Tri-Tech Holding Q2 Revenue Up 149.3% to $20.2M, Net Income Up 23.9% to $1.8M, Diluted EPS $0.21 YTD Revenue Up 205.9% to $37.8M, YTD Net Income $3.46M, Diluted EPS $0.42 vs. $0.34.
Conference Call Today, August 15, at 9:00 AM EDT
Beijing, China – August 15, 2011 – Tri-Tech Holding Inc. (Nasdaq: TRIT), a premier Chinese company that provides leading turn-key solutions in China for the water resources, water and wastewater treatment, industrial safety and pollution control markets, announced today that revenue for the second fiscal quarter ended June 30, 2011 increased 149.3% to $20.2 million from $8.1 million in Q2 2010. Net income for the quarter was $1.8 million or a 23.9% increase over net income of $1.4 million in Q2 2010. Diluted EPS was $0.21 per diluted share compared to $0.19 in Q2 2010.
Additional Second Quarter 2011 Highlights
Key Second Quarter 2011 Events
Revenue from Water/Wastewater Treatment and Municipal Infrastructure continued to be very strong, constituting 83% of total revenue, or $16.8 million, an increase of $12.5 million or 294.3%, compared to $4.3 million in Q2 2010. This substantial increase was primarily attributable to sizable revenue recognition of the Ordos water plant construction project. In the quarter, $16.1 million was recorded for this project, reflecting an additional 25% completion of the initial contract and 20% completion of the expansion phase. In total, the initial Ordos contract was 70% completed by the end of Q2. Final customer acceptance is expected by September 30, 2011 when the remaining 30% of revenue of the initial contract will be recognized subject to customer acceptance.
Revenue from Water Resources Management Systems and Engineering Services saw moderate growth of 12.7% to $2.31 million from $2.105 million in Q2 2010, representing 11.5% of total revenue.
Revenue from Industrial Pollution Control and Safety was $1.12 million, a decrease of 37.8% from the same period in 2010, representing 5.5% of the total revenue for Q2 2011. This reflected a delay in project completion and customer acceptance for several large projects. Additionally, the Industrial Pollution Control and Safety segment instituted a strategic transition during the quarter with a change in the focus of its technical capabilities. It established new strategies and growth targets in industrial wastewater treatment and desalination opportunities partially as a result of the J&Y acquisition.
Liquidity and Capital Resources
Order Backlog and Pipeline
The Company is currently tracking potential projects with a total expected value of $147.2 million, of which approximately $95.1 million is Wastewater Treatment and Municipal Infrastructure, $21.8 million is Water Resource Management and Engineering Services Segment and $30.3 million is Industrial Pollution Control and Safety. The Company has not been awarded any of these projects, and there are no guarantees that it will be selected for any such projects.
Year 2011 Guidance Update
“We have a large pipeline of projects and anticipate increasing opportunities for new business in wastewater treatment, water reuse, seawater desalination and flash flood monitoring. We believe Tri-Tech will continue to maintain stable and rapid growth under the current favorable national policy and government financial support in water resources and environmental protection infrastructure.
“Reflecting the bidding season that normally starts around March, in the second quarter of 2011 we announced numerous awards of large contracts including the expansion phase of the Ordos drinking water plant for $20 million. We expect a large percentage of the subsequent revenue from these projects to be recognized in the second half of the year when Tri-Tech typically shows its best performances both in revenue and cash flow.
Water, Wastewater Treatment and Municipal Infrastructure
“The retrofit and construction and of wastewater treatment infrastructure for small- to medium-sized cities, high concentration industrial wastewater treatment and sludge disposal will be given top priority in the development of the environmental industry under the FYP. China is expanding its use of recycled water as an important step toward improving water conservation. Compared to the 70% water reuse ratio in developed countries, China’s water reuse is still in its infancy. Improvements in recycled water resources present large potential business opportunities to be developed.
“China’s water resource management regulations were published earlier this year. They combine a series of documents such as the State Council Circular No. 1 and the Action Program on Implementation of the Most Stringent Water Resources Management Work Plan. We believe these regulations offer significant opportunities in the water reuse industry. In recent years, local governments and large industrial enterprises have initiated water reuse projects. These projects gradually become less dominated by government investment and function more as market-based operations, especially in regions with water shortage such as Beijing and Tianjin. Residential water prices have risen significantly in these municipalities. The relatively lower cost of production makes recycled water increasingly competitive.
“We won a recycled water project to improve the quality of recycled water produced from the wastewater treatment plant at the Tianjin Airport Economic Zone Wastewater Treatment Plant. The treated recycled water will be used as industrial process water for industrial plants in the Tianjin Airport Economic Zone. With the fast development of industrial parks and supportive government energy conservation policies, we expect more opportunities in water treatment and reuse projects from the industrial parks.
“In the second quarter, we were awarded a contract for the expansion phase of the water treatment plant for the City of Ordos valued at approximately $20 million. This followed the initial contract for the Ordos drinking water plant project ($40 million) awarded in 2010. China continues to face the problem of heavily polluted water sources, which led the Chinese government to issue drinking water standard GB5749-2006. The standard mandates increased water quality indicators from 35 to 106 and will be enforced by 2012. Such national standard places great emphasis on the upgrading of China’s water infrastructure. We believe this presents further opportunity for Tri-Tech. The Ordos water treatment plant project is an exemplar of our ability to execute large projects, deploy market resources and capital, and implement innovative technology.
“The recent investment of $1.7 million in Yuanjie Water boosted our growth in the segment. Directly targeting the consumer use market, Yuanjie Water is engaged in water system integration for large high-rise buildings, through R&D, manufacturing, installation, and sales and operation of water treatment equipment systems. Yuanjie is strategically focused on becoming an industry leader in water system integration, providing know-how, technology and services to customers. We expect Yuanjie Water will expand our reach into a new sector of the water industry, that is, the down-stream of our operations to end users. This should provide a new flow of sustainable profit for Tri-Tech.
Water Resource Management Systems and Engineering Services
“Directly benefiting from the national policy and special water resources conservancy funds, our subsidiary Yanyu Water recorded remarkable results on flash flood monitoring and forecasting for the quarter. We were awarded flash flood monitoring contracts totaling $7 million in 12 counties and districts in four provinces, giving us the best results for a single quarter in our Company’s history in this segment. The positive momentum is continuing. Several contracts were awarded in July including the Yanyu contracts for flash flood monitoring projects in three counties in Yunnan Province, four counties in Hebei Province and three districts in Beijing. These projects are altogether valued at $4.08 million. In the next round of flash flood project bidding, we expect to continue the expansion of our market share and to secure more projects. Yanyu is also actively pursuing the business opportunities for small- to- medium-sized river improvement projects.
Industrial Pollution Control and Safety
“China’ seawater desalination capacity has increased 20-fold during the past 10 years and it is estimated that it will quadruple from the current level in the next 10 years. According to the targets set by the Chinese government, China’s seawater desalination capacity will reach 2.5 million tons to 3 million tons per day by 2020.
“As Tri-Tech’s first overseas acquisition, J&Y has enormous strategic importance. The acquisition enables us to aggressively expand our opportunities in seawater desalination and industrial water treatment. J&Y brings valuable technology and engineering experience that will enable us to become a strong company in the rapidly growing seawater desalination, water reuse, and zero liquid discharge markets driven by increased scarcity of water resources.
“This acquisition illustrates our determination to build a major global company in the water treatment industry. J&Y joins Tri-Tech with cutting edge yet well tested technologies including desalination, zero liquid discharge technology, evaporators, reverse osmosis, filtration, and ion exchange, among other biological, physical and chemical methods. J&Y has developed superior desalination technology with enormous market potential. We believe Tri-Tech will additionally benefit from J&Y’s decades of experience in the water and wastewater treatment industry.
Research and Development
“Construction of our research, development and production base in Tianjin, the Baoding facility, began in June. Part I of phase one, the construction for odor control equipment fabricating and automatic control box assembling, is scheduled for a late September completion. The design for part II of the phase one construction, the main office building and the dormitory, has been submitted for government approval. Phase one is to be completed around May 2012. Phases two and three of the construction are scheduled to be completed by the end of 2013. The total capital budget is $18 million for the first two phases. The total spending on the project as of June 30, 2011 was $5.83 million including $5.3 million for the land use rights.
Funding for Continuous Growth
“We are attempting to optimize our capital structure. Funds from the IPO and follow-on offering have efficiently funded our growth. However, under current market conditions and because of our share price performance, we now intend to raise capital in a non-dilutive manner. We have no immediate plans to secure funding through the sale of stock.
“To the extent we are able to finance our growth with funds from bank loans, we plan to do so. However, such short-term debt financing will only meet working capital requirements for short-term projects and may not permit us to bid for larger, more long-term projects that would be in the company's best interest.
“Sizable build-transfer project financing, strategic acquisitions and construction of the R&D and manufacturing base require longer-term capital investments. For such continuous growth, we are giving top priority to medium and long term debt financing through the sale of corporate bonds. We are actively exploring cooperative opportunities with several Chinese banks and expect the sale of corporate bonds to enable us to finance more longer term projects. We are also looking into project financing,” Mr. Zhao, said.
To participate, call U.S. Toll Free Number +1 (877) 941-2322 approximately 10 minutes before the call. International callers, please dial +1 (480) 629-9667. The conference ID number is 4464803. A live webcast of the call will be available at http://viavid.net/dce.aspx?sid=00008B60. Both an MP3 file one hour after the call and a transcript 48 hours after the call will be available. These will be archived for 90 days and accessible via http://www.tri-tech.cn andhttp://www.hawkassociates.com.
About Tri-Tech Holding Inc.
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This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. Among other things, expectations about expansion into adjacent industry verticals, growth of our Industrial Pollution Control Services, and the potential development of the company’s other existing service lines contain forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.