VANCOUVER, April 12 /CNW/ - Hanwei Energy Services Corp. ("Hanwei" or the "Company") today provided an update on its business operations as well as announced changes to its management team.
The Company disclosed in its most recent Management Discussion and Analysis for the three and twelve months ended December 31, 2009 that it was reviewing its wind power business with the view to restructuring this segment. In addition, the Company also disclosed that it was limiting further investments in the turbine manufacturing business as well as deliveries to its customer until it received payments on existing account receivable amounts, and was downsizing the non-core functions of the segment to reduce overhead expenses, as part of a company-wide cost reduction initiative.
Under the current industry and market conditions in China, which have become increasingly unfavorable to small wind power equipment manufacturers, management is actively considering/reviewing alternatives to reposition its wind power business. Alternatives under active consideration include (i) a strategic cooperation agreement among the Company, a large PRC based wind power manufacturing company, and a wind farm operator, and (ii) a joint venture between the Company and a PRC state owned enterprise, where the Company would hold a non-controlling interest. With respect to the potential strategic cooperation agreement, discussions have been ongoing for several months, and no agreement in principle has been reached. If such an agreement were reached, it is anticipated that the Company would focus on wind blade manufacturing and sales. With respect to the potential joint venture, discussions are at an early stage, no agreement in principle has been reached and the PRC state owned enterprise is conducting preliminary due diligence. The Company's objective in repositioning its wind power business is to ensure any continued participation is viable from a business perspective, to alleviate the amount of working capital devoted to such business and to collect on its outstanding receivable from its wind power customer.
In its FRP Pipe segment, Hanwei is focused on strengthening its penetration of the Chinese and Kazakhstan markets. The recovery of the oil industry in these two markets is consistent with that of the worldwide economy which may lead to increased demand in 2010 as compared to 2009. Hanwei is also expanding its marketing activities into certain international markets such as the Middle East and South America.
In the FGD segment, the 50/50 joint venture with Ershigs Inc. (Hanwei Ershigs), continues to make progress on introducing its FRP products, including chimney liners, to the Chinese market. However, the segment is still at an early stage and the Company does not expect significant growth from this segment in the near future.
Preliminary Operating Results for the Three Months Ended March 31, 2010
Preliminary operating results for the three months ended March 31, 2010 are consistent with the Company's historical trends in the past years for the FRP pipe segment and the FGD segment. The wind power segment did not make any delivery in this period. The Company is planning to release its financial results for this period and the fiscal year ended March 31, 2010 in late June 2010.
"We have endured a very difficult economic cycle and are working hard to restructure our wind business, as well as to return Hanwei to profitability," stated Fulai Lang, President and CEO of Hanwei. "Our vision for the wind power business has been partly derailed due to unexpected changes in government policy, which have severely inhibited our competitive position in the market. These changes are driving significant consolidation in the domestic wind power market which has been pushing out many of the smaller manufacturers. We do have a recognized, quality wind power equipment manufacturing asset and a long term supply contract which we expect will make our business segment attractive to potential partners and/or purchasers and will diligently continue our efforts on this initiative."
A short-term loan of RMB40 million maturing on March 9, 2010 was renewed for another one-year term. The new loan bears interest at 6.9% per annum and matures on March 17, 2011.
A short-term loan of RMB40 million maturing on March 26, 2010 was repaid, and the Company is currently going through re-application procedures and expects to renew this loan in April 2010.
Additionally, Hanwei has secured another short-term loan ofRMB100 million from the Agriculture Development Bank of China. The loan bears interest at 5.3% per annum and matures on February 17, 2011.
Hanwei announced that Kim Oishi, senior vice president of financial and business development, will resign from his position effective May 1, 2010. Mr. Oishi will continue to assist Hanwei on a consulting basis.
"On behalf of the board and management of Hanwei, I would like to thank Kim for his hard work and dedication to the Company during his tenure and look forward to his continued contributions to Hanwei as a consultant," concluded Mr. Lang.
Certain information in this press 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 the repositioning of the Company's wind power business, the continued discussions relating to repositioning of the Company's wind power business, and the reductions in expenses, 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 is based on certain assumptions, which could change materially in the future, including the assumption that the world economy will recover, the wind power business will be repositioned to address the changing wind power market conditions, the Company's FGD business will improve, and the Company will implement its downsizing plan and expenses will be reduced as a result of such a plan. There is no assurances that the wind power business will be repositioned, that agreements on any potential strategic cooperation or joint venture with respect to the Company's wind power business will be reached, and that any repositioning of the Company's wind power business will allow it to viably continue its participation in the wind power business from a business perspective, to alleviate the amount of working capital devoted to such business, or to collect on its outstanding receivable from its wind power customer. The forward-looking information in this press release describes the Company's expectations as of the date of this press release. Material factors or risks which could cause actual results or events to differ materially from a conclusion in such forward-looking information include the risk that the world economy does not recover as expected, the repositioning of the Company's wind power business does not succeed, the Company's pipe business does not perform positively, the Company is unable to implement its downsizing plan at all, partially or in a way substantially different than planned, and expenses will not be reduced as a result of any downsizing plans, , as well as the risks set out in the risk factors section of Hanwei's Annual Information Form dated March 31, 2009, and the Company's press releases filed subsequent there to, all filed with Canadian securities regulators and available on SEDAR at www.sedar.com.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.
SOURCE HANWEI ENERGY SERVICES CORP.
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