SmartHeat Inc. Announces Third Quarter 2009 Financial Results, Affirms Full Year Earnings Guidance and Anticipates Growth Momentum to Continue Into 2010

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Release: 2009-11-16 12:28

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SmartHeat, Inc. (NASDAQ:HEAT) a market leader in China's clean technology, energy savings industry today announced record financial results for the third quarter ended September 30, 2009. SmartHeat's products significantly reduce heat energy costs, increase energy efficiency and reduce air pollution.

James Jun Wang, Chairman & CEO of SmartHeat, commented, "We are excited to announce a quarter of strong financial performance. Our third quarter financial results are the result of a favorable market environment for our industry and our management team diligently executing on our growth strategies. China's energy savings industry is supported by the Chinese government as a sector that is receiving significant funding through government initiatives and the Chinese stimulus package. Because of this support, China's heat energy savings industry has not been as negatively impacted by the current global economic slowdown.

"The weakened economy has increased customer awareness of utilizing energy saving equipment from which we are a primary beneficiary. SmartHeat is well positioned to potentially reap significant benefits from the world's transition to cleaner technologies and energy saving equipment," concluded Mr. Wang.

Third Quarter Financial Performance

Revenues were $37.8 million in the third quarter of 2009 compared to $20.7 million in the same period last year, an 83% increase. The significant revenue increase was due significant sales growth across all product lines as a result of:

Increasing our traditional heat supply sales as a result growth in the China domestic infrastructure construction industry, accounting for $24.22 million or 43% of total sales,

Adding new customers in the chemical, engineering, electric power, metal smelting industries, accounting for $19.37 million or 34% of our total sales,

Rising heat meter sales, accounting for $7.8 million or approximately 14% of total sales.

Gross profit was $13.1 million in the third quarter of 2009 compared to $7.4 million in the same period last year, a 77% increase. Gross profit increased primarily due to the increased sales.

Operating expenses were $2.5 million in the third quarter of 2009 compared to $2.1 million in the same period last year, an 18% increase. Operating expenses increased in the quarter because of the higher general and administrative expenses associated with an increase in expenses incurred to expand our growing sales and due to our recent financing activities.

Operating income was $10.7 million in the third quarter of 2009 compared to $5.4 million in the same period last year, a 100% increase. Operating income increased as a result of continued economies of scale in production costs combined with the rapid growth in revenues and improved operating efficiency.

Net income was $8.9 million in the third quarter of 2009 compared to $4.3 million in the same period last year, a 105% increase. Earnings per share were $0.36 in the third quarter of 2009 compared to $0.18 in the same period last year. In addition to the increased revenue and income from operations, net income and EPS both benefited from a decrease in the tax rate during the quarter from 18.5% to 15.5%.

Affirms Full Year 2009 Earnings Guidance

SmartHeat re-affirms its full year 2009 earnings guidance of approximately $15.5 million in net income and approximately $80 million in revenues compared to $6.3 million in net income and $32.7 million in revenues in 2008.

Business Outlook

Mr. Wang commented, "We continue to experience increasing order flow and demand from our existing and new customers for our energy savings equipment. Not only has demand for our products increased, but our production capabilities and product offerings have increased with recent acquisitions.

"In the third quarter the Company completed a $75 million equity offering. The net proceeds from the offering will be used for general corporate purposes, including the continued expansion of our product offerings, capital expenditures, and to meet growing working capital needs to continue our rapid growth. We believe the additional working capital will also be used by the company to bid on additional projects which are larger and more profitable, which we believe to be strategic fits to our long term business plan.

"We believe SmartHeat's earnings growth momentum will continue well into 2010 as we anticipate a broader domestic economic expansion in China next year. We are optimistic that SmartHeat is on track to achieve solid fourth quarter earnings growth and another year of rapid growth in 2010 for our growing list of individual and institutional shareholders," Mr Wang concluded.

About SmartHeat Inc.

Founded by James Jun Wang, a former executive at Honeywell China, SmartHeat Inc. (www.smartheatinc.com) is a NASDAQ Global Market listed (Nasdaq: HEAT) US company with its primary operations in China. SmartHeat is a market leader in China's clean technology energy savings industry. SmartHeat manufactures standard plate heat exchangers (PHEs), custom plate heat exchanger units (PHE Units) and heat meters. SmartHeat's products directly address air pollution problems in China where massive coal burning for cooking and heating purposes is the only source of economical heat energy in China. With broad product applications, SmartHeat's products significantly reduce heating costs, increase energy use and reduce air pollution. SmartHeat's customers include global Fortune 500 companies as well as municipalities and industrial/residential users. China's heat transfer market is currently estimated at approximately $2.4 billion with double-digit annual growth according to China Heating Association.

Safe Harbor Statement

All statements in this press release that are not historical are forward- looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. SmartHeat's actual results may differ from its projections. Further, preliminary results are subject to normal year-end adjustments. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect SmartHeat's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in SmartHeat's filings with the Securities and Exchange Commission.

Contact Corporate Communications: Ms. Jane Ai, Corporate Secretary SmartHeat Inc. Tel: 011-86-24-25363366 Email: info@SmartHeatinc.com