China GrenTech Corp. Limited, a China-based provider of radio frequency ("RF") and wireless coverage products and services, announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2010.
In a release on March 16, the Company noted fourth quarter 2010 financial highlights
-Total revenue was RMB794.3 million (US$120.3 million)(1), an increase of 59.0 percent year-over-year
-Gross profit was RMB221.0 million (US$33.5 million), an increase of 133.2 percent year-over-year
-Operating income was RMB132.4 million (US$20.1 million), compared to a loss of RMB10.0 million during the fourth quarter of 2009
-Net income attributable to the equity shareholders of GrenTech was RMB102.9 million (US$15.6 million), compared to a loss of RMB7.1 million during the fourth quarter of 2009
-Diluted earnings per ADS(2) was RMB4.40 (US$0.67), compared to a loss of RMB0.30 per ADS during the fourth quarter of 2009
Fiscal Y ear 2010 Financial Highlights
-Total revenue increased by 7.4 percent year-over-year to RMB1,720.7 million (US$260.8 million)
-Gross profit increased by 20.3 percent year-over-year to RMB455.7 million (US$69.1 million)
-Operating income increased significantly by 157.8 percent year-over-year to RMB155.7 million (US$23.6 million)
-Net income attributable to the equity shareholders of GrenTech increased significantly by 200.4 percent year-over-year to RMB98.1million (US$14.9 million)
-Diluted earnings per ADS was RMB4.12 (US$0.62), compared to diluted earnings per ADS of RMB1.35 in 2009
"Not only has our top line performance grown consecutively for the last several years, but we have also achieved a major breakthrough in attaining a significant improvement in profitability this year as management committed to a more robust business strategy to enhance the overall development of the Company. We are delighted to deliver outstanding fourth quarter and fiscal year 2010 results, as we were able to achieve solid growth, improve our product mix to focus on higher margin products, improve operational efficiency and strengthen internal controls, and as a result, significantly enhance our net income and margins," said Yingjie Gao, Chairman and CEO of GrenTech.
"In 2010, we took the following steps to improve products mix and profitability: i) we promoted new products including WLAN, digital optic coverage products and network coverage to subway segment etc., all of which represented over 20 percent of our total revenue. These new products introductions enriched our product offerings and contributed to the increase in our margins, and ii) we enhanced our traditional product portfolio with a higher proportion of integrated services sales which has higher margin than equipment sales. This strategy has proven successful as for the first time, our sales contract value of integrated services has exceeded sales from traditional wireless coverage equipments," Gao added.
"In order to maintain our technology edge and stay ahead of the competition, we increased research and development expenditures by 19.5 percent from 2009 levels. As a result, we achieved an important milestone in our digital technology platform, where we developed a series of digital optic coverage products and solutions. In order to resolve the problem of different networks sharing the same coverage system, we use high-speed data transmission technology and pico-power distribution technology. This technology reduces signal disturbances and improves efficiencies of signal transmission, while creating a suite of solutions for indoor wireless coverage where GSM, CDMA, WCDMA, TD-SCDMA, WLAN and other signals can be used simultaneously with minimal interference. This is an important breakthrough as the technology can be used as a basis for the advancement of integration of telecom, broadcast TV and Internet networks in China (" tri-network integration"). Based on our in-house technology development, we were successful in winning all 7 bid sections for the CMMB project in 2010, underlying the strength of our technology and industry know how."
"During the year, we were invited to be part of World Expo 2010 and Guangzhou Asian Games communications and network support team in China, which we believe demonstrates our leading position in the market. We also obtained "Outstanding contributor award to the Guangzhou Asian Games communications and network support team" by China Mobile. In addition, we were the sole equipments provider for China Mobile of Shanghai Expo's WLAN, and WLAN solutions provider for China Telecom to the China Pavilion at the Expo event."
"Looking forward to 2011, we are confident that China GrenTech is well positioned to maintain its growth momentum in the traditional wireless coverage business and base station RF business. In the meantime, we will continue to expand our businesses, including by providing nationwide WLAN products and integrated services for China Mobile to help it accommodate growing demand for bandwidth; leveraging our CMMB project to penetrate China Broadcasting Corp.'s network; expanding market share in the light rail transit and subway wireless coverage projects; and expanding our aesthetic antenna business and introducing other new products. We believe that the Chinese telecommunication operators will maintain their level of investment in network construction in 2011, which, together with our pipeline of new product introductions and new client retention, will enable us to continue to deliver solid growth for the coming year."
Fourth Quarter and Fiscal Year 2010 Financial Results
Revenue
Revenue for the fourth quarter 2010 was RMB794.3 million (US$120.3 million), representing a RMB294.7 million (US$44.7 million), or 59.0 percent increase compared to the same period of 2009. The primary driver was the increased revenue of RMB173.0 million (US$26.2 million) generated from China Mobile in the fourth quarter, representing an increase of 160.1 percent from 2009. Revenue generated from China Unicom also increased by RMB114.4 million (US$17.3 million), representing an increase of 80.4 percent from 2009.
Total fiscal year 2010 revenue was RMB 1,720.7 million (US$260.8 million), which increased by 7.4 percent from RMB1,602.9 million in 2009. Revenue from wireless coverage products and services increased by 19.1 percent year-over-year, whereas revenue from base station RF products decrease by 27.0 percent compared to 2009. The increase in revenues in the wireless coverage products and services segment was attributable to China Mobile's increased spending to enhance its GSM network quality and increased investment in WLAN. During 2010 the Company was successful in expanding its WLAN business as well as increasing regional market shares in wireless coverage business with China Mobile, which resulted in a 61.7 percent or RMB241.3 million (US$36.6 million) increase in revenue from that account. In addition, the other new products and services that were launched in 2010, including digital optic coverage products, and network coverage to subway segment etc., also contributed to the growth in total revenue in 2010. Revenue generated from China Unicom and China Telecom was slightly deceased as the lower coverage spending by both of these telecom operators. Sales from base station RF products also decreased due to the slower pace in 3G infrastructure spending after its peak period in 2009.
Earnings
Net income for the fourth quarter of 2010 was RMB102.9 million (US$15.6 million), compared to a net loss of RMB7.1 million in the same period of 2009.
For the fiscal year 2010, net income increased by 200.4 percent to RMB98.1 million (US$14.9 million) from RMB32.7 million in 2009.
Diluted earnings per ADS for the fourth quarter of 2010 were RMB4.40 (US$0.67), compared to diluted loss per ADS of RMB0.30 in the same period of 2009.
Diluted earnings per ADS for fiscal year 2010 were RMB4.12 (US$0.62), compared to RMB1.35 in 2009.
Business Outlook
Wireless Coverage Products and Services
Looking ahead, China Mobile's continued spending to enhance its GSM network coverage and expand its WLAN to accommodate large data usage among its users will remain important growth drivers for China GrenTech. In addition, the Company will also continue its effort in research and development to support China Mobile's TD-LTE trial phase. The Company also expects business from China Unicom to grow as it invests to expand its WCDMA network to accommodate more users and enhance its WLAN coverage to support the increase in data usage. The Company also expects CMMB's network coverage to continue to expand due to the push for tri-network integration. In addition, wireless coverage in the subway segment is also expected to provide opportunities for the Company to grow its business in the quarters ahead. GrenTech will leverage its strong track record to maintain its growth momentum in the traditional wireless coverage business, at the same time, the Company will continue to develop and launch new products as well as its extensive integrated services capabilities to meet the growing market demand.
Base Station RF Products
The Company will leverage its current customer base to increase introduction of new products to expand market share. Along with the development of TD-LTE trial phase, the Company believes that its TD-LTE RF products will be launched during the third or fourth quarter of 2011. The Company will also look into increasing sales to overseas operators to provide overall coverage solutions and RF products.
Guidance for First Quarter 2011
For the first quarter of 2011, GrenTech forecasts revenue to be in the range of RMB160 million to RMB184 million.
GrenTech is a developer of radio frequency ("RF") technology in China and a provider of wireless coverage products and services in China. The Company uses RF technology to design and manufacture wireless coverage products, which enable telecommunication operators to expand the reach of their wireless communication networks to indoor and outdoor areas, such as buildings, highways, subways, tunnels and remote regions. GrenTech's wireless coverage services include design, installation and project warranty services. The Company also tailors the design and configuration of its wireless coverage products to the specific requirements of its customers.
Based on its in-house RF technology platform, the Company also develops and produces base station RF parts and components sold to base station manufacturers. GrenTech is a qualified supplier of RF parts and components to major global and domestic base station manufacturers. More information: GrenTech.com.cn.
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