Hanwei announces financial results for the third quarter of 2007



    TSX: HE

    VANCOUVER, Nov. 13 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the
"Company") today announced its financial results for the three and nine months
ended September 30, 2007. All currency amounts referred to in this news
release are in Canadian dollars unless stated otherwise.
    Net income for the nine months ended September 30, 2007 was $1,787,804,
an increase of $1,732,195 compared to net income of $55,609 for the same
period in 2006. Net loss for the three months ended September 30, 2007 was
$260,214, an improvement of $239,899 from a net loss of $500,113 for the same
period in 2006.
    For the nine months ended September 30, 2007, sales revenue was
$16,764,424, an increase of $4,218,566 or approximately 34% compared to the
same period in 2006. For the three months ended September 30, 2007, sales
revenue was $3,363,285, a decrease of $474,402 or 12% compared with the same
period in 2006. This decrease was caused by the timing of revenue recognition,
as certain orders shipped in the third quarter were not inspected and
confirmed by customers. Sales revenues for these orders shipped in the third
quarter will be recognized in the fourth quarter.
    Sales orders for delivery in the fourth quarter as at September 30, 2007
were RMB 184 million ($24 million), which represents an increase of 330%
compared to sales orders for delivery in the fourth quarter of 2006 as at
September 30, 2006. Sales orders for delivery in the fourth quarter of 2007 as
at September 30, 2007 included (a) RMB 78 million ($10 million) for oil pipe,
which represents a growth of 82% compared to September 30, 2006, (b) RMB
100 million ($13 million) for wind power equipment, which was nil as at
September 30, 2006, and (c) RMB 6 million ($1 million) for spray headers for
flue gas desulphurization ("FGD") pollution control systems for coal fired
power plants, which was nil as at September 30, 2006. In addition to these
sales orders, the Company also received expressions of interest for oil pipe
for delivery in 2007 of RMB 52 million ($7 million) as at September 30, 2007.

    Third Quarter 2007 Highlights:

    
     -  In September 2007, Hanwei graduated from the TSX Venture Exchange to
        the Toronto Stock Exchange.

     -  During the third quarter, Hanwei added six new high-pressure
        fiberglass-reinforced plastic ("FRP") pipe production lines at its
        existing facility in Daqing, China at a capital cost of
        RMB 15 million ($2.1 million). The Company now has 16 production
        lines and total pipe production capacity of approximately 3,200 km
        per annum, a 100% increase compared with production and sales in 2006
        and a 60% increase compared with capacity at the end of 2006.

     -  The Company approved $5 million of capital expenditures to establish
        a high pressure FRP oil pipe manufacturing plant in Aktobe,
        Kazakhstan with initial capacity of 400 km per annum. Subsequent to
        the third quarter, the Company established a 100% owned subsidiary in
        Kazakhstan, called Kazakhstan Hanwei Fibreglass Reinforced Plastic
        Co. Ltd., to produce FRP pipe to service the oil industry in
        Kazakhstan and neighbouring countries.

     -  The Company approved $10 million of capital expenditure to establish
        a high pressure FRP pipe manufacturing facility in Tianjin, China
        with initial capacity of 800 km per annum. The Company established
        Hanwei Hongda Energy Services (Tian Jin) Co., Ltd ("Hongda") as its
        100% owned subsidiary in Tianjin, China to manufacture the FRP
        products. Subsequent to the third quarter, a site of 73,000 square
        metres (786,000 square feet) was approved by the regulatory
        authorities for Hongda's manufacturing facility. The Company invested
        $19.58 million in Hongda as part of its registered capital.

     -  The Company established a 100% owned subsidiary, Hanwei Wind Power
        Equipment (Daqing) Co., to carry out its wind power business.
        Subsequent to the third quarter, the Company has completed the
        construction of its first set of moulds and has commenced the
        production of FRP wind power blades (propellers). The Company's wind
        power turbine assembly line has been completed and assembly of wind
        power turbines is expected to commence in late November 2007, when
        all the turbine parts are expected to be delivered to the Company. By
        mutual agreement with Daqing Deta Electric Co. Ltd. ("Deta"), the
        Company's customer for its wind power products, the delivery schedule
        under the RMB 200 million ($26 million) wind power manufacturing
        agreement has been adjusted to the delivery of 4 turbines, 10 blade
        sets and 30 towers by December 31, 2007 and the delivery of the
        remaining 16 turbines and 10 blade sets called for in the initial
        contract by March 31, 2008. All terms, product quantities, and
        payment schedules remain unchanged.
    

    "Our accomplishments in the third quarter and year to date reflect our
ability to leverage our FRP expertise into new, growing markets and to meet
our targets for 2007," stated Fulai Lang, President and CEO of Hanwei. "Our
oil pipe business continues its strong growth as we expanded production in
China and generated sales in new markets such as Kazakhstan. We are on
schedule to successfully complete the first part of our wind power equipment
contract with Deta. We have established a base of expertise and customers in
the coal power products business and are seeking opportunities to expand our
coal products offering. Our graduation to the TSX will aid us in our efforts
to add new products and technologies to our portfolio, as well as increase our
exposure to a broader investor base."

    Financial Highlights:

    
    -------------------------------------------------------------------------
    In Canadian         For the three months ended  For the nine months ended
    dollars except
    per share data
    -------------------------------------------------------------------------
                           Sept 30,      Sept 30,      Sept 30,      Sept 30,
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue            $ 3,363,285   $ 3,837,687   $16,764,424   $12,545,858
    -------------------------------------------------------------------------
    Gross Margin                31%           32%           43%           38%
    -------------------------------------------------------------------------
    Net Income (loss )    (260,214)     (500,113)    1,787,804        55,609
    -------------------------------------------------------------------------
    EPS
    -------------------------------------------------------------------------
      Basic                  (0.00)        (0.02)         0.04          0.00
    -------------------------------------------------------------------------
      Fully Diluted          (0.00)        (0.02)         0.04          0.00
    -------------------------------------------------------------------------
    Weighted number
     of shares
     outstanding
    -------------------------------------------------------------------------
      Basic             57,869,620    21,000,000    42,893,876    21,000,000
    -------------------------------------------------------------------------
      Fully Diluted     57,869,620    21,000,000    43,916,262    21,000,000
    -------------------------------------------------------------------------
    

    Results of Operations:

    Revenues for the three months ended September 30, 2007 were $3,363,285, a
decrease of 12% compared to the same period in 2006. This decrease was due to
a timing issue as certain customers were late in issuing their inspection
reports, which is one of the criteria for the Company to recognize revenues.
Gross margin for the three months ended September 30, 2007 was 31% compared to
32% in the same period in 2006. For the three months ended September 30, 2006,
both basic and diluted earnings per share were nil, which represent an
improvement of $0.02 compared to the earnings loss per share of $0.02 in the
same period in 2006.
    Due to the high percentage of sales to the oil and gas industry in China,
Hanwei experiences regular seasonality in its sales. Revenues from the first
nine months of 2006 were 52.8% of annual revenues in 2006 and net income from
the first nine months of 2006 was 1.2% of annual net income. In 2007, the
Company expects a similar seasonality in its oil pipe sales, with the fourth
quarter expected to account for a large percentage of revenues and net income.
As the Company diversifies its customer base internationally and expands into
other energy industries, seasonality is expected to decrease. The coal power
and wind power sectors are both expected to have relatively flat seasonality.
    Revenues for the nine months ended September 30, 2007 were $16.8 million,
an increase of 34% compared to the same period in 2006. Approximately 96% of
the revenues for the nine months ended September 30, 2007 were generated from
the high pressure FRP oil pipe business and 4% from FRP spray headers for the
coal power industry.
    Net income for the nine months ended September 30, 2007 was $1.8 million,
a significant increase compared with net income of $60,000 for the same period
in 2006. Earnings per share were $0.04 compared to nil for the same period in
2006. The financial results for the three and nine months ended September 30,
2007 were consistent with management's expectations and the Company is
expected to meet its 2007 financial year targets.
    Net income as a percentage of revenues for the nine months ended
September 30, 2007 was 11% compared with 0.4% in the same period of 2006. This
increase was mainly driven by a combination of revenue growth and expense
savings from economies of scale.
    Cash and cash equivalents totalled $45,950,323 as of September 30, 2007,
representing an increase of $43,583,479 from December 31, 2006. This increase
was due to three private placements, completed on January 5, 2007, April 2,
2007 and June 21, 2007 with combined gross proceeds of approximately
$77.25 million, offset by cash outlays for investments in expanding FRP oil
pipe production capacity, the wind power business and working capital.
    Working capital was $74,319,411 as of September 30, 2007, an increase of
$63,063,432 from $11,255,979 as of December 31, 2006. This increase was
largely due to a net cash balance of $46 million from recent financings.
Current assets, excluding cash and cash equivalents, increased by
$14.8 million mainly due to an increase in deposits for raw material
purchases, especially for the newly started wind power business and increased
inventories to support sales growth in FRP pipe. Current liabilities decreased
by $4.7 million due to the repayment of loans from related parties and short
term bank loans.

    Outlook

    Management expects continued strong growth in its high pressure FRP pipe
business for the oil industry for the remainder of 2007. Management expects
sales of high pressure FRP pipe to the oil industry to grow by as much as 60%
for the 2007 financial year due to increased production capacity combined with
increased sales and marketing programs in China, Kazakhstan and other
international markets.
    With the commercialization of the Company's FRP spray headers for FGD
pollution control systems for coal power plants, the Company has established
production and marketing expertise and a base of customers. The Company is
seeking to add new products for the coal power industry through research and
development, acquisition, licensing and joint venture arrangements.
    The Company has made progress in the production of wind power equipment
and is on target to deliver the first part of its initial order by December
31, 2007, outlined in its manufacturing agreement and with the composition of
the initial agreement adjusted by mutual agreement. Please refer to the
Company's news release "Hanwei completes arrangements for the supply of up to
RMB 1.7 billion worth of wind power products" dated June 1, 2007, which is
available on SEDAR at www.sedar.com, as updated by this news release, for more
details.
    Hanwei will be holding a conference call to discuss its financial results
for the three and nine months ended September 30, 2007. Mr. Kim Oishi, Senior
Vice President of Finance and Business Development, and Mr. Yucai (Rick)
Huang, Chief Financial Officer, will host the call.

    
    Date:                    Wednesday, November 14, 2007

    Time:                    2:00 p.m., Eastern Time

    Dial in number:          1-866-214-7077 or 416-915-9608

    Taped Replay:            1-866-244-4494 or 416-915-1028
                             (available for 14 days)

    Taped Replay Pass Code:  485256

    Live Webcast Link:

    http://events.onlinebroadcasting.com/hanwei/111407/index.php
    

    FORWARD-LOOKING INFORMATION AND NON-GAAP MEASURES

    Certain information in this news release is forward-looking within the
meaning of certain securities laws, and is subject to important risks,
uncertainties and assumptions. This forward-looking information includes,
among other things, information with respect to management's estimates of
capital requirements, as well as information with respect to the Company's
beliefs, plans, expectations, anticipations, estimates and intentions. The
words "may", "could", "should", "would", "suspect", "outlook", "believe",
"anticipate", "estimate", "expect", "intend", "plan", "target" and similar
words and expressions are used to identify forward-looking information. The
forward-looking information in this news release describes the Company's
expectations as of the date of this news release.
    The results or events anticipated or predicted in such forward-looking
information may differ materially from actual results or events. Material
factors which could cause actual results or events to differ materially from a
conclusion, forecast or projection in such forward-looking information
include, among others: the Company's growth strategy may fail, the Company is
currently dependent on the oil and gas sector for the majority of its sales,
the Company may not be able to develop its proposed new products and services,
risks related to expanding operations, the Company is dependent on a few major
customers, the Company's expansion plans carry a number of risks, a robust
market for wind power products in China is still in the process of developing,
the Company has not demonstrated the ability to deliver its wind power
products, changes in technology or product requirements may affect the
Company's ability to deliver wind power products, there is significant
uncertainty surrounding wind power regulation in China, the Company must meet
Chinese governmental localization requirements in producing its wind power
products, there are uncertainties related to the Company's wind power
agreements with certain Chinese companies, the Company is dependent on key
personnel, the Company depends on its intellectual property and the failure to
protect that intellectual property may adversely affect the Company's future
growth and success, the Company may require additional capital to expand its
operations, the Company currently faces and will continue to face significant
competition, the Company business currently faces seasonal fluctuations in
revenues, the Company may not have adequate insurance for all potential
claims, changes in raw material or energy cost may adversely affect the
Company's operating margins, the Company's operations are subject to
environmental risks and hazards, the Company faces specific risks associated
with doing business in China (including risks relating to state ownership,
government intervention, foreign investment, repatriation of profit and
currency conversion, shareholders' rights and enforcement of judgments,
developing legal system, recent Chinese regulations relating to cross-border
mergers and acquisitions, protection of intellectual property rights, permits
and business licenses, appropriation, tax, infrastructure and interest rate
fluctuations), the Company faces specific risks associated with doing business
in Kazakhstan, the Company is subject to exchange rate fluctuations, a
significant percentage of the Company's common shares are owned, in the
aggregate, by its directors and officers, the Company may be affected by
actions of its joint venture partner, expressions of interest may not turn
into sales or revenue, projections with respect to the size of the Kazakhstan
market and the Company's ability to profitably access such market from Daqing
or locally may not align with the Company's expectations and a similar risk
with respect to the markets in the Commonwealth of Independent States
(including Azerbaijan, Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, Russia,
Tajikistan, Turkmenistan, Uzbekistan and Ukraine), and Indonesia, India, Saudi
Arabia, Oman, and Peru.

    The Company cautions that the foregoing list of material factors is not
exhaustive. When relying on the Company's forward-looking information to make
decisions, investors and others should carefully consider the foregoing
factors and other uncertainties and potential events. The Company has assumed
a certain progression, which may not be realized. It has also assumed that the
material factors referred to in the previous paragraph will not cause such
forward-looking information to differ materially from actual results or
events. However, the list of these factors is not exhaustive and is subject to
change and there can be no assurance that such assumptions will reflect the
actual outcome of such items or factors. For additional information with
respect to certain of these and other factors, refer to the risk factors
section of the Company's Annual Information Form dated July 10, 2007 filed
with Canadian securities regulators, which is available on SEDAR at
www.sedar.com.
    The Company has included in this news release figures based on
expressions of interest, orders received and shipments made, which are
non-GAAP measures. Readers are cautioned that expressions of interest, orders
received and shipments made are not recognized measures under Canadian GAAP
and should not be construed to be an indicator of performance or liquidity or
cash flows. The Company's method of calculating these measures may differ from
methods used by other entities and accordingly the Company's measures may not
be comparable to similar measures used by other entities. The Company uses
these figures because management has a high degree of confidence that the
expressions of interest, orders received and shipments made will represent
sales and it believes such figures provide a useful indication of the
Company's progress in further developing its market in China and diversifying
internationally.

    THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS NEWS RELEASE PRESENTS
THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS NEW RELEASE AND,
ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. HOWEVER, THE COMPANY
EXPRESSLY DISCLAIMS ANY INTENTION OR OBLIGATION TO UPDATE OR REVISE ANY
FORWARD-LOOKING INFORMATION, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY APPLICABLE LAW.





For further information:

For further information: Kim Oishi, SVP of Finance and Business
Development, (416) 804-9228, koishi@hanweienergy.com; Kevin O'Connor, Investor
Relations, (416) 962-3300, koconnor@genoa.ca

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HANWEI ENERGY SERVICES CORP.

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