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Articles 

China Natural Gas Inc. Reports Operating Results (10-Q/A)

December 28, 2011 | About:

China Natural Gas Inc. (CHNG) filed Amended Quarterly Report for the period ended 2010-09-30.

China Natural Gas Inc. has a market cap of $41.42 million; its shares were traded at around $1.93 with a P/E ratio of 2.57 and P/S ratio of 0.46. China Natural Gas Inc. had an annual average earning growth of 15.5% over the past 5 years.

Highlight of Business Operations:

Natural Gas from Fueling Stations. Natural gas revenue from our fueling stations increased by 6.1%, or $907,994, to $15,697,918 during the three months ended September 30, 2010 from $14,789,924 during the three months ended September 30, 2009, and contributed 70.3% of our total revenue, the largest of our four major business lines. The increase in natural gas revenue was primarily due to the addition of four new fueling stations during the second quarter of 2010 and one new fueling station in the third quarter of 2009, offset by the closed one fueling station during the third quarter of 2010. During the three months ended September 30, 2010, we sold 42,291,708 cubic meters of compressed natural gas through our fueling stations compared to 40,420,123 cubic meters during the three months ended September 30, 2009. In the three months ended September 30, 2010, the average revenue of our fuel stations was $402,511 and the average sales volume was 1,084,403 cubic meters of compressed natural gas per station, compared to approximately $418,622 and 1,144,074 cubic meters in the three months ended September 30, 2009. The reason for the decline in per station sales was primarily due to the construction of main subway lines in Xi an, which caused certain bus routes to deviate from our stations and resulted in decreased sales. During the three months ended September 30, 2009, unit selling price was $0.34 (RMB 2.33) and $0.46 (RMB 3.10) net of VAT in Shaanxi and Henan Provinces, respectively, or $0.38 (RMB 2.54) on an average basis, compared to unit selling price of $0.34 (RMB 2.33) and $0.42 (RMB 2.83) net of VAT in Shaanxi and Henan Provinces, respectively, or $0.37 (RMB 2.50) on an average basis during the three months ended September 30, 2009.

Natural Gas from Fueling Stations. Cost of revenue of our natural gas for our fueling stations increased by 18.6%, or $1,317,651, to $8,393,038 during the three months ended September 30, 2010 compared to $7,075,387 during the three months ended September 30, 2009. The procurement price for natural gas in Shaanxi increased from $0.16 (RMB 1.12) per liter in the three months ended September 30, 2009 to $0.17 (RMB 1.14) per liter in the three months ended September 30, 2010. In Henan Province, the average procurement price for natural gas increased from $0.19 (RMB 1.30) during the third quarter of 2009 to $0.27 (RMB 1.83) in the third quarter of 2010, as we continued our gradual shift from coal bed methane as a source of supply for our fueling stations to regular natural gas due to uncertainty in the market supply of coal bed methane as well as the increased market demand for both coal bed methane and natural gas. The procurement prices in Henan Province, however, remained significantly below the natural gas retail price of $0.46 (RMB 3.10) in Henan Province for both the three month period ended September 30, 2009 and the three month period ended September 30, 2010.

Natural Gas from Fueling Stations. Natural gas revenue from our fueling stations increased by 3.9%, or $1,718,661, to $45,817,828 during the nine months ended September 30, 2010, from $44,099,167 during the nine months ended September 30, 2009, and contributed 72.9% of our total revenue, the largest of our four major business lines. The increase in natural gas revenue was primarily due to the addition of four new fueling stations during the second quarter of 2010 and one new fueling station in the third quarter of 2009, offset by the closed one fueling station during the third quarter of 2010. During the nine months ended September 30, 2010, we sold 125,840,032 cubic meters of compressed natural gas through our fueling stations compared to 120,866,756 cubic meters during the nine months ended September 30, 2009. In the nine months ended September 30, 2010, the average revenue of our fuel stations was $1,195,352 and the average sales volume was 3,283,069 cubic meters of compressed natural gas per station, compared to approximately $1,256,029 and 3,442,517 cubic meters in the nine months ended September 30, 2009. The reason for the decline in per station sales was primarily due to the construction of main subway lines in Xi an, which caused certain bus routes to deviate from our stations and resulted in decreased sales. During the nine months ended September 30, 2010, unit selling price was $0.34 (RMB 2.33) and $0.43 (RMB 2.92) net of VAT in Shaanxi and Henan Provinces, respectively, or $0.37 (RMB 2.51) on an average basis, compared to $0.34 (RMB 2.33) and $0.42 (RMB 2.83) net of VAT in Shaanxi Province and Henan Province, respectively, or $0.37 (RMB 2.5) on an average basis during the nine months ended September 30, 2009.

Natural Gas from Fueling Stations. Cost of revenue of our natural gas for our fueling stations increased by 15.6%, or $3,169,272, to $23,512,276 during the nine months ended September 30, 2010 compared to $20,343,004 for the nine months ended September 30, 2009. The increase in the cost of natural gas for our fueling stations was primarily due to the increase in procurement prices for coal bed methane in Henan Province from $0.19 (RMB 1.30) during the nine months ended September 30, 2009 to $0.24 (RMB 1.63) during the nine months ended September 30, 2010. The increase was also a result of the increase in the average procurement price in Henan Province from $0.19 (RMB 1.30) during the third quarter of 2010 compared to an average price of $0.27 (RMB 1.83) in the third quarter of 2010, as we continued our gradual shift from coal bed methane as a source of supply for our fueling stations to regulation natural gas due to uncertainty in the market supply of coal bed methane as well as the increased market demand for both coal bed methane and natural gas. The procurement prices in Henan Province, however, remained significantly below the natural gas retail price of $0.46 (RMB 3.10) in Henan Province for both the nine month period ended September 30, 2009 and the nine month period ended September 30, 2010.

Sales and marketing costs increased 22.5% or $1,764,652, from $7,845,784 for the nine months ended September 30, 2009 to $9,610,436 for the nine months ended September 30, 2010, primarily due to a $572,081 increase in depreciation expense, a $278,162 increase in rental expense, $254,723 increase in transportation expense, and a $225,863 increase in electricity costs, primarily related to the addition of four new fueling stations in the second quarter of 2010 and one new fueling station in the third quarter of 2009, offset by the disposal of one fueling station during the third quarter of 2010. The increase also reflects costs related to social security benefits for our sales employees that we began to incur in the third quarter of 2009. Transportation cost during the nine months ended September 30, 2010 was approximately $4,684 per million cubic meters of natural gas compared to $2,536 per million cubic meters of natural gas for the three months ended September 30, 2009.

Read the The complete Report

About the author:

10qk
Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 2.0/5 (4 votes)

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