ZhongDe Waste Technology AG: Challenging circumstances adversely affect results 2012

(PresseBox) ( Frankfurt, )
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- Revenues decreased by 24.0 per cent to 24.8 million Euros
- EBIT amounted to -12.6 million Euros
- Order intake strongly increased to 140.6 million Euros
- Order backlog grew significantly to 257.4 million Euros
- Solid cash position

2012 was a very challenging transition period for ZhongDe Waste Technology AG in regards to the completion of its running BOT and EPC projects. While revenues decreased to 24.8 million Euros, gross profit went down by 62.0 per cent to 1.6 million Euros. The company expects to benefit from the favorable economic environment in China for eco-friendly waste disposal in the future.

In the fiscal year 2012 revenues of ZhongDe Waste Technology decreased by 24.0 per cent to 24.8 million Euros (2011: 32.4 million Euros). This decrease was mainly influenced by the fact that the construction progress of the current EPC (Engineering, Procurement and Construction) projects Dingzhou and Zhucheng was suspended according to the requirements of the owners and the fact that the construction progress of BOT (Build, Operate and Transfer) projects was slower than planned, mainly due to delays in obtaining required government approvals. With 24.5 million Euros or 99.0 per cent most of the revenues were generated from BOT projects and only 0.3 million Euros from EPC projects (2011: 8.9 million Euros). The demand for small- and mid-sized incinerators came to a halt in 2012, thus there were no recorded revenues in 2012 in this business segment.

Gross profit amounted to 1.6 million Euros in 2012, which corresponds to a decrease of 62.0 per cent compared to the previous year (2011: 4.1 million Euros). Accordingly gross profit margin went down from 12.7 per cent in 2011 to 6.4 per cent in 2012. The main reason for this development was the adjustment of costs estimated for the construction of EPC and BOT projects.

As a consequence of the aforementioned circumstances, EBIT went down by 62.4 per cent to
-12.6 million Euros (2011: -7.7 million Euros). EBIT margin amounted to -51.0 per cent (2011:
-24.0 per cent). Furthermore, ZhongDe realised a net loss of 12.2 million Euros (2011: net loss of 10,7 million Euros).

Positive effects of cost controlling and strong order backlog

ZhongDe's strict cost control measures showed positive results within the financial year 2012. While selling and distribution costs explicitly decreased by 49.0 per cent to 1.9 million Euros (2011: 3.7 million Euros), administrative expenses could be reduced by 13.0 per cent to 3.7 million Euros (2011: 4.3 million Euros).

Despite the negative results in 2012, ZhongDe has a solid base regarding its high order intake and backlog. Order intake strongly increased in 2012 to 140.6 million Euros (2011: 6.5 million Euros). Order backlog also grew significantly by 78.0 per cent from 144.2 million Euros in 2011 to 257.4 million Euros in 2012. This was mainly due to the new BOT project in Lanzhou, which ZhongDe won in October 2012.

Solid cash position

Furthermore, ZhongDe still disposes of a strong cash position. Cash and cash equivalents amounted to 100.3 million Euros (2011: 117.3 million Euros). This gives the company a favorable position for further investments. First of all ZhongDe plans to invest the funds in its budgeted EPC and BOT projects and further business activities.

Equity slightly decreased by 10.3 per cent to 112.8 million Euros (2011: 125.7 million Euros), while the equity ratio went down from 63.0 per cent in 2011 to 58.0 per cent in 2012.

Modest outlook

Looking ahead to 2013 and 2014, ZhongDe expects to further benefit from the favorable political and economic environment for eco-friendly waste disposal as well as from the growing demand for waste-to-energy plants in China, but also throughout Asia. Currently ZhongDe is negotiating on two new projects with an expected volume of 1.000 tons per day each and is confident to close the contracts in 2013. This year, ZhongDe will enter two new projects into the approval procedure. Moreover, ZhongDe's current three BOT projects will be completed and begin their operations in 2013. These BOT projects will generate revenues as soon as they generate cash-inflows from by-products such as electricity. ZhongDe's biggest project - Lanzhou - will finish the preparation state and start its construction in 2013 as well.

All in all, ZhongDe expects the next year to maintain a transition period in which the company will finalise its existing projects and start its operations as well as the project in Lanzhou. This will result in comparably more cash-inflows from guaranteed payments from the operations, but at the same time in decreased revenues for that transition period. For 2013, although an improvement of the operating result is to be expected, a loss before taxes is to be expected, however, with the Group's cash position being stabilized. ZhongDe anticipates, that its financial performance will improve and create value for its shareholders in the mid-term.

Please find the complete annual report 2012 of ZhongDe Waste Technology AG on the company's website under the following link: http://www.zhongde-ag.com/investor_relations/publikationen.html
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