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| 8-K - New Oriental Energy & Chemical Corp. | v178759_8-k.htm |
EXHIBIT
99.1
NEW
ORIENTAL ENERGY & CHEMICAL CORP.
TRANSCRIPT
OF
ANNUAL
MEETING OF STOCKHOLDERS
March
23, 2010
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Ken
Donenfeld:
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Good
morning ladies and gentlemen. I am Ken Donenfeld of DGI Investor Relations
and I’m very pleased to assist the management of New Oriental Energy &
Chemical Corp. by welcoming you to the New Oriental Energy & Chemical
Corp. Annual Meeting of Stockholders and reading several statements
prepared by the Company.
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I would
like to introduce you to the directors and management of the Company who are
present on the call today:
Chen Si
Qiang is the Chief Executive Officer and Chairman of the Board of Directors of
the Company.
Wang Gui
Quan, who is the President of the Company, has been with the Company since 2003
and has been a Director since October 2006.
Donglai
Li is the Chief Financial Officer of the Company.
Li Jun is
the Financial Controller of the Company.
Liya Wu
will act as Secretary of this Meeting.
As
directed by Mr. Chen Si Qiang, the Annual Meeting of Stockholders of New
Oriental Energy & Chemical Corp. is hereby called to order.
We will
handle the formal requirements of the meeting and then proceed to a brief
discussion regarding the business of the Company and a question and answer
session.
Mr. Aaron
Menzi is the Inspector of Elections at this meeting. Please hand any
undelivered proxies to him at this time.
Is there
a quorum present?
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Inspector:
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Yes,
there are present in person or represented by proxy the holders of a
majority of the outstanding shares of Common Stock entitled to vote at
this meeting.
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Ken
Donenfeld:
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A
quorum is present and the Company has received a certified list of the
holders of the Common Stock of the Company at the close of business on
February 2, 2010, the record date, and copies of the notice of meeting,
proxy statement, the annual report, and an affidavit of the Company's
transfer agent regarding the due mailing of the materials, which will be
filed with the minutes of this
meeting.
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There are
two proposals to be acted on at this Meeting.
The first
proposal on the Agenda is the election of seven directors of the Company, to
hold office until the Annual Meeting of Stockholders in 2011, or until their
successors have been duly elected and qualified.
As
indicated in the Company’s Proxy Statement, Mssrs. Chen Si Qiang, Wang Gui Quan,
Zhou Dian Chang, Lei Qi, Cao Xiaokai, Shi Yan and Howard S. Barth have been duly
nominated to serve as members of the Board of Directors.
We will
vote on the election of the nominees as the Directors and the adoption of the
following resolution:
Resolved,
that Messrs. Chen Si Qiang, Wang Gui Quan, Zhou Dian Chang, Lei Qi, Cao Xiaokai,
Shi Yan and Howard S. Barth be elected as Directors of the Company, to hold
office until the Company’s Annual Meeting of Stockholders in 2011 and until
their respective successors have been duly elected and qualified.
The
second proposal on the Agenda is ratification of the appointment of Weinberg
& Company, P.A. as the Company’s independent public accountants for the
fiscal year ending March 31, 2010.
We will
vote on the ratification of the appointment of Weinberg & Company, P.A. and
the adoption of the following resolution:
Resolved,
that the appointment of Weinberg & Company, P.A. as the company’s
independent public accountants for the fiscal year ending March 31, 2010 be
hereby ratified and approved in all respects.
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If
anyone would like to vote in person, please raise your hand and the
Inspector of Elections will give you a ballot. If you are
voting by ballot, please mark your ballot and hold it up so that the
inspector may collect it.
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All the
stockholders present in person or by proxy having had an opportunity to vote,
the polls are now declared closed.
While the
votes are being tabulated, I will read the following statements on behalf of the
committees of the Board of Directors.
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·
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The
Nominating Committee operates under the Company’s By-laws and the
Committee’s Charter, and consists of three independent directors: Lei Qi,
Shi Yan and Xiaokai Cao.
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·
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After
discussions, the Compensation Committee decided that the Company does not
need to adjust the current compensation system, and the Compensation
Committee did not receive any written correspondence regarding adjusting
current compensation system. If we receive the written consent of
adjusting current compensation and welfare system during the coming fiscal
year, we will execute under the By-laws and other
regulations.
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·
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The
Nominating Committee operates under the Company’s By-laws and the
Committee’s Charter, and consists of three independent directors: Cao
Xiaokao, Howard S Barth and Qi Lei.
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·
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After
discussions, the Nominating Committee decided that the Company does not
need to modify or create any additional positions, and the Nominating
Committee did not receive any written correspondence regarding modifying
or creating director positions.
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·
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The
Nominating Committee recommends that the persons nominated be elected as
the Company’s directors to serve until the next annual shareholder’s
meeting or their successors are elected and
qualified.
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·
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The
audit committee is comprised of Mr.Yan Shi,Mr. Xiaogai Cao and Howard
Barth.
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·
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The
audit committee assists the Board of Directors in fulfilling its oversight
responsibilities with respect to (a) the company's systems of internal
controls regarding finance, accounting, legal compliance and ethical
behavior, (b) the company's auditing, accounting, and financial reporting
processes, (c) the company's financial statements and other financial
information provided by the company to its shareholders, the public and
others, (d) the company's compliance with legal and regulatory
requirements and (e) the performance of the company's Corporate audit
department and independent
auditors.
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·
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The
committee will encourage continuous improvement of, and adherence to , the
company's policies, procedures and practices at all levels. It's main
responsibility is oversight and we will continue to improve the company's
internal auditing and reporting
procedures.
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I will
now read the comments prepared by Mr. Chen for this occasion.
Welcome
to all of you. I will assume most of you are familiar with the
Company. For those who are not, the Company historically, and since
being privatized in 2003, been a successful producer of coal based, specialty
chemicals—in particular—urea for the production of nitrogenous
fertilizer. In this business we have received many awards for our
product and wide recognition of our brand name in the
market. Improved crop yields to feed China’s enormous population has
been and will continue to be a concern of the government and a business
opportunity in which the strongest Companies will do well over
time.
I was
pleased, therefore, to be able to report in our third quarter report, that after
a very difficult period – triggered by the world economic crisis in late 2008
and 2009—and the pricing for oil and coal—we were back in the black in the
legacy segment of our business.
Clearly,
I was overly optimistic about this occurrence at our last annual meeting—and the
interim period has been a difficult one for our shareholders, including
myself. But, I believe that many of the factors I thought would be
coming into play then now seem more realistic. In particular, demand
for the product remains strong. Additionally, the cost of coal, our
key raw material, has moderated.
At the
end of December, coal was 900 RMB or ($132) per ton. More recently it
has been about RMB 940 ($138) per ton. In 2010 we expect the average
price of coal to drop to RMB 850 ($125) per ton for two reasons. 1) China keeps
on increasing the import volume of coal to satisfy the demand 2) in 2009, the
Chinese government put efforts into the integration of coal mines and a series
of M&A activities that enhance the overall scale of the production of coal
mines. This will help our urea business return to a more normal
mode.
As those
of you who follow us know, however, the key reason for the unfavorable
comparisons we have generated in the recent past has been the much more
difficult situation with respect to methanol and DME sales. In fact,
we have temporarily halted DME sales for the past several quarters and limited
sales of methanol. The early excitement in our Company was a
consequence of our decision to expand our production of these important,
non-polluting alternative fuels. Over the years, we have built
world-leading expertise in the production of these specialty chemicals,
researched uses for the products, and continue to envision a future for the
Company where our leadership and growth in coal based alternative fuels will be
the hallmark of our Company.
To that
end, in March, 2008 we obtained a license for the production of
600,000 tons of DME, which would make us the leading Chinese producer of this
much cleaner and more efficient alternative to diesel fuel and the LPG widely
used in China for home heating and cooking. And, utilizing our own
cash flow, we began construction of a new 200,000 ton capacity methanol plant,
which would make us self sufficient in the methanol required to achieve maximum
DME production, and also—conditions permitting—to sell surplus
methanol.
By
hindsight, our timing for this was not good. With the world economic
crisis in 2008, the decline in world oil prices, the price of LPG and the high
price of coal made existing production of DME uneconomic. Further,
conditions for obtaining financing for the project also deteriorated as our own
cash flow was impacted.
We
nevertheless have persisted using our cash and some borrowings and the methanol
project is now more than 85% complete. And we have not given up on
financing—with promised support for the Company from its largest shareholder of
$7.3mln to $11.7mln over time. We anticipate it will require about
$11 million to relaunch our DME efforts when market conditions
permit.
While we
have twice postponed the planned completion of the methanol expansion, in our
third quarter we reset the planned completion for June this year. By
that time, we don’t expect that market conditions will have returned to the
climate in which we began construction. However, we do believe that
by then we may be seeing the beginning of the improvements we need.
Specifically,
with a significant boost from the government, China’s economy in 2009 vastly
outperformed all other economies around the world. While moves are
afoot to put some brakes on the growth—it will no doubt continue to be strong
with key consequences including greatly increased spending for gasoline and
other fuels by consumers and businesses. More roads are being built,
cars and trucks are being sold and factories are developing more products for
the domestic market even as exports remain slower. Imported oil needs
are rising, and with a receding recession worldwide, oil prices have
risen.
The other
consequence of the economic rebound is more pollution—even though the government
has voiced strong support for making China greener and healthier.
At some
point, in our view, this situation will trigger growing demands for less
expensive, cleaner alternative fuels—and we believe coal-based methanol and DME
will be seen as part of the solution.
Further,
in the marketplace, the economic signs we look at are showing the
following:
As
compared with lows about a year ago, oil prices recently have been hovering at
about $80 per barrel.
In China,
as I said, the price of coal recently has moved down to about $138 per ton, and
we expect it will drop to about $125 per ton.
Methanol
demand is there, as reflected in our third quarter sales. But these
were loss leader sales to maintain our market position. In the first
11 months of 2009, methanol prices were very low and averaged at the RMB2000 or
(US$293) per ton level. In December 2009, due to the issuance of the
methanol-petrol standard, the methanol market showed a very irrational increase
and peaked at RMB 3000 (US$ 439) per ton shortly after the issuance of the
standard. The market went back to and maintained at about the RMB 2600 (US$381)
per ton level. In 2010, with the central government's providing more incentive
and enforcement of the usage of methanol-petrol, the price of methanol is
expecting to be increased
With
respect to DME, the Dec 09 price was RMB 3500 (US$ 512) per ton, Current price
is about RMB 3600 (US$ 527) per ton. The DME price will show an increasing trend
with the issuance of product standards and the maturity and popularity of
transportation equipment utilizing it. In our third quarter report we
said we expected to restart DME sales soon when we saw prices of RMB 3150 per
ton in China.
Just to
round out the picture, with respect to urea, the Dec 09 average price was RMB
1727 (US$ 253) per ton and the February 2010 price was RMB 1770 (US$ 259) per
ton. From March, the urea selling price was supposed to increase for the
seasonal sales, but due to the most serious drought in Southwest China area in
60 years, the urea market was very low and the current price is RMB1680 (US$
246) per ton, but this will be temporary
And so,
once again I must say I am cautiously optimistic about our outlook over the next
six months or so—and hope I am more accurate than I have been in the most
unusual times we experienced over the past year or so. I can’t
comment on our financing progress—other than to say that we reported we obtained
a short term loan of $2.34 million in January and are exploring other
avenues.
I respect
and appreciate our holders who remain optimistic about the longer term future of
the Company and can only promise that we are doing everything possible, and
working as hard as ever, to fulfill their expectations. They are our
expectations as well.
Mr.
Inspector, would you please advise us of the results of the voting?
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Inspector:
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I
am pleased to report that the required number of shares of common stock
have been voted in favor of the election of all of the nominated
Directors.
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They
are hereby elected to serve as Directors of the Company for a term
expiring on the date of the next Annual Meeting of the Company or until
their successors are duly elected and
qualified.
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I
am also pleased to report that the required number of shares of common
stock have been voted in favor of ratification of the appointment of
Weinberg & Company, P.A. as the company’s independent public
accountants for fiscal year ending March 31, 2010. The
appointment of Weinberg & Company, P.A. is hereby ratified and
approved in all respects.
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Ken
Donenfeld:
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Thank
you. The management is now available to answer questions from
stockholders.
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[There
were no questions.]
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If
there is no other business, then by the instruction of Mr. Chen the
meeting is adjourned. Thank you very
much.
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