2014

Sino-Forest Reports Second Quarter 2011 Results

TORONTO, Aug. 15, 2011 /PRNewswire/ - Sino-Forest Corporation ("Sino-Forest" or the "Company") (TSX:TRE) announced its financial results today for the second quarter ended June 30, 2011. All amounts in this release are expressed in U.S. dollars unless otherwise indicated.

Highlights of Second Quarter and First Half 2011 Results

  • Revenue increased 6% in Q2 to $317 million and 19% in H1 2011 to $656 million
  • EBITDA was down 4% in Q2 to $155 million and increased 14% in H1 2011 to $347 million
  • In Q2 IFRS accounting for fair value of financial instruments resulted in a non-cash gain of approximately $469.5 million
  • Net income increased 125% in Q2 to $447 million and 98% in H1 2011 to $425 million
  • Net income before changes in fair value of financial instruments decreased from $60.8 million to a loss of $9.8 million in Q2
  • Cash, cash equivalents and short term deposits were $899 million as at June 30, 2011
  • The Independent Committee continues to make progress with its review, but has advised that additional time will be needed to complete its report primarily due to a prolonged data collection and review process

Financial Highlights for the Second Quarter and First Half ended June 30, 2011 compared to 2010:

     
(US$ millions, except margins and per share amounts) Second Quarter ended June 30 First Half ended June 30
2011 2010 Change 2011 2010 Change
$ $ % $ $ %
Revenue 317.4 298.6 6 656.3 549.6 19
Gross Profit(1) 75.4 114.3 (34) 201.2 212.5 (5)
Gross Profit Margin 23.8% 38.3% (15)%pts 30.7% 38.7% (8)%pts
EBITDA(2) 155.2 162.4 (4) 347.3 305.3 14
Net Income 447.1 199.0 125 425.0 214.9 98
Diluted Earnings Per Share 1.64 0.77 113 1.63 0.88 96
Cash Flow Used In Operating Activities (90.3) (62.4) 45 (211.9) (184.4) 15

Notes (1) and (2) are at the end of this release

Comparing Q2 2011 results to the same period in 2010, net income before changes in fair value of financial instruments decreased from $60.8 million to a loss of $9.8 million. The reasons for the decrease of $70.6 million were primarily related to a lower gross margin dollar from plantation fibre operations and higher selling and administrative expenses and finance costs as discussed below.

International Financial Reporting Standards ("IFRS") impact on Convertible Notes
In the first quarter of 2011, most publicly accountable enterprises in Canada including Sino-Forest were required to adopt IFRS, which has had a material impact on several aspects of the Company's reporting. One aspect warranting particular attention is how the Company is required to depict a certain component of the Company's financing strategy which introduced a heightened degree of volatility to the financial statements.  Specifically, the Company's outstanding 2013 convertible notes and 2016 convertible notes (collectively the "Convertible Notes") are convertible into the Company's common shares, at the option of the holder, at a defined conversion rate.  However, the indentures governing the terms of the Convertible Notes provide that the Company may elect to deliver, in lieu of common shares, cash or a combination of cash and common shares.  Under Canadian GAAP, the conversion feature was analyzed as equity, based on the Company's unconditional ability to settle the instrument on conversion by issuing common shares.  Under IFRS, however, this feature is analyzed as an embedded derivative liability, measured separately at fair value at the end of each reporting period because it is not closely related to the underlying Convertible Notes, recognizing changes in fair value through profit or loss.

This remeasurement of the embedded derivative liability at fair value alone generated a gain of $416.5 million or diluted earnings per share ("EPS") of $1.46 for the six months ended June 30, 2011, compared to a gain of $132.9 million or diluted EPS of $0.50 for the same period in 2010.  Consequently, the Company's bottom line result was a net income for the six months ended June 30, 2011 of $425 million or diluted EPS of $1.63, compared to a net income of $214.9 million or diluted EPS of $0.88 for the same period in 2010.

As disclosed in the interim financial statements for the three months ended March 31, 2011, on June 13, 2011, the Board of Directors approved the elimination of the Company's option to settle the Convertible Notes by delivering cash or a combination of cash and common shares.  The elimination of this option would have changed the treatment of the embedded derivative liability, removing the requirement to measure that derivative financial liability at fair value at the end of each reporting period.  Instead, the Convertible Notes would have been treated as consisting of a liability portion amortized over the loan period, and an equity portion classified as equity.

The Company obtained an opinion from legal counsel that the removal of the option would not adversely affect the holders' rights in any material respect pursuant to the indentures governing the Convertible Notes and therefore would not require approval of the holders or their agents.  However, the trustee has taken the contrary position that the amendment would require consent of the Convertible Notes holders.  While the Company and its legal advisors disagree with this position, management has decided not to pursue the amendment at this time.

Business Segment Highlights

     
  Second Quarter ended
June 30, 2011
Second Quarter ended
June 30, 2010
$'000 % $'000 %
Wood Fibre Operations 288,216 90.8 281,322 94.2
   Plantation Fibre 192,093 60.5 180,909 60.6
   Trading of Wood Logs 96,123 30.3 100,413 33.6
Manufacturing and Other Operations 18,088 5.7 17,265 5.8
Greenheart 11,080 3.5 - -
Total Revenue 317,384 100.0 298,587 100.0

Our revenue increased 6.3% to $317.4 million in the three months ended June 30, 2011 from $298.6 million in the same period in 2010.  The increase in revenue was mainly due to the increase in revenue from our plantation fibre and Greenheart operations.

Wood Fibre Operations
Plantation Fibre

The following table sets forth revenue from plantation fibre operations.

     
  Second Quarter ended June 30, 2011 Second Quarter ended June 30, 2010
Area Sold Volume
Sold
Avg.
Price/m3
Total
Revenue
Area Sold Volume
Sold
Avg.
Price/m3
Total
Revenue
  Hectares '000 m3 $ $'000 Hectares '000 m3 $ $'000
Standing timber 20,575 2,534 75 190,471 6,702 1,681 92 154,391
Logs 269 25 64 1,622 2,634 363 73 26,518
Total 20,844 2,559 75 192,093 9,336 2,044 89 180,909

Revenue from sales of plantation fibre increased 6.2% to $192.1 million in the three months ended June 30, 2011 from $180.9 million in the same period in 2010, mainly due to an increase in the revenue from the sales of standing timber, partially offset by the decrease in the revenue of logs.

The average sales per hectare decreased 52.4% to $9,216 per hectare in the three months ended June 30, 2011 from $19,378 per hectare in the same period in 2010.

The average yield per hectare sold as standing timber was 123 cubic meters ("m3") for the three months ended June 30, 2011 and 251 m3 in the same period in 2010.  The average yield per hectare sold as logs was 94 m3 for the three months ended June 30, 2011 and 138 m3 in the same period in 2010.

The fall in the average selling price of standing timber was mainly due to a difference in sales mix.  In the three months ended June 30, 2011, most of the standing timber sales were from plantations located in Guangxi and Guizhou Provinces and in the same period in 2010, the standing timber sales were primarily from plantations located in Yunnan Province.  The average selling price of pine and Chinese fir that we sold from Guangxi and Guizhou Provinces in the three months ended June 30, 2011 was $80 per m3, compared to an average selling price of $98 per m3 for broadleaf that we sold from Yunnan Province in the same period in 2010.

Trading of Wood Logs
Revenue from trading of imported and domestic wood products and logs decreased 4.3% to $96.1 million in the three months ended June 30, 2011 from $100.4 million in the same period in 2010.  This decrease was mainly due to the fall in average selling price of products.

Manufacturing and Other Operations: Revenue from manufacturing and other operations increased 4.8% to $18.1 million in the three months ended June 30, 2011 from $17.3 million in the same period in 2010.

Greenheart Operations: Revenue from Greenheart operations was $11.1 million in the three months ended June 30, 2011.

Gross Profit
Gross profit decreased 34.0% to $75.4 million in the three months ended June 30, 2011 from $114.3 million in the same period in 2010.  Gross profit margin, being gross profit expressed as a percentage of revenue, decreased to 23.8% in the three months ended June 30, 2011 from 38.3% in the same period in 2010, mainly due to the fall in gross profit margin of plantation fibre operations.

Plantation Fibre:
Gross profit margin from sales of standing timber decreased to 31.6% or $24 per m3 in the three months ended June 30, 2011 from 63.0% or $58 per m3 in the same period in 2010, mainly due to the lack of sales of plantations in Yunnan Province which generated relatively higher margins in 2010.  In the three month ended June 30, 2010, the average selling price was $17 per m3 higher than the same period in 2011 and the cost of fibre sold in the three months ended June 30, 2011 was $17 per m3 higher than the same period in 2010, resulting in a reduction in the gross margin.  The lower average selling price and higher cost of fibre per m3 was the result of a difference in sales mix.  In the three months ended June 30, 2010, 97.8% of standing timber sales were in Yunnan Province which achieved a higher average selling price and a lower purchase cost per m3 compared to the same period in 2011 in which 96.6% of standing timber sales were from Guangxi and Guizhou Provinces where the average selling price was lower and the cost of fibre was higher.

As our results indicated, there can be considerable variation from quarter to quarter in our gross profit margin and our financial performance in general depending on the sales mix of our standing timber sales.  The sales mix in any quarter will vary by variety of species, yield per hectare, quality, diameter, location and other factors.  The selling price of fibre in certain locations in China (e.g. Yunnan Province currently) is higher than other locations.  As well, the price we paid for the standing timber and the period of time for which we have held it will also impact our gross profit margin.  As noted above, the standing timber we sold from Yunnan Province in the three months ended June 30, 2010 was sold at a high price and acquired at a low cost, relative to our sales of standing timber for the three months ended June 30, 2011 from plantations primarily located in Guangxi and Guizhou Provinces.  As a result, our gross profit margin from sales of standing timber declined substantially in the second quarter of 2011 relative to the same period in 2010.

Our gross profit margin in the three months ended June 30, 2011 as compared to the three months ended June 30, 2010 is more representative of our expected average gross profit margin for future sales.  In addition, we have recently made the decision to sell our purchased plantations on a 2.5 to 3 year cycle rather than the previously used 3 year cycle.  We made this decision based upon the current age profile of our standing timber and the period for which we have held it relative to our need to have trees available for sale.

Trading of Wood Logs: Gross profit margin from trading of imported and domestic wood products and logs decreased to 4.1% in the three months ended June 30, 2011 from 5.5% in the same period in 2010, mainly due to the fall of margins from trading of Russian logs.

Manufacturing and Other Operations Gross Profit Margin: Gross profit margin from our manufacturing and other operations decreased to 6.2% in the three months ended June 30, 2011 from 12.6% in the same period in 2010.  The decrease was mainly due to a fall in average selling price of the wood flooring business segment.

Greenheart Operations Gross Profit Margin: Gross profit margin from our Greenheart operations was 48.5% in the three months ended June 30, 2011.

Selling and Administrative Expenses: Our selling and administrative expenses increased 73.6% to $40.3 million in the three months ended June 30, 2011 from $23.2 million in the same period in 2010.  The increase was mainly due to increased legal and professional fees of $2.9 million, research and development costs of $2.1 million, incremental plantation maintenance fees and insurance charges of $1.7 million as a result of increased plantation area under management, and incremental costs of approximately $6.9 million relating to the acquired Greenheart Group.

Net Income: As a result of the foregoing and other factors discussed in the Company's management's discussion and analysis for the three months and six months ended June 30, 2011 (the "MD&A"), and primarily as a result of the fair value adjustment of the embedded derivatives of our outstanding Convertible Notes of $469.5 million, our net income for the period increased 124.7% to $447.1 million in the three months ended June 30, 2011 from $199.0 million in the same period in 2010.  Our net income for the period as a percentage of revenue increased to 140.9% in the three months ended June 30, 2011 from 66.6% in the same period in 2010.

Cash Flows from Operating Activities of Continuing Operations: Cash flows from operating activities before movement in timber holdings, measured at cost increased to a cash inflow of $79.7 million in the three months ended June 30, 2011 from a cash inflow of $51.3 million in the same period in 2010, mainly as a result of a decrease in trade and other receivables and an increase in trade and other payables.  Net increase in timber holdings measured at cost increased to $170.0 million in the three months ended June 30, 2011 from $113.7 million in the same period in 2010, resulting in an increase to net cash flow used in operating activities in the three months ended June 30, 2011 compared to the same period in 2010.

Expenditures on Timber Holdings and Manufacturing subsidiaries

     
  Second Quarter ended June 30 First Half ended June 30
  2011 2010 2011 2010
  Hectare $'M Hectare $'M Hectare $'M Hectare $'M

Tree acquisition

44,457 258.6 39,137 203.8 144,491 733.2 76,441 392.7

Re-planting and maintenance of plantations

  5.1   8.3   8.9   15.5

Manufacturing and others

  5.8   10.2   14.6   12.3

Business Acquisition

  0.2   --   0.2 86,786 17.9

Total

  269.7   222.3   756.9   438.4

Management will review its planned acquisition pace and adjust these projected expenditures as necessary based on several factors, including some that that may be beyond our control such as changes in the macroeconomic environment in the PRC.  Further, management expects that, subject to unanticipated developments, at least until the completion of the Independent Committee's examination and the release of the summary of its report, the pace of tree acquisition by the Company will be maintained at a sustaining level which is dictated by cash flows generated by sales of trees under the British Virgin Islands structure being utilized to acquire additional plantations.  However, the replanting of 200,000 hectares in the next two to three years will remain a top priority and the Company expects to explore financing within the PRC through bank loans to fund replanting.

Repayment of 9.125% Guaranteed Senior Notes due August 2011

Subsequent to the end of the quarter, the Company deposited with paying agent Citibank, N.A., for payment in cash to holders of its 9.125% Guaranteed Senior Notes due August 17, 2011 (the "2011 Notes"), the outstanding principal amount of $87,670,000, plus accrued interest to maturity.  The Company is thereby repaying the outstanding principal of the 2011 Notes.  Following such repayment, the 2011 Notes will be cancelled and de-listed from the Singapore Exchange Securities Trading Limited.

Update on the Independent Committee's Review

On June 2, 2011, Muddy Waters, LLC issued a report (the "Report") containing various allegations regarding the Company, its assets, operations and financial results. As a result of the Report, on June 2, 2011, the Board of Directors of the Company appointed a committee of independent directors (the "Independent Committee") to thoroughly examine and review the allegations contained in the Report, and report back to the Board of Directors. The Independent Committee has retained independent legal counsel in Canada, Hong Kong and mainland China. The Independent Committee is also using the services of independent accounting firm PricewaterhouseCoopers LLP and affiliates ("PwC") to assist with the examination.  PwC is highly familiar with the forestry industry and with the business environment in China.

The scope of the Independent Committee's review is significant, reflecting the wide range of allegations contained in the Report.  The Independent Committee and its advisors have worked, and will continue to work to compile and analyze the vast amount of data required for their comprehensive review of Sino-Forest's operations and business, the relationships between Sino-Forest and other entities, and Sino-Forest's ownership of assets.

At the beginning of the process, the Independent Committee informed the Board that the review would likely take at least two to three months. On August 11, 2011, the Independent Committee delivered its First Interim Report to the Board of Directors. The Independent Committee advised the Board as to the current scope of the review, provided a progress update and the anticipated timing of its next interim report and the completion of the review. The Independent Committee indicated it expected to provide a further interim report within six to eight weeks and currently believes that its review process will be completed prior to the Company's year end.

Throughout the fact finding exercise, the Independent Committee has faced challenges due among other issues to the decentralization of data necessary for the completion of its review. This has lengthened the period of time required for gathering and commencing analysis of vast amounts of electronic data and thousands of documents from all the subsidiaries of the Company, including contracts, government documentation, computer and server data, and other information that could relate to the allegations in the Report and the Ontario Securities Commission ("OSC") investigation. This has been indicative of broader challenges associated with the sourcing and verification of data in China. Additionally, the cooperation with the OSC's investigation continues to require resources of management and the Independent Committee alongside the process of the Independent Committee's review.

Until the completion of its review, the Independent Committee believes it would be premature to provide any further updates, due to the breadth and generality of many of the allegations and their interrelated natures. When the review is finalized, the Company's intention is to share a summary of the findings publicly and announce all actions to be taken as a result of any recommendations from the Independent Committee.

Outlook

Mr. Allen Chan, Chairman & Chief Executive Officer said "Management's overriding priorities are to maintain the operations of the business and to continue to support the work of the Independent Committee and its advisors and to cooperate with the OSC in its investigation.  Our company has been significantly impacted by the allegations made by Muddy Waters and the second quarter of 2011 was further impacted by management's focus on dealing with the allegations.  We expect this will continue to be the case as the Independent Committee's review and the investigation of the OSC proceed.  However, we believe that we will be able to overcome this difficult situation in due course.  We look forward to the release of the Independent Committee's and PwC's findings."

Mr. Chan continued "Sino-Forest's business continues to be affected by a variety of macroeconomic factors. On the one hand, the high inflation rate and property speculation have triggered interest rates increases and curbs on lending in China, which have impacted housing policy and building. This has resulted in the easing of log prices especially for construction and plywood manufacturing. On the other hand, we have benefited from our strategy of targeting inland provinces and third tier cities with consistent demand for wood fibre as those regions benefit from economic development such as investment in low-income housing and infrastructure construction."

Domestic log prices especially for eucalyptus and pine have been flat during second quarter of 2011 due to reduced domestic demand, but management expects them to recover in the second half of 2011 or in the first quarter of 2012.  At the same time, spending at the local government level increased 28% in the first half of 2011 to 11.7 trillion Renminbi even though spending by the Central government was down 3.8%, according to the National Bureau of Statistics of China. Therefore, we remain optimistic regarding China's long-term development and growth, which in turn benefits the forestry sector as China remains a net wood fibre importer.

As our results indicated, there can be considerable variation from quarter to quarter in our gross profit margin and our financial performance in general depending on the sales mix of our standing timber sales.  The sales mix in any quarter will vary by variety of species, yield per hectare, quality, diameter, location and other factors.

Our gross profit margin for sales of standing timber in the three months ended June 30, 2011 as compared to the three months ended June 30, 2010 is more representative of our expected average gross profit margin for future sales.  In addition, we have recently made the decision to sell our purchased plantations on a 2.5 to 3 year cycle rather than the previously used 3 year cycle.  We made this decision based upon the current age profile of our standing timber and the period for which we have held it relative to our need to have trees available for sale.

Decision not to host Q2 2011 conference call
As the Independent Committee and its advisors are still in the process of examining the allegations made by Muddy Waters, the Board and management have decided to refrain from hosting any conference calls or providing any public comments on the issues raised by the Report, until the completion of the Independent Committee's review.  The Company appreciates your support and understanding in this challenging period of time. The Company intends to reschedule the previously planned analyst trip upon the completion of the Independent Committee's review.

A full copy of the company's earnings release, financial statements and MD&A will be released and posted on the company's website under "Investor Relations - Earnings Releases" http://www.sinoforest.com/earningsreleases.asp and filed under the Company's profile on SEDAR at www.sedar.com.

About Sino-Forest Corporation
Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of tree plantations, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products. Sino-Forest also holds a majority interest in Greenheart Group Limited (HKSE:00094), a Hong-Kong listed investment holding company with assets in Suriname (South America) and New Zealand and involved in sustainable harvesting, processing and sales of its logs and lumber to China and other countries. Sino-Forest's common shares have been listed on the Toronto Stock Exchange under the symbol TRE since 1995. Learn more at www.sinoforest.com.

Note (1) to the Financial Highlights table: Gross profit for any year / period is defined as revenue less cost of sales, plus or minus - for wood fibre operations - the change in fair value of timber holdings less estimated point-of-sale costs.  We present a measure for gross profit because we believe certain investors find this useful in assessing our operating performance.  In addition, we include the fair value change as part of our calculation of gross profit because the fair value change represents a portion of the total gain or loss we will ultimately realize on the underlying assets, and we believe this should be regarded as a component of our core operating performance.  However, gross profit is not a recognized term under IFRS and should not be considered as an alternative to net income or as an indicator of operating performance or as any other measure of performance derived in accordance with IFRS.  Because it is not a measure defined by IFRS, gross profit as calculated and presented by us may not be comparable to similar measures presented by other companies.

Note (2) to the Financial Highlights table: EBITDA for any year / period is defined as operating profit for the year/period after adding back depreciation and amortization, as well as a component of timber holdings from cost of sales and changes in fair value of timber holdings less estimated point-of-sale costs for the year/period.  We present EBITDA as additional information because we believe it is a useful measure for certain investors to determine our operating cash flow and historical ability to meet debt service and capital expenditure requirements.  EBITDA is not a measure of financial performance under IFRS and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with IFRS.

Cautionary notes: No stock exchange or regulatory authority has approved or disapproved of information contained herein. Certain information included in this news release is forward-looking and is subject to important risks and uncertainties. When used in this news release, the words "believe", "intend", "estimate", "expect", "plan" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words.  These forward-looking statements are based on current expectations. The results or events predicted in these statements may differ materially from actual results or events and are no guarantees of future performance of Sino-Forest.  Factors which could cause results or events to differ from current expectations include, among other things: the outcome of examinations currently underway by the Independent Committee and securities regulatory authorities, the outcome of class action proceedings initiated against the Company as a result of allegations made in the Report, our ability to acquire rights to additional standing timber, our ability to meet our expected plantation yields, the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs, our reliance on the relationship with local plantation land owners and/or plantation land use rights holders, authorized intermediaries, key customers, suppliers and third party service providers, our ability to operate our production facilities on a profitable basis, changes in currency exchange rates and interest rates, the evaluation of our provision for income and related taxes, economic, political and social conditions and government policy in the PRC, the Republic of Suriname and New Zealand, and stock market volatility, the risk factors referred to under "Recent Developments" in the MD&A, and other factors not currently viewed as material that could cause actual results to differ materially from those described in the forwarding-looking statements.  For additional information with respect to certain of these and other factors, see the reports filed by Sino-Forest Corporation with applicable Canadian securities administrators. Sino-Forest Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

SINO-FOREST CORPORATION
Condensed Interim Consolidated Income Statements
[Expressed in thousands of United States dollars, except for earnings per share information] [unaudited]

  For the three months  For the six months
  ended June 30,  ended June 30,
  2011  2010  2011  2010
  $  $  $  $
Continuing Operations
Wood fibre  288,216 281,322 612,636  521,049
Manufacturing and other  18,088 17,265 30,942 28,553
Greenheart  11,080 - 12,730 -
Revenue   317,384 298,587 656,308  549,602
         
Cost of sales  (246,874) (185,562)  (470,387)  (348,781)
Gain on change in fair value of timber holdings
less estimated point-of-sale cost
 4,892 1,296 15,281  11,714
Gross profit  75,402 114,321 201,202  212,535
         
Other operating income  207 154  519  465
Selling and administrative expenses   (40,319) (23,223)  (70,659)  (46,233)
Other operating expenses  (4,049) (1,658) (6,510)  (1,730)
Operating profit  31,241  89,594 124,552  165,037
Finance costs  (45,610) (34,317)  (90,027)  (64,898)
Finance income  4,563 5,515  6,111  8,940
(Loss) profit before changes in fair value of
financial instruments 
(9,806)  60,792  40,636  109,079 
Gain on changes in fair value of
financial instruments  
469,508 150,066  416,468  128,948
Profit before tax from continuing operations  459,702 210,858 457,104  238,027
Income tax expense    (12,477) (11,443)  (32,263)  (22,102)
Profit for the period from continuing operations  447,225 199,415  424,841  215,925
 
Discontinued operations
(Loss) profit after tax for the period from
discontinued operations 
(104) (455)  173  (1,050)
Net profit for the period  447,121 198,960  425,014  214,875
Attributable to:
Equity holders of the parent  447,063 198,936  426,363  214,853
Non-controlling interests  58 24 (1,349) 22
  447,121 198,960  425,014  214,875

  For the three months  For the six months
  ended June 30,  ended June 30,
  2011  2010  2011  2010
  $  $ $   $
Earnings per share, attributable to 
equity holders of the parent
- Basic, for profit for the period  1.82  0.82  1.73  0.88
- Diluted, for profit for the period  1.64  0.77  1.63  0.88
Earnings per share for continuing operations,
attributable to equity holders of the parent
- Basic, for profit from continuing operations   1.82  0.82  1.73  0.89
- Diluted, for profit from continuing operations  1.64  0.77  1.63  0.88
Earnings (loss) per share for discontinued operations,
attributable to equity holders of the parent
- Basic, for (loss) profit from discontinued operations  (0.00)  (0.00)  0.00  (0.00)
- Diluted, for (loss) profit from discontinued operations  (0.00)  (0.00)  0.00  (0.00)

SINO-FOREST CORPORATION
Condensed Interim Consolidated Statements of Financial Position
[Expressed in thousands of United States dollars] [unaudited]
 


As at 
June 30,
2011 
As at
December 31,
2010
  $
ASSETS    
Current assets    
Cash and cash equivalents   861,648 1,223,352
Short-term deposits   37,217 32,101
Trade and other receivables    428,020 699,393
Prepayments    97,631  68,139
Timber holdings, measured at cost   3,483,676 2,888,556
Inventories   65,775 50,977
  4,973,967 4,962,518
Non-current assets    
Timber holdings, measured at fair value   262,036 249,090
Property, plant and equipment   90,124 82,525
Investment properties   23,430 23,498
Other non-current financial assets   9,072 11,153
Intangible assets and goodwill   272,718 264,217
Other assets   266,928 200,455
Deferred tax asset   3,948 3,500
  928,256 834,438
Total assets   5,902,223 5,796,956
     
LIABILITIES AND EQUITY    
Current liabilities    
Interest-bearing loans and borrowings   204,501 241,629
Trade and other payables   297,021 338,719
Provisions   225,519 183,874
Income taxes payable   10,109 10,979
  737,150 775,201
Non-current liabilities    
Interest-bearing loans and borrowings   1,566,811 1,541,093
Deferred tax liability   49,593 48,934
Derivative financial instruments   31,858 448,326
  1,648,262  2,038,353
Total liabilities   2,385,412 2,813,554
     
Equity    
Issued capital   1,268,022 1,261,086
Retained earnings   1,964,854 1,544,960
Other reserves   211,773  115,432
Equity attributable to equity holders
of the parent  

3,444,649

2,921,478
Non-controlling interests   72,162 61,924
Total equity   3,516,811 2,983,402
Total liabilities and equity   5,902,223 5,796,956

SINO-FOREST CORPORATION
Condensed Interim Consolidated Statements of Cash Flows
[Expressed in thousands of United States dollars] [unaudited]


For the three months
ended June 30, 
For the six months
ended June 30,
  2011  2010  2011  2010
  $  $  $
OPERATING ACTIVITIES
Profit before tax from continuing operations  459,702  210,858  457,104  238,027
Loss before tax from discontinued operations  -  (8)  -  (161)
Profit before tax  459,702  210,850  457,104 237,866
Non-cash adjustment to reconcile profit before tax to net cash flows:
  Depreciation and amortization   3,451  2,556  6,864  4,750
  Share-based compensation  882  536  1,458  1,187
  Gain on change in fair value of financial instruments  (469,508)  (150,066)  (416,468)  (128,948)
  Gain on changes in fair value of timber holdings less estimated point-of-sale costs   (4,892)  (1,296)  (15,281)  (11,714)
  Unrealized exchange losses  5,390  2,538  7,200  1,869
  Finance income  (4,563)  (5,515)  (6,111)  (8,940)
  Finance costs  45,610  34,317  90,027  64,898
  Other  472  (118)  1,736  1,413
  36,544  93,802  126,529  162,381
Working capital adjustments:
  Decrease (increase) in trade and other receivables  26,531  (44,076)  268,045  (34,226)
  (Increase) decrease in prepayments  (10,960)  5,146  (35,020)  (4,836)
  Increase in inventories  (11,823)  (82)  (11,432)  (15,163)
  Increase in other assets  -  (25,800) -
  Decrease (increase) in non-current trade receivables  1,116  (1,822) 1,391  (1,690)
  Increase (decrease) in trade and other payables  38,174  (2,609)  1,883  (62,190)
  79,582  50,359 325,596  44,276
Interest received  1,322  1,429  2,967  2,429
Income tax paid  (1,156)  (458)  (1,405)  (670)
Cash flows from operating activities before movement
of timber holdings, measured at cost  
79,748  51,330  327,158  46,035
Net increase in timber holdings, measured at cost  (170,070) (113,770)  (539,017)  (230,455)
Net cash flows used in operating activities  (90,322)  (62,440)  (211,859)  (184,420)

 


For the three months
ended June 30,
For the six months
ended June 30,
  2011 2010  2011 2010
  $ $ $ $
INVESTING ACTIVITIES
Net increase in timber holdings, measured at fair value  (5,418) (9,411)  (5,149) (4,322)
Purchase of property, plant and equipment  (5,341) (3,290) (8,515) (12,094)
Addition of investment properties  (29) (379) (29) (622)
Payment for other assets  (13,817)  (521) (16,549) (690)
Payment for prepaid lease payment  (5,871) (1,621) (7,486) (1,689)
Payment for intangible assets  (320)  - (5,320)  -
Proceeds from disposal of property, plant and equipment  23 96 103 133
Refunds of other non-current financial assets  1,000 - 1,000 -
Decrease of non-pledged short-term deposits  12,351 731 11,670 7,920
Acquisition of subsidiaries, net of cash acquired   (149)  - (149)  5,638
Net cash flows used in investing activities   (17,571)  (14,395) (30,424) (5,726)
FINANCING ACTIVITIES
Proceeds from interest-bearing loans and borrowings  106,159 97,297 225,462 189,901
Repayment of interest-bearing loans and borrowings  (145,130) (69,145) (264,987) (142,023)
Payment of transaction cost of issue of shares  - (411) - (411)
Proceeds from exercise of share options - 3,014 - 4,896
Proceeds from exercise of share options of a subsidiary  103 - 446 -
Payment of deferred financing costs  - - - (5,893)
Interest paid  (31,218)  (11,255) (65,914) (36,048)
Increase in pledged short-term deposits  (16,146) (311) (16,356) (174)
Net cash flows (used in) from financing activities  (86,232) 19,189  (121,349) 10,248
Net decrease in cash and cash equivalents  (194,125) (57,646) (363,632) (179,898)
Net foreign exchange difference  892  5  1,928 264
Cash and cash equivalents, beginning of period   1,054,881 980,373 1,223,352 1,102,366
Cash and cash equivalents, end of period   861,648 922,732  861,648  922,732

 

SOURCE Sino-Forest Corporation




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