China TMK Battery Systems sees 29% second quarter profit growth
China TMK Battery Systems Inc. (OTC Bulletin Board: DFEL), a Chinese manufacturer and distributor of customized rechargeable battery solutions to the global consumer products industry, has announced its 2010 second quarter results, recording an increase in revenue of 47.3% at $16.8 million and a gain in net income of 28.9% at $2.3 million on account of rising demand for the company`s products and its expanded sales and marketing efforts, it said.
Total cost of sales increased $4.8 million, or 56%, to $13.4 million for Q2 2010. The company`s gross profit rose 21.2% to $3.4 million in the period compared to $2.8 million in the second quarter of 2009, with gross margin of 20.2% and 24.5% in each respective period.
"We continued our strong growth in the second quarter, with increasing demand for consumer products which utilize environmentally friendly rechargeable batteries, and our push into new end markets," said chairman and president Henian Wu.
The quarter also marked a major step for the company, as it signed a five-year exclusive distribution agreement with Nevada-based Alexis Power Supply Inc, part of TMK`s strategy to become a major supplier of nickel metal hydride-based (Ni-MH) power systems.
The company recently began commercial production of its Ni-MH battery packs, which will be used as back-up power supply sources for multiple industrial applications, including telecommunications, solar, railroad and traffic control systems.
The first shipment is due in October, at which time Alexis will market and distribute TMK`s products in the US and internationally.
Sales for the first six months of this year totalled $30.0 million compared to $21.3 million in the same period in 2009, an increase of 41.1%, mainly driven by growth in the company`s battery sales. Net income for the company in H1 2010, however, was approximately $0.8 million, a decrease of 74.0% from the same period last year, primarily due to a one-time merger cost.
In July, TMK began supplying AA/AAA products to Batteries Plus, Inc. a battery retailer in the US with more than 400 retail stores located in 43 states. The Company expects to generate approximately $1.5 to $3.0 million of revenues in 2011 through this relationship as it rolls out more products to all of Batteries Plus' more than 400 retail locations.
TMK is currently doubling its production capacity to accomodate customer orders and to increase its market share, added Wu.
Cash and cash equivalents as of June 30, 2010 totaled $0.9 million.
Investors were not impressed with the company`s results, however, as its share price dropped 6.25% in the first hour of trading to $1.35.
Founded in 1999, TMK manufactures and distributes high rate discharge Nickel Metal Hydride multi-cell batteries in its manufacturing facility located in Shenzhen, China.
The company works with its clients throughout the product design cycle to develop and integrate reliable and long-lasting rechargeable power solutions for widely used consumer products, which include home appliances, cordless power tools, medical devices, multiple personal communication devices and electric bicycles segments. It is also focused on becoming a supplier of back-up power solutions to the telecommunications industry and for traffic lighting applications.
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