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Sinocoking Coal and Coke Chemical Industries Announces 2012 First Quarter Financial Results Continues to Optimize Product Mix to Maximize Results

Construction of the New Coking Facility to be Completed by 2011 Year-End

PINGDINGSHAN, China, Nov. 9, 2011 /PRNewswire-Asia-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 2012 first quarter ended September 30, 2011.

First Quarter 2012 vs. First Quarter 2011

  • Revenue increased by 70.3% to $22,151,334 from $13,008,462, due to an increase in all product categories in terms of both sales volumes and selling prices except for the slight decrease in the raw coal sales volume.
  • Revenue from the sale of coal products increased by 191% to approximately $11,303,713 and comprised 51% of total revenues as compared to 30% of total revenues in last year's first quarter.
    • Total metric tons of coal products sold increased by 59% to 84,085 metric tons.
    • Raw coal revenue rose 13% due to a 28% increase in average selling prices and despite the slight decrease in raw coal sales volume. We were unable to produce or purchase sufficient raw coal to sell as a result of the mining moratorium.
    • Washed coal revenue increased 579% due to a 23% increase of average selling prices and increased volume.
    • Coal tar revenue increased 69% due to a 6% increase in average selling prices and increased volume.
  • Revenue from the sale of coke products increased by 19% to approximately $10,847,621 and comprised 49% of total revenues for the quarter as compared to 70% a year ago.
    • Total metric tons sold increased by 12% to 45,060 metric tons.
    • Average selling prices for coke products increased by 6%.
  • Gross margin decreased to 32.5% as compared to 35.7%, due to higher average prices of raw coal purchased in the open market driven by supply shortages.
  • Income from operations increased 78.7% to $6,478,405 compared to $3,624,739.
  • Pre-tax income, including the change in fair value of warrants, decreased to $9,785,097 as compared to $16,430,766(1).
  • Net income, including the change in fair value of warrants, was $8,308,713, or $0.39 per diluted share as compared to $15,481,998, or $0.73 per diluted share(1).
  • Excluding the change of fair value of warrants, net income increased by 106.4% to $5,288,991, or $0.25 per diluted share as compared to $2,562,323, or $0.12 per diluted share(1).

  1. Fair value of warrants for the three months ended September 30, 2011 and September 30, 2010 was $3,019,722 $12,919,675, respectively.

SinoCoking's Chairman and CEO, Mr. Jianhua LV noted, "We started the first quarter of fiscal 2012 on a strong note with increases in revenue and operating income. In response to market demand, we continued to optimize our product mix and took advantage of higher selling prices for coal products. As a result, revenue generated from the sale of coal products increased to over 51% of total revenue as compared to only 30% one year earlier.

"Our business continues to be impacted by several factors such as a) the mine consolidation process and mining moratorium in Henan, b) the acceleration of government-mandated closure of small-sized and less-efficient coking facilities, and c) the central government's efforts to provide economic stimulus to maintain momentum and growth in domestic consumption. We are working hard to minimize the effects of these factors and take advantage of opportunities that have been presented to us by executing our ambitious business plan which includes:

  • The completion of the construction of the new coking facility by 2011 year-end, which at full capacity is projected to produce up to 900,000 metric tons of coke and coke products annually and generate over $100 million in revenue and over $20 million in net income annually. In addition, this new modern, state-of-the-art facility will help us:
    • Expand our product portfolio, by recapturing more coking by-products for refinement into useful industrial chemicals, and production of more high value-added chemical products
    • Achieve greater energy efficiency while also lessening any environmental impact
    • Generate power for our own use and/or sale
    • We also intend to produce purified coal gas at this plant to sell as a fuel source to local residents through the state-owned gas grid
  • The resumption of operations at full capacity for our Hongchang and Xingsheng mines; finalize the preparation work for the Shuangrui and Shunli coal mines to receive clearance to start production.
  • The acquisition of other coal mines to source raw materials."

Discussing the new coking facility, Mr. Lv went on to say, "The construction of the facility continues and is scheduled to be completed by December 31, 2011, with production to begin shortly thereafter. Thus far, we have completed the construction of the shallow foundation, an underground workshop and the furnace and chimney rack, and we expect to complete the building of furnaces and start installing equipment and machinery by the end of November. Pictures of the construction of the facility are available on our website www.sinocokingchina.com."

Regarding the status of mine operations Mr. Lv added, "In August, our Hongchang and Xingsheng mines received clearance from Henan Coal Seam Gas to resume operations. In September 2011, Hongchang mine halted operations to complete certain mine engineering work and safety upgrades, which have not been completed. Additionally, Henan Coal Seam Gas has applied with the appropriate provincial-level agencies to confirm these clearances; upon such confirmation, we expect both mines will be issued the licenses and permits necessary to resume operations at full capacity. We expect this process to be completed by calendar 2011 year-end. Additionally, Shuangrui and Shunli mines should receive clearance from Henan Coal Seam Gas to resume operations by calendar 2011 year-end as well, and then will apply with local authorities for the necessary licenses and permits."

Mr. Sam Wu, SinoCoking's Chief Financial Officer noted, "We continue to fund our business activities from cash flow from operations. During the three months ended September 30, 2011, we used approximately $20.1 million to purchase equipment and machinery, as well as for the construction of the new coking facilities and approximately $1.2 million for the land use rights to the land underlying our new coking plant. Additionally, we have access to an aggregate of approximately RMB 360 million (approximately $55 million) under a medium-term loan, and the credit to issue approximately $14 million bank guaranteed notes under our Hongli and Hongchang affiliates, with the term of 50% cash deposit of the face value in advance. We believe that cash flow from operations and our credit line are sufficient to complete our major business initiatives."

Conference Call

SinoCoking's Chairman and CEO, Jianhua Lv, and CFO, Sam Wu, will host a conference call on Friday, November 11, 2011 at 10:00 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 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

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME






FOR THE THREE MONTHS ENDED SEPTEMBER 30,





2011


2010





(unaudited)


(unaudited)

REVENUE

$

22,151,334

$

13,008,462








COST OF REVENUE


14,947,457


8,364,109








GROSS PROFIT    


7,203,877


4,644,353








OPERATING EXPENSES:






Selling


81,543


84,467


General and administrative


643,929


935,147



Total operating expenses


725,472


1,019,614








INCOME FROM OPERATIONS


6,478,405


3,624,739








OTHER INCOME (EXPENSE)






Finance income (expense), net


107,326


(56,950)


Other income (expense), net


179,644


(56,698)


Change in fair value of warrants


3,019,722


12,919,675



Total other income


3,306,692


12,806,027








INCOME BEFORE INCOME TAXES


9,785,097


16,430,766








PROVISION FOR INCOME TAXES


1,476,384


948,768








NET INCOME


8,308,713


15,481,998








OTHER COMPREHENSIVE INCOME






Foreign currency translation adjustment


1,188,744


1,146,299








COMPREHENSIVE INCOME

$

9,497,457

$

16,628,297








WEIGHTED AVERAGE NUMBER OF COMMON SHARE






Basic


21,090,948


20,871,192


Diluted


21,090,948


21,288,959








EARNINGS PER SHARE






Basic

$

0.39

$

0.74


Diluted

$

0.39

$

0.73





SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)






SEPTEMBER 30,


JUNE 30





2011


2011

ASSETS





CURRENT ASSETS






Cash

$

12,412,010

$

26,266,687


Restricted cash


8,846,000


8,320,500


Accounts receivable, trade, net


12,386,707


8,489,272


Loans receivable


9,994,337


16,764,390


Notes receivable, trade


4,067,964


-


Other receivables


12,929,242


232,126


Inventories


5,539,090


3,010,926


Advances to suppliers


10,688,291


8,994,833


Advances to suppliers -related party


582,026


575,700



Total current assets


77,445,667


72,654,434

PLANT AND EQUIPMENT, net


16,925,992


17,157,542

CONSTRUCTION IN PROGRESS


34,010,565


23,204,544







OTHER ASSETS






Prepayments for land use rights


10,330,220


8,980,335


Prepayments for mine acquisitions


4,692,000


25,546,922


Prepayments for construction


17,853,677


8,134,736


Intangible - land use rights, net


1,924,059


1,919,987


Intangible - mineral rights, net


29,511,485


29,408,865


Long-term investments


2,783,920


2,753,660


Other assets


110,052


108,290



Total other assets


67,205,413


76,852,795




Total assets

$

195,587,637

$

189,869,315

LIABILITIES AND EQUITY





CURRENT LIABILITIES






Short term loans - bank

$

5,004,800

$

4,950,400


Accounts payable - trade


98,547


144,147


Other payables and accrued liabilities


865,918


1,426,285


Other payables - related party


579,400


455,768


Customer deposits


89,789


127,965


Taxes payable


1,908,056


2,856,671



Total current liabilities


8,546,510


9,961,236

LONG TERM LIABILITIES






Long term loans


56,304,000


55,692,000


Warrants liability


2,549,325


5,569,047



Total long term liabilities


58,853,325


61,261,047












Total liabilities


67,399,835


71,222,283

COMMITMENTS AND CONTINGENCIES





EQUITY






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







21,090,948 and 21,090,948 issued and outstanding as of







September 30, 2011 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


106,073,598


98,004,993


Accumulated other comprehensive income


6,300,616


5,111,872



Total SinoCoking Coal and Coke Chemicals Industries, Inc's  equity


119,524,602


109,983,832


NONCONTROLLING INTERESTS


8,663,200


8,663,200




Total equity


128,187,802


118,647,032




Total liabilities and equity

$

195,587,637

$

189,869,315




SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.



RELATED LINKS
http://www.sinocokingchina.com
http://www.theequitygroup.com

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