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

Nov 09, 2011, 16:05 ET from SinoCoking Coal and Coke Chemical Industries, Inc.

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