President of China Linen pleased with financial results for 2009-Texglobe

China Linen Textile Industry, Ltd., a China-based company engaged in the production and sale of linen yarn and various types of linen fabric, announced its financial results for the year ended December 31, 2009.

Revenue
Revenue for the year ended December 31, 2009 totaled $29.4 million, up approximately 28.1% from $22.9 million for the year ended December 31, 2008. The company added 7 customers during 2009 and increased sales by 5% in new geographic areas. The increase in revenue was primarily attributable to increased sales volume of linen fabric.

Cost of Goods Sold
Cost of goods sold amounted to $20.7 million for 2009, or 70.4% of revenues, compared to $17.6 million, or 76.9%, of revenues for 2008. The Company was able to drive down cost of materials by further development of the Company's proprietary technology reducing the amount of raw material lost in production process, improving production efficiency and resulting in a product mix with higher gross margins. The Company anticipates that cost of goods sold will remain consistent with 2009 levels or be lower during 2010 due to economies of scale due to the expanded capacity.

Gross Profit
Gross profit for 2009 was $8.7 million, up 64.5% from $5.3 million for 2008. The increase in gross profit was mainly attributable to increased sales in 2009, and to revenue-per-unit outpacing costs. Gross margin for the year ended December 31, 2009 was approximately 29.6% as compared to gross margin of approximately 23.1% for the year ended December 31, 2008.

Operating Expenses
Operating expenses decreased 25.2% to $1.6 million in 2009 from $2.2 million in 2008, which included approximately $0.8 million, or 43.1%, in stock-based compensation which was not present in 2009. Management was able to prudently manage expenses and was able to increase volume.

Operating Income increased 127.5% to $7.1 million for 2009 and operating margins were 24.1% compared to 13.6% in 2008.

Other Income
Other income decreased by 16.5% to $0.8 million for the year ended December 31, 2009 from $1.0 million in the year ago period as a result of decrease in government subsidies received by Lanxi Sunrise, the majority-owned subsidiary through which China Linen conducts all of its business operations. During 2009 and 2010, Lanxi Sunrise received or expects to receive government subsidies on local income taxes paid equal to 40% of its total annual income tax paid for each such year.

Provision for Taxes
Provision for taxes was $2.1 million for 2009, as compared to $1.2 million for 2008, an increase of approximately 77.5%, with an effective tax rate of 27.2% and 29.7% in each respective period.

Net Income
Net income was $5.7 million for the year ended December 31, 2009 as compared to $2.9 million for the year ended December 31, 2008, representing an increase of approximately 100.6%. Earnings per share in 2009 amounted to $0.28, up 86.7% from $0.15 in 2008, based on weighted average shares outstanding of 20.1 million and 19.5 million respectively.
"We are pleased with our financial results for 2009, which included record revenues and net income as well as improved gross and net margins," stated Mr. Gao Ren, chairman and president of China Linen.

"We saw an increase in demand from both domestic and international customers during the year, and continued to operate at full capacity, while driving our production costs down. With the goal of capturing a larger share of the growing market for linen fabric and yarn products, we recently expanded our linen fabric production by 26% to 2.1 million meters annually and our linen yarn production capacity by 39% to 620 tons annually.

“We also added the capability to bleach linen fabric, which is an important part of the value chain and will allow us to better service our customers to generate incremental revenues at higher margins or consistent margins. We plan to further expand our production capacity and will leverage our R&D capabilities to produce new and competitive products.

“In addition we plan to expand sales nationally and internationally to markets in Europe, the U.S., and the Middle East. As a leading producer and exporter of linen in China, we believe we are well positioned to capitalize on the industry demand and dynamics to generate strong revenue and net income growth with superior margin profiles."

Balance Sheet and Cash Flow
As of December 31, 2009, the Company had cash and cash equivalents of $2.3 million, compared to $10,674 at December 31, 2008. Working capital at year-end 2009 totaled $12.0 million. The Company had total stockholders' equity of $21.5 million at December 31, 2009, with total assets of $36.1 million versus total liabilities of $14.6 million. For the year 2009, the Company generated $3.5 million in cash from operations versus $4.3 million for the same period in 2008.

Fiscal year 2010 Guidance
For fiscal year 2010, management is confirming revenue guidance of $38.1 million, representing growth of 29.6% over 2009, and net income guidance of approximately $9.3 million, representing year-over-year growth of approximately 63.2%. The company expects to report earnings per share of $0.39, representing a 39.3% year-over-year increase.

China Linen Textile Industry, Ltd. is principally engaged in the production and sale of linen yarn and various types of linen fabric. The Company is also involved in consultation and R&D related to linen technology and linen products.