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China America (CAAH) Reports a Strong Fourth Quarter

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China America (CAAH) Reports a Strong Fourth Quarter

China America Holdings, Inc. (CAAH), a Chinese chemical company similar to DuPont (DD) or Huntsman Corporation (HUN) in the United States, reported a strong end to 2009 in its 10-Q filing with the Securities and Exchange Commission.

China America Holdings, Inc. (CAAH), a diversified Chinese chemical company, reported revenues that increased 40% to $11 million, due to higher sales volumes for its liquid coolants. Meanwhile, its gross profit margin increased from 2.9% to 8.6%, helping the firm to dramatically narrow its net loss and move towards profitability.

Going forward, the company plans to continue their cost-savings efforts and increase efficiency in their operations during this volatile economy. Investors can also look forward to the firm’s historical peak season, from March through July, which should help drive earnings through the second quarter of fiscal 2010.

According to China America’s 10-Q filing, it also plans to benefit from the Chinese economic recovery:

“The Chinese government announced a $586 billion domestic economic stimulus program in November 2008 designed to support domestic economic activity. The two-year program includes spending for housing, infrastructure, agriculture, health care and social welfare. In addition to previously announced tax rebates, the program includes a tax deduction for corporate capital expenditures.

While we cannot directly attribute specific sales to the impact of this program, we believe we have seen a benefit to our company as the overall Chinese economy begins to recover partially as a result from this stimulus program. The tax rebates on export sales have indirectly helped us as our customers have been hurt by tariffs and can take advantage of the rebates, which could translate to more business for us.

We expect the rebound in the Chinese economy to continue during the current fiscal year and allow us to regain previous sales levels and allow prices to return to previous levels.”

Source: 10-Q Filing

China America’s balance sheet also remains very robust, with its asset growing some 10% during the past quarter. During the period, the company reported $2.3 million in cash and total assets of $15.3 million, with no long-term debt and current liabilities of just $6.7 million. As a result, the company is poised to survive the downturn and capitalize on growth opportunities.

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