SHANGHAI, Nov. 5 /PRNewswire-Asia-FirstCall/ -- 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 quarter ended September 30, 2009.

Third Quarter 2009 Financial Highlights -- Total sales were RMB212.6 million (US$31.1 million), a decrease of 25.4% from the third quarter of 2008 and a decrease of 9.0% from the second quarter of 2009 -- Gross profit was RMB89.9 million (US$13.2 million), a decrease of 25.4% from the third quarter of 2008 and a decrease of 5.6% from the second quarter of 2009 -- Income from operations was RMB63.4 million (US$9.3 million), a decrease of 33.9% from the third quarter of 2008 and a decrease of 5.7% from the second quarter of 2009 -- Net income attributable to Chemspec International Limited shareholders was RMB52.6 million (US$7.7 million), a decrease of 58.3% from the third quarter of 2008 and a decrease of 2.3% from the second quarter of 2009. Net income attributable to Chemspec International Limited shareholders for the third quarter 2009 would have decreased 37.2% from the same period last year excluding a one-time income tax refund of RMB 42.5 million in the third quarter of 2008 -- Basic and diluted earnings per ADS (1 ADS = 60 ordinary shares) were RMB1.45 (US$0.21), as compared to RMB4.21 in the third quarter of 2008 and RMB1.77 in the second quarter of 2009. Excluding a one-time income tax refund of RMB 42.5 million for the third quarter of 2008, basic and diluted earnings per ADS would have been RMB 2.79 in the third quarter of 2008. Recent Business Developments -- Expanded production capacity, as planned, in expectation of an eventual economic recovery. Added a total of 687K liters of reactor volume, net of certain reductions of volume due to facility revamping, from the beginning of the year 2009 through the end of third quarter of 2009. This includes the partial completion of the first phase of construction of two new factories, Binghai Kangjie and Quzhou Kangpeng, and completion of new workshops at two existing factories, Wei Er and Wan Su. -- Initiated facility improvements at the Taixing and Huajing factories. -- Completed and moved in October 2009 into a new Headquarters and an R&D Center capable of housing up to 350 scientists. -- Hired two new vice presidents, both of whom have strong overseas industrial backgrounds that will help enhance marketing and sales functions. -- Acquiring Kangpeng Nonghua and the remaining non-controlling interests in the Company''s Wei Er subsidiary and merging the two agrochemical subsidiaries to facilitate the Company''s application for a Chinese Agriculture Active Ingredient ("AI") Production License in order to expand in the agriculture AI business. The Company expects that the necessary government approvals for the close of the transactions can be obtained around the end of 2009.

Dr. Jianhua Yang, Chairman and CEO of Chemspec, commented: "As we cautioned in our last earnings announcement, the third quarter turned out to be an extremely challenging period, and our financial performance reflects the pressure. Electronics industry sales recovered somewhat since the second quarter of 2009, but are not expected to reach the same level in the second half of 2009 compared to the second half of 2008. Our customers in the agrochemical and pharmaceutical end-markets around the world were clearly impacted by the global downturn and bad weather patterns that affected agriculture. They experienced a significant slowdown in the second quarter of 2009, and then saw a further decline in orders in the third quarter of 2009 from their customers. As a result, we believe they decided to primarily focus on cleaning up their inventories to adjust for excessive orders at the start of 2009 in anticipation of another year of short supply. They also have postponed the launch of new products, which has caused them to reduce their purchases from us in the third quarter of 2009, and possibly beyond."

Mr. Bing Zhu, Chief Financial Officer of Chemspec, commented: "Our customers in some industries are less able to accurately forecast demand under these uncertain conditions, and as a result, we have as little visibility as we have ever had since we started operating as a company. However, despite these challenges, we are pleased that we continue to remain in fine financial shape, with stable gross margins, strong capabilities in generating operating cash flows and an extremely solid balance sheet. The fundamentals of our company remain unchanged: we hold a leading position in organic specialty chemical technologies, our products and services remain world-class in terms of quality, we maintain competitive cost advantages as a China-based contract manufacturing organization (CMO) that is well positioned for the rising demand from global outsourcing trends, and we cater to a solid blue-chip end-user base."

Dr. Yang concluded, "Looking forward, we believe the recovery could be slow and it could stretch out to the end of the year and even into the beginning of next year. However, we are taking full advantage of this downturn to press ahead with a number of initiatives. With an eye on future business expansion, we are in the process of adding direct product offerings that will supplement our current CMO project model. We also plan to expand our product line to include agricultural and pharmaceutical new chemical entities (NCEs) and other downstream active ingredients (APIs and AIs). Additionally, we are stepping up our focus on the China market. We believe our strong track record of delivering high quality products and services along with a long-standing focus on environmental, health and safety (EHS) standards will appeal to the China market where such attributes are becoming increasingly important. And lastly, we partially completed the first phase of construction of two new factories and added capacity at two existing facilities, bringing a net 687K liters of new reactor capacity online since the start of the year. We are also taking actions to strengthen our business development team and supporting R&D capabilities. While we are clearly in the depths of a downturn, we believe it is in the best interest of the company to take a long-term view and plan for the inevitable up-cycle. We believe our investments now will pay dividends in the future, and the low depreciation costs on capital spending should not significantly impact our results over the next few quarters. While we do not currently have visibility on the timing of a turnaround within some of the industries to which we supply, we believe we are prudently positioning ourselves for the long term growth of our business."

Third Quarter 2009 Financial Results Total Sales

For the three months ended September 30, 2009, the Company generated total sales of RMB212.6 million (US$31.1 million), a decrease of 25.4% from the third quarter of 2008 and a decrease of 9.0% from the second quarter of 2009. The decrease in sales in the third quarter of 2009 mainly reflects the slow-down in sales of electronic and agrochemical products, and in agrochemical-related sales of goods purchased.

Gross Profit and Gross Margin

Gross profit was RMB89.9 million (US$13.2 million), a decrease of 25.4% from the third quarter of 2008 and a decrease of 5.6% from the second quarter of 2009. Gross margin was 42.3% in the third quarter of 2009, as compared to 42.3% in the third quarter of 2008 and 40.8% in the second quarter of 2009. The steady gross margin in the third quarter of 2009 reflects the higher average unit selling price and the Company''s continued efforts to improve manufacturing processes and cost controls.

Operating Expenses

Selling expenses and general and administrative expenses were RMB19.0 million (US$2.8 million) during the third quarter of 2009, representing an increase of 1.7% from RMB18.7 million in the third quarter of 2008 and a decrease of 5.9% from RMB20.2 million in the second quarter of 2009. The changes were caused primarily by an increase in administrative headcount due to the fast growth and personnel needs of the Company as compared to the third quarter of 2008, a decrease in share-based compensation due to the amortization effect of unconditional share options with graded vesting and decreased shipping costs associated with the decrease in sales volumes to customers as compared to the second quarter of 2009.

Research and development (R&D) expenses increased by 10.1% to RMB7.1 million (US$1.0 million) during the third quarter of 2009 from RMB6.4 million in the third quarter of 2008 and were unchanged from the second quarter of 2009. The increase compared with the same period in 2008 was due primarily to an increase in hiring of highly experienced scientists, especially from overseas, to enhance the Company''s R&D capabilities to meet the growing needs of the Company''s customers, in addition to fluctuations in material consumption for R&D activities.

Income from operations and earnings before income taxes

As the result of the above, income from operations was RMB63.4 million (US$9.3 million) and earnings before income taxes was RMB64.2 million (US$9.4 million) in the third quarter of 2009, decreases of 33.9% and 28.5%, respectively, from the third quarter of 2008, and decreases of 5.7% and 5.9%, respectively, from the second quarter of 2009.

Net income attributable to Chemspec International Limited shareholders

Net income attributable to Chemspec International Limited shareholders was RMB52.6 million (US$7.7 million) in the third quarter of 2009, a decrease of 58.3% from the third quarter of 2008 and a decrease of 2.3% from the second quarter of 2009. The decrease in year-over-year net income attributable to Chemspec International Limited shareholders was mainly caused by (1) a one-time tax refund in the third quarter of 2008 of RMB42.5 million, (2) the increase of effective income tax rate, and (3) the decrease in sales.

Basic and diluted earnings per ADS were RMB1.45 (US$0.21), as compared to RMB4.21 in the third quarter of 2008 and RMB1.77 in the second quarter of 2009.

Cash Flows

As of September 30, 2009, the Company had RMB409.7 million (US$60.0 million) of cash, as compared to RMB176.8 million as of September 30, 2008. The increase in the Company''s cash position was primarily due to the proceeds of approximately RMB389.0 million from the Company''s IPO. During the nine months ended September, 2009, the Company generated operating cash flows of RMB198.8 million (US$29.1 million) as compared to RMB238.6 million for the same period of 2008. Significant cash outflows for the nine-month period ended September 30, 2009 included capital expenditures of RMB 188.1 million (US$27.5 million) for production facility expansion and net repayment of the Company''s bank borrowings of RMB55.0 million (US$8.1 million) from RMB60.0 million as of December 31, 2008.

Statement Regarding Unaudited Financial Information

The financial information set forth above is based on the Company''s unaudited interim consolidated financial statements and is subject to adjustments that may be identified by the Company and/or Chemspec''s auditors during the audit of the Company''s annual consolidated financial statements.

Business Outlook

Based on the Company''s current operations, total revenues for year 2009 are expected to be between RMB815 million and RMB825 million.

Conference Call Details

The company will host a conference call and live webcast to discuss its third quarter results and forward outlook at 8:00am Eastern Time (9:00 pm Beijing time) on Friday, November 6, 2009.

- U.S. Toll Free Number: 1-866-519-4004 - International Dial-in Number: +656-735-7955 - Mainland China Toll Free Number: 800-819-0121 (land line) 400-620-8038 (Mobile) - Hong Kong Toll Free Number: 852-247-50994 - U.K. Toll Free Number: 080-8234-6646 - 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 after the conclusion of the conference call through midnight, November 13, 2009, Eastern Time.

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 - China North Dial-In +86 108007140386 - China South Dial-In +86 108001400386 - Conference ID: 37453488 About Chemspec

Chemspec is a leading China-based contract manufacturer of highly engineered specialty chemicals and the largest manufacturer of fluorinated specialty chemicals in China based on sales. 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 http://www.chemspec.com.cn/ .

Safe Harbor Statements

This announcement contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in Chemspec''s filings with the U.S. Securities and Exchange Commission, including its registration statement on Form F-1, as amended from time to time. Chemspec does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

(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 Federal Reserve Board certified exchange rate on September 30, 2009, which was RMB6.8262 to USD1.00. The percentages stated are calculated based on RMB. For further information, please contact: Chemspec International Ltd. In Shanghai Bing Zhu Chief Financial Officer Tel: +86-21-6363-8108 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, 2008 2009 2009 RMB''000 RMB''000 USD''000 ASSETS Current assets Cash 180,081 409,743 60,025 Pledged bank deposits 21,536 35,513 5,202 Accounts receivable, net 142,535 131,042 19,197 Bills receivable -- 200 29 Inventories 197,742 223,633 32,761 Prepayment and other receivables 16,865 24,757 3,627 Deferred income tax assets 345 1,219 179 Total current assets 559,104 826,107 121,020 Equity method investment -- 13,387 1,961 Property, plant and equipment, net 385,526 623,835 91,388 Land use rights 53,105 53,543 7,844 Goodwill 6,942 6,942 1,017 Deferred offering costs 9,843 -- -- Deferred income tax assets 360 400 59 Total assets 1,014,880 1,524,214 223,289 LIABILITIES AND EQUITY Current liabilities Bank borrowings 60,000 -- -- Accounts payable 77,785 96,010 14,065 Bills payable 27,562 40,770 5,973 Amounts due to related parties 38,019 59 9 Accrued expenses and other payables 55,714 126,042 18,463 Income taxes payable 6,213 7,970 1,168 Total current liabilities 265,293 270,851 39,678 Bank borrowings -- 5,000 732 Deferred income tax liabilities 14,851 23,215 3,401 Deferred income 5,565 9,912 1,452 Total liabilities 285,709 308,978 45,263 Equity Ordinary shares: HK$ 0.01 par value; 20,000,000,000 shares authorized as of December 31, 2008 and September 30, 2009; 1,800,000,000 and 2,179,680,000 shares issued and outstanding as of December 31, 2008 and September 30, 2009, respectively 18,446 21,792 3,192 Additional paid-in capital 30,597 369,189 54,085 Statutory reserves 45,837 45,837 6,715 Accumulated other comprehensive income 6,749 7,023 1,029 Retained earnings 619,521 758,726 111,149 Total Chemspec International Limited shareholders'' equity 721,150 1,202,567 176,170 Non-controlling interests 8,021 12,669 1,856 Total equity 729,171 1,215,236 178,026 Total liabilities and equity 1,014,880 1,524,214 223,289 Chemspec International Limited Unaudited Quarterly Consolidated Statements of Income Three-month periods ended September 30, June 30, September 30, September 30, 2008 2009 2009 2009 RMB''000 RMB''000 RMB''000 USD''000 Sales 284,921 233,520 212,577 31,141 Cost of sales (164,283) (138,258) (122,635) (17,965) Gross profit 120,638 95,262 89,942 13,176 Selling expenses (2,900) (2,780) (2,267) (332) General and administrative expenses (15,800) (17,429) (16,743) (2,453) Research and development expenses (6,425) (7,056) (7,073) (1,036) Other operating expenses (69) (1,384) (775) (114) Other operating income 456 212 311 45 Government grants -- 398 11 2 Income from operations 95,900 67,223 63,406 9,288 Other income (expenses): Equity in net loss of an equity method investee -- -- (85) (12) Interest income 678 679 464 68 Interest expense (622) (53) (218) (32) Foreign currency exchange (loss) gain, net (5,883) 328 222 33 Other (expense) income (335) 29 375 55 Earnings before income taxes 89,738 68,206 64,164 9,400 Income tax benefit (expense) 37,735 (12,746) (11,202) (1,641) Net income 127,473 55,460 52,962 7,759 Net income attributable to non-controlling interests (1,173) (1,588) (335) (49) Net income attributable to Chemspec International Limited shareholders 126,300 53,872 52,627 7,710 Basic earnings per share RMB 0.07 RMB 0.03 RMB 0.02 US$ 0.00 Diluted earnings per share RMB 0.07 RMB 0.03 RMB 0.02 US$ 0.00 Basic earnings per ADS RMB 4.21 RMB 1.77 RMB 1.45 US$ 0.21 Diluted earnings per ADS RMB 4.21 RMB 1.77 RMB 1.45 US$ 0.21 Chemspec International Limited Unaudited Consolidated Statements of Cash Flows Nine-month period ended September 30, September 30, September 30, 2008 2009 2009 RMB''000 RMB''000 USD''000 Cash flows from operating activities Net income 244,078 144,753 21,206 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 16,579 24,647 3,611 Land use rights 522 726 106 Loss on disposal of property, plant and equipment 484 2,482 364 Equity in net loss of an equity method investee -- 85 12 Bad debt expense (309) -- -- Unrealized foreign exchange loss (gain), net 1,005 (200) (29) Gain on transfer of land use right to an equity method investee -- (290) (43) Share-based compensation 12,444 12,506 1,832 Deferred income tax expense 12,096 7,450 1,091 Changes in operating assets and liabilities, net of effects of divestiture of a subsidiary: Pledged bank deposits related to purchase of inventory (15,103) 5,317 779 Inventories (85,275) (25,891) (3,793) Accounts receivable 18,497 11,751 1,721 Bills receivable (500) (200) (29) Prepayment and other receivables 18,086 (7,892) (1,156) Accounts payable 10,050 18,225 2,670 Bills payable related to purchase of inventory 17,056 3,666 537 Accrued expenses and other payables (2,906) (71) (10) Income taxes payable (8,210) 1,757 257 Net cash provided by operating activities 238,594 198,821 29,126 Cash flows from investing activities Capital expenditures, including interest capitalized (85,827) (188,052) (27,549) Proceeds from the sale of a subsidiary 3,420 -- -- Proceeds from sale of property, plant and equipment 46 -- -- Investment in an equity method investee -- (11,225) (1,644) Non-interest bearing advances to related parties (24,400) -- -- Non-interest bearing advances repaid by related parties 41,080 -- -- Net cash assumed from acquisition of a subsidiary 2,255 -- -- Payments for land use rights (16,966) (3,121) (457) Pledged bank deposit related to purchase of property, plant and equipment -- (19,294) (2,826) Net cash used in investing activities (80,392) (221,692) (32,476) Cash flows from financing activities Acquisition of additional equity interest in a subsidiary (8,000) -- -- Capital contributions to a subsidiary by a non-controlling shareholder -- 1,600 234 Proceeds from issuance of ordinary shares -- 389,022 56,990 Payments for initial public offering costs (6,292) (42,846) (6,277) Proceeds from bank loans 70,000 15,000 2,197 Repayments of bank loans (40,000) (70,000) (10,255) Dividend paid by a subsidiary to non-controlling shareholders -- (2,500) (366) Proceeds from non-interest bearing borrowings from related parties 20,400 -- -- Repayments of non-interest bearing borrowings from related parties (74,747) (37,943) (5,558) Net cash (used in) provided by financing activities (38,639) 252,333 36,965 Effect of foreign currency exchange rate changes on cash 303 200 29 Net increase in cash 119,563 229,462 33,615 Cash at beginning of period 56,929 180,081 26,381 Cash at end of period 176,795 409,743 60,025 Supplemental disclosures of cash flow information: Income taxes paid 10,936 25,609 3,752 Income taxes refund 58,767 -- -- Interest paid, net of amounts capitalized 1,739 1,042 153 Supplemental schedule of noncash investing and financing activities: Payable for purchase of property, plant and equipment 37,301 102,943 15,081 Bills payable for purchase of property, plant and equipment -- 15,002 2,198 Land use right contributed to an equity method investee -- 1,957 287

Chemspec International Limited

CONTACT: Chemspec International Ltd., In Shanghai - Bing Zhu, Chief
Financial Officer, +86-21-6363-8108, ir@chemspec.com.cn; Christensen, In New
York - Kathy Li, +1-212-618-1978, kli@christensenir.com, or in Hong Kong - Tip
Fleming, +852-9212-0684, tfleming@christensenir.com

Web site: http://www.chemspec.com.cn/