China Linen Textile Industry (CTXIF.OB) Posts Record Q3 Results, Raises Guidance

QualityStocks would like to highlight China Linen Textile Industry, Ltd. (OTCBB: CTXIF). The company is principally engaged in the production and sale of linen yarn and various types of linen fabric. They are also involved in consultation and R&D related to linen technology and linen products. China Linen carries on all of its business activities through its subsidiary, Heilongjiang Lanxi Sunrise Linen Textile Industry Co., Ltd. ("Lanxi Sunrise"), established in June 2002 and located in Lanxi County, the "Homeland of Flax in China," near Harbin City in China.

In the company’s news yesterday,

China Linen Textile posted record third quarter 2010 results, reporting increases stemming from increased market demand and enhanced sales efforts.

“We are pleased to report record revenue and earnings for the third quarter of 2010, which were a direct result of our expanded sales efforts for our broad line of linen fabrics, increased linen yarn distribution channels, and our fixed asset lease agreement with Lanxi Tianxianfang Linen Company, Ltd. which significantly expanded our production capacity,” Gao Ren, chairman and president of China Linen stated in the press release. “Our recent acquisition of Lanxi Tianxianfang is an important milestone in our goal to become a vertically integrated producer and the benefits of this relationship were evidenced in our recent operating and financial results to further improve our financial and operational performance.”

Revenue for the third quarter of 2010 increased 109.3 percent to $14.0 million, compared to $6.7 million for the third quarter of 2009. Sales of linen fabric sales increased 110.9 percent year-over-year to $12.5 million, accounting for 89.0 percent of sales for the period. Sales of linen yarn increased to $1.5 million, up from $0.2 million a year ago. New customer sales contributed to approximately 45 percent of total revenue in the third quarter of 2010.

China Linen reported gross profit for the third quarter of 2010 at $4.4 million, a 114.9 percent increase from $2.1 million in the third quarter of 2009. Gross margin was 31.5 percent versus 30.7 percent in the third quarter of 2009.

Operating expenses for the third quarter of 2010 increased to approximately $0.7 million, compared to $0.2 million for the comparable quarter of 2009. The company attributes the increase to increased selling expenses and increased expenses in connection with its public company compliance efforts.

China Linen’s operating income for the third quarter of 2010 increased 98.2 percent to $3.7 million compared to operating income of $1.9 million in the third quarter of 2009.

The company reported a 74.9 percent increase in net income for the third quarter of 2010, compared to $1.6 million for the third quarter of 2009. Diluted earnings per share increased 74.1 percent to $0.14 compared to $0.08 for the third quarter of 2009, based upon 20.2 million and 20.1 million weighted average number of shares outstanding, respectively.

As of September 30, 2010, cash and cash equivalents totaled $4.4 million, nearly double the $2.3 million reported on December 31, 2009.

The company raised its full-year guidance of sales from $38.1 million to $44.0 million and maintains net income guidance of $9.3 million and raises EPS guidance from $0.39 to $0.46 based on 20,215,003 weighted average number of shares outstanding.

Ren said the company is anticipating new customer orders and noted that by boosting its production capacity, the company is on track to meet its 2011 expansion goals.

“China Linen’s continued international and domestic market expansion is anticipated to yield additional customers and orders, which will drive incremental growth and support our efforts to further penetrate the existing customer base. We expanded our linen yarn production capacity by approximate 40 percent and linen fabric production capacity by 26 percent through the additional of Lanxi Tianxianfang, which provides the foundation to meet our 2011 growth objectives,” Ren stated.

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Forward-Looking Statement:
This release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Risks and uncertainties applicable to the company and its business could cause the company's actual results to differ materially from those indicated in any forward-looking statements.