth compared to 2010, but new business areas such as the CMMB project and subway network coverage have been slower than projected at the beginning of the year," Mr. Gao added.
"In the remainder of 2011, we will strive to strategically improve our business operations and focus on mid- and long-term growth. We believe that investment by telecommunication operators in the industry, combined with our new production and technology introductions, will enable GrenTech to continue to grow on a sound and steady basis," Mr. Gao concluded.
(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 September 30, 2011 as set forth in
the H.10 statistical release of the U.S. Federal Reserve Board, which
was US$1.00=RMB6.3780. 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 September 30, 2011.
(2) Each ADS represents 25 of the Company's ordinary shares.
Third Quarter 2011 Financial Results
Revenue
Revenue for the third quarter of 2011 was RMB406.2 million (US$63.7 million), representing an increase of RMB9.3 million (US$1.5 million) or 2.4% compared to the same period of 2010. The primary drivers were increased revenue of RMB11.1 million (US$1.7 million) generated from China Unicom, representing an increase of 13.0% from the third quarter of 2010, and increased revenue of RMB3.9 million (US$0.6 million) generated from China Telecom, representing an increase of 10.2% from the third quarter of 2010. Revenue from China Mobile decreased by RMB9.0 million (US$1.4 million). Revenue generated from base station RF products decreased by RMB0.1 million (US$0.02 million) compared to the same period of 2010.
Three Months Ended September 30
-------------------------------
2010 2011
---- ----
% of Total
Revenues Revenues Revenues Revenues
-------- -------- -------- ----------
(RMB'000) (RMB'000) (US$'000)
--------- --------- ---------
Wireless Coverage Products and Services
---------------------------------------
China Mobile 180,348 171,316 26,860 42.2%
------------ ------- ------- ------ ----
China Unicom 85,486 96,588 15,144 23.8%
------------ ------ ------ ------ ----
China Telecom 37,971 41,846 6,561 10.3%
------------- ------ ------ ----- ----
Overseas 3,953 966 151 0.2%
-------- ----- --- --- ---
Non-operators 11,444 17,953 2,815 4.4%
------------- ------ ------ ----- ---
Subtotal 319,202 328,669 51,531 80.9%
-------- ------- ------- ------ ----
Base Station RF Products
------------------------
OEMs 77,698 77,567 12,162 19.1%
---- ------ ------ ------ ----
Total 396,900 406,236 63,693 100.0%
----- ------- ------- ------ -----
Cost of Revenues
Cost of revenues in the third quarter of 2011 was RMB295.0 million (US$46.3 million), which was relatively unchanged from RMB293.2 million in the same period of 2010.
Gross Profit and Gross Margin
Gross profit for the third quarter of 2011 was RMB111.2 million (US$17.4 million), representing an increase of 7.2% or RMB7.5 million (US$1.2 million) from RMB103.8 million in the same period of 2010. Gross margin for the third quarter of 2011 was 27.4%, compared to 26.1% in the comparable period of 2010. The increase in gross margin was a result of the increased sales of WLAN products, which has a higher margin, compared to the same period of 2010.
Other Revenue
During the third quarter of 2011, other revenue was RMB5.5 million (US$0.9 million), compared to RMB5.0 million in the same period of 2010. The slight increase was attributable to the increased rental rate from the area of the Company's headquarters which are leased to third parties.
Operating Expenses
Total operating expenses for the third quarter of 2011 were RMB91.1 million (US$14.3 million), representing a 9.3% increase from RMB83.4 million in the third quarter of 2010.
Research and Development Costs
Research and development costs for the third quarter of 2011 were RMB20.3 million (US$3.2 million), or 5.0% of sales, representing an 8.6% decrease from research and development costs of RMB22.2 million, or 5.6% of sales, in the third quarter of 2010. The decrease was in line with the current pace of new product research and development, reflecting reduced expenditures in research and development materials.
Sales and Distribution Expenses
Sales and distribution expenses for the third quarter of 2011 were RMB47.0 million (US$7.4 million), representing an increase of 17.3% compared to RMB40.1 million in the corresponding period in 2010. The increase was primarily due to the increases in salaries, travelling and various promotion expenses relating to the promotion of new products and related services.
General and Administrative Expenses
General and administrative expenses for the third quarter of 2011 were RMB23.8 million (US$3.7 million), representing an increase of 12.9% compared to RMB21.1 million in the corresponding period in 2010. The increase was primarily due to the increases in training expenses.
Operating Income
During the third quarter of 2011, operating income was RMB25.6 million (US$4.0 million), compared to RMB25.3 million in the same period in 2010. Operating margin for the third quarter of 2011 was 6.3%, relatively unchanged from the comparable period of 2010.
Other Income/Expense
Interest income during the third quarter of 2011 was RMB5.1 million (US$0.8 million), representing an increase of 23.1% compared to RMB4.1 million in the corresponding period in 2010. The increase was primarily due to the increase in interest rate.
Interest expense during the third quarter of 2011 was RMB19.9 million (US$3.1 million), representing an increase of 36.9% from RMB14.5 million in the corresponding period in 2010. The increase in interest expense was primarily due to a combination of an increase in short-term bank loans and an increase in the effective interest rate.
Earnings
Net income attributable to equity holders of the Company for the third quarter of 2011 was RMB9.1 million (US$1.4 million), representing a decrease of RMB3.8 million or 29.8% compared to net income of RMB12.9 million in the same period of 2010.
Diluted earnings per ADS for the third quarter of 2011 were RMB0.39 (US$0.06), compared to diluted earnings per ADS of RMB0.54 in the same period of 2010.
Balance Sheet
Cash, cash equivalents and restricted cash were RMB354.1 million (US$55.5 million) as of September 30, 2011, representing a decrease of 24.7% as compared to December 31, 2010. This is primarily attributable to additional cash spending on raw material procurement, operating expenses and research and development, as well as the construction of GrenTech High-tech park located in Longgang District.
Total accounts receivable including long-term accounts receivable as of September 30, 2011 was RMB1,871.9 million (US$293.5 million), representing an increase of 15.8% as compared to December 31, 2010. This is primarily due to the fact that a majority of accounts receivable relating to revenue in the third quarter of 2011 have not entered into the collection period.
Inventories as of September 30, 2011 increased by 53.3% to RMB986.1 million (US$154.6 million) compared to December 31, 2010. The increase in inventories was mainly due to the fact that more inventories were reserved for the forecasted massive sales in the fourth quarter of 2011.
Total assets as of September 30, 2011 were RMB4,118.9 million (US$645.8 million), representing an increase of 20.5% from December 31, 2010.
Total liabilities as of September 30, 2011 were RMB 2,567.7 million (US$402.6 million), representing an increase of 37.6% from December 31, 2010.
Business Outlook
Wireless Coverage Products and Services
1. China Mobile: investment in WLAN business development and community
network coverage business are expected to accelerate in the fourth
quarter. At the same time, the fifth round of TD-SCDMA investment will
commence in the near future.
2. China Unicom: after initial success with the 3G business development in
2011, additional investments are expected to enhance its development for
mass coverage in the next three years. In addition, the results of the
recent centralized bidding for telecommunication equipment will be
announced soon.
3. China Telecom: centralized bidding results of telecommunication equipment
will be announced soon.
Base Station RF Products
1. The Company believes that market demand for passive modules will reach
peak levels in the fourth quarter, and the Company expects an increase in
shipments; certain overseas customers of the Company's passive module
business will conduct on-site inspection of the Company's operations and
supply chain and confirm GrenTech's ability to deliver new products in
2012.
2. Overseas telecommunication operators will visit the Company's management
and tour the facility in the fourth quarter of 2011
3. More efforts will be made on business development for overseas markets to
expand the Company's market share and increase overall revenue and
profitability.
Guidance for Fourth Quarter 2011
For the fourth quarter of 2011, GrenTech forecasts its revenue to be in the range of RMB800.0 million to RMB880.0 million.
Conference Call
The Company will host a conference call at 8:00 a.m. Eastern Standard Time / 9:00 p.m. Beijing/Hong Kong time on November 9, 2011, to discuss the results for the third quarter 2011. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: +1-866-519-4004. International callers should dial +65-6723-9381 and Hong Kong callers should dial 800-93-0346. When prompted by the operator, mention conference pass code GRENTECHCALL.
If you are unable to participate in the call at this time, a replay will be available for 7 days starting on November 9, 2011, 11:00 pm (Eastern). To access the replay, please dial +1-866-214-5335, international callers dial +61-2-8235-5000, and enter the pass code 23781701.
A live webcast of the conference call and replay will also be available on the investor relations page of GrenTech's website at: http://www.grentech.cn/Catalog_209.aspx
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 his enable telecommunication operators to expand the reach of their wireless communication networks to indoor and outdoor areas such as buildings, highways, subways, 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 parts and components sold to base station manufacturers. GrenTech is a qualified supplier of RF parts and components to major global and domestic base station manufacturers. For more information, please visit www.GrenTech.com.cn.
Safe Harbor Statement
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, which could adversely affect the Company's business and margins; 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 (including the Company's bids for the CMMB project); 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 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 uncertainty regarding the planned integration of telecom, broadcast TV and Internet networks in China and how such convergence, if it happens, may affect the Company's business; 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.
Company Contact: Investor Relations Contact:
Lian Xin, Senior Manager David Rudnick, Account Manager
China GrenTech Corp. Ltd. CCG Investor Relations
Tel: +86 755 2650 3007 Tel: + (1) 646-626-4172 (New York)
E-mail: investor@powercn.com E-mail: david.rudnick@ccgir.com
-Financial Tables Follow-
China GrenTech Corporation and Subsidiaries
Unaudited Condensed Consolidated Balance Sheet
(RMB and US$ expressed in thousands)
September
December 31, 30, September 30,
2010 2011 2011
---- ---- ----
RMB RMB US$
Assets
Cash and cash equivalents 380,098 188,729 29,591
Restricted cash 90,132 165,383 25,930
Accounts receivable, net 1,154,540 1,445,580 226,651
Inventories 643,265 986,143 154,616
Other current assets 106,953 177,247 27,791
------- ------- ------
Total current assets 2,374,988 2,963,082 464,579
Long-term accounts receivable 462,521 426,368 66,850
Other non-current assets 581,494 729,486 114,375
------- ------- -------
Total assets 3,419,003 4,118,936 645,804
========= ========= =======
Liabilities
Short-term bank loans 638,229 1,056,572 165,659
Other current liabilities 1,133,772 1,285,442 201,544
--------- --------- -------
Total current liabilities 1,772,001 2,342,014 367,203
Long-term bank loan 90,000 221,200 34,682
Other non-current liabilities 4,598 4,532 711
----- ----- ---
Total liabilities 1,866,599 2,567,746 402,596
Equity
Non-controlling interests 6,335 4,982 781
Total equity attributable to the equity
shareholders of China GrenTech
Corporation Limited, or GrenTech 1,546,069 1,546,208 242,427
--------- --------- -------
Total liabilities and equity 3,419,003 4,118,936 645,804
========= ========= =======
China GrenTech Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(RMB and US$ expressed in thousands)
For Three Months Ended September 30,
2010 2011 2011
---- ---- ----
RMB RMB US$
Revenues 396,900 406,236 63,693
Cost of revenues (293,150) (295,035) (46,258)
-------- -------- -------
Gross profit 103,750 111,201 17,435
Other revenue 4,968 5,505 863
Operating expenses:
Research and development
costs (22,218) (20,298) (3,183)
Sales and distribution
expenses (40,078) (47,027) (7,373)
General and
administrative expenses (21,084) (23,798) (3,731)
Total operating expenses (83,380) (91,123) (14,287)
------- ------- -------
Operating income 25,338 25,583 4,011
Other (expense)/income:
Interest income 4,108 5,059 793
Interest expense (14,531) (19,900) (3,120)
Investment income 0 0 0
Foreign currency exchange
loss 40 (939) (147)
Grant income 0 268 42
Total other expense (10,383) (15,512) (2,432)
------- ------- ------
Income/(loss) before
income tax expense 14,955 10,071 1,579
Income tax expense (2,529) (1,401) (220)
------ ------ ----
Net income/(loss) 12,426 8,670 1,359
Net income(loss)
attributable to non-
controlling interests 474 381 60
Net income/(loss)
attributable to equity
shareholders of the
Company 12,900 9,051 1,419
====== ===== =====
Earnings/(loss) per
share attributable to
the equity shareholders
of the Company:
- Basic 0.02 0.02 0.003
- Diluted 0.02 0.02 0.002
==== ==== =====
Weighted average number
of ordinary shares
outstanding:
- Basic 582,387,825 567,096,425 567,096,425
=========== =========== ===========
- Diluted 592,022,210 575,905,270 575,905,270
=========== =========== ===========
For Nine Months Ended September 30,
2010 2011 2011
---- ---- ----
RMB RMB US$
Revenues 926,677 983,878 154,261
Cost of revenues (691,916) (717,530) (112,501)
-------- -------- --------
Gross profit 234,761 266,348 41,760
Other revenue 12,500 13,581 2,129
Operating expenses:
Research and development
costs (56,564) (58,897) (9,234)
Sales and distribution
expenses (107,583) (117,124) (18,364)
General and administrative
expenses (59,878) (67,846) (10,638)
Total operating expenses (224,025) (243,867) (38,236)
-------- -------- -------
Operating income 23,236 36,062 5,653
Other (expense)/income:
Interest income 12,836 14,260 2,236
Interest expense (42,590) (54,275) (8,510)
Investment income 0 9 1
Foreign currency exchange
loss (456) (2,468) (387)
Grant income 2,100 368 58
Total other expense (28,110) (42,106) (6,602)
------- ------- ------
Income/(loss) before income
tax expense (4,874) (6,044) (949)
Income tax expense (393) 3,169 497
---- ----- ---
Net income/(loss) (5,267) (2,875) (452)
Net income(loss)
attributable to non-
controlling interests 509 1,354 212
Net income/(loss)
attributable to equity
shareholders of the Company (4,758) (1,521) (240)
====== ====== ====
Earnings/(loss) per share
attributable to the equity
shareholders of the
Company:
- Basic (0.01) (0.003) (0.0004)
=======
- Diluted (0.01) (0.003) (0.0004)
===== ====== =======
Weighted average number of
ordinary shares
outstanding:
- Basic 585,815,792 564,705,303 564,705,303
=========== =========== ===========
- Diluted 585,815,792 564,705,303 564,705,303
=========== =========== ===========
China GrenTech Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(RMB and US$ expressed in thousands)
For Nine Months Ended September 30,
2010 2011 2011
---- ---- ----
RMB RMB US$
Net cash used in operating
activities (321,779) (169,611) (26,593)
Net cash used in investing
activities (14,581) (252,029) (39,515)
Net cash provided by/
(used in) financing
activities (10,309) 232,739 36,491
Effect of exchange rate
changes on cash (456) (2,468) (387)
---- ------ ----
Net decrease in cash and
cash equivalents (347,125) (191,369) (30,004)
======== ======== =======
SOURCE China Grentech Corporation Limited
