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THT Heat Transfer posts Q3 results, revenue drops, but contract value grows

THT Heat Transfer Technology (NASDAQ:THTI) saw third quarter profits fall as it experienced delays with customer payments and delivery schedules, but the blip is expected to be temporary as demand remains strong, the company said late Monday.

For the three months that ended September 30, the provider of heat exchangers and heat exchange solutions in China, posted a net profit of US$0.12 million, or US$0.01 per share, compared to US$1.56 million, or US$0.10 per share, in the same period a year ago.

Sales revenue decreased by 19.31 percent year-over-year to US$10.31 million.

"This quarter we saw a decline in our net revenue as tightened credit within China led customers to delay their payment and delivery schedules," said chairman and CEO, Guohong Zhao.

"Although macroeconomic conditions adversely impacted our third quarter financial results and caused a buildup in inventory, we view this disruption as temporary and believe the strength of product lineup, robust pipeline and sound strategy will drive value in the long term."

Indeed, the company said that contract value in the third quarter was up almost 32 percent year-over-year, signifying that demand remains strong, and that THT is  "well positioned for future growth as customers' credit lines are restored".

Still, sales volume in the third quarter, due to the tightened credit environment in China and resulting delivery delays, amounted to 645 units, down from 1,547 units a year earlier.

Revenue from plate heat exchangers totaled US$4.61 million, a 39.8 percent decline from the third quarter a year ago, while sales from heat exchange units came in at US$1.4 million, a near 32 percent drop.

Sales from shell-and-tube heat exchangers also fell during the quarter, but the company saw a new source of revenue from its new wide channel welded plate heat exchangers at US$1.37 million, as compared to nil a year ago.

Inventory levels rose from $13.71 million at the end of 2010 to $22.49 million at quarter-end, a result of delivery delays, but the company said on a conference call this morning that it expects inventories to normalize in the future.

Gross profit margin for the latest quarter edged up to 43.75 percent from 43.55 percent in the previous-year period, driven by higher average unit prices as the company improved its product mix, it said.

Total operating expenses in the period rose 14.7 percent to US$4.31 million as THT boosted its sales team by 15 people and continued to invest in the development of new products.

"Taking the current credit environment into consideration, we expect fourth quarter 2011 revenue to be in the range of US$10 million to US$12 million. We are closely monitoring the situation and carefully evaluating clients' payment and credit histories to ensure timely payment and maintain healthy accounts receivable levels," Zhao concluded.

Cash and equivalents totalled US$3.30 million at quarter-end, as the company works to improve its production  process with the construction of a new facility and the purchase of new equipment.

Heat exchangers help improve energy efficiency, and are used in a number of industries. THT's products focus on energy conservation, emission reduction and other environmentally friendly applications.