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KHD Humboldt Wedag International Ltd. Reports Second Quarter and Six-Month Results

08/14/2006
   - Backlog Increases 83% and Earnings Before Tax Exceed Guidance by 42% -

HONG KONG, Aug. 14 /PRNewswire-FirstCall/ -- KHD Humboldt Wedag International Ltd. ("KHD") (Nasdaq: KHDH) announces results for the quarter and six months ended June 30, 2006. The quarter has seen the completion of the majority of projects for the final phase of KHD's transition to an industrial plant engineering and equipment supply company. This transition began with the distribution of a substantial portion of the financial services operations, Mass Financial Corp, to our shareholders during the first quarter of the year. The second quarter, ended June 30, 2006, is our first full operating quarter since the distribution.

Revenues for the three months ended June 30, 2006, for the going-forward industrial plant engineering and equipment supply business increased to $84.6 million versus $73.0 million in the same three-month period in 2005. For the second quarter of 2006, earnings before taxes ("EBT") for the industrial plant engineering and equipment supply segment was $10.2 million, an increase of 13 percent over the same period in 2005.

For the first six months of 2006, industrial plant engineering and equipment supply revenues increased by more than 18 percent, to $150.1 million from $128.3 million in the first half of 2005. EBT for the industrial plant engineering and equipment supply services segment was $14.7 million, an increase of 28 percent over the corresponding period of 2005.

KHD is raising its guidance on EBT, consistent with the June 30th numbers in that category, when EBT was $10.2 million versus the previous forecast of $7.2 million. The company attributes this increase to cost controls and improving margins. The new full-year guidance for EBT is $37.9 million. KHD is maintaining its $424.6 million guidance for 2006 as to revenue, even though revenue for the June 30th quarter was $16.2 million short of the previous forecast of $100.8 million. In a business such as industrial plant engineering and equipment supply that depends on sequential events, a delay can push timing off in the short term. The company believes that revenues that were delayed in the June 30th quarter will catch up during the remainder of the year. The revenues and EBT are not evenly distributed among all quarters. The following information and other statements in this release are forward-looking and are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially.

The weighted average number of shares for the quarter ended June 30, 2006 increased to 15.4 million on a diluted basis in the current quarter from 13.7 million in the second quarter of 2005. For the first six months of 2006, the weighted average number of shares increased to 15.1 million on a diluted basis from 13.7 million in the same period of 2005. During the current quarter, the Euro depreciated by approximately 10 percent against the Canadian dollar, compared to the same quarter in 2005. This depreciation of the Euro against the Canadian dollar significantly reduced our revenue and net income.

Order intake for the three months ended June 30, 2006 was $289.2 million, an increase of 151 percent over the same quarter of 2005. Of this total, 35 percent came from the emerging Asia/Pacific region, 35 percent from the Americas and 26 percent from Europe.

Order backlog for the second quarter of 2006 was $563.9 million, an increase of 83 percent over the second quarter of 2005.

Sales for the second quarter of 2006 were up to $77.4 million, an increase of 18 percent over the same period in 2005.

Order intake for the first six months of 2006 was $384.6 million, an increase of 97 percent over the corresponding period of 2005. Of this total, 33 percent of order intake came from the emerging Asia/Pacific region, 28 percent from the Americas, 26 percent from Europe and 10 percent from the Middle East.

Order backlog for the first six months of 2006 was $563.9 million, an increase of 83 percent over the corresponding period of 2005.

Sales for the first six months of 2006 reached $139.5 million, an increase of 28 percent over the corresponding period of 2005.

Order intake is defined as the total value of all orders received during the respective period, while order backlog is the value of orders received but not yet fulfilled. For comparative purposes, all amounts for order intake and backlog and sales were translated from Euro to $ at 1.1841, the exchange rate prevailing on December 31, 2005.

CEO Jim Busche commented, "The upward trend of order intake, backlog and earnings has continued through the second quarter. The improving leading indicators mirror the message we hear constantly from our customers, i.e., that the marketplace is receptive for our technically advanced, quality products at competitive pricing. This is further a reflection of the robust rates of growth in the economies of Asia, Russia, South America, Europe and the USA, as infrastructure continues to expand and modernize to accommodate requirements in travel, communications, construction, and the delivery of services. The demand for cement, iron, coal and other minerals shows no sign of slacking."

Jim Busche added, "The demand for infrastructure continues to accelerate. In India alone, the demand for infrastructure to accommodate new industry continues to drive high demands for basic materials such as those our plants are designed to process: cement, iron, coal and other essential minerals. The rate of expansion in Asia, Russia and the Americas is substantial. We believe that the combination of our reputation for excellence and innovation, combined with our long history of performance place us in an enviable position vis-a-vis other companies in our industry."

Following are the results for the quarter and six months ended June 30, 2006 for KHD as a whole. It must be noted that in considering these results they are not accurate indicators of KHD going forward as they include numbers before our reorganization on January 31, 2006.

Total revenues for the three months ended June 30, 2006, decreased to $88.2 million compared to $225.5 million in the second quarter of 2005. Net income for the 2006 second quarter was $7.3 million, or $0.48 per share, compared to $13.5 million, or $0.98 per share in the same quarter last year. For the first six months of 2006, total revenues decreased from $397.6 million to $189.1 million. Net income for the first six months of 2006 decreased to $10.3 million, or $0.69 per share from $18.3 million, or $1.34 per share in the prior year.

Chairman Michael Smith commented, "The transition to an industrial plant engineering and equipment supply company is almost complete. The projects yet to be completed are the disposition of redundant assets that relate to the old financial services business. A major effort is underway to rationalize these assets. We ended the second quarter with $212 million in cash, $402 million in current assets, and a current working capital ratio that exceeds 2:1. Our equity grew to $278 million. While we believe our financial performance through the second quarter is encouraging, we recognize the need for continuous improvement and remain committed to capitalizing on the strong market conditions while implementing further cost controls and improving margins."

Mr. Smith continued, "We are working to become more transparent and we realize we need to achieve more in this important area as we become a larger company in our industry. We encourage our shareholders to read the entire Form 6-K report for a greater understanding of our industrial plant engineering and equipment supply business, which is now available on our website."

About KHD Humboldt Wedag International Ltd.

KHD Humboldt Wedag International Ltd. (the "Company") owns companies that operate internationally in the industrial plant engineering and equipment supply industry, and specializes in the cement, coal and minerals processing industries. To obtain further information on the Company, please visit our website at http://www.khdhumboldt.com.

All figures are in US dollars and earnings per share amounts are on a diluted basis. The consolidated balance sheet and income statement for June 30, 2006 were translated from Canadian dollars into U.S. dollars at U.S. dollar 1 = Canadian dollars 1.1150 (equivalent to Euro 1 = U.S. dollars 1.2777)

Disclaimer for Forward-Looking Information

Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company's future growth, results of operations, performance and business prospects and opportunities. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management's current views and are based on certain assumptions. These assumptions, which include, management's current expectations, estimates and assumptions about certain projects and the markets the Company operates in, the expressed or implied by the forward-looking statements, including, but not limited to: (1) a downturn in general economic conditions in Asia, Europe, the United States and internationally, (2) a decreased demand for the Company's products, (3) a decrease in the demand for cement, minerals and related products, (4) the number of competitors with competitively priced products and services, (5) product development or other initiatives by the Company's competitors, (6) shifts in industry capacity, (7) fluctuations in foreign exchange and interest rates, (8) fluctuations in availability and cost of raw materials or energy, (9) delays in the start of projects included in our forecasts, (10) delays in the implementation of projects included in our forecasts, disputes regarding the performance of our services, (11) the uncertainty of government regulation and politics in Asia and the Middle East and other markets, (12) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges, and (13) other factors beyond the Company's control.

Additional information about these and other assumptions, risks and uncertainties are set out in the "Risks and Uncertainties" section in our Form 6-K filed with the Securities and Exchange Commission and our MD&A filed with Canadian security regulators.

    Contact Information:   Allen & Caron Inc
            Joseph Allen (investors)
            (212) 691-8087
            joe@allencaron.com
            or
            Len Hall (media)
            (949) 474-4300
            len@allencaron.com
            Rene Randall
            KHD Humboldt Wedag International Ltd
            (604) 683-8286
            rrandall@bmgmt.com
            -FINANCIAL TABLES FOLLOW-
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED BALANCE SHEETS
            As of June 30, 2006 and December 31, 2005
            (Unaudited)
            (amounts in U.S. dollars; in thousands)
            2006           2005
            ASSETS
            Current assets
            Cash and cash equivalents                       $211,558       $194,313
            Restricted cash                                   21,826         22,016
            Securities                                        16,551         16,265
            Loans                                              2,521         10,638
            Receivables, commodities transactions                  0         10,450
            Receivables, industrial plant engineering
            and equipment supply                             31,861         34,588
            Receivables                                       20,000         25,533
            Commodity inventories                                  0         24,356
            Inventories                                       33,521         38,641
            Real estate held for sale                         28,832         27,479
            Contract deposits, prepaid and other              23,328         11,201
            Future income tax assets                          11,952          7,594
            401,950        423,074
            Non-current assets
            Securities                                           800          7,893
            Loans                                             10,347          9,436
            Properties, plant and equipment                   11,361         10,835
            Investment in resource property                   31,696         30,312
            Goodwill                                           9,687         12,987
            Equity method investments                            908         16,021
            Future income tax assets                           8,282         12,496
            Investment in preferred shares of a former
            subsidiary                                       79,731              0
            152,812         99,980
            $554,762       $523,054
            LIABILITIES
            Current liabilities
            Accounts payable and accrued expenses           $155,248       $159,628
            Notes payable, commodities transactions                0          9,890
            Notes payable, industrial plant engineering
            and equipment supply                                619          2,944
            Long-term debt, current portion                        0          1,606
            Pension liabilities                                1,278          1,489
            Deposits                                           8,702         17,327
            Provision for warranty costs                      28,037         20,527
            Future income tax liability                            0            303
            193,884        213,714
            Long-term liabilities
            Long-term debt, less current portion              20,265          6,253
            Pension liabilities                               27,957         25,584
            Provision for warranty costs                       6,743          4,427
            Future income tax liability                        7,253         10,154
            Other long-term liabilities                          226            575
            62,444         46,993
            Total liabilities                          256,328        260,707
            Minority interests                                  20,330         18,088
            SHAREHOLDERS' EQUITY
            Common stock                                      76,477         62,481
            Contributed surplus                                  407              0
            Equity component of convertible debt                  80            125
            Retained earnings                                229,235        209,416
            Cumulative translation adjustment                (28,095)       (27,763)
            278,104        244,259
            $554,762       $523,054
            Note: 2005 numbers include the financial services segment which was
            distributed as a stock dividend to our shareholder on January 31, 2006.
            As a result, the June 30, 2005 results are not a true comparison of KHD at
            June 30, 2006.
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED STATEMENTS OF INCOME
            For the Three Months Ended June 30, 2006 and 2005
            (Unaudited)
            (amounts in U.S. dollars; in thousands, except per share data)
            2006           2005
            Revenues                                           $88,203       $225,549
            Expenses
            Cost of revenues                                  69,209        188,345
            General and administrative                         8,789         15,775
            Stock-based compensation                             407              0
            Interest                                             396          1,772
            78,801        205,892
            Income before income taxes                           9,402         19,657
            Provision for income taxes                            (124)        (4,354)
            9,278         15,303
            Minority interests                                  (1,945)        (1,851)
            Net income                                          $7,333        $13,452
            Earnings per share
            Basic                                              $0.48          $0.99
            Diluted                                            $0.48          $0.98
            Weighted average shares outstanding
            Basic                                         15,217,866     13,599,118
            Diluted                                       15,350,749     13,744,463
            Note: 2005 numbers include the financial services segment which was
            distributed as a stock dividend to our shareholder on
            January 31, 2006. As a result, the June 30, 2005 results are not a
            true comparison of KHD at June 30, 2006.
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED STATEMENTS OF INCOME
            For the Six Months Ended June 30, 2006 and 2005
            (Unaudited)
            (amounts in U.S. dollars; in thousands, except per share data)
            2006           2005
            Revenues                                          $189,054       $397,602
            Expenses
            Cost of revenues                                 153,513        338,288
            General and administrative                        18,717         31,700
            Stock-based compensation                             407              0
            Interest                                           1,692          3,667
            174,329        373,655
            Income before income taxes                          14,725         23,947
            Provision for income taxes                          (1,969)        (2,656)
            12,756         21,291
            Minority interests                                  (2,498)        (2,959)
            Net income                                         $10,258        $18,332
            Earnings per share
            Basic                                              $0.69          $1.35
            Diluted                                            $0.69          $1.34
            Weighted average shares outstanding
            Basic                                         14,493,132     13,588,193
            Diluted                                       15,078,748     13,733,538
            Note: 2005 numbers include the financial services segment which was
            distributed as a stock dividend to our shareholder on
            January 31, 2006.  As a result, the June 30, 2005 results are not a
            true comparison of KHD at June 30, 2006.
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            FINANCIAL SUMMARY
            As of June 30, 2006
            (Unaudited)
            (amounts in U.S. dollars; in thousands, except per share data and ratios)
            Cash and cash equivalents                        $211,558
            Short-term securities                              16,551
            Working capital                                   208,066
            Total assets                                      554,762
            Shareholders' equity                              278,104
            Book value per share                                18.22
            Current ratio                                        2.07
            Long-term debt to equity ratio                       0.07
            
SOURCE  KHD Humboldt Wedag International Ltd.
            -0-                             08/14/2006
            /CONTACT:  Investors, Joseph Allen, +1-212-691-8087, joe@allencaron.com,
            or Media, Len Hall, +1-949-474-4300, len@allencaron.com, both of Allen & Caron
            Inc, for KHD Humboldt Wedag International Ltd; or Rene Randall of KHD Humboldt
            Wedag International Ltd, +1-604-683-8286, rrandall@bmgmt.com/
            /Web site:  http://www.khdhumboldt.com /
            (KHDH)
            CO:  KHD Humboldt Wedag International Ltd.
            ST:  Hong Kong
            IN:  MNG
            SU:  ERN ERP
            AF-KA
            -- LAM021 --
            9241 08/14/2006 07:30 EDT http://www.prnewswire.com
            
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