HANWEI ENERGY SERVICES OUTLINES BUSINESS STRATEGY
- RENEWED FOCUS ON CORE EXPERTISE IN FRP PIPE -
- HANWEI TO DISCONTINUE/REPOSITION NON-CORE BUSINESSES -
TSX: HE
VANCOUVER, Sept. 28 /CNW/ - Hanwei Energy Services Corp. (TSX: HE) ("Hanwei" or the "Company"), today outlined its business strategy for the Company going forward.
"The core of our business remains our expertise in the production and field applications of our fiberglass reinforced plastic ("FRP") pipe products," stated Mr Fulai Lang, Chairman and Chief Executive Officer. "Our production facilities and engineering are first class. We hold superior proprietary technology over our competitors. Our FRP pipe products meet and exceed the requirements of several stringent international rating agencies. We are best at this. As such we must focus on FRP, expand our sales capability internationally utilizing our core products in a wider range of markets and applications, and strengthen our sales and management so that enhanced results are forthcoming."
Hanwei has reviewed its operations and examined the market potential of all segments of its business. Through this review, and in conjunction with management's renewed focus on Hanwei's core FRP business, the Company has identified several key initiatives and milestones that will enable Hanwei to leverage its core expertise in FRP pipe production.
Reposition/discontinue non-core businesses
The Company has determined that the growth profile of its FGD pollution control systems business is too slow in developing due to market conditions affecting potential profitability. As such the Company has elected to cease its marketing and production operations in FGD pollution control systems for coal-fired power plants in China and dissolve its China joint venture with Ershigs Inc.
As previously reported, the Company is continuing its discussions with a major Chinese, state-owned enterprise on a potential repositioning of its wind power business. While discussions are ongoing and no agreement in principal has been reached such an arrangement aims at leveraging the significant influence and market stature of a major local partner where Hanwei becomes a direct financial beneficiary, while minimizing its management resource requirements and maintaining focus on its core FRP pipe business. Such repositioning also reinforces the Company's efforts to collect on its outstanding receivable from its wind power customer.
Diversification of Sales Channels and FRP Applications in the China Domestic Market:
The Company holds an excellent client list that includes the leading Chinese oil & gas producers known worldwide that include CNPC, Petrochina and Sinopec. These longstanding relationships are an enduring testimony to the Company's quality of products and field service capability. The Company will continue to leverage the endorsement of these established relationships into other oil & gas locations across China as well as utilize feedback from these major accounts to determine and implement complimentary technologies for domestic oil field applications. The Company has previously announced efforts to drive sales in brine, saltwater and offshore oil & gas applications. Renewed focus will be also placed on these markets to ensure results will be achieved.
International Expansion Targeting Sales Accounts in Middle East and Middle Asia Markets:
Direct sales teams and agent relationships are currently being expanded internationally in key markets.
The Middle East remains a major market for oil & gas production and the Company's recent $9.9 million order to Kuwait is strategically significant in establishing Hanwei's position in this region. This order has completed production and is being shipped for delivery over the coming months. The scale and size of orders in this region are larger than that traditionally received by the Company from China domestic operations and potentially can be spread over a number of years. A number of other major contracts are being pursued.
The Kazakhstan region also remains a key market for the Company. Several major producers are in the process of replacing their steel pipes currently utilized in the Kazakhstan oil fields with non-metal products. Kazakhstan's geographic location allows the Company to leverage in to neighboring markets of Russia, Belarus and Ukraine and in both oil & gas and complimentary applications. By example, this region suffers from an aging infrastructure (e.g., sewage transmission lines) much of which was installed by the former Soviet Union in the 1960's.
In order to scale the Company's sales network into a much wider platform, sales agency agreements are being formed so as to utilize pre-existing relationships, networks, local market knowledge and experience of proven agents in particular regions. To date, ten regional sales agency agreements are in place which include Kuwait, Oman, and Saudi Arabia. The Company's sales teams are working directly with these regional agents together with the Company's engineering, installation and service teams so as to maximize support for new accounts currently being pursued.
Enhanced FRP Production Utilization from Existing Facilities:
While Hanwei benefits from excellent relationships with the major Chinese oil & gas companies, production cycles are dictated by these companies that control the timing, specification and size of orders. Through the combination of new China and international sales the Company aims to improve the utilization of its main production facility in Daqing, China and spread production capacity across the full year with a balanced distribution of accounts. As part of this strategy the diversification of accounts recognizes the requirement to grow international sales, develop new FRP pipe technologies to meet ongoing extraction requirements for the Daqing oil fields, as well as new complementary pipe applications in non oil & gas sectors. The result of these initiatives will shift production capacity across the year.
Enhance and Expand FRP Production Capacity as Sales Volume Builds:
As sales volume builds and new market opportunities are presented, the Company will assess the development of small, regional market, production facilities as field outposts to the larger production capability in Daqing. Such small production facilities will represent the Company's quality and engineering programs in key markets to gain valuable local political and preferential policy, and provide a conduit to further fill capacity in Daqing. These regional market, small factories will be developed with local partners so as to lower capital and executional risk and with commonality of interest maintained with the majority of production to be filled in China to meet the regional sales orders. Once sales and capacity are sufficient to warrant production expansion these regional factories could be expanded.
"The experience of the last few years has made us a better, stronger company. It requires us to make the necessary strategic decisions to enhance our management and sales activities as well as the hard, tactical decisions for disciplined attention to what we do best. We are committed to growing our results through our core FRP business," concluded Mr Fulai Lang.
About Hanwei Energy Services Corp.
Hanwei Energy Services Corp. is the leading Chinese manufacturer of high pressure, fiberglass reinforced plastic ("FRP") pipe products and associated technologies and services for the international oil and gas sector. Hanwei serves major energy customers in the Chinese and global energy markets.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
FORWARD-LOOKING INFORMATION
Certain information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of certain securities laws, and is subject to important risks, uncertainties and assumptions. The words "may", "could", "should", "would", "suspect", "outlook", "believe", "anticipate", "estimate", "expect", "intend", "plan", "target" and similar words and expressions are used to identify forward-looking information. Material factors or risks which could cause actual results or events to differ materially from a conclusion in such forward-looking information include the risks that the Company is unable to address the warranty repairs for defective products, the sales of FRP pipe products will not stabilize, the Company is unable to make deliveries of FRP pipe products in Kazakhstan and the Middle East, the Company will not be able to repay its short-term loans or to have such loans renewed, the industries in which the Company operates will not recover, the Company's business segments will not experience expected growth in the near future, the Company may not be able to fulfill its sales orders, the Company is unable to reposition or downsize its wind power business, the Company is not able to meet its capital and financing needs, the creditworthiness of the Company's customers deteriorates and the Company is unable to collect on outstanding accounts receivable, as well as the risks set out in the risk factors section of the Company's Annual Information Form dated June 29, 2010 filed with Canadian securities regulators and available on SEDAR at www.sedar.com.
THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE PRESENTS THE EXPECTATIONS OF THE COMPANY AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE. READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE. WHILE THE COMPANY MAY ELECT TO, THE COMPANY DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME, EXCEPT AS REQUIRED BY APPLICABLE SECURITIES LEGISLATION.
For further information: Graham Kwan, Executive Vice President, Strategic Development and Corporate Affairs, 604-685-2239, [email protected]; Yucai (Rick) Huang, Chief Financial Officer, 604-685-2239, [email protected]; Kevin O'Connor, Investor Relations, 416-962-3300, [email protected]
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