Euro Tech Holdings Company Limited Reports Interim Results For The Six Months Ended June 30, 2023

Rhea-AI Summary

Euro Tech Holdings Company Limited (Nasdaq: CLWT) reported an 18.2% increase in revenue for the six months ended June 30, 2023, reaching US$7,957,000. However, gross profit decreased by 20.6% to US$1,498,000, leading to a net loss of US$255,000 for the same period. The company is focusing on expanding its market outside China due to the global economic uncertainty and slower recovery in China.

Insights

Financial Analyst

An increase in revenue by 18.2% signifies that Euro Tech Holdings Company Limited is potentially expanding its market reach, especially through its trading activities. However, a decline in gross profit by 20.6% could be indicative of rising costs or pricing pressures, possibly from increased competition or higher material costs. The reduction in general and administrative expenses suggests efforts to streamline operations, likely a positive move for operational efficiency.

Investors should consider the net loss widening from US$184,000 to US$255,000, which may raise concerns about the company's profitability trajectory. The management's commentary on the economic slowdown in China, a key market, suggests that the company's performance is susceptible to macroeconomic factors. The company's strategic pivot towards the ASEAN and UAE markets and the diversification into industrial wastewater solutions could open new revenue streams, although these initiatives will take time to mature and are not without risks.

Industry Analyst

The Ballast Water Treatment Systems (BWTS) market is becoming increasingly competitive and Euro Tech's expansion into ASEAN and UAE is a strategic move to capture a share of these emerging markets. BWTS are essential for preventing the spread of invasive aquatic species through shipping ballast water and the market is driven by strict international regulations. Euro Tech's efforts to sign new distributors and receive orders from diverse geographies are positive indicators for its market penetration.

However, the industrial wastewater solution segment is also significant, as environmental regulations tighten globally. The company's breakthrough in Thailand could be a sign of its capability to leverage its expertise in new markets. The focus on sectors like pharmaceutical, electronic and renewable energy for wastewater solutions aligns with global trends towards sustainability and may provide a competitive edge.

Risk Management Expert

The company's performance is evidently affected by geopolitical tensions and economic uncertainties, such as the Ukraine war and the energy crisis in Europe. The CEO's acknowledgment of these factors demonstrates an awareness of external risks that could impact operations. The decision to diversify geographically and focus on high-growth markets is a risk mitigation strategy that could reduce dependency on the Chinese market.

Exploring a white label solution for BWTS could be a way to broaden the product's market presence without the capital expenditure associated with brand marketing. This could be a cost-effective strategy, but it also comes with reliance on partners' brand strengths and distribution networks. Stakeholders should monitor the company's ability to secure reliable partners and the impact of these relationships on the company's market share and brand identity.

HONG KONG, Dec. 22, 2023 /PRNewswire/ -- Euro Tech Holdings Company Limited (Nasdaq: CLWT) today reported its unaudited financial results for the six months ended June 30, 2023.

The Company's revenue for the six months ended June 30, 2023 ("1H 2023") were US$7,957,000, an 18.2% increase as compared to  US$6,730,000 for the six months ended June 30, 2022 ("1H 2022"). The increase was primarily due to increase in revenue from trading activities of US$1,205,000.

Gross profit decreased by 20.6% to US$1,498,000 for 1H 2023 as compared to US$1,888,000 for 1H 2022. The decrease was primarily due to the decrease in gross profit margin % on revenue from engineering activities.

General and administrative expenses decreased by US$159,000 to US$2,213,000 for 1H 2023 as compared to US$2,372,000 for 1H 2022. The decrease was principally due to the cessation of business operation of Shanghai Euro Tech Ltd. in 2022.

The Company's net loss for 1H 2023 was US$255,000 as compared to US$184,000 for 1H 2022 resulting from decrease in gross profit.

Mr. David Leung, CEO of the company commented, "In the first half year of 2023, amid continuous economy slowdown in China, it was not that easy for the Company to perform well as there were fewer new projects and some current projects were being delayed for completion in China. Despite these adverse impacts, we have been participating in major exhibitions and business roadshows in Middle East and ASEAN countries. As a result, we have signed up with several new distributors in ASEAN and UAE region to promote our Ballast Water Treatment Systems ("BWTS"). We have subsequently received orders for our BWTS from Dubai, Singapore, Thailand and Turkey. Apart from BWTS, we have also made our first new sales breakthrough in Thailand for being awarded a sales contract from a chemical company to provide industrial wastewater solution equipment and services. We believe there will be more opportunities from Thailand in future.

We expect the pace of recovery in China will take a longer time than our original plan due to the global economy is still clouded with lots of uncertainty, such as Ukraine war, energy crisis in Europe as well as the tense relationship between China and USA. To mitigate these potential risks, we have to look for more export business for our BWTS by appointing more distributors outside China. We will focus more on high growth markets for small BWTS. We may look into the feasibility of the white label solution by looking for potential business partners who will sell PACT BWTS under their own brands. As for industrial wastewater solution business in China, we will continue to focus on high growth industries such as pharmaceutical, electronic, renewable energy sectors."

About BWTS

BWTS are an imminent requirement by The International Maritime Organization ("IMO") to prevent the biological unbalance caused by the estimated 12 billion tons of ballast water transported across the seas by ocean-going vessels when their ballast water tanks are emptied or refilled. In 2012, ballast water discharge standard became a law in the US. Any vessel constructed in December 2013 or later will need to comply when entering US waters, and existing vessels will follow shortly after. IMO's Ballast Water Management Convention entered into force for new-built vessels on September 8, 2017 after ratification by 52 States, representing 35.1441% of world merchant shipping tonnage. In July 2017, IMO decided that the phase-in period for ballast water system retrofits started on 8 September 2019. 

The company obtained type approval certificate from China's Classification Society for its 200, 300, 500, 750, 1200 and 1250 Cubic Meters per hour BWTS in 2016.

The IMO convention stipulates that type approval for revised G8 requirements must be obtained for all BWTS installed on or after October 28, 2020, and the company have been in compliance with such requirements.

The ballast water port solution system is a system installed in port to offer ballast water treatment services for ocean going ships without their own BWTS and for those with damaged BWTS.

Certain statements in this news release regarding the Company's expectations, estimates, present view of circumstances or events, and statements containing words such as estimates, anticipates, intends, or expects, or words of similar import, constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements indicate uncertainty and the Company can give no assurance with regard to actual outcomes. Specific risk factors may include, without limitation, having the Company's offices and operations situated in Hong Kong and China, doing business in China, competing with Chinese manufactured products, competing with the Company's own suppliers, dependence on vendors, and lack of long term written agreements with suppliers and customers, development of new products, entering new markets, possible downturns in business conditions, increased competition, loss of significant customers, availability of qualified personnel, negotiating definitive agreements, new marketing efforts and the timely development of resources. See the "Risk Factor" discussions in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 20-F for its fiscal year ended December 31, 2022.

EURO TECH HOLDINGS COMPANY LIMITED
CONSOLIDATED BALANCE SHEETS

		As of June 30, 2023 (Unaudited)	As of December 31, 2022 (Audited)
		US$'000	US$'000
ASSETS
Current assets:
Cash and cash equivalents		4,358	5,628
Restricted cash		979	930
Accounts receivable, net		1,457	1,586
Prepayments and other current assets		535	486
Contract assets		257	217
Inventories		593	603
		──────	──────
Total current assets		8,179	9,450
		──────	──────
Property, plant and equipment, net		171	179
Investments in affiliates		8,131	8,251
Goodwill		1,071	1,071
Operating lease right-of-use assets, net		322	219
Deferred tax assets		102	108
Restricted cash		-	85
		──────	──────
Total non-current assets		9,797	9,913
		──────	──────
TOTAL ASSETS		17,976	19,363
		══════	══════
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings		-	222
Accounts payable		1,891	2,279
Contract liabilities		551	625
Other payables and accrued expenses		921	1,231
Current portion of long-term operating lease liabilities		166	113
Income tax payable		1	-
		──────	──────
Total current liabilities		3,530	4,470
		──────	──────
Deferred tax liabilities		-	-
Long-term operating lease liabilities, net of current portion		137	87
		──────	──────
Total non-current liabilities		137	87
		──────	──────
TOTAL LIABILITIES		3,667	4,557
		──────	──────
Commitments and contingencies		-	-
SHAREHOLDERS' EQUITY:
Ordinary share, 20,000,000 shares authorized and no par value; 7,899,832 and 7,899,832 shares issued as of June 30, 2023 and  December 31, 2022, respectively		123	123
Additional paid-in capital		9,738	9,715
Treasury stock, 176,200 and 167,700 shares at cost as of June 30, 2023 and     December 31, 2022, respectively		(797)	(786)
PRC statutory reserves		362	362
Accumulated other comprehensive income		736	725
Retained earnings		3,378	3,633
		──────	──────
Total shareholders' equity attributable to Euro Tech Holdings Company     Limited		13,540	13,772
Noncontrolling interests		769	1,034
		──────	──────
Shareholders' equity		14,309	14,806
		──────	──────
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		17,976	19,363
		══════	══════

EURO TECH HOLDINGS COMPANY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

		2023 (Unaudited)	2022 (Unaudited)
		US$'000	US$'000
Revenue, net:
Trading and manufacturing		5,191	3,986
Engineering		2,766	2,744
		────────	────────
		7,957	6,730
Cost of revenue:
Trading and manufacturing		(4,102)	(3,044)
Engineering		(2,357)	(1,798)
		────────	────────
		(6,459)	(4,842)
		────────	────────
Gross profit		1,498	1,888
Operating expenses:
Finance costs		(3)	(3)
General and administrative expenses		(2,213)	(2,372)
		────────	────────
LOSS FROM OPERATION		(718)	(487)
Interest income		14	8
Other income, net		3	(7)
Equity in income of affiliates		203	221
		────────	────────
LOSS BEFORE INCOME TAXES		(498)	(265)
Income tax (expense) credit		(4)	7
		────────	────────
NET LOSS		(502)	(258)
Net loss attributable to noncontrolling interests		247	74
		────────	────────
Net (loss) attributable to Euro Tech Holdings     Company Limited		(255)	(184)
		════════	════════
Other comprehensive (loss)
Net (loss)		(502)	(258)
Foreign currency adjustment loss		(7)	(41)
		────────	────────
COMPREHENSIVE LOSS		(509)	(299)
Comprehensive loss attributable to    noncontrolling interests		265	99
		────────	────────
Comprehensive (loss) attributable to Euro    Tech Holdings Company Limited		(244)	(200)
		════════	════════
Net (loss) per ordinary share attributable to   Euro Tech Holdings Company Limited
- Basic		$  US(0.03)	$  US(0.02)
		════════	════════
- Diluted		$  US(0.03)	$  US(0.02)
		════════	════════
Weighted average number of ordinary    shares outstanding
- Basic		7,729,439	7,732,132
		════════	════════
- Diluted		7,729,439	7,732,132
		════════	════════

 

 

 

View original content:https://www.prnewswire.com/news-releases/euro-tech-holdings-company-limited-reports-interim-results-for-the-six-months-ended-june-30-2023-302021623.html

SOURCE EURO TECH HOLDINGS COMPANY LIMITED

FAQ

What is the revenue for Euro Tech Holdings Company Limited for the six months ended June 30, 2023?

The revenue for Euro Tech Holdings Company Limited for the six months ended June 30, 2023, was US$7,957,000.

What was the net loss for Euro Tech Holdings Company Limited for the six months ended June 30, 2023?

The net loss for Euro Tech Holdings Company Limited for the six months ended June 30, 2023, was US$255,000.

What is the ticker symbol for Euro Tech Holdings Company Limited?

The ticker symbol for Euro Tech Holdings Company Limited is CLWT.

What is the CEO's comment on the company's performance in the first half of 2023?

The CEO mentioned that the company faced challenges due to the economic slowdown in China but has been focusing on expanding its market outside China to mitigate potential risks.