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SinoCoking Coal and Coke Chemical Industries Announces Fiscal 2014 Second Quarter Financial Results

February 19, 2014

Gained Access to 650,000 Metric Tons Coking Capacity Through Entrustment Arrangement

PINGDINGSHAN, China, Feb. 19, 2014 /PRNewswire-FirstCall/ — SinoCoking Coal and Coke Chemical Industries, Inc. (Nasdaq: SCOK) (the “Company” or “SinoCoking”), a vertically-integrated coal and coke processor, today announced its financial results for the fiscal 2014 second quarter ended December 31, 2013.

Fiscal 2014 Second Quarter vs. Fiscal 2013 Second Quarter

    --  Total revenue decreased to $13.2 million, as compared to $21.2 million.
    --  Gross margin improved to 15.6%, as compared to 13.8%.
    --  Income from operations decreased to $1.5 million, as compared to $2.3
        million.
    --  Net loss was $0.1 million or $(0.01) per diluted share, as compared to
        net income of $0.8 million or $0.04 per diluted share.

Fiscal 2014 First Half vs. Fiscal 2013 First Half

    --  Total revenue decreased to $30.7 million, as compared to $38.8 million.
    --  Gross margin improved to 16.8%, as compared to 12.5%.
    --  Income from operations increased to $4.0 million, as compared to $3.6
        million.
    --  Net income decreased to $1.1 million or $0.05 per diluted share, as
        compared to $1.5 million or $0.07 per diluted share.

SinoCoking’s Chairman and CEO, Mr. Jianhua Lv, commented, “Our fiscal 2014 second quarter performance was mainly due to a significant decrease in sales of coal products, which reflected ongoing weak market demand, despite winter generally being a high coal consumption season.”

Mr. Lv added, “Approximately 95% of our revenue came from coke products and only 5% from coal products, as compared to approximately 51% and 49%, respectively, in the same period of fiscal 2013. This reflects changes to our operating strategy in order to adapt to market conditions, as current coal demand remains very weak due to over capacity of crude steel. Thus, we temporarily stopped raw coal and washed coal trading. On the other hand, we have begun selling coke and coke powder to Fangda Special Steel Technology Co., Ltd. (“Fangda Steel”), one of China’s best-known special steel manufacturers, and we expect sales to Fangda Steel to steadily rise.”

Mr. Lv continued. “Although gross profit as compared to the same period of fiscal 2013 decreased by 30% to $2.1 million, gross margin increased to 15.6% as we stopped coal trading, which tends to be a low margin business.”

Recent Business Developments

On December 18, 2013, we signed a 5-year entrusting agreement with Jiyuan Tianlong Coking Co., Ltd (“Tianlong”) to manage Tianlong’s coking equipment. Founded in 2003, Tianlong is a joint-venture private enterprise engaged in the production of metallurgical coke.

As per the terms of the agreement, Hongli will utilize Tianlong’s equipment, which has an annual coking capacity of 650,000 metric tons, to produce high quality metallurgical coke for sales to steel manufacturers such as Fangda Steel.

Including Tianlong’s equipment, the Company has more than doubled its coking capacity to over 1.1 million metric tons annually as follows:

    --  Over 250,000 metric tons through Hongli's Baofeng plant;
    --  200,000 metric tons through the Pingdingshan Hongfeng Coal Processing
        and Coking, Ltd. ("Hongfeng"), a plant which the Company leased in early
        2013 and plans to renew once the current lease expires in March 2014;
        and
    --  650,000 metric tons from Tianlong's equipment.

In November 2013, we signed an agreement to supply Fangda Steel with 6,000 metric tons of grade II coke and 3,000 metric tons of clean coke per month, and 36,000 metric tons of grade II coke and coke powder have been delivered as of December 31, 2013. Our added coking capacity will enable us meet Fangda Steel’s coke requirements even should they increase significantly.

Mr. Lv noted, “Since current market demand for coke products remains soft and timing of full recovery remains unknown, we have put the construction of our new coking plant on hold and have revised our business strategy as follows:

    --  Expanded our access to raw coal by signing an agreement with a coal
        producer;
    --  Increased our coke production capacity and product offering by leasing
        third party facilities and equipment with little upfront capital; and
    --  Increased revenue stream by signing the agreement with Fangda Steel.

As a result of these initiatives, we have minimized the risks in and optimized our use of working capital by proactively using our assets.”

Mr. Lv concluded, “We will continue our efforts to seek opportunities and innovative ways to support our business. We expect the foregoing initiatives to begin to yield positive results in fiscal 2014, and we look forward to report our progress in the coming months.”

Conference Call

Mr. Lv and Mr. Sam Wu, CFO, will host a conference call on Friday, February 21, 2014 at 9:30 am ET to discuss these results as well as recent corporate developments.

Interested parties may participate in the call by dialing: (201) 493-6744. Please 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 http://www.investorcalendar.com/IC/CEPage.asp?ID=172312 or visit the Company’s website www.scokchina.com and then go to 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 Shuangri Coal Mining Co., Ltd., and Baofeng Xingsheng 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.scokchina.com               www.theequitygroup.com


                                                                  SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

                                                                CONDESED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                                                                                              (UNAUDITED)

                                                                                                                             For the Three Months Ended                 For the Six Months Ended
                                                                                                                                    December 31,                              December 31,

                                                                                                                                     2013                      2012                      2013                      2012
                                                                                                                                     ----                      ----                      ----                      ----

    REVENUE                                                                                                                   $13,208,253               $21,238,642               $30,684,223               $38,800,836

    COST OF REVENUE                                                                                                            11,152,697                18,302,685                25,531,366                33,955,623
                                                                                                                               ----------                ----------                ----------                ----------

    GROSS PROFIT                                                                                                                2,055,556                 2,935,957                 5,152,857                 4,845,213
                                                                                                                                ---------                 ---------                 ---------                 ---------

    OPERATING EXPENSES:

                                       Selling                                                                                     39,754                    42,176                    80,628                    85,757

                                       General and administrative                                                                 475,246                   581,345                 1,078,827                 1,208,173

                                       Total operating expenses                                                                   515,000                   623,521                 1,159,455                 1,293,930
                                                                                                                                  -------                   -------                 ---------                 ---------

    INCOME FROM OPERATIONS                                                                                                      1,540,556                 2,312,436                 3,993,402                 3,551,283
                                                                                                                                ---------                 ---------                 ---------                 ---------

    OTHER INCOME (EXPENSE)

                                       Interest income                                                                            184,247                   208,461                   367,340                   431,101

                                       Interest expense                                                                        (1,311,812)                 (997,461)               (2,090,579)               (2,019,065)

                                       Other finance expense                                                                      (87,717)                  (91,123)                 (150,260)                 (163,367)

                                       Other income, net                                                                                -                     8,333                         -                     8,333

                                       Change in fair value of warrants                                                                 -                    41,317                        12                   714,847

                                       Total other expense, net                                                                (1,215,282)                 (830,473)               (1,873,487)               (1,028,151)
                                                                                                                               ----------                  --------                ----------                ----------

    INCOME BEFORE INCOME TAXES                                                                                                    325,274                 1,481,963                 2,119,915                 2,523,132

    PROVISION FOR INCOME TAXES                                                                                                    431,932                   650,238                 1,065,689                 1,031,494
                                                                                                                                  -------                   -------                 ---------                 ---------

    NET INCOME (LOSS)                                                                                                            (106,658)                  831,725                 1,054,226                 1,491,638

    OTHER COMPREHENSIVE INCOME (LOSS)

                                       Foreign currency translation                                                               756,310                   280,321                 1,601,757                    (8,374)

                                       adjustment

    COMPREHENSIVE INCOME                                                                                                         $649,652                $1,112,046                $2,655,983                $1,483,264

    WEIGHTED AVERAGE NUMBER

    OF COMMON SHARES

                                       Basic and diluted                                                                       21,121,372                21,121,372                21,121,372                21,121,372

    EARNINGS (LOSS) PER SHARE

                                       Basic and diluted                                                                           $(0.01)                    $0.04                     $0.05                     $0.07


                                                                                                     SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

                                                                                                                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                                                                                 (UNAUDITED)

                                                                                                                                   ASSETS
                                                                                                                                   ------

                                                                                                                                                                                                     December 31,                                        June 30,

                                                                                                                                                                                                                         2013                                            2013
                                                                                                                                                                                                                         ----                                            ----

    CURRENT ASSETS

                       Cash                                                                                                                                                     $87,328                                           $782,018

                       Restricted cash                                                                                                                                                -                                          9,708,000

                       Accounts receivable, trade                                                                                                                            13,561,596                                          9,474,197

                       Other receivables and deposits                                                                                                                         5,790,761                                          4,334,370

                       Loans receivable                                                                                                                                       8,032,037                                          8,032,037

                       Inventories                                                                                                                                            3,601,486                                          3,018,909

                       Advances to suppliers                                                                                                                                  6,893,705                                          8,791,837

                       Prepaid expenses                                                                                                                                         194,530                                                  -

                       Total current assets                                                                                                                                  38,161,443                                         44,141,368
                                                                                                                                                                             ----------                                         ----------

    PLANT AND EQUIPMENT, net                                                                                                                                                                                       14,867,527                                      15,269,766
                                                                                                                                                                                                                   ----------                                      ----------

    CONSTRUCTION IN PROGRESS                                                                                                                                                                                       40,697,177                                      40,224,821
                                                                                                                                                                                                                   ----------                                      ----------

    OTHER ASSETS

                       Refundable deposit                                                                                                                                     4,911,000                                          4,854,000

                       Prepayments                                                                                                                                           62,285,817                                         61,562,890

                       Intangible assets, net                                                                                                                                32,587,066                                         32,244,071

                       Long-term investments                                                                                                                                  2,920,278                                          2,886,383

                       Other assets                                                                                                                                             114,590                                            113,260

                       Total other assets                                                                                                                                   102,818,751                                        101,660,604
                                                                                                                                                                            -----------                                        -----------

                                                                     Total assets                                                                                                                                $196,544,898                                    $201,296,559
                                                                                                                                                                                                                 ============                                    ============

                                                                                                                           LIABILITIES AND EQUITY
                                                                                                                           ----------------------

    CURRENT LIABILITIES

                       Current maturity of long term loan                                                                                                                $            -                                        $50,158,000

                       Accounts payable, trade                                                                                                                                1,658,892                                            183,504

                       Notes payable                                                                                                                                                  -                                          9,708,000

                       Other payables and accrued liabilities                                                                                                                 2,250,705                                          2,229,362

                       Other payables - related parties                                                                                                                         304,513                                            140,465

                       Acquisition payable                                                                                                                                    4,747,300                                          4,692,200

                       Customer deposits                                                                                                                                        129,417                                            208,815

                       Taxes payable                                                                                                                                          1,208,325                                          1,133,450

                       Total current liabilities                                                                                                                             10,299,152                                         68,453,796
                                                                                                                                                                             ----------                                         ----------

    LONG TERM LIABILITIES

                       Long term loan                                                                                                                                        50,747,000                                                  -

                       Total long term liabilities                                                                                                                           50,747,000                                                  -
                                                                                                                                                                             ----------                                                ---

                                                                     Total liabilities                                                                                                                             61,046,152                                      68,453,796
                                                                                                                                                                                                                   ----------                                      ----------

    COMMITMENTS AND CONTINGENCIES

    EQUITY

                        Common stock, $0.001 par value, 100,000,000
                        shares

                       authorized,

                       21,121,372 shares issued and outstanding                                                                                                                  21,121                                             21,121

                       Additional paid-in capital                                                                                                                             3,592,053                                          3,592,053

                       Statutory reserves                                                                                                                                     3,689,941                                          3,689,941

                       Retained earnings                                                                                                                                    112,359,051                                        111,304,825

                       Accumulated other comprehensive income                                                                                                                11,504,980                                          9,903,223

                        Total SinoCoking Coal and Coke Chemicals
                        Industries,                                                                                                                                         131,167,146                                        128,511,163

                       Inc.'s  equity

                       NONCONTROLLING INTERESTS                                                                                                                               4,331,600                                          4,331,600

                                                                     Total equity                                                                                                                                 135,498,746                                     132,842,763
                                                                                                                                                                                                                  -----------                                     -----------

                                                                     Total liabilities and equity                                                                                                                $196,544,898                                    $201,296,559
                                                                                                                                                                                                                 ============                                    ============

SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.


Source: PR Newswire



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