Packaging
China Bottles, Inc. Announces Fiscal Year 2007 Results
Thursday 17. April 2008 - -- Revenue records to $22.5million -- Net income records to $3.7million and fully diluted EPS $0.08
China Bottles, Inc. (”The Company”) (BULLETIN BOARD: HTTH) , a leading plastic packaging solution company in the People’s Republic of China (”PRC”), today announced financial results for the fiscal year ended December 31, 2007.
Full Year 2007 Highlights
— Net revenues totaled $22.5 million
— Gross profit was $6.5 million
— Operating income was $4.5 million
— Net income was $3.7 million and fully diluted EPS $0.08
Full Year 2007 Results
Revenue was $22,501,627 for the year ended December 31, 2007, attributable primarily due to expanding demand in the blown molding equipment and molds division. These products are competitively priced and as more beverage companies seek to initiate in house bottle production China Bottles is able to deliver cost competitive equipment and machinery.
During 2007, the mold production equipment was the largest contributor to the Company’s revenue at 69.2% or revenue or $15.5million. The finished bottle production line contributed 23.2% of the revenue at $5.2million and bottle production machinery contributes $1.7 million or approximately 7.6% of the Company’s revenue.
Cost of sales for 2007 was $15,933,826.
Gross profit was $6,567,801 for the year ended December 31, 2007. Gross profit as a percentage of net revenues was 29.2% for the year of 2007.
Sales and marketing expense, including distribution expenses was $357,184 for the year ended December 31, 2007. The main components of this expense consisted of exhibition fees and freight charges, constituting 23% and 19%, respectively, The increase in sales and marketing expenses was primarily due to an increased participation in sales exhibitions and an increase in marketing activities including an expansion of sales personnel.
General and administrative expenses increased from $2,090 for the year ended December 31, 2006 to $1,646,483 for the year ended December 31, 2007, an increase of $1,644,393. The most significant item for the year ended December 31, 2007, was represented by legal and professional fees which constituted 70% of the total of general and administrative expense. These fees were primarily incurred in the business acquisition in late August 2007.
Interest Expense was $66,541 for the year ended December 31, 2007, and was primarily tied to short-term bank loans.
Income before tax was $5,135,989 for the year ended December 31, 2007. Provision for taxation was $1,392,122, with an effective tax rate of 27%.
Net income for the year ended December 31, 2007 was $3,743,867. The Company’s net margin for the year ended December 31, 2007 was 16.7%.
Financial Condition
The company financed its operation primarily through cash flow from operations and short-term bank loans. As of December 31, 2007, it had approximately $1,375,786 cash and cash equivalents.
Cash provided from operational activities for 2007 amounted to $737,710. The increased in cash outflow was due primarily to increases in accounts receivable, inventories, prepaid expenses and other receivables.
Net Cash used in investing activities for 2007 amounted to $3,895,239 due to purchasing equipment and land use right for our expansion of production capacity.
Net cash provided from financing activities were to $4,133,956 for the year ended December 31, 2007. During the year, The Company received two short-term bank loans and obtained addition cash through the August 2007 acquisition.
Company Highlights
China Bottles completed a reverse takeover transaction to become public company on August 26, 2007
During 2008, the Company intends to focus on expanding market penetration for our products based on our position in the growing China market, favorable cost structure as compared to overseas suppliers, focus on product innovation and customer relationships. In order to support this growth we plan to invest in new production facilities in Northern China and upgrade our existing production lines to enhance their efficiency. The Company is evaluating financing alternatives to meet the capital expenditures and working capital required to meet these goals, including the issuance of equity and debt.
The Company also intends to establish an R&D center in Guangzhou City in 2008 so as to attract more talented researchers and engineers and enhance the competitiveness of our products. Our R&D projects include initiatives that will seek to:
(1) Increase the production speed for Automated Circle Blowing Machine to
1500 bottles per hour;
(2) Develop a Direct-line Machine;
(3) Redesign the appearance of current machines;
(4) Develop a mold for bottle caps;
(5) Improve of appearance of molds and end products.
The Company plans to implement Hybrid Build-to-Order (BTO) and Build-to-Stock (BTS) production models that are expected to improve production efficiencies. China Bottles expects to improve its product delivery time and shorten its sales cycles with a BTO production model. The Company will begin production when sales orders are committed allowing greater control in production planning and improving production efficiency and potentially enhancing profit margins.
China Bottles also plan to locate their sales headquarters in Beijing to increase visibility and penetrate the North China and international market. Locating in Beijing has the potential to enhance market share by enhancing business relationships with both domestic and international clients.
”Our revenues reflected in our fiscal year 2007, represent our continued growth in the sales of blown molding equipment and molds and our continued success in delivering innovative and unique finished bottle products to our clients. The blown molding equipment industry in China has experienced significant growth and we are focused on addressing this need. In addition, our bottle processing plant continues to expand its production” said Mr. Zhao, Chonghui, CEO of China Bottles, Inc. ”PET packaging has enjoyed substantial growth over the last twenty years across global markets for diverse applications. Its replacement of glass, metal, and other plastics has been unequaled in the packaging industry and we are excited to be a part of that growth.”
Business Outlook
China Bottles as a manufacturer of polyethylene terephthalate (PET) blow molding packaging equipment and molds in China for fifteen years has an established customer base. Their additional expertise in the production of beverage bottles creates strong relationships with beverage companies interested in initiating and upgrading their own bottling production line. China Bottles produces, markets and sells a full range of packaging production equipment including high speed injection molding machines for blow molding of PET bottles and molds which shape and form the bottles. The Company also produces bottles that are primarily made of PET which is a plastic resin that is a recyclable, durable plastic with strong resistance to heat, moisture and diluted acid.
“We are pleased to have completed our transition to become a public company and are now focusing our attention on our growth strategy. As we examine possibilities for additional financing to fund our growth we continue to look forward to serving the large number of companies that are initiating and upgrading their existing PET bottle production line. With fifteen years of experience we have strong relationships in the packaging industry and intend to build on those,” said Mr. Zhao, Chonghui, CEO of China Bottles. “Our success is based on close and continuing interaction with our customers, innovative products and our ability to deliver to our customers the ability to implement a competitive manufacturing cost structure in the packaging equipment and machinery by developing their own bottling production line in China,” added Mr. Zhao.
As of the April 11, 2008, the company has approximately 75 million shares of common stock outstanding. All currency amounts in this press release are reported in U.S. Dollars.
Additional information about China Bottles, Inc., including its financial statements for the period ended December 31, 2007, is available in the company’s current report on Form 8-K filed with the Securities and Exchange Commission on April 14, 2008. All forward looking statements in this press release should be read in conjunction with the ”risk factors” set forth in the above-mentioned current report and in the other period reports of the company.