China: Ming Yang Announces Q1 Financial Results

China Ming Yang Wind Power Group Limited (Ming Yang), a leading wind turbine manufacturer in China, announces its unaudited financial results for the first quarter ended March 31, 2012. 

First Quarter 2012 Financial Highlights:

• Total wind turbine generators (“WTGs”) for which revenue was recognized amounted to an equivalent wind power project output of 120MW, or 80 units of 1.5MW WTGs, a decrease of 60.0% compared to Q1 2011.
• Total revenue was RMB406.6 million (US$64.6 million), a decrease of 70.9% compared to Q1 2011.
• Gross profit was RMB40.5 million (US$6.4 million), a decrease of 88.9% compared to Q1 2011. Gross margin was 10.0% for Q1 2012, compared to 26.0% in Q1 2011.
• Total comprehensive loss was RMB116.2 million (US$18.5 million), compared to a total comprehensive income of RMB218.8 million in Q1 2011.
• Basic and diluted loss per share was RMB0.93 (US$0.15), compared to basic and diluted earnings per share of RMB1.80 for Q1 2011.

Recent Developments:

• On May 10, 2012, the Company announced that its MY-3.0MW Super-Compact Drive (“SCD”) WTG had successfully passed low voltage ride through (“LVRT”) performance tests and obtained the LVRT certification.
• On May 28, 2012, the Board of Directors approved the promotion of Mr. Manfred Loong to Chief Executive Officer of Ming Yang Wind Power (International) Co., Ltd. (“Ming Yang International”), a wholly-owned subsidiary of Ming Yang incorporated in Hong Kong, and the appointment of Mr. Vincent Pang as the new Chief Financial Officer of Ming Yang, effective June 1, 2012. Mr. Pang, 42, has approximately 20 years of experience in accounting, financial management and corporate financial advisory services, including mergers and acquisitions and financial restructuring. Before joining Ming Yang in March 2012, Mr. Pang worked in various positions at KPMG since September 1992, where he provided extensive accounting and financial advisory services to various corporate clients. Mr. Pang received his bachelor’s degree in economics from The University of Hong Kong in 1992. Mr. Pang is a Hong Kong certified public accountant and a member of The Hong Kong Institute of Chartered Secretaries.

Mr. Chuanwei Zhang, Chairman and CEO of Ming Yang, commented on the first quarter results, “The growth of China’s wind power industry is slowing down with a more stringent project approval process, a step in the evolution of the industry. Increased price competition and decreased demand also trimmed the margins of China’s WTG manufacturers. Against this backdrop and coupled with continued adverse winter weather, our performance in the first quarter was adversely impacted. Gross margin in the quarter, however, showed moderate improvement compared with the previous quarter, primarily due to a more stable average selling price (“ASP”).

“It is expected that the wind power industry in China will continue to face challenges, with an estimated further reduced newly installed capacity in 2012. Nevertheless, the unusually demanding industry environment may prompt further market consolidation from which we believe we will benefit as a leading market player.

“As the largest non-state owned WTG manufacturer in China and a top ten WTG manufacturer globally, we believe Ming Yang is well-positioned to continue to strengthen its leading market position with a sharp focus on product quality, research and development, innovative business model and cost competitiveness. We are confident that we can capitalize on market opportunities in China and the international markets and retain our competitiveness both during and after this market downturn.”

Mr. Zhang continued: “We are pleased to announce two new appointments which represent our commitment to strengthen the breadth and depth of the management team of the international markets. With Mr. Manfred Loong’s stature and extensive experience with multinationals and our Company, he has been promoted to CEO of Ming Yang International because he is the best candidate to carry out our strategic overseas investments and international expansion initiatives going forward. We are also pleased to welcome Mr. Vincent Pang to our senior management team as our new CFO. Mr. Pang has an impressive background reinforced with extensive finance and accounting expertise, and we look forward to the significant benefits he will bring to Ming Yang.”

First Quarter 2012 Unaudited Financial Results

Revenue

Revenue in the first quarter of 2012 was RMB406.6 million (US$64.6 million), representing a decrease of 70.9% from RMB1,397.3 million in the corresponding period of 2011. WTGs for which revenue was recognized amounted to an equivalent wind power project output of 120MW, or 80 units of 1.5MW WTGs, compared to 297MW, or 198 units of 1.5MW WTGs, for the corresponding period in 2011. The decrease in revenue in the first quarter was primarily due to delays in installation and commissioning of 1.5MW WTGs on a number of wind farm projects caused by adverse weather conditions and overall decreased market demand in China.

Gross Profit and Gross Margin

Gross profit in the first quarter of 2012 was RMB40.5 million (US$6.4 million), representing a decrease of 88.9% from RMB363.8 million for the corresponding period in 2011. Gross margin in the first quarter of 2012 was 10.0%, compared to 26.0% for the corresponding period in 2011. The year-over-year decline was a result of a significant decrease in ASP compared to the first quarter of 2011 when the Company experienced an exceptionally favorable mix of higher margin sales contracts for WTGs commissioned in that period.

Selling and Distribution Expenses

Selling and distribution expenses were RMB70.3 million (US$11.2 million) for the first quarter of 2012, compared to RMB37.6 million for the corresponding period in 2011, representing an increase of 87.1%. In response to intensified market competition, the Company incurred more marketing and bidding expenses during this period to maintain its order backlog.

Administrative Expenses

Administrative expenses were RMB50.2 million (US$8.0 million) for the first quarter of 2012, compared to RMB54.2 million for the corresponding period in 2011, representing a decrease of 7.3%, primarily due to a decrease in share-based compensation.

Research and Development Expenses

Research and development expenses were RMB18.6 million (US$2.9 million) for the first quarter of 2012, compared to RMB15.9 million for the corresponding period in 2011, representing an increase of 17.0%. This increase was primarily due to research and development costs incurred with respect to the development of the Company’s SCD WTGs.

Net Finance Expense

Net finance expense was RMB48.2 million (US$7.6 million) for the first quarter of 2012, compared to a net finance income of RMB8.8 million in the corresponding period of 2011. This increase was primarily due to the fees paid to a bank for the arrangement of finance leases for the Company’s customers for the settlement of its trade receivables, and interest of the Company’s RMB-denominated unsecured three-year medium term notes issued in January 2012.

Profit/Loss Before Income Tax Expense/Benefit

Loss before income tax benefit was RMB126.0 million (US$20.0 million) for the first quarter of 2012, compared to a profit before tax expense of RMB268.2 million in the corresponding period of 2011.

Income Tax Expense/Benefit

Income tax benefit was RMB10.5 million (US$1.7 million) for the first quarter of 2012, compared to an income tax expense of RMB41.6 million in the corresponding period of 2011. The income tax benefit was primarily due to the recognition of deferred tax assets on tax losses during the period.

Total Comprehensive Income/Loss and Earnings/Losses per Share

Total comprehensive loss for the first quarter of 2012 was RMB116.2 million (US$18.5 million), compared to a total comprehensive income of RMB218.8 million in the corresponding period of 2011.

For the first quarter of 2012, basic and diluted loss per share was RMB0.93 (US$0.15), compared to basic and diluted earnings per share of RMB1.80 for the corresponding period in 2011.

Cash and Cash Equivalents

Cash and cash equivalents as of March 31, 2012 were RMB2,282.4 million (US$362.4 million), compared to RMB1,339.5 million as of December 31, 2011. The increase was primarily due to the proceeds received from the issuance of the Company’s RMB-denominated unsecured three-year medium-term notes in January 2012.

Business Update

Order Book Update

New Sales Contracts – During the first quarter of 2012, Ming Yang entered into sales contracts for wind power projects with a total output of 229.5MW, representing 149 units of 1.5MW WTGs and 1 unit of 6.0MW SCD WTG.

Order Backlog – As of March 31, 2012, the Company’s order backlog amounted to 2.2GW. Cumulative signed orders since its inception amounted to 5.2GW.

Orders awarded and pending contract signing amounted to 1.2GW as of March 31, 2012.

Share Repurchase Program

During the first quarter of 2012, the Company repurchased 903,946 ADSs, representing 903,946 ordinary shares, for an aggregate consideration of US$2.1 million (including commissions), under its share repurchase program. Since the inception of the program, Ming Yang has repurchased an aggregate of 3,153,897 ADSs, representing 3,153,897 ordinary shares, for an aggregate consideration of US$8.7 million including commissions.

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Offshore WIND staff, June 4, 2012; Image: mingyang