Longwei Signs Sales Agreements with Huajie Customers

Source: www.gulfoilandgas.com 10/29/2012, Location: Asia

Longwei Petroleum Investment Holding Ltd., an energy company engaged in the storage and distribution of finished petroleum products in the People's Republic of China ("PRC"), announced it has signed purchase agreements with nine major customers for its Huajie facility and received the endorsement of local government and business leaders based on a site visit to its new facility on October 23, 2012.

The Huajie facility site visit by local government leaders included Mr. Zhong, the General Director of the Fanshi County Commerce Bureau; Mr. An, the General Director of the Xinzhou Commerce Bureau; and Mr. Wang, the Vice Director of the Yuanping Railway Operations Bureau; in addition to other local business leaders.

These leaders had high praise for Longwei's purchase of the Huajie facility. They pledged their support to ensure its success by assisting Longwei to expand its customer base quickly by encouraging local enterprises in Fanshi County to utilize the new facility and increase their petroleum consumption. The local leaders view the new facility as a stimulant for regional growth and as a key piece of infrastructure to support local employment and economic development.

"We are pleased to receive the full support of the local government and business leaders, and their endorsement to help us build our customer base," said Cai Yongjun, Chairman and Chief Executive Officer of Longwei. "Since opening the facility, we have signed contracts with at least nine major regional industrial companies in mining, steel and logistics. We are looking forward to adding more customers and extending our reach into this fast-growing industrial area of northern Shanxi Province."

The officials toured the facility and new operations with the Company's management team. Longwei demonstrated the facility's working processes, including storage and pumping operations, fire control, and other safety and environmental measures. The group expressed a high degree of satisfaction with the facility's workflow, safety and quality control.

Longwei expects year-over-year revenue growth of approximately 26.6% to $646.3 million, and net income growth of approximately 24.2% to $77.6 million, adjusted for the warrant derivative liability, for the fiscal year ending June 30, 2013. The growth is driven primarily by the ramp-up of the Huajie facility and organic growth at the Company's two existing facilities.

Recent economic indicators show that the PRC economy has stabilized and expects higher growth in the fourth quarter of 2012. "Now is a critical point for the country's industrial economy. Positive factors are accumulating," said Zhu Hongren, Chief Engineer of the Ministry of Industry and Information Technology. The PRC also surpassed the United States as the world's largest recipient of global foreign direct investment in the first half of 2012, showing that global investors have confidence in the world's second-largest economy. China Daily (October 26, 2012).

"We expect meaningful revenue contribution from our Huajie facility beginning in the second half of fiscal 2013 as we ramp up our operations and sales efforts," said Michael Toups, Chief Financial Officer of Longwei. "Based on our experience during the Gujiao ramp-up phase in 2010, we are confident we can develop this new market quickly."

The GDP growth rate for Shanxi during 2011 was 13%, according to China Daily (March 13, 2012), and it is expected to be approximately 10% for 2012, which outpaces the general economic growth estimates of 7.5% in the PRC. The provincial government has estimated the fixed-asset investment in Shanxi to be RMB 5 trillion (approximately $790 billion) over the next five years, according to China Daily (September 13, 2011). The provincial government also recently announced an additional RMB 1 trillion (approximately $158 billion) in local development projects as part of the region's industrial stimulus plan, according to China Securities News (August 23, 2012). The Company believes its locations within Shanxi Province are advantageous to the growth of its business model.

Longwei has received strong interest from institutional and private investors in visiting its facilities, including the new Huajie facility. The Company plans to host an investor and analyst day to invite shareholders and interested parties to tour its facilities. Once plans are finalized, the Company will release additional details. Longwei recently reported revenues of US $510.6 million and net income of US $65.1 million for the fiscal year ended June 30, 2012. At the June 30, 2012 fiscal year-end, the Company reported total assets of US $342.3 million and a book value per share of $3.31.


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