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Message: ZPP Q4 + Year end 2008 good growth future looking bright
PERSONAL COMMENT .: Growth numbers for Q4 2008 were good as expected in previous release , expectations for 2009 are encouraging since the company has cash , strong partnership ans is pause for further growth with new installation ready next quarter . They're positioned to make further acquisition in due time , and there partnership gives them national exposure as well as possibility for international export market when the economic siyuation will allow. From here it looks like sound management and wise strategic planning . Attention Business/Financial Editors Zongshen PEM Power Systems Inc. Announces Fourth Quarter and Full Year 2008 Financial Results << TSX: ZPP Fourth Quarter 2008 Highlights
- Unit sales reach a record 93,591 units - Revenues increase 244 percent quarter-over-quarter to $25.6 million - Basic and diluted-earnings per share amount to $0.05 and $0.04 respectively Full Year 2008 Highlights
- Unit sales reach a record 227,074 units - Revenues increase 291 percent year-over-year to $62.9 million - Basic and diluted earnings per share amount to a record $0.07 - Strong balance sheet with $45.0 million in cash and loan receivable >> VANCOUVER, March 31 /CNW/ - Zongshen PEM Power Systems Inc. ("ZPP" or "the Company") (TSX:ZPP), today announced its financial results for the three and twelve-month periods ended December 31, 2008. All currency amounts referred to in this news release are in Canadian dollars unless stated otherwise. For the three-month period ended December 31, 2008 the Company reported
record revenues of $25.6 million versus $7.4 million in the corresponding quarter last year, representing a 244 percent growth rate. Volume sales during the fourth quarter of 2008 totalled 93,591 units, compared with 29,608 units in the fourth quarter of 2007. Gross profit amounted to $2.0 million or 8 percent of sales compared to $508,579 or 6.8 percent of sales during the same period in 2007. versus a net loss of $925,356 during the fourth quarter of 2007. Net income during the three-month period was inclusive of $971,491 in foreign exchange gains, and $474,184 in interest income generated on the Company's strong cash balance. At December 31, 2008, the Company had cash and cash equivalents, and loan receivable totalling $45.0 million, compared to $37.1 million at December 31, 2007.
Subsequent to December 31, 2008, the loan receivable of $11.9 million was fully repaid in cash. "2008 proved to be a challenging year from a macroeconomic perspective and for ZPP meeting its 260,000 unit sales target, however we are proud of ZPP's accomplishment in achieving tremendous growth in revenues and profits on a year-over-year basis," noted Zongshen Zuo, Chairman and CEO of Zongshen PEM Power Systems Inc. "We are currently reviewing and bolstering our growth plan for 2009, which may prove to be a very exciting period for ZPP and its stakeholders, during one of the most challenging economic environment we have
seen in decades. ZPP is well positioned in China's large market for e-bikes and small gas bikes, with a solid base of operations and a strong balance sheet. In 2009, we will focus on developing a premium e-bike product for the China market that is also attractive for international markets and on
identifying and assessing acquisition targets that can add products and distribution at opportunistic prices." For the twelve-month period ended December 31, 2008 the Company increased revenues by 291 percent to $62.9 million versus $16.1 million during the corresponding quarter in 2007. Volume sales during 2008 totaled 227,074 units, compared with 60,130 units during the same period in 2007. Operating income amounted to $1.8 million during 2008 versus an operating loss of $1.8 million last year. Net income during the period amounted to a record $4.5 million or $0.07 per share on a basic and fully diluted basis, versus a net loss of $1.7 million or $0.04 per share during the corresponding period in 2007. Net income during the twelve-month period was inclusive of $819,512 in foreign exchange gains, and $1.8 million in interest income. ZPP benefited from strong unit sales, revenue and net earnings growth in 2008, however the Company did not succeed in achieving significant growth and market penetration with its e-bike products. The primary factors, which negatively impacted the growth performance of the e-bike sales, were the
highly competitive and fragmented nature of the Chinese market and the Company's lack of a differentiated electric motor and battery technology. Due to intense competition and lack of differentiation, net margins for the leading, large-scale e-bike companies in China are very low. ZPP's remains committed to and focused on building a premium e-bike business in China and
international markets,
The Company's focus in 2009 will be to develop and acquire electric motor and battery technologies, and work with Zongshen Industrial Group to integrate them into its large suite of two-wheeled and three-wheeled products.
The small-gas bike business has proven to be a great addition to ZPP's product portfolio. The domestic market remains very promising for the growth of this division, and management continues to leverage the strength of this division while developing the strength, technology and future of its e-bike division.
During the second quarter of 2008, the Company commenced the construction of its Chongqing production facility, which will be operational during the second quarter of 2009.
The new production facility will have annual
production capacity for 600,000 bikes (phase 1) and is expandable to have four production lines with a total production capacity of 1.2 million units (phase 2).
Given the severe economic slowdown, ZPP Chongqing will rollout only one production line producing up to 150,000 units per annum, and ramp up as the
Subsequent to year-end, the Company reported that it has suspended and terminated all research and development initiatives for the development of fuel cell technology due to the lack of hydrogen infrastructure, manufacturing cost and ultimately low return on capital associated with this initiative. As a result of this strategic change in the Company's alternative power business unit, ZPP is expected to reduce approximately $250,000 per annum in R&D costs. Due to the global economic environment, and its negative impact primarily on export markets, ZPP expects 2009 to be a challenging year for organic
growth of its e-bike and small gas bike business. ZPP is well positioned to advance its growth strategy with a solid foundation in e-bikes and small gas bikes, a strong balance sheet, a large market for its products and a major shareholder and partner with assets and resources that can be leveraged to gain competitive advantages. Management and the Board of Directors do not expect organic growth in
units sales in 2009 versus 2008. However, the Company remains committed to developing and/or partnering with leading battery and electric motor companies to further develop the strength of the electric vehicle business in China and international markets, while leveraging the demand for its small-gas bikes in the domestic markets.
With its new Chongqing manufacturing facility, ZPP can increase capacity with a small incremental investment.
In addition the Company is profitable and has a strong balance sheet. Accordingly, the Company will
identify and assess complementary acquisition targets that can add products, technology and/or distribution. About Zongshen PEM Power Systems Inc. Zongshen PEM Power Systems Inc. is a public company trading under the symbol ZPP on the Toronto Stock Exchange. The Company is engaged in the commercialization of alternative power systems including batteries, fuel cells and solar power, for a variety of consumer and industrial applications. The Company manufactures low-cost, high quality, environmentally friendly small gas motorbikes, electric motorcycles, electric bicycles and other e-vehicles in China for the Chinese domestic and international markets. Zongshen PEM Power System's largest shareholder is Zongshen Industrial Group, one of China's largest manufacturers and distributors of motorcycles, engines, and power equipment. Forward Looking Information This release contains forward-looking statements, which may be identified by statements containing the words "will", "anticipate", "expect", "intend" and other similar expressions. These statements are based on certain factors and assumptions including foreign exchange rates, expected growth and sales, results of operations, performance, and business prospects and opportunities and effective income tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to: our relationship with Zongshen Industrial Group; fluctuations in market demand for small gas motorbikes and e-bikes; changes in competitive pressures, including pricing pressures; timing and amount of capital expenditures; changes in financial and capital markets and corresponding effects on the company's investments; changes in currency and exchange rates; and the effects of government policy and regulations;. Additional risks and uncertainties can be found in our MD&A for the interim period ended December 31, 2008 and in our other filings with the Canadian securities commissions. Forward-looking statements are given only as at the date of this release and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. -30- /For further information: Ali Mahdavi, Zongshen PEM Power Systems Inc., Vice President, Corporate Finance & Investor Relations, (416) 962-3300, 1-877-775-8734, [email protected]/
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