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China Ruitai International Holdings Co., Ltd. Reports Results for the First Quarter 2010

FEICHENG, China, May 19 /PRNewswire-Asia-FirstCall/ -- China Ruitai International Holdings Co., Ltd. ("China Ruitai," "TaiAn" or the "Company") (OTC Bulletin Board: CRUI), a manufacturer and distributor of cellulose ether additives for use in the production of pharmaceuticals, construction materials, PVC products, foods and beverages and cosmetics, today announced financial results for its first quarter ended March 31, 2010.

    First Quarter 2010 Highlights
    -- Q1 revenue increased 24.4% to $10.2 million
    -- Q1 net income increased 35.7% to $1.9 million
    -- Q1 EPS of $0.07 vs. $0.05

    First Quarter 2010 Results
                                Q1 2010              Q1 2009          CHANGE
    Net Sales                $10.2 million         $8.2 million       +24.4%
    Gross Profit             $3.30 million        $3.25 million        +1.7%
    Net Income
     attributable to China
     Ruitai International
     Holding Co., Ltd.        $1.9 million         $1.4 million       +38.6%
    Earnings Per Share           $0.07                $0.05           +40.0%

Company Overview and First Quarter 2010 Results

China Ruitai is one of the largest manufactures of non-ionic cellulose ether products in China. Specifically, cellulose either is an organic chemical derived from cotton that serves as a thickener and stabilizer for a wide variety of commercial industries and products, including pharmaceuticals, construction materials, petrochemicals, food and beverage products, in addition to cosmetics. Specifically, the Company's cellulose ether is a stabilizer and thickener in latex paint and dry mix for concrete mortar and, used as a membrane reagent in pharmaceuticals, and a thickener and binding agent for foods and cosmetics, including fruit preserves, ice cream, toothpaste and lipsticks. The Company produces twelve, industry-specific products under its "RuiTai" brand, which are sold through a network of domestic and international distributors to Asia, Europe, the Middle East and North America.

During the three month period ended March 31, 2010, the Company posted revenues of $10.2 million, a 24.4% increase from $8.2 million in the same year ago period, which benefited from higher sales volumes to customers as the global economy recovered. International sales in the first quarter of 2010 contributed 30.7% of revenues versus 36.8% in the same period in 2009, while sales to Chinese customers accounted for approximately 69.3% compared to 63.2 % in each respective period. Primary export products from the Company include; Hydroxypropyl Methyl Cellulose (known as "HPMC") which is used in the construction industry, PVC used in the petrochemical industry and for various products in the pharmaceutical industry. 27.6% of overall sales for the first quarter emanated from customers, which produce premium pharmaceutical, food and cosmetic products. China Ruitai has sales agents located in thirty offices throughout the PRC, including Beijing and Shanghai, with branch offices in seven other tier two cities. Capacity utilization during the first quarter of 2010 was 83% vs. 70% in the year ago period, as the Company produced 1,700 tons compared to 1,430 tons.

During the three month period ended March 31, 2010, the Company's cost of sales increased 39.3% to $6.9 million over the same year ago period. This increase was driven by higher sales volumes accompanied by increased prices for specialty cotton, which doubled during the first quarter of 2010 to $1631 per ton compared to the year ago period. The two key raw materials required for the production of cellulose ether products are purified cotton and etherifying epoxy propane. The Company is based in Feicheng City, which is located in the Shandong Province, a region known for its cotton production, and also home to a number of large etherifying epoxy propane producers. Corresponding gross profits for the quarter were 32.3% compared to 39.5% for the first quarter of 2009. The fluctuation of the cotton price is primarily due to the severe drought in China which has led to decreased supply. While cotton prices during the first quarter reached historical highs, management decided to maintain selling prices, while the majority of our competitors increased selling prices to match costs. Several small competitors exited the market as result of the Company's strategy. As cotton prices have remained elevated during the second quarter, China Ruitai increased selling prices to more adequately reflect production costs, with the goal of achieving gross margins close to historical levels.

Selling expenses which consist of sales commissions, freight charges, and travel were $0.4 million for the three month period ended March 31, 2010 an increase of approximately 24.3% compared to the first quarter of 2009. This increase was due to increased transportation costs and increased sales commissions associated with increased sales.

General and administrative expenses totaled $0.3 million for the three month period ended March 31, 2010 compared to $0.8 million for the same year ago period, a decrease of approximately 65.1%, which was associated with lower research and development costs and the elimination of non-cash equity compensation expenses associated with consultant warrants.

For the three month period ended March 31, 2010, income from operations increased 28.1% to $2.7 million from the year ago period, as a result of decreased operating expenses and rental income of $0.3 million from a newly acquired commercial property in Beijing.

On December 30, 2009, the Company allowed its related party "Shandong Ruitai Chemicals Co., Ltd." to satisfy a total of $31.7 million in debt owed in return for Shandong Ruitai's transfer of 100% of its ownership interest in real estate property located in Beijing, China, commonly known as the "Taishan Building." As a result, starting from the first quarter of 2010, the 130,125 square foot "Taishan Building" started generating quarterly rental income of $0.3 million which will positively impact future earnings.

Net income attributable to China Ruitai International Holding Co., Ltd. was $1.9 million for the three month period ended March 31, 2010, an increase of approximately 38.6% over the year ago period. Earnings per share for the quarter ended March 31, 2010 increased 40.0% to $0.07 versus $0.05 in the same period 2009, based on 26 million fully diluted shares outstanding.

"Our strategy to focus Company resources, production and sales efforts on higher margin, higher growth industries in China, including pharmaceuticals, food and cosmetics, yielded strong growth in our first quarter earnings," said Mr. Ma, Chairman and CEO of China Ruitai. "We have continued to properly position and increase awareness of our "Ruitai" brand throughout the industry, while developing relationships with distributors and end customers who are some of the fastest growing of the industries that we service."

Financial Condition

On March 31, 2010, current assets were $65.3 million while total assets were $120.4 million. On March 31, 2010, cash and cash equivalents were $7.9 million compared to $10.2 million as of December 31, 2009.

Accounts receivable were $7.7 million, an increase of approximately 87.0% compared to accounts receivable of $4.1 million as of December 31, 2009 with day sales outstanding of 69 compared to 50, respectively. As of March 31, 2010, accounts payable were $7.0 million, an increase of approximately 12.8% compared to accounts payable of $6.2 million as of December 31, 2009.

On March 31, 2010, current liabilities were $94.3 million, notes payable were $48.6 million, and short-term bank loans were $25.4 million.

Cash flow from operations for the first quarter was $0.7 million compared to $2.7 million in the year ago period. Total stockholder's equity was $24.1 million in the first quarter of 2010, up 9.2% from $22.0 million as of December 31, 2009.

2010 Business Outlook

"Our domestic industry consists of a number of fragmented suppliers. With consolidation underway and given the fact that a number of smaller firms failed during the recent economic downturn, we have experienced increased sales opportunities for our higher-margin products. Our facility can produce 10,000 metric tons per year, exceeding our closest competitor and making us the largest in China," began Chairman Ma.

"We are well positioned to benefit from the overall economic recovery in multiple industries, and plan to emphasize sales of our higher growth, higher margin products," concluded Mr. Ma.

About China Ruitai International Holdings Co.

China Ruitai, through its wholly-owned subsidiary, Pacific Capital Group and its majority-owned subsidiary, TaiAn, is engaged in the production, sales, and exportation of deeply processed chemicals, with a primary focus on non- ionic cellulose ether products. Cellulose ether is an organic chemical that dissolves in water and other organic solvents. Due to the surface-active properties of cellulose ether, it acts as a thickener and stabilizer in aqueous solutions, making it a beneficial additive in a wide variety of commercial industries and products, including, but not limited to the pharmaceutical industry, the construction industry, PVC products, food and beverage products, petroleum, and cosmetics. Specific examples of applications in which cellulose ether products are used include: as a stabilizer and thickener in latex paint; in mortar dry mix for building materials; to improve the performance of resin in PVC production; as a membrane reagent, stabilizer, and thickener in pharmaceuticals; and to improve jam, ice cream, toothpaste and lipsticks in the food and cosmetic industries. TaiAn is one of the largest non-ionic cellulose ether producers in China.

Forward-Looking Statements

Certain statements in this release and other written or oral statements made by or on behalf of the Company are "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future are forward-looking statements within the meaning of these laws. The forward-looking statements are subject to a number of risks and uncertainties including market acceptance of the Company's services and projects and the Company's continued access to capital and other risks and uncertainties. The actual results the Company achieves may differ materially from any forward- looking statements due to such risks and uncertainties. These statements are based on our current expectations and speak only as of the date of such statements.

    For additional information contact:

    China Ruitai International Holdings Co., Ltd.
     Ms. Crystal Tang, VP of Finance
     Add:   1221 Avenue of Americas Suite 4200
            New York, NY 10020
     Tel:   +1-212-899-5131
     Fax:   +1-212-899-3189

    HC International, Inc.
     John Mattio, Senior Vice President
     Add:   420 Lexington Avenue
            New York, New York
     Tel:   +1-203-616-5144

                          Consolidated Balance Sheets

                                            March 31, 2010  December 31, 2009
    Current Assets:
    Cash and cash equivalents                   $7,953,190       $10,174,528
    Restricted cash                             32,274,000        33,054,466
    Accounts receivable, net                     7,665,940         4,098,729
    Notes receivable                             7,731,215         7,153,450
    Advance to suppliers                         1,570,685         1,649,685
    Inventories                                  7,581,269         8,132,681
    Other receivables                              499,085           126,657
    Total current assets                        65,275,384        64,390,196

    Property and equipment, net                 13,503,313        13,204,825
    Commercial leasing assets, net              36,607,620        36,710,934
    Land use rights, net                         4,976,737         4,988,817
    Long term investment                                 --          888,960

                                              $120,363,054      $120,183,732
    Current liabilities:
    Short-term bank loans                      $25,370,298       $27,195,342
    Accounts payable                             6,964,910         6,175,266
    Notes payable                               48,557,700        50,020,476
    Advance from customers                         619,812           127,419
    Due to related party- current portion        1,748,793         2,979,171
    Income tax payable                           5,574,445         5,277,239
    Other payables                               4,101,386         2,900,942
    Loan from employees                          1,362,186         1,476,292
    Total current liabilities                   94,299,530        96,152,147

    Due to related party- long-term
     portion                                     1,992,107         1,986,114
    Total Liabilities                           96,291,637        98,138,261

    Common stock ($.001 par value;
     50,000,000 shares authorized,
     26,000,000 shares issued and
     outstanding as of March 31, 2010 and
     December 31, 2009)                             26,000            26,000
    Additional paid-in capital                   2,908,171         2,908,171
    Statutory reserve                            1,369,652         1,369,652
    Retained earnings                           18,118,760        16,179,230
    Accumulated other comprehensive
     income                                      1,414,398         1,347,371

    Total Equity of the Company's
     Shareholders                               23,836,981        21,830,424
    Noncontrolling interest                        234,436           215,047
    Total Equity                                24,071,417        22,045,471

                                              $120,363,054      $120,183,732

          Consolidated Statements of Income and Comprehensive Income

                                                 Three months ended March 31,
                                                    2010               2009
                                                 (unaudited)       (unaudited)
    Sales                                       $10,238,256        $8,231,180
    Cost of sales                                 6,929,872         4,976,541

    Gross profit                                  3,308,384         3,254,639

    Operating expenses:
    General and administrative expenses             284,252           815,233
    Selling expenses                                359,075           288,977
    Total operating expense                         643,327         1,104,210

    Commercial leasing income                       303,183                --
    Cost of commercial leasing                     (214,007)               --
    Income from operations                        2,754,233         2,150,429

    Other income/(expense)
    Interest income                                 391,180           542,403
    Interest expense                               (578,487)         (765,551)
    Other income/(expense)                           38,295           (41,983)

    Income before income tax expense              2,605,221         1,885,298

    Income tax expense                              646,302           471,326

    Net income                                    1,958,919         1,413,972

    Less: Net income attributable to the
     noncontrolling interest                         19,389            14,140
    Net income attributable to China
     Ruitai International Holding Co.,
     Ltd.                                         1,939,530         1,399,832

    Other comprehensive income
    Foreign Currency Translation
     Adjustment                                      67,027            20,012

    Comprehensive income                         $2,006,557        $1,419,844

    Earnings per share
    Basic and diluted                                 $0.07             $0.05
    Weighted average number of common
     shares outstanding
    Basic and diluted                            26,000,000        26,000,000

                 Consolidated Statements of Cash Flows

                                                Three months ended March 31,
                                                   2010              2009
                                               (unaudited)       (unaudited)
    Cash flows from operating activities:
    Net income                                  $1,958,919        $1,413,972
    Adjustments to reconcile net income
     to net cash provided by operation
    Depreciation                                   564,625           311,395
    Amortization of land use rights                 27,122            26,746
    Stock based compensation                            --           121,000
    Changes in operating assets and
    Restricted cash                                879,900        (9,931,952)
    Accounts receivable                         (3,553,625)       (1,163,972)
    Notes receivable                              (556,011)        2,607,913
    Advance to suppliers                            83,947                --
    Inventories                                    575,753            52,815
    Other receivables                             (371,918)         (949,364)
    Accounts payable                               770,749           900,750
    Notes payable                               (1,613,150)        9,055,602
    Advance from customers                         491,841               170
    Income tax payable                             281,188           215,819
    Other payables                               1,191,228             6,572
    Net cash provided by operating
     activities                                    730,568         2,667,466

    Cash flows from investing activities:
    Purchase of property and equipment            (609,265)         (287,450)
    Due from a related party                            --        (5,084,785)

    Net cash used in investing activities         (609,265)       (5,372,235)

    Cash flows from financing activities:
    Proceeds from bank loans                     6,003,851                --
    Repayment of bank loans                     (7,910,301)         (730,293)
    Due to a related party                        (347,609)               --
    Loan from employees                           (118,513)          238,785

    Net cash used in financing activities       (2,372,572)         (491,508)

    Effect of foreign exchange rate
     changes                                        29,931             6,142
    Net decrease in cash and cash
     equivalent                                 (2,251,269)       (3,196,277)

    Cash and cash equivalent- beginning
     of period                                  10,174,528         5,319,456

    Cash and cash equivalent-end of
     period                                     $7,953,190        $2,129,321

    Supplementary cash flow information:
    Cash paid for interest expense                $578,487          $637,819
    Cash paid for income tax                      $365,239          $220,524

SOURCE China Ruitai International Holdings Co., Ltd.
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