YIYANG, Jiangxi Province, China, — Fuda Faucet Works, Inc. (OTC BB: FUFW) (“Fuda Faucet” or the “Company”), a Chinese company engaged, through variable interest entities, in the business of developing, manufacturing, marketing and distributing mid-tier European style brass faucets, spouts and fittings to the international markets, has announced its financial results for the third quarter ended September 30, 2008.

Third Quarter 2008 Highlights
• Net sales increased 45.5% year-over-year to $10.2 million
• Gross profit increased 18.9% year-over-year to $1.7 million
• Gross profit margin was 16.6%
• Net income totaled $0.8 million
• Further strengthened sales force in Russia and United Arab Emirates

“During the third quarter, we have continued our expansion strategy by investing in production capacity and distribution channels to strengthen our position in key growth markets,” said Ms. Yiting Wu, CEO of Fuda Faucet. “We are seeing continuous strong demand from customers for our product lines and have now significantly expanded our production capacity.”

Third Quarter 2008 Results
Net sales for the third quarter ended September 30, 2008 totaled $10.2 million, up 45.5% from $7 million in the three month period ended September 30, 2007. The increase in net sales was mainly related to the success of the Company’s marketing efforts in the United Arab Emirates and Russia, where the majority of Fuda’s products are sold. The United Arab Emirates continued as the main distribution center for Fuda Faucet’s products, contributing approximately $8.6 million in net sales in the three months ended September 30, 2008 and capturing 84.7% of total net sales in the quarter. Sales continue to become more geographically dispersed as compared to the third quarter of 2007, when the United Arab Emirates accounted for 88.1% of total sales. Sales in Russia equaled $1.6 million in the quarter ended September 30, 2008, or 15.3% of total sales, up from 8.8% of total sales in the same quarter in 2007.

Gross profit for the third quarter of 2008 was $1.7 million, an increase of 18.9% from $1.4 million for the same period prior year; however, the company reported lower gross margin, 16.6% for the third quarter of 2008, compared to 20.3% for the corresponding period last year. The decline in the gross margin reflected the increased depreciation with the completion of the new factory and an increased percentage of copper for some products in accordance with certain customers’ requirements.

Operating expenses totaled $0.7 million in the third quarter of 2008, compared to $0.3 million for the same period of the prior year. The main reason for the increase in operating expenses was higher general and administrative (‘G&A’) expenses, which in the third quarter of 2008 totaled $0.4 million, or 4.2% of net sales, up from $0.15 million, or 2.1% of net sales, in the corresponding quarter of the previous year. The increase in G&A expenses was primarily due to the expansion of the Company’s operating activities in their newest manufacturing facility in Yiyang. Also, consulting and professional fees incurred from being a listed company contributed to operating expenses. In the third quarter of 2008, fees totaled $98,207, or 0.9% of net sales, up from 1.6% in the same quarter a year prior. The continued increase in fixed assets also augmented depreciation costs. Selling expenses amounted to $93,120, 0.9% of net sales, for the third quarter of 2008, compared to $54,036, 0.8% of net sales, in the third quarter of 2007. The increase was caused by the Company’s growing sales volume and associated increased cost of shipping along with increasing sales salaries. The Company’s advertising expenses decreased by 78% to $7,966 during the nine months ended September 30, 2008.

Operating income for the third quarter of 2008 totaled $1 million, compared to $1.7 million for the same period in 2007, while operating margin was 9.9% in 3Q08 compared to 23.8% in 3Q07. This decrease was mainly attributed to the increased general and administrative expenses and also 3Q07 operating income, which had included one-time income of $567,493 from a transfer of a patent.

Interest expense was $0.3 million in the third quarter of 2008, an increase of 210.2% from $0.1 million a year ago. Interest expense was mainly attributable to an increase in the Company’s short-term bank loans and associated rise in interest rates.

Net income for the third quarter of 2008 was $0.8 million, or $0.06 per fully diluted share, a decrease of 49.4% from net income of $1.6 million, or $0.15 per fully diluted share, for the third quarter of 2007. Earnings per share were calculated using a diluted weighted share count of 13.8 million shares for the third quarter of 2008 and 10.6 million shares for the third quarter of 2007.

“Our higher cost structure related to the new production facility and costs associated with being a public company impacted profit margin during the third quarter,” said Ms. Wu. “We would expect to see margins improve in the future as we are able to get more market share to targeted levels.”

Nine Month 2008 Results
Net sales for the first nine months of 2008 were $28.7 million, up 60.3% from sales of $17.9 million during the same period prior year. Gross profit was $5.4 million, or 18.8% of net sales, up 52.1% from $3.6 million, or 19.8% of net sales, in the nine months ending September 30, 2008 and 2007, respectively. Operating income was $3.7 million, or 12.8% of net sales, up 5% from $3.5 million, or 19.5% of net sales, in the nine months ended September 30, 2007. Net income for the first nine months of 2008 was $2.8 million, compared to net income of $3.3 million in the same period a year ago. Diluted earnings per share were $0.21, compared to $0.31 per diluted share in the same period a year ago. Earnings per share were calculated using a diluted weighted share count of 13.8 million shares for the first nine months of 2008 and 10.6 million shares for the first nine months of 2007.

Financial Condition
On September 30, 2008, the Company had cash and cash equivalents of $1.1 million and working capital of $2.1 million. Accounts receivable were $10.1 million and inventory was $6.4 million. On September 30, 2008, the Company had short-term bank loans of $14.2 million and stockholders’ equity of $16.5 million.

Cash provided by operating activities for the nine months ended September 30, 2008 was $1,629,113, representing a 609.6% increase over $229,573 in the same period of last year. The improvement of the Company’s cash position in operating activities was attributable to the increase of sales and better collection of accounts receivable. During this same period, the Company had a $913,882 net increase in cash and cash equivalents, representing a 621.4% increase over $(175,272) in the same period of last year.

Business Outlook
Starting from April this year, Fuda Faucet has tripled its potential production capacity from prior year’s 1.2 million sets/year to 3.5 million sets/year, and during the second quarter, Fuda Faucet had increased its utilization 192% by adding a new production facility. In the third quarter, the Company upgraded its original facilities. The Company expects to introduce additional working capital to realize full utilization of its fixed assets. The demand outlook for the Company’s products remains positive.

“We remain confident regarding the long-term profitability of our investments. As soon as we are able to intensify production, we expect to capture a larger share of the market for faucets,” said Ms. Wu. “The demand for our products continues to be robust in the Middle East and Europe and we have strong expectations from sales in Russia and Nigeria this year as well. Demand for faucets, spouts, fittings, and related products, is driven by the booming investment in real-estate and plumping construction projects in our target markets; and, a growing middle class in the regions is likely to stimulate demand further,” she concluded.

The Company is continuously strengthening its presence in new growth markets. The operations in Moscow are developing and sales from the region are expected to continue to take a larger share of total revenue by the end of 2008. The Company anticipates the Nigerian operations to start generating sales later in 2008.

In addition, Fuda Faucet has started expanding its product mix by including hoses and valves and is planning to offer complete sets of bathroom and kitchen products and related services to its customers to obtain higher margins.

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Safe Harbor Statement
This announcement contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the company’s ability to obtain the necessary financing to continue and expand operations, to market its products in new markets and to offer products at competitive pricing, to attract and retain management, and to integrate and maintain technical information and management information systems; compliance with laws and regulations of the PRC, the effects of currency policies and fluctuations, general economic conditions and other factors detailed from time to time in the Company’s filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.