SinoCoking Coal and Coke Chemical Industries Announces 2012 Third Quarter Financial Results
PINGDINGSHAN, China, May 10, 2012 /PRNewswire-Asia-FirstCall/ — SinoCoking Coal and Coke Chemical Industries, Inc. (Nasdaq: SCOK) (the “Company” or “SinoCoking”), a vertically-integrated coal and coke processor, announced today its financial results for the fiscal 2012 third quarter and nine month periods ended March 31, 2012.
Fiscal 2012 Third Quarter vs. Fiscal 2011 Third Quarter
- Revenue decreased by 15.4% to approximately $16.8 million from approximately $19.9 million.
- Coal and coke products accounted for 48.2% and 51.8% of revenue, respectively, as compared to 55.2% and 44.8%, respectively in the same periods of last year.
- Volume of coal products sold decreased by 42.5%, while volume of coke products sold increased by 2.7% from a year ago.
- Gross margin decreased to 15.7%, as compared to 36.4%.
- Income from operations decreased to $1.9 million from $6.3 million.
- Net income, including the foreign currency transaction adjustment, was $2.1 million or $0.07 per diluted share, as compared to $19.8 million or $0.81 per diluted share.
Fiscal 2012 Nine Months vs. Fiscal 2011 Nine Months
- Revenue increased by 13.4% to approximately $56.3 million, due to increased sales of coke and washed coal.
- Coal and coke products accounted for 49.1% and 50.9%, respectively, as compared to 44.4% and 55.6%, respectively, in the same periods of last year.
- Volume of coal products sold decreased by 9.1%, while volume of coke products sold increased by 3.0% from a year ago.
- Gross margin decreased to 23.4%, as compared to 38.3%.
- Income from operations decreased to $11.0 million from $16.2 million.
- Net income, including the foreign currency transaction adjustment, was $14.9 million or $0.59 per diluted share, as compared to $28.3 million or $1.22 per diluted share.
Discussing mining operations for the 2012 three and nine month periods, SinoCoking’s Chairman and CEO, Mr. Jianhua Lv noted, “Coal supplies in Henan Province remained limited as were production activities for all producers due to the ongoing mining moratorium. Since the provincial-wide mining moratorium imposed in June 2010, our Hongchang mine has been operating at approximately 50% capacity, while operations at our other three coal mines (acquired in August 2011) were halted as these mines were waiting to receive clearance from local authorities to commence operations. As required by provincial guidelines, Hongchang mine also halted operations in early September 2011 to complete certain mine engineering work and safety upgrades, which were completed by the end of that month. However, due to an accident in November 2011 at one of the mines owned by Yima Coal Group, a state-owned enterprise and one of the six provincial level consolidators in Henan, all mid-scale mines in Henan province, including our four mines, were ordered to shut down their operations and undergo additional safety checks and inspections. Thus far, local authorities have not issued clearances to mines to resume operations and the timing as to when such clearances will be issued remains unknown.”
He continued, “Due to the inadequate raw coal supply in Henan province, and due to the halt of operations at our Hongchang mine, as of September 2011 we have met our coal requirements largely by: (a) using the raw coal and washed coal we had accumulated over the last few quarters in anticipation of the commencement of operations of new coking facility which is still under construction and (b) purchasing raw coal from other provinces, such as Gansu, Shanxi and Inner Mongolia. As a result of these purchases, for the three and nine month periods ended March 31, 2012, our cost of raw coal increased and our margins decreased. We don’t expect a return to historical margins until the mining moratorium for mid-size coal producers in Henan province is lifted.”
Mr. Lv added, “In the meantime, due to our vertically integrated business model, we have been able to continue to optimize our product mix and take advantage of market conditions for coal and coke products. Specifically, as compared to the 2011 third quarter and nine month periods:
- Revenue from the sale of raw coal for the 2012 third quarter and nine months decreased by 72.9% and 53.4%, respectively, mainly due to limited supply.
- Revenue from the sale of washed coal for the 2012 third quarter and nine months increased by 12.5% and 96.4%, respectively, as a result of increased sales volume. We had originally stocked up on washed coal in anticipation of the completion of the construction of our new coking plant.
- Revenue from sale of coal tar for the 2012 third quarter and nine months decreased by 83.0% and 34.0%, respectively. In February 2011, our current coking plant was upgraded, which led to production of a higher-quality and higher priced coal tar. However, since the upgrade, less coal tar is being produced while testing to achieve the best washed coal mix continues.
- Revenue from sale of coke for the 2012 third quarter and nine month period increased by 9.2% and 7.4%, respectively, as a result of higher sales volume, despite a slightly lower average selling price from a year ago.
Mr. Lv continued, “Following a long period of high coke demand, demand softened during the final months of 2011 which continued into 2012, mainly due to China’s inflation control policy. Such policy directly impacted the real estate and construction industries, and indirectly downstream industries such as ours and the steel industry. We expect the market to recover by the end of 2012 calendar year, and we have updated our business plan accordingly:
Coal operations:
- We are currently exploring the availability of coal resources in northwest China in an effort to boost our access to raw coal and minimize the ongoing effect of the mining moratorium in Henan.
Coking operations:
- We will continue to expand and upgrade production capacity at our existing coking facility to achieve greater energy efficiency and reduce environmental impact.
- We plan to complete the construction of our new coking facility by the end of the 2012 calendar year, which we believe will increase our coke production capacity to over 1.1 million metric tons per year.
- On a longer term, our business plan includes the recapturing of additional coking by-products for refinement into useful industrial chemicals, and production of more high value-added chemical products.
Mr. Sam Wu, SinoCoking’s Chief Financial Officer noted, “We continue to fund our business activities from cash flow from operations. During the nine months period ended March 31, 2012, we used approximately $17.3 million in investing activities, and used approximately $31.1 million in purchasing and advanced payments for the equipment and machinery for our new coking facilities. We prepaid approximately $1.9 million to purchase the land use rights for expanding our current coking site in order to accommodate the coal preparation system. Additionally, we have access to an aggregate of approximately RMB 360 million (approximately $54.9 million) under a medium-term loan, and also through our arrangement with Pingdingshan Rural Cooperative Bank, we have access to a $30.3 million line of credit. We believe that cash on hand and our credit lines are sufficient for our current needs for capital.”
Conference Call Rescheduled
Due to an unforeseen management conflict, the quarterly conference call has been rescheduled as follows:
Date: Monday, May 14, 2012
Time: 9:00 am ET
Dial in number: (201) 493-6744
Webcast link: http://www.investorcalendar.com/IC/CEPage.asp?ID=168116
During the call, SinoCoking’s Chairman and CEO, Jianhua Lv and CFO, Sam Wu will discuss third quarter 2012 financial results as well as recent corporate developments.
Interested parties should call in 10 minutes before the conference is scheduled to begin and ask for the SinoCoking call. After opening remarks, there will be a question and answer period. Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to lcati@equityny.com.
The conference call will also be broadcast live over the Internet. To listen to the webcast, please go to www.sinocokingchina.com and then to the Presentations/Events page where the conference call is posted. Please go to the website at least 15 minutes early to register, and download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days. We suggest listeners use Microsoft Internet Explorer as their web browser.
About SinoCoking
SinoCoking and Coke Chemical Industries, Inc., a Florida corporation, is a vertically-integrated coal and coke processor that uses coal from both its own mines and that of third-party mines to produce basic and value-added coal products for steel manufacturers, power generators, and various industrial users. SinoCoking has been producing metallurgical coke since 2002, and acts as a key supplier to regional steel producers in central China. SinoCoking also produces and supplies thermal coal to its customers in central China. SinoCoking currently owns its assets and conducts its operations through its subsidiaries, Top Favour Limited and Pingdingshan Hongyuan Energy Science and Technology Development Co., Ltd., and its affiliated companies, Henan Province Pingdingshan Hongli Coal & Coke Co., Ltd., Baofeng Coking Factory, Baofeng Hongchang Coal Co., Ltd., Baofeng Hongguang Environment Protection Electricity Generating Co., Ltd., Zhonghong Energy Investment Company, Henan Hongyuan Coal Seam Gas Engineering Technology Co., Ltd., Baofeng Shuangrui Coal Mining Co., Ltd., Baofeng Xingsheng Coal Mining Co., Ltd. and Baofeng Shunli Coal Mining Co., Ltd.
For further information about SinoCoking, please refer to our periodic reports filed with the Securities and Exchange Commission.
Forward Looking Statement
This press release contains forward-looking statements, particularly as related to, among other things, the business plans of the Company, statements relating to goals, plans and projections regarding the Company’s financial position and business strategy. The words or phrases “plans”, “would be,” “will allow,” “intends to,” “may result,” “are expected to,” “will continue,” “anticipates,” “expects,” “estimate,” “project,” “indicate,” “could,” “potentially,” “should,” “believe,” “think”, “considers” or similar expressions are intended to identify “forward-looking statements.” These forward-looking statements fall within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and are subject to the safe harbor created by these sections. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. Such forward-looking statements are based on current expectations, involve known and unknown risks, a reliance on third parties for information, transactions or orders that may be cancelled, and other factors that may cause our actual results, performance or achievements, or developments in our industry, to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties related to the fluctuation of local, regional, and global economic conditions, the performance of management and our employees, our ability to obtain financing, competition, general economic conditions and other factors that are detailed in our periodic reports and on documents we file from time to time with the Securities and Exchange Commission. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. The Company cautions readers not to place undue reliance on such statements. The Company does not undertake, and the Company specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement. Actual results may differ materially from the Company’s expectations and estimates. The Company provides no assurances that any potential acquisitions will actually be consummated, or if consummated that such acquisitions will be on terms and conditions anticipated on the date of this press release, and the Company makes no assurances with regard to any results of any such acquisitions.
Contact:
SinoCoking Investor Relations Counsel:
Sam Wu, Chief Financial Officer The Equity Group Inc.
+ 86-375-2882-999 Lena Cati
sinocoking@sina.com lcati@equityny.com / (212) 836-9611
www.sinocokingchina.com www.theequitygroup.com
See Accompanying Tables
SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
2012 2011 2012 2011
---- ---- ---- ----
REVENUE $16,804,057 $19,872,461 $56,252,724 $49,626,255
COST OF REVENUE 14,166,799 12,636,751 43,122,271 30,635,815
---------- ---------- ---------- ----------
GROSS PROFIT 2,637,258 7,235,710 13,130,453 18,990,440
--------- --------- ---------- ----------
OPERATING EXPENSES:
Selling 43,602 75,894 168,469 231,808
General and administrative 648,834 870,284 1,982,620 2,541,924
Total operating expenses 692,436 946,178 2,151,089 2,773,732
------- ------- --------- ---------
INCOME FROM OPERATIONS 1,944,822 6,289,532 10,979,364 16,216,708
--------- --------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income 222,583 105,403 999,883 113,433
Interest expense (302,746) (120,401) (1,033,768) (393,933)
Other finance expense (34,002) (104,313) (107,435) (408,867)
Other income (expense), net (47) (542) (9,136) (109,929)
Change in fair value of warrants 163,394 12,191,235 4,526,330 13,663,378
Total other income, net 49,182 12,071,382 4,375,874 12,864,082
------ ---------- --------- ----------
INCOME BEFORE INCOME TAXES 1,994,004 18,360,914 15,355,238 29,080,790
PROVISION FOR INCOME TAXES 576,341 1,222,473 2,983,158 3,450,074
------- --------- --------- ---------
NET INCOME 1,417,663 17,138,441 12,372,080 25,630,716
OTHER COMPREHENSIVE INCOME
Foreign currency translation
adjustment 714,277 2,680,710 2,543,636 2,680,710
COMPREHENSIVE INCOME $2,131,940 $19,819,151 $14,915,716 $28,311,426
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic 21,090,948 21,043,206 21,090,948 20,927,453
Diluted 21,090,948 21,057,332 21,090,948 20,941,252
EARNINGS PER SHARE
Basic $0.07 $0.81 $0.59 $1.22
Diluted $0.07 $0.81 $0.59 $1.22
SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
------
March 31, June 30,
2012 2011
---- ----
CURRENT ASSETS
Cash $3,650,347 $26,266,687
Restricted cash 12,040,500 8,320,500
Accounts receivable, trade, net 12,220,958 8,489,272
Notes receivable, trade 1,583,000 -
Other receivables 1,661,965 232,126
Loans receivable 10,957,437 16,764,390
Receivable, mine acquisition prepayments 17,075,148 -
Inventories 7,580,251 3,010,926
Advances to suppliers 14,455,894 8,994,833
Advances to suppliers -related party - 575,700
Total current assets 81,225,500 72,654,434
---------- ----------
PLANT AND EQUIPMENT, net 16,515,488 17,157,542
---------- ----------
CONSTRUCTION IN PROGRESS 39,697,825 23,204,544
---------- ----------
OTHER ASSETS
Prepayments for land use rights 11,103,542 8,980,335
Prepayments for mine acquisitions - 25,546,922
Prepayments for construction 21,779,538 8,134,736
Intangible - land use rights, net 1,912,966 1,919,987
Intangible - mineral rights, net 29,870,000 29,408,865
Long-term investments 2,821,015 2,753,660
Other assets 111,382 108,290
Total other assets 67,598,443 76,852,795
---------- ----------
Total assets $205,037,256 $189,869,315
============ ============
SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES
Short term loans - bank $5,698,800 $4,950,400
Accounts payable, trade 4,020 144,147
Notes payable 4,749,000 -
Other payables and accrued liabilities 907,990 1,426,285
Other payables - related party 263,860 455,768
Customer deposits 90,880 127,965
Taxes payable 1,687,930 2,856,671
Total current liabilities 13,402,480 9,961,236
---------- ---------
LONG TERM LIABILITIES
Long term loans 56,988,000 55,692,000
Warrants liability 1,042,717 5,569,047
Total long term liabilities 58,030,717 61,261,047
---------- ----------
Total liabilities 71,433,197 71,222,283
---------- ----------
COMMITMENTS AND CONTINGENCIES
EQUITY
Common shares, $0.001 par value, 100,000,000 authorized,
21,090,948 issued and outstanding as of
March 31, 2012 and June 30, 2011, respectively 21,091 21,091
Additional paid-in capital 3,442,083 3,442,083
Statutory reserves 3,687,214 3,403,793
Retained earnings 110,134,963 98,004,993
Accumulated other comprehensive income 7,655,508 5,111,872
Total SinoCoking Coal and Coke Chemicals Industries,
Inc's equity 124,940,859 109,983,832
----------- -----------
NONCONTROLLING INTERESTS 8,663,200 8,663,200
Total equity 133,604,059 118,647,032
----------- -----------
Total liabilities and equity $205,037,256 $189,869,315
============ ============
SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.
