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/C O R R E C T I O N -- Chemspec International Limited/

SHANGHAI, Nov. 12, 2010 /PRNewswire via COMTEX/ -- In the news release, Chemspec International Limited Announces Third Quarter 2010 Unaudited Financial Results, issued 12-Nov-2010 by Chemspec International Limited over PR Newswire, a Business Outlook section has been added and the quote from Dr. Jianhua Yang has been updated accordingly. The complete, corrected release follows: Chemspec International Limited Announces Third Quarter 2010 Unaudited Financial Results Chemspec International Limited (NYSE: CPC; "Chemspec" or the "Company"), a leading China-based contract manufacturer of highly-engineered specialty chemicals, today announced its unaudited financial results(1) for the third quarter ended September 30, 2010.

Third Quarter 2010 Financial Highlights Total sales increased 53.7% from the third quarter of 2009(2) and 21.7% from the second quarter of 2010 to RMB 324.7 million (US$ 48.5 million), which was a new quarterly record for the Company.

Gross profit totaled RMB 123.4 million (US$ 18.5 million), an increase of 38.0% from the third quarter of 2009(2) and 25.0% from the second quarter of 2010.

Income from operations was RMB 85.9 million (US$ 12.8 million), an increase of 38.7% from the third quarter of 2009(2) and 23.4% from the second quarter of 2010.

Net income attributable to the Company's shareholders was RMB 70.4 million (US$ 10.5 million), an increase of 34.6% from the third quarter of 2009(2) and 22.4% from the second quarter of 2010.

Basic and diluted earnings per ADS(3) were RMB 1.95 (US$ 0.29) and RMB 1.94 (US$ 0.29), respectively. Both basic and diluted earnings per ADS were RMB 1.44 (US$ 0.22) in the third quarter of 2009(2) and RMB 1.59 (US$ 0.24) in the second quarter of 2010.

Dr. Jianhua Yang, Chairman and Chief Executive Officer of Chemspec, commented, "I am pleased to announce our third quarter financial results, which set a new record high in our Company's history. These results reflect a continued upswing in demand in our end markets, particularly in the electronics sector where our highly engineered specialty chemical products are used. Our pharmaceutical business remained stable and we started to see a mild recovery in the agrochemical business. The improved performance in both revenue and gross margin during the period was mainly attributed to the strong growth in our electronics chemical business, an active realignment of customer inventory, and an effective shift in product mix. Overall, we have experienced a strong recovery in our business over the first three quarters of this year and we expect to carry this momentum into the end of the year. Currently, we expect full fiscal year 2010 revenue to be approximately RMB 1,060 - 1,100 million, which represents growth of approximately 29% - 34% compared with fiscal year 2009." Mr. Zixin Wang, Vice President of Finance, commented, "We are happy to report our strong financial results for the third quarter of 2010. While our inventories increased in absolute terms in the third quarter of 2010, primarily as a result of the increase in total sales, inventories as a percentage of total sales decreased compared with the second quarter of 2010. We attribute the decrease in inventories as a percentage of total sales to our continued efforts in managing our inventories efficiently. We have also been able to maintain fairly stable operating margins as a result of strict cost control measures over the past quarters. We expect to continue these efforts during the remainder of the year." Third Quarter 2010 Financial Results Total Sales During the three months ended September 30, 2010, the Company generated total sales of RMB 324.7 million (US$ 48.5 million), representing an increase of 53.7% from RMB 211.3 million in the third quarter of 2009 and an increase of 21.7% from RMB 266.8 million in the second quarter of 2010. We attribute the increase in sales primarily to strong demand in the electronics chemical market during the third quarter of 2010.

Gross Profit and Gross Margin Gross profit was RMB 123.4 million (US$ 18.5 million), which was an increase of 38.0% from RMB 89.5 million in the third quarter of 2009 and 25.0% from RMB 98.7 million in the second quarter of 2010. Gross margin was 38.0% in the third quarter of 2010, compared with 42.3% in the third quarter of 2009 and 37.0% in the second quarter of 2010. The changes in gross margin from the same period last year and the previous quarter were mainly due to the shift in product mix and price adjustments for certain products.

Operating Expenses Selling expenses and general and administrative (SG&A) expenses were RMB 23.0 million (US$ 3.4 million) during the third quarter of 2010, representing an increase of 18.1% from RMB 19.4 million in the third quarter of 2009 and an increase of 44.8% from RMB 15.9 million in the second quarter of 2010. The increase in SG&A expenses compared with the same period of 2009 was primarily due to an increase in depreciation expenses related to the Company's new headquarters, and the payment of consulting fees related to Sarbanes-Oxley (SOX) compliance. The sequential increase was because the Company recognized a reversal in share-based compensation expenses in the second quarter of 2010 due to the forfeiture of options that were granted to former employees.

Research and development expenses increased by 113.2% to RMB 15.1 million (US$ 2.3 million) from RMB 7.1 million in the third quarter of 2009 and by 2.1% from RMB 14.8 million in the second quarter of 2010. The increase in R&D expenditures compared with the same period in 2009 was primarily due to higher material consumption as well as an increase in R&D headcount as the Company hired additional experienced scientists and engineers. Compared with the second quarter of 2010, R&D expenses remained stable.

Net income attributable to Chemspec International Limited shareholders Net income attributable to Chemspec International Limited shareholders increased to RMB 70.4 million (US$ 10.5 million), a rise of 34.6% from RMB 52.3 million in the third quarter of 2009 and 22.4% from RMB 57.5 million in the second quarter of 2010. The increase in net income attributable to Chemspec International Limited shareholders was primarily due to the increase in sales.

Basic and diluted earnings per ADS were RMB 1.95 (US$ 0.29) and RMB 1.94 (US$ 0.29), respectively. Both basic and diluted earnings per ADS were RMB 1.44 (US$ 0.22) in the third quarter of 2009 and RMB 1.59 (US$ 0.24) in the second quarter of 2010.

Cash Flows As of September 30, 2010, the Company had RMB 145.3 million (US$ 21.7 million) of cash, compared with RMB 351.1 million as of December 31, 2009. Significant cash outflows for the nine-month period ended September 30, 2010 included capital expenditure payments of RMB 181.1 million (US$ 27.1 million) for the expansion of production facilities and the increase in inventory to RMB 439.5 million (US$ 65.7 million) from RMB 393.6 million at the end of second quarter of 2010. The higher inventory was due to a rise in the production and sales of more complex products, primarily for the electronics end-market.

Business Outlook Overall, the Company experienced a strong recovery in business during the first three quarters of 2010 and management expects that revenue for fiscal year 2010 will be between RMB 1,060 and RMB 1,100 million, which represents an increase of approximately 29% - 34% compared with fiscal year 2009.

Conference Call Details The Company will host a conference call and live webcast to discuss its third quarter financial results at 8:00 am Eastern Standard Time (9:00 pm Shanghai Time) on Friday, November 12, 2010.

The dial-in details for the live conference call are as follows: - U.S. Toll Free Number: +1-866-519-4004 - International Dial-in Number: +65-6723-9381 -Mainland China Toll Free Number: 800-819-0121 -Mainland China Domestic Mobile: 400-620-8038 - Hong Kong Toll Free Number: 800-930-346 Conference ID: CPC A live and archived webcast of the conference call will be available on the Investor Relations section of Chemspec's website at http://www.chemspec.com.cn.

A telephone replay of the call will be available from 11:59 pm Eastern Standard Time on November 12, 2010 through 11:59 pm Eastern Standard Time on November 19, 2010.

The dial-in details for the replay are as follows: - U.S. Toll Free Number: +1-866-214-5335 - International Dial-in Number: +61-2-8235-5000 Conference ID: 24110185 (1) Certain Renminbi (RMB) amounts in this press release have been translated into U.S. dollar (USD) solely for the convenience of the reader. The conversion of RMB into USD in this release is based on the noon buying rate in the City of New York for cable transfers in RMB per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York on September 30, 2010, which was RMB 6.6905 to USD1.00. The percentages stated are calculated based on RMB.

(2)2009 financial data have been adjusted to reflect the retrospective adjustment of the Company's financial data due to the acquisition of Jiangsu Kangpeng Nong Hua Limited on November 9, 2009. The transaction was considered a combination between entities under common control.

(3) 1 ADS=60 ordinary shares About Chemspec Chemspec is a leading China-based contract manufacturer of highly engineered specialty chemicals, especially, the fluorinated specialty chemicals. In manufacturing specialty chemicals, Chemspec also provides process design and process development services, which enable efficient and rapid production of specialty chemicals that are incorporated into the products of Chemspec's end users. Chemspec's customers and end users include electronics, pharmaceutical and agrochemical companies. For more information, please visit www.chemspec.com.cn.

For further information, please contact: Chemspec International Ltd.

In Shanghai

Carol Fang

Manager, Investor Relations

Tel: +86-21-63638108

Email: ir@chemspec.com.cn

Christensen

In New York

Kathy Li

Tel: +1-212-618-1978

Email: kli@christensenir.com

In Hong Kong

Tip Fleming

Tel: +852-9212-0684

Email: tfleming@christensenir.com

Chemspec International Limited

Unaudited Consolidated Balance Sheets

December 31, September 30, September 30,

2009 2010 2010

RMB'000 RMB'000 USD'000

ASSETS

Current assets

Cash 351,097 145,280 21,714

Pledged bank deposits 37,919 74,795 11,179

Accounts receivable, net 94,154 112,994 16,889

Bills receivable 1,327 623 93

Inventories 271,434 439,511 65,692

Prepayment and other

receivables 38,738 80,843 12,083

Amounts due from related

parties 64 - -

Deferred income tax assets 3,424 6,515 974

----- ----- ---

Total current assets 798,157 860,561 128,624

Property, plant and

equipment, net 699,181 809,430 120,982

Land use rights 56,064 59,144 8,840

Intangible assets 839 757 113

Goodwill 7,446 7,446 1,113

Investment in an affiliate 13,296 12,943 1,935

Deferred income tax assets 300 - -

Total assets 1,575,283 1,750,281 261,607

========= ========= =======

LIABILITIES AND EQUITY

Current liabilities

Bank borrowings - 20,000 2,989

Accounts payable 81,870 161,085 24,077

Bills payable 49,738 55,323 8,269

Accrued expenses and other

payables 183,266 129,609 19,372

Amounts due to related

parties 23,659 8,559 1,279

Deferred income - 14,044 2,099

Income taxes payable 1,298 8,368 1,251

----- ----- -----

Total current liabilities 339,831 396,988 59,336

Bank borrowings 10,000 5,000 747

Deferred income tax

liabilities 18,056 20,744 3,101

Deferred income 15,136 2,585 386

------ ----- ---

Total liabilities 383,023 425,317 63,570

Equity

Chemspec International

Limited shareholders'

equity

Ordinary shares: Par value:

HK$ 0.01; Authorized:

20,000,000,000 shares as

of December 31, 2009 and

September 30, 2010; Issued

and outstanding:

2,167,620,000 shares as of

December 31, 2009 and

2,169,624,240 shares as of

September 30, 2010; 21,686 21,705 3,244

Additional paid-in capital 323,916 322,288 48,171

Statutory reserves 63,422 63,422 9,479

Accumulated other

comprehensive income 6,803 5,538 828

Retained earnings 770,425 906,212 135,448

------- ------- -------

Total Chemspec

International Limited

shareholders' equity

1,186,252 1,319,165 197,170

Noncontrolling interests 6,008 5,799 867

----- ----- ---

Total equity 1,192,260 1,324,964 198,037

--------- --------- -------

Total liabilities and

equity 1,575,283 1,750,281 261,607

========= ========= =======

Chemspec International Limited

Unaudited Quarterly Consolidated Statements of Income

Three-month periods ended

September 30, June 30,

2009 2010

RMB'000 RMB'000

(As adjusted)

Sales 211,305 266,831

Cost of sales (121,848) (168,101)

-------- --------

Gross profit 89,457 98,730

Selling expenses (2,405) (2,341)

General and

administrative

expenses (17,044) (13,521)

Research and

development expenses (7,074) (14,765)

Other operating

expenses (1,297) (623)

Other operating income 311 522

Government grants 11 1,618

--- -----

Income from operations 61,959 69,620

Other income

(expenses):

Interest income 467 339

Interest expense (418) -

Foreign currency

exchange gain (loss),

net 220 (994)

Equity in loss of an

affiliate (85) (121)

Other income 376 165

Other expenses - (236)

--- ----

Earnings before income

taxes 62,519 68,773

Income tax expense (11,427) (10,663)

------- -------

Net income 51,092 58,110

Net (income) loss

attributable to

noncontrolling

interests

1,200 (577)

----- ----

Net income

attributable to

Chemspec

International Limited

shareholders

52,292 57,533

====== ======

Basic earnings per

share RMB 0.02 RMB 0.03

======== ========

Diluted earnings per

share RMB 0.02 RMB 0.03

======== ========

Basic earnings per ADS RMB 1.44 RMB 1.59

======== ========

Diluted earnings per

ADS RMB 1.44 RMB 1.59

======== ========

Three-month periods ended

September 30, September 30,

2010 2010

RMB'000 USD'000

Sales 324,692 48,530

Cost of sales (201,248) (30,080)

-------- -------

Gross profit 123,444 18,450

Selling expenses (3,203) (479)

General and

administrative

expenses (19,767) (2,954)

Research and

development expenses (15,080) (2,254)

Other operating

expenses (121) (18)

Other operating income 242 36

Government grants 400 60

--- ---

Income from operations 85,915 12,841

Other income

(expenses):

Interest income 532 80

Interest expense - -

Foreign currency

exchange gain (loss),

net (1,625) (243)

Equity in loss of an

affiliate (134) (20)

Other income 45 7

Other expenses - -

--- ---

Earnings before income

taxes 84,733 12,665

Income tax expense (14,210) (2,124)

------- ------

Net income 70,523 10,541

Net (income) loss

attributable to

noncontrolling

interests

(122) (18)

---- ---

Net income

attributable to

Chemspec

International Limited

shareholders

70,401 10,523

====== ======

Basic earnings per

share RMB 0.03 USD 0.00

======== ========

Diluted earnings per

share RMB 0.03 USD 0.00

======== ========

Basic earnings per ADS RMB 1.95 USD 0.29

======== ========

Diluted earnings per

ADS RMB 1.94 USD 0.29

======== ========

Nine-month periods ended

September September September

30, 30, 30,

2009 2010 2010

RMB'000 RMB'000 USD'000

(As

adjusted)

Sales 643,244 811,674 121,317

Cost of sales (381,562) (493,162) (73,710)

-------- -------- -------

Gross profit 261,682 318,512 47,607

Selling expenses (8,428) (8,047) (1,203)

General and

administrative

expenses (49,079) (54,049) (8,078)

Research and

development expenses (22,901) (43,550) (6,509)

Other operating

expenses (3,765) (1,295) (194)

Other operating income 717 1,273 190

Government grants 609 2,468 369

--- ----- ---

Income from operations 178,835 215,312 32,182

Other income

(expenses):

Interest income 1,814 1,429 214

Interest expense (1,841) (80) (12)

Foreign currency

exchange loss, net (2,192) (2,666) (399)

Equity in loss of an

affiliate (85) (353) (53)

Other income 428 258 39

Other expenses - (236) (35)

--- ---- ---

Earnings before income

taxes 176,959 213,664 31,936

Income tax expense (35,588) (32,591) (4,871)

------- ------- ------

Net income 141,371 181,073 27,065

Net income attributable

to noncontrolling

interests (4,009) (826) (124)

------ ---- ----

Net income attributable

to Chemspec

International Limited

shareholders 137,362 180,247 26,941

======= ======= ======

Basic earnings per

share RMB 0.07 RMB 0.08 USD 0.01

======== ======== ========

Diluted earnings per

share RMB 0.07 RMB 0.08 USD 0.01

======== ======== ========

Basic earnings per ADS RMB 4.25 RMB 4.98 USD 0.74

======== ======== ========

Diluted earnings per

ADS RMB 4.24 RMB 4.98 USD 0.74

======== ======== ========

Chemspec International Limited

Unaudited Consolidated Statements of Cash Flows

Nine-month periods ended

September September September

30, 30, 30,

2009 2010 2010

RMB'000 RMB'000 USD'000

(As

adjusted)

Cash flows from

operating

activities

Net income 141,371 181,073 27,064

Adjustments to

reconcile net

income to net

cash provided by

operating

activities:

Depreciation and

amortization of

property, plant

and equipment 26,468 52,391 7,831

Amortization of

land use rights 810 978 146

Amortization of

intangible assets 81 82 12

Loss on disposal

of property,

plant and

equipment 3,035 606 91

Equity in loss of

an affiliate 85 353 53

Inventory

writedowns 2,541 1,788 267

Gain on transfer

of land use right

to an affiliate (290) - -

Unrealized foreign

exchange (gain)

loss, net (200) 892 133

Share-based

compensation 12,506 266 40

Deferred income

tax expense

(benefit) 7,409 (103) (15)

Changes in

operating assets

and liabilities:

Pledged bank

deposits related

to purchase of

inventory 5,317 (30,428) (4,548)

Inventories (29,934) (169,865) (25,389)

Accounts

receivable 26,158 (19,662) (2,939)

Bills receivable (200) 704 105

Prepayment and

other receivables (9,466) (34,527) (5,161)

Accounts payable 10,353 79,215 11,840

Bills payable

related to

purchase of

inventory 3,666 14,202 2,123

Accrued expenses

and other

payables (4,192) (12,860) (1,922)

Deferred income 4,357 1,493 223

Income taxes

payable 868 7,070 1,057

--- ----- -----

Net cash provided

by operating

activities 200,743 73,668 11,011

------- ------ ------

Cash flows from

investing

activities

Capital

expenditures,

including

interest

capitalized (188,626) (181,132) (27,073)

Investment in an

affiliate (11,225) - -

Pledged bank

deposit related

to purchase of

property, plant

and equipment (19,294) (6,448) (964)

Non-interest

bearing advances

repaid by related

parties 2,500 64 10

Payments for land

use rights (3,121) (4,058) (607)

Net cash used in

investing

activities (219,766) (191,574) (28,634)

-------- -------- -------

Cash flows from

financing

activities

Capital

contributions

from

noncontrolling

shareholders 1,600 - -

Cash distribution

to noncontrolling

shareholders (2,500) - -

Dividends paid - (44,460) (6,645)

Proceeds from

issuance of

ordinary shares 389,022 5,697 852

Issuance costs of

ordinary shares

upon IPO (42,846) (3,028) (453)

Acquisition of

additional equity

interests in

subsidiaries - (45,400) (6,786)

Proceeds from

short-term bank

borrowings 15,000 20,000 2,989

Repayments of

short-term bank

borrowings (75,000) - -

Proceeds from

long-term bank

borrowings 5,000 - -

Repayments of

long-term bank

borrowings - (5,000) (747)

Repurchase of

ordinary shares - (5,807) (868)

Deposit for

purchase of

ordinary shares (7,578) (1,133)

Proceeds from non-

interest bearing

borrowings from

related parties 6,000 - -

Repayments of non-

interest bearing

borrowings from

related parties (46,310) (1,000) (149)

Net cash provided

by (used in)

financing

activities 249,966 (86,576) (12,940)

------- ------- -------

Effect of foreign

currency exchange

rate changes on

cash 200 (1,335) (200)

--- ------ ----

Net increase

(decrease) in

cash 231,143 (205,817) (30,763)

Cash at beginning

of period 180,602 351,097 52,477

------- ------

Cash at end of

period 411,745 145,280 21,714

======= ======= ======

Supplemental

disclosures of

cash flow

information:

Income taxes paid 26,524 25,624 3,830

Interest paid, net

of amounts

capitalized 1,875 80 12

Noncash investing

and financing

activities:

Accrued IPO cost 6,900 - -

Payable for

purchase of

property, plant

and equipment 102,943 108,905 16,278

Payable for

acquisition of

Kangpeng Nong Hua - 5,900 882

Bills payable for

purchase of

property, plant

and equipment 4,771 19,488 2,913

Land use right

contributed to an

affiliate 1,957 - - SOURCE Chemspec International Limited www.prnewswire.com Copyright (C) 2010 PR Newswire. All rights reserved -0- KEYWORD: China INDUSTRY KEYWORD: CHM SUBJECT CODE: ERN

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