SmartHeat Inc. Announces Record Full Year 2010 Financial Results – 52% Revenue Growth, 47% Net Income Growth

NEW YORK, March 15, 2011 /PRNewswire-Asia/ — SmartHeat Inc. (Nasdaq: HEAT; website: www.smartheatinc.com), a market leader in China’s clean technology, energy savings industry, today announced record financial results for the year ended December 31, 2010. SmartHeat management is scheduled to host an investor conference call at 8:30 a.m. EDT on March 15, 2011.

Financial Highlights:

• Revenues of $125.41 million, up 51.89% from 2009
• Operating income of $26.69 million, up 46.85% from 2009
• Net income of $22.69 million, up 46.99% from 2009

Business Highlights:

• Meets or exceeds guidance for 2010
• Commences acquisition strategy with German heat pump manufacturer and designer GWP in the first quarter of 2011
• Continues with market expansion in Western China and nuclear industry

Revenues

In 2010, total sales increased 51.89% to $125.41 million compared to $82.56 million in 2009.

In the fourth quarter of 2010, total sales increased 60.61% to $41.79 million compared to $26.02 million in 4Q09. All three of the Company’s product lines contributed to higher sales in 2010 and were a result of China’s energy-saving policies, continued growth in energy-saving industry, and our successful market expansion.

The breakdown of revenues for 2010 was $55.44 million from PHE units and $60.22 million from heat exchangers, with sales from PHE units up 42.21% compared to 2009 and sales from heat exchangers up 69.18% compared to 2009. Sales from heat meters were up 22.08% from 2009 and accounted for $9.74 million in revenues for 2010.

The breakdown of revenues for the fourth quarter of 2010 was $21.64 million from PHE units and $19.33 million from heat exchangers, with sales from PHE units up 107.57% compared to 4Q09 and sales from heat exchangers up 25.06% compared to 4Q09. Sales from heat meters were up 482.29% from 4Q09 and accounted for $0.83 million in revenues for the quarter.

The following table presents the revenue contribution by percentage for each major product line in 4Q10 in comparison with 4Q09 and fiscal year 2010 in comparison with 2009:

Net Income

Net income in 2010 totaled $22.70 million ($0.68 per diluted share), up 47% from $15.44 million ($0.58 per diluted share) in 2009.

Net income in the fourth quarter totaled $6.50 million, up 122.26% from $2.92 million in 4Q09. The higher net income was driven primarily by increased sales from PHEs and PHE units. Earnings per share for 2010 increased by $0.10 per share.

Gross Profit Margin

Gross profit margin for 2010 was 35.65%, up from 35.24% in 2009. Gross profit margin for 4Q10 was 36.55%, up from 35.03% in 4Q09. The margin maintenance for 2010 is due mainly to our effective cost control and our cost-plus pricing.

Operating Expense

Operating expenses as a percentage of sales were 14.4% for fiscal year 2010 and 17.8% for Q410, compared to 13.2% for fiscal year 2009 and 22.9% for Q409. The increase in operating expenses resulted from increased sales and expansion of our business, including the hiring of more sales personnel, higher depreciation expense, training the marketing team and establishing new sales offices in more regions of China. We believe the expansion and training of our marketing team and other employees will increase sales and improve the efficiency of our operations. We will continue our tight budgetary control and cost effectiveness.

2011 Full Year Guidance

SmartHeat is announcing full year 2011 guidance of $22 – $28 million in net income on $120 – $150 million in revenues, reflecting $0.60 – $0.80 EPS.

Outlook

Mr. James Jun Wang, Chairman and Chief Executive Officer of Smart Heat Inc., commented: “We maintained the momentum from the first nine months of 2010 and delivered another set of strong results. We thank our hard working employees who are dedicated to executing our operational strategy. We are quite pleased to see the significant payback we expected to receive from investments made to expand our sales and distribution channels.”

“Government requirements to implement energy savings and emission reduction have increased the demand for our energy-saving products in all industrial sectors. We are optimistic about taking advantage of economic development in West China and urbanization trends throughout the country even though China is experiencing inflation and is responding to currency and inflationary pressures. Furthermore, we plan to reap the benefits of our expansion into western China and are excited about the addition of the German heat pump manufacturer GWP, which, with our expansion into nuclear energy products, will be a valuable addition to our clean energy business portfolio.” concluded Mr. Wang.

Investor Conference Call Instructions:

SmartHeat management will host an earnings conference call to discuss its 2010 financial results and 2011 outlook.

Date and time: 8:30 a.m. U.S. Eastern Daylight Saving Time, March 15, 2011

U.S. toll free number: +1 866-800-8648

International direct dial-in: +1-617-614-2702

Conference passcode: 163 032 65

About SmartHeat Inc.

Founded by James Jun Wang, a former executive at Honeywell China, SmartHeat Inc. (www.smartheatinc.com) is a NASDAQ Global Market listed (NASDAQ: HEAT) U.S. company with its primary operations in China. SmartHeat is a market leader in China’s clean technology energy savings industry. SmartHeat manufactures heat exchangers, custom plate heat exchanger units (PHE Units) and heat meters. SmartHeat’s products directly address air pollution problems in China where massive coal burning for cooking and heating purposes is the only source of economical heat energy in China. With broad product applications, SmartHeat’s products significantly reduce heating costs, increase energy use, reduce air pollution, and have broad applications. SmartHeat’s customers include global Fortune 500 companies as well as municipalities and industrial/residential users. China’s heat transfer market is currently estimated at approximately $2.4 billion with double-digit annual growth according to the China Heating Association.

Safe Harbor Statement

All statements in this press release that are not historical are forward- looking statements made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company’s expectations. SmartHeat’s actual results may differ from its projections. Further, preliminary results are subject to normal year-end adjustments. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect SmartHeat’s current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in SmartHeat’s filings with the Securities and Exchange Commission.