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Lizhan Environmental Corp. (LZEN) Posts Solid FY 2010 Results, Reflecting Growth and New Product Launch

Lizhan Environmental Corp., a China-based supplier of synthetic leather and other fabrics made from recycled leather waste and other materials, today posted its fiscal year 2010 results for the year ended September 30, 2010, reporting increases across the board.

Fiscal-year 2010 revenue was $46.3 million, up 114.3 percent compared to $21.6 million in revenue reported for fiscal 2009. Net income increased 199.7 percent to $2.7 million as compared to $8.2 million for the prior year.

The company attributes the increases to continued growth stemming from its commercial production launch in 2007, as well as developments to date. In 2009 Lizhan launched the production and sales of recycled leather flocked fabric products, which account for 54.3 percent and 73.9 percent of the company’s total revenue for fiscal years 2009 and 2010, respectively.

“The momentum that we have achieved in driving our business model is clearly a reflection of the exceptional year experienced operationally and financially by the company in 2010. Major initiatives were also taken during the year that will lay the foundation for significant expected growth in 2011 and beyond,” Jianfeng Liu, CEO of Lizhan stated in the press release. “Our record revenues in 2010, outstanding margins and profit, all are reflections of our success in addressing our customers’ needs, making the necessary investment in our research and development, increasing market penetration both domestically and internationally, and most importantly, enhancing the quality of our products.”

The company continues to work on improving its products, and recently completed the testing of a new “green” product line based on a new leather processing technology that uses leather scraps to leather derived from natural fibers, which the company refers to as Evergreen Products. Lizhan expects to begin mass production in mid-February, and plans to launch mass production of the second of its Evergreen Product production lines by May 2011, contingent on product demand.

“We are gratified to see the continued sales growth of our recycled leather flocked fabric products. Our present efforts to complete the preparation of the production process for our new Evergreen product line expands our commitment to provide ‘cutting-edge,’ environmentally friendly product innovations that provide value and quality to our customers,” Liu stated.

Gross profit for fiscal 2010 increased 201.2 percent to $11.3 million, from $3.7 million for the same period in 2009. For the year ended September 30, 2010, and 2009, the company’s gross profit margin was 24.3 percent and 17.3 percent, respectively.

As of September 30, 2010, the company had $2.6 million in cash and cash equivalents and stockholder’s equity was $18.3 million. The company generated $7.6 million in cash from operating activities in 2010 compared to $474,000 in 2009.

Liu also noted that the company became a publicly listed company in November of 2010, which enabled the company to raise funds that is has allocated, in part, to finance its second Evergreen Product production line by May 2011.

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