Valve Industry Blog

KAIFENG, China, Nov. 13 /Xinhua-PRNewswire-FirstCall/ — China Valves Technology, Inc. (OTC Bulletin Board: CVVT) (”China Valves” or the “Company”), a leading metal valve manufacturer with operations in the People’s Republic of China (the “PRC”), today announced its unaudited financial results for the quarter ended September 30, 2008.
Highlights for the Third Quarter 2008 and Recent Developments

– Net revenue was $21.4 million, an increase of 237.9% from the
third quarter of 2007
– Gross profit was $8.6 million, an increase of 212.2% from the
third quarter of 2007, and gross margin was 39.9%, compared
to 43.2% in the third quarter of 2007
– Income from operations was $5.7 million, an increase of
253.9% from the third quarter of 2007, and operating margin
was 26.4%, compared to 25.2% in the third quarter of 2007
– Net income was $4.6 million, an increase of 224.7% from the
third quarter of 2007, and net income margin was 21.6%,
compared to 22.5% in the third quarter of 2007
– Successfully closed a private placement of 16,778,523 shares
of common stock generating gross proceeds of $30 million
– Started to manufacture high quality technology intensive
forged steel valves for use in ultra supercritical thermal
power generating units, and obtained about $1.7 million in related
purchase orders

“I am glad to report that our revenue and net income grew significantly and also rebounded from the temporary delay in orders and supply deliveries caused by the tragic earthquake in Sichuanprovince in the second quarter of 2008, with revenue and net income increasing threefold on a year-over-year basis. Increased selling prices and effective cost control measures allowed us to scale up our production while preserving our profit margins and developing new products,” stated Mr. Siping Fang, Chairman and CEO of China Valves. “Increased sales and our ability to provide new products to customers helped to solidify our leading position in the Chinese industrial valves industry in the third quarter of 2008.”
Third Quarter 2008 Results
China Valves’ net revenue in the third quarter of 2008 was $21.4 million, an increase of 237.9% from $6.3 million in the third quarter of 2007. Sales volume was 4,142 tonnes for the third quarter of 2008, up 113.7% from 1,938 tonnes in the third quarter of 2007.
Approximately 55.5% of the Company’s sales in the third quarter came from high temperature pressure power station gate valves (used to control steam flow) and two-way metal sealing butterfly valves (used to control municipal water and sewage flow) which had 82.0% and 86.0% domestic market shares, respectively. Two new generation products, ball valves (used to cut, distribute and change fluid flow) and vent valves (used to control the flow of gases), generated strong sales in the third quarter of 2008. Third quarter sales also increased because the Company delivered products that were delayed by the Sichuan Province earthquake in May 2008.
Gross profit in the third quarter of 2008 was $8.6 million, an increase of 212.2% from $2.7 million in the third quarter of 2007. Gross profit margin was 39.9%, compared to 43.2% in the third quarter of 2007. Gross profit margin decreased slightly because of higher production costs caused by overall higher raw material prices and additional expenses for developing new products and acquiring special materials and production equipment for new products.
Operating expenses in the third quarter of 2008 were $2.9 million, an increase of 153.6% from $1.1 million in the third quarter of 2007. Operating expenses increased mostly because of higher selling expenses, which consist primarily of advertising and promotion expenses, sales tax, freight charges and greater sales commissions to sales representatives that increased proportionately with increased sales volume. General and administrative expenses increased mostly because of expanded overall marketing and sales activities, professional fees associated with being a public company and financing activities, higher administrative expenses associated with business expansion, and higher research and development costs for developing new products. Total operating expenses as a percentage of sales were 13.5% in the third quarter of 2008, compared to 18.0% in the third quarter of 2007.
Income from operations in the third quarter of 2008 was $5.7 million, an increase of 253.9% from the third quarter of 2007. Operating margin was 26.4% in the third quarter of 2008, compared to 25.2% in the third quarter of 2007.
Total other income in the third quarter of 2008 was $523,943, compared to other income of $5,276 in the third quarter of 2007. The majority of this increase came from collecting a brand management fee from distributors. Net interest expense was $132,026in the third quarter of 2008 compared to net interest expense of $18,582 in the third quarter of 2007. The net interest expense was associated with a short term bank loan.
Income tax expense was $1.5 million. Income tax expense increased in the third quarter of 2008 as a result of higher assessable income with increased sales. This increase was offset by a new reduced tax rate of 25.0%, effective since January 2008, compared to a tax rate of 33.0% in the third quarter of 2007.
Net income was $4.6 million in the third quarter of 2008, an increase of 224.7% from $1.4 million in the third quarter of 2007.
Fully diluted earnings per common share were $0.10 for the third quarter of 2008, compared to $0.04 in the third quarter of 2007. There were 46,489,664 fully diluted weighted average ordinary shares outstanding as of in the third quarter of September 30, 2008, compared to 40,106,500 in the third quarter of 2007.
Nine Month Financial Results
Revenues for the first nine months of 2008 were $46.2 million, up 77.6% from revenues of $26.0 million in the first nine months of 2007. Sales volume was 11,449 tonnes for the first nine months of 2008 up 61.5% from 7,088 tonnes in the first nine month of 2007. Gross profit was $18.5 million, up 77.8% from gross profit of $10.4 million for the nine months of 2007. Gross margin was 40.0 % for the first nine months of 2007 and 2008. Operating income was $10.4 million, up 71.1% from $6.1 million for the first nine months of 2007. Net income was $8.1 million, or $0.19 per fully diluted share, compared to $5.2 million, or $0.13 per fully diluted share, for the first nine months of 2007.
Financial Condition
As of September 30, 2008, the Company had $27.9 million in cash and cash equivalents, up from $2.8 million as of December 31, 2007. The majority of this increase came from the Company’s private placement of shares in August 2008. Inventory and accounts receivable increased proportionately with the increase in overall scale of production.
Working capital was $39.7 million as of September 30, 2008, compared to $9.3 million as of December 31, 2007. Total shareholders’ equity was $75.4 million as of September 30, 2008, up from $64.8 million as of December 31, 2007.
Cash flow from operations declined mainly because of a greater amount of other payables, including a one-time social insurance fees for employees, purchases needed to maintain inventory levels for materials and finished products.
The Company expects to use most of the proceeds from its recent private placement to acquire other companies. The Company is currently looking for acquisition candidates that will complement and enhance its current production and distribution capabilities.
Recent Developments
In October 2008, China Valves began to manufacture high quality technology intensive forged steel valves for use in ultra supercritical thermal power generating units. These types of valves are able to withstand extremely high temperatures and pressure, and are longer lasting with greater airproof characteristics than ordinary and imported forged steel valve products. The Company received purchase orders amounting to approximately $1.7 million for over 30 types of these new forged steel valves.
In August 2008, the Company closed a private placement financing for 16,778,523 shares of its common stock which generated gross proceeds of $30 million. In connection with the private placement, the Company’s major shareholder entered into a make good escrow agreement with the investors pursuant to which he pledged certain amount of shares he beneficially owns for the benefits of the investors. The pledged shares will be released to the major shareholder if the Company achieves an after tax net income of $10.5 million for 2008, $23.0 million, or $0.369 per fully diluted share for 2009, and $31.0 million, or $0.497 per fully diluted share for 2010. If the Company does not achieve the after tax net income thresholds of any year, a proportionate number of amount shares will be released to the investors on a pro-rata basis.
Business Outlook
“About 80.0% of our sales are made to domestic customers and our growth depends primarily on large infrastructure projects inChina. The Chinese government recently announced that it will support domestic economic growth by undertaking new infrastructure projects. We expect that these major infrastructure projects will have a positive impact on the industrial valve industry, including our company’s continued growth,” said Mr. Fang.
“China Valves is operating at full capacity and is modernizing and expanding its production facilities. We currently have an over $32 million order backlog which should take us until the third quarter of 2009 to fulfill,” added Mr. Fang.
“We have undertaken a renovation and construction project to modernize and expand our facilities. This includes upgrading existing production facilities to improve operating efficiencies in our Zhengdie location, and constructing a new production facility with state-of-the-art equipment and a new power transformer station in our Kaifeng location. The new production facility will focus on high technology high quality valve products for use in the thermal and nuclear power industries and water industry, and will use about 30% less energy in manufacturing than an older facility. We started construction in September of 2008, and expect to finish renovation and construction at the beginning of 2009.”
“We plan to develop new valves for new markets in 2009, and will adjust our product mix to emphasize sales of high margin high quality products. We will continue to explore acquisition of companies that will increase our distribution channels and ability to serve new industries,” concluded Mr. Fang.
Conference Call
China Valves’ management will host a conference call at 9:00 a.m. Eastern Time on Thursday, November 13, 2008 to discuss financial results for the third quarter of its fiscal year 2008. To participate in this live conference call, please dial the following number five to ten minutes prior to the scheduled time: 888-419-5570. International callers should call 617-896-9871. The Conference Pass Code is 218 096 90.
If you are unable to participate in the call, a replay will be available for fourteen days starting from 11:00 a.m. Eastern Timeon Thursday, November 13. To access the replay, call 888-286-8010. International callers should call 617-801-6888. The Conference Pass Code is 595 403 85.
This conference call will also be broadcasted live on the Internet and can be accessed by all interested parties on China Valves’ website: http://www.cvalve.net/en/ . To listen to the live webcast, please go to China Valves’ website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available shortly after the call on China Valves’ website for 90 days.
About China Valves Technology, Inc.
China Valves Technology, Inc. through its subsidiaries, Zhengzhou Zhengdie Valve Co, Ltd. and Henan Kaifeng High Pressure Valve Co., Ltd., is engaged in development, manufacture and sale of high-quality metal valves for the electricity, petroleum, chemical, water, gas and metallurgy industries. The Company has one of the best known brand names in China’s valve industry, and its history can be traced back to 1959 when it was formed as a state-owned enterprise. The Company develops valve products by extensive research and development and owns a number of patents. It enjoys significant domestic market shares and exports toAsia and Europe.
Safe Harbor Statements
Any statements set forth above that are not historical facts are forward- looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company’s ability to develop and market new products, the ability to access capital for expansion, the ability to acquire other companies, changes from anticipated levels of sales, changes in national or regional economic and competitive conditions, changes in relationships with customers, changes in principal product profits and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to update or revise to the public any forward-looking statements, whether as a result of new information, future events or otherwise. This press release was developed by China Valves, and is intended solely for informational purposes and is not to be construed as an offer or solicitation of an offer to buy or sell the Company’s stock. This press release is based upon information available to the public, as well as other information from sources which management believes to be reliable, but it is not guaranteed by China Valves to be accurate, nor does China Valves purport it to be complete. Opinions expressed herein are those of management as of the date of publication and are subject to change without notice.

Original LInk

Emerson Process Management delivered an exceptional year, with reported sales increasing 17 percent to $6.7 billion. Underlying sales growth for the year was 14 percent, which excludes a favorable impact of 4 percent from currency translation and a negative 1 percent impact from the Brooks Instrument divestiture, net of acquisitions.

TED ATKINS The valve industry certainly cannot keep on going up when all other industries are going in the opposite direction

The South African Valve and Actuator Manufacturer’s Association (Savama) predicts that the valve industry may experience a slight downturn, corresponding with the current economic climate.

Savama chairperson Ted Atkins explains that the valve industry has the tendency to follow the state of the country’s economy. “When the country’s economy is booming, so is the valve industry, with the reverse also being true.

It appears that the South African economy, and the world economy, will experience a slowdown, which means the valve industry will consequently also encounter some difficulty. The valve industry certainly cannot keep on going up when all other industries are going in the opposite direction.”

Further, Atkins says that the local valve manufacturing industry is being heavily pressurised by valve imports, especially from Eastern countries. He attributes this to the rise in costs of locally manufactured valves, which is in line with the rising costs of raw materials. “Steel prices in South Africa are significantly higher compared to those of its trading partners.

The steel price has a considerable effect on the cost of locally manufactured castings. That, together with the fact that there is no control over the export of scrap metal in the country, means that the casting costs in the country are notably higher than those of some imported products,” says Atkins.

He notes that the government has put a scrap metal scheme in place, wherebyimport and export duties can be regulated. However, the scheme has not been applied to date, even though the legislation has been around for almost 18 months.

Atkins notes that fully machined castings can be imported from China at 60% of the cost of local castings.  “Consequently, a number of Savama’s members are importing some of their products and components from other countries, to the detriment of the local industry,” he comments.

Atkins says fewer people are employed in the valve manufacturing industry today, than were employed five years ago, though this reduction has not been reflected by the valve industry’s buoyancy in past years. “This means that there has been a negative growth of labour within the valve industry, mainly owing to issues beyond the association’s control,” he adds.

Further, the association has seen a 20% drop in membership owing to mergingbetween a number of valve companies over the last couple of years. “The association expects this trend of consolidation to continue for years to come, consequently reducing the number of valve companies in the country,” says Atkins.

In addition, Atkins notes that it is extremely difficult to encourage young people to participate in the valve industry. This can be attributed to the industry’s narrow profit margins. “Profit margins are continuingly being pressured by the imports of valve products,” he comments.

For these reasons, Savama is currently realigning itself with the changing requirements of the industry. “A number of the association’s members are importing parts of their products, and assembling them locally. Today, the local manufactur- ing industry is being measured on who owns the intellectual property, rather than where the valve is being manufactured,” says Atkins.

Savama recently changed its constitution to accommodate the broadening of its membership. Atkins concludes that if the association wishes to progress and remain a force within the industry, it will continue to adapt to ever-changing markets.

Original Link

Butterfly ValvesThese valves occupy less space in the line than any other valves. Relatively tight sealing without excessive operating torque and seat wear is accomplished by a variety of methods, such as resilient seats, piston rings on the disk, and inclining the stem to limit contact between the portions of disk closest to the stem and the body seat to a few degrees of curvature.

Fluid-pressure distribution tends to close the valve. For this reason, the smaller manually operated valves have a latching device on the handle, and the larger manually operated valves use worm gearing on the stem. This hydraulic unbalance is proportional to the pressure drop and, with line velocities exceeding 7.6 m/s (25 ft/s), is the principal component in the torque required to operate the valves. Compared with other valves for low-pressure drops, these valves can be operated by smaller hydraulic cylinders. In this service butterfly valves with insert bodies for bolting between existing flanges with bolts that pass by the body are the lowest-first-cost valve in pipe sizes 10 in and larger. Pressure drop is quite high compared with that of gate valves.

Swing Check Valves

These valves are used to prevent reversal of flow. Normal design is for use only in horizontal lines, where the force of gravity on the disk is at a maximum at the start of closing and at a minimum at the end of closing. Unlike most other valves, check valves are more likely to leak at low pressure than at high pressure, since fluid pressure alone forces the disk to conform to the seat. For this reason elastomers are often mounted on the disk. Swing check valves are available with low cost insert bodies. Other kind of check valve are lift check valve.

Angle Valve

These valves are similar to globe valves; the same bonnet, stem, and disk are used for both (Fig. Top). They combine an elbow fitting and a globe valve into one component with a substantial saving in pressure drop. Flanged angle valves are easier to remove and replace than flanged globe valves.

Diaphragm Valve

These valves are limited to pressures of approximately 50 lbf/in2 (Fig. Middle). The fabric-reinforced diaphragms may be made from natural rubber, from a synthetic rubber, or from natural or synthetic rubbers faced with Teflon* fluorocarbon resin.

The simple shape of the body makes lining it economical. Elastomers have shorter lives as diaphragms than as linings because of flexing but still provide satisfactory service. Plastic bodies, which have low moduli of elasticity compared with metals, are practical in diaphragm valves since alignment and distortion are minor problems.

These valves are excellent for fluids containing suspended solids and can be installed in any position. Models in which the dam is very low, reducing pressure drop to a negligible quantity and permitting complete drainage in horizontal lines, are available. However, drainage can be obtained with any model simply by installing it with the stem horizontal. The only maintenance required is replacement of the diaphragm, which can be done very quickly without removing the valve from the line.

Plug Cocks

These valves (Fig. Bottom) are limited to temperatures below 260°C (500°F) since differential expansion between the plug and the body results in seizure. The size and shape of the port divide these valves into different types. In order of increasing cost they are short venturi, reduced rectangular port; long venturi, reduced rectangular port; full rectangular port; and full round port.

In lever-sealed plug cocks, tapered plugs are used. The plugs are raised by turning one lever, rotated by another lever, and reseated by the first lever. Lubricated plug cocks may use straight or tapered plugs. The tapered plugs may be raised slightly, to reduce turning effort, by injection of the lubricant, which also acts as a seal. Plastic is used in nonlubricated plug cocks as a body liner, a plug coating, or port seals in the body or on the plug.

In plug cocks other than lever-sealed plug cocks, the contact area between plug and body is large, and gearing is usually used in sizes 6 in and larger to minimize operating effort. There are several leversealed plug cocks incorporating mechanisms which convert the rotary motion of a handwheel into sequenced motion of the two levers.

For lubricated plug cocks, the lubricant must have limited viscosity change over the range of operating temperature, must have low solubility in the fluid handled, and must be applied regularly. There must be no chemical reaction between the lubricant and the fluid which would harden or soften the lubricant or contaminate the fluid. For these reasons, lubricated plug cocks are most often used when there are a large number handling the same or closely related fluids at approximately the same temperature. Lever-sealed plug cocks are used for throttling service. Because of the large contact area between plug and body, if a plug cock is operable, there is little likelihood of leakage when closed, and the handle position is a clearly visible indication of the valve position.