SHENZHEN, China, Jan. 23 /PRNewswire-Asia-FirstCall/ -- China BAK Battery, Inc. (''China BAK'', or ''BAK'') (Nasdaq: CBAK - News), one of the largest lithium-ion battery cell manufacturers in the world, as measured by production output, today announced its financial results for the first quarter of fiscal year 2009 (''FY09'').

    Recent Achievements and Highlights
    -- Net revenue remained strong in the midst of the global financial crisis
       and recession; gross margin remained at a similar level to our previous
       fiscal quarter;
    -- Cylindrical (notebook) cells revenue continued to be robust, accounting
       for 27% of total revenue; prismatic cells revenue continued to grow and
       reflect further penetration of the China OEM cellular phone market;
    -- A number of cost-cutting steps were taken and at least $1.5 million of
       operating expense reduction per quarter is expected for the coming
       quarters.

First Quarter FY09 Financial Results

Net revenues for the first quarter of FY09 were $68.1 million, down 6.4% from $72.7 million last quarter, and up 29.0% from $52.8 million in the same quarter of last year.

Revenues from cylindrical cells used in notebook computers were $18.4 million, down 6.5% from $19.7 million last quarter and up 615.7% from $2.6 million in the same quarter of last year. Market demand from notebook computer manufacturers weakened slightly due to the global financial crisis and recession.

Revenues from prismatic cells, including aluminum-case cells, steel-case cells and battery packs, were $45.8 million, up 1.7% from $45.0 million last quarter and up 2.1% from $44.8 million in the same quarter of last year. Revenues from aluminum-case cells were $37.3 million, up 3.6% from $36.0 million last quarter and up 24.0% from $30.1 million in the same quarter of last year. Revenues from battery packs were $5.4 million, up 0.2% from $5.4 million last quarter and up 8.1% from $5.0 million in the same quarter of last year. Revenues from steel-case cells were $3.1 million, down 15.1% from $3.6 million last quarter, and down 68.3% from $9.8 million in the same quarter of last year. We started to phase out the production of steel-case cells in the quarter, so revenue from steel-case cells is expected to be minimal in coming quarters.

Revenues from lithium polymer cells, used in personal electronic devices such as personal digital assistants (PDAs), MP3 players and Bluetooth devices, were $3.9 million in the first quarter of FY09, down 51.2% from $8.0 million last quarter, and down 27.4% from $5.4 million in the same quarter of last year. Market demand from our largely U.S.-based lithium polymer cell customers weakened due to the financial crisis and recession.

Gross profit for the first quarter of FY09 was $10.6 million, down 7.7% from $11.5 million last quarter and up 49.1% from $7.1 million in the same quarter of last year. Gross margin was 15.6%, compared to 15.8% last quarter and 13.5% in the same quarter of last year. The slight decrease in gross margin from the previous quarter was the result of lower average selling prices offset mostly by lower average costs. The increase in gross margin from the previous year's first fiscal quarter was attributable to improvements in our product mix and increased average selling prices, which outweighed the impact of average cost increases.

Operating expenses totaled $9.8 million or 14.4% of revenues in the first quarter of FY09, as compared to $8.4 million or 11.6% of revenues last quarter and $6.9 million or 13.1% of revenues in the same quarter of last year. Research and development expenses were $1.4 million or 2.1% of revenues, as compared to $1.7 million or 2.3% of revenues last quarter and $1.3 million or 2.5% of revenues in the same quarter of last year. Sales and marketing expenses were $1.6 million or 2.3% of revenues, as compared to $1.6 million, or 2.2% of revenues last quarter and $1.3 million or 2.6% of revenues in the same quarter of last year. General and administrative expenses were $6.8 million or 9.9% of revenues, as compared to $5.1 million or 7.1% of revenues last quarter and $4.2 million or 8.0% of revenues in the same quarter of last year. The $6.8 million number includes nearly $3 million of bad debt expense, most of which was related to delayed collection of accounts receivable relating to the timing of the Chinese New Year holiday.

Operating income for the first quarter of FY09 was $0.8 million, as compared to $3.0 million last quarter and $0.2 million in the same quarter of last year.

Net loss was $1.7 million in the first quarter of FY09, as compared to net income of $1.5 million last quarter and net loss of $0.9 million in the same quarter of last year. Diluted earnings per share were negative $0.03 compared with $0.03 per diluted share last quarter and negative $0.02 per diluted share in the same quarter of last year.

For the first quarter of FY09, Days Sales Outstanding (''DSO'') decreased to 103 as compared to 104 last quarter; and inventory turns increased to 3.64 from 3.6 last quarter.

Financial Condition

On December 31, 2008, China BAK had $37.2 million in cash and cash equivalents and negative $18.3 million in working capital, reflecting a current ratio of 0.92:1. Short-term bank loans and long-term bank loans totaled $172.2 million as compared to $170.1 million on September 30, 2008. Shareholders' equity totaled $166.3 million. China BAK had $24.1 million available for borrowing under its credit facilities.

Cost-Cutting Efforts

In Q1FY09, China BAK initiated a number of actions to cut down cost and expenses. These included reduction in total headcount, work hours for hourly workers, and compensation packages for salaried employees, including senior executives. Employees were also required to take unpaid leaves and will be required to take longer holiday leaves during the Chinese New Year holiday. In addition, we are suspending prismatic cell production for the month of January 2009 to reduce inventory and to lower energy costs. All these measures are expected to bring at least $1.5 million reduction in operating expenses per quarter for the rest of FY09.

Business Outlook

''We are pleased to see stable revenue and gross margin this quarter. Revenues from cylindrical cells remained strong, and revenues from prismatic cells continued to grow. This performance is remarkable in light of the difficult market situation. However, the crisis has affected many markets our customers serve. Looking at weakened demand from our customers, we feel it necessary to take a more cautious look at our revenue guidance for FY09. We now expect FY09 revenue to fall in the range of $270 million to $300 million, which, at the midpoint of the range, will represent a 16% growth from FY08 levels,'' commented Mr. Xiangqian Li, CEO of China BAK.

''In the face of such a challenging environment, we will continue to exercise prudent and disciplined management. With cost-cutting measures we initiated last quarter and more to be adopted in the coming months, we expect to achieve operating expense reductions totaling at least $1.5 million per quarter for the rest of FY09,'' commented Mr. Tony Shen, CFO of China BAK.

Conference Call

China BAK will host a conference call at 7:00 p.m. ET on Friday, January 23, 2009 to discuss results for the first quarter of FY09 ended December 31, 2008. Joining Xiangqian Li, China BAK's President and Chief Executive Officer on the call will be Tony Shen, Chief Financial Officer and Dr. Huanyu Mao, Chief Operating Officer and Chief Technology Officer. To participate in the conference call, please dial the following number approximately fifteen minutes prior to the scheduled conference call time: +1-888-482-0024. International callers should dial +1-617-801-9702. The pass code for the call is 525 335 07. If you are unable to participate in the call at this time, a replay will be available from 9:00 p.m. ET on Friday, January 23, 2009 through 9:00 p.m. ET, Friday, February 6, 2009. To access the replay, please dial +1-888-286-8010. International callers should dial +1-617-801-6888. The pass code for the replay is 63 938 928. The conference call will be broadcast live over the Internet and can be accessed by all interested parties on the China BAK website at http://www.bak.com.cn/ . To listen to the live webcast, please go to the China BAK's website at least fifteen minutes prior to the start of the call to register, download and install any necessary audio software. For those unable to participate during the live broadcast, shortly after the call a replay will be made available on China BAK's website for 90 days.

About China BAK Battery Inc.

China BAK Battery Inc. is one of the largest manufacturers of lithium-based battery cells in the world, as measured by production output. It produces battery cells that are the principal component of rechargeable batteries commonly used in cellular phones, notebook computers and portable consumer electronics, such as digital media devices, portable media players, portable audio players, portable gaming devices, and PDAs. China BAK Battery, Inc.'s 3.0 million square foot facilities are located in Shenzhen and Tianjin, PRC, and have been recently expanded to produce new products.

Safe Harbor Statement

This press release contains forward-looking statements, which are subject to change. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All ''forward-looking statements" relating to the business of China BAK Battery, Inc. and its subsidiary companies, which can be identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties which could cause actual results to differ. These factors include but are not limited to: risks related to China BAK's business and risks related to operating in China. Please refer to China BAK's Annual Reports on Form 10-K for the fiscal years ended September 30, 2008, for specific details on risk factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. China BAK's actual results could differ materially from those contained in the forward-looking statements. China BAK undertakes no obligation to revise or update its forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

For more information, please contact:

     Louis Li
     Acting Manager
     Investor Relations Department
     China BAK Battery, Inc.
     Tel:   +86-755-8977-0504
     Email: IR@bak.com.cn