2014

SinoCoking Coal and Coke Chemical Industries Announces 2012 Second Quarter Financial Results

PINGDINGSHAN, China, Feb. 10, 2012 /PRNewswire-Asia-FirstCall/ -- SinoCoking Coal and Coke Chemical Industries, Inc. (Nasdaq: SCOK) (the "Company" or "SinoCoking"), a vertically-integrated coal and coke processor, today announced its financial results for the fiscal 2012 second quarter ended December 31, 2011.  

Fiscal 2012 Second Quarter vs. Fiscal 2011 Second Quarter

  • Revenue increased by 3.3% to approximately $17.3 million from approximately $16.7 million due to stronger revenue from coal products offset by weaker revenue from coke products.
  • Due to tight coal supplies, revenue from the sale of coal products increased by 16.9% to approximately $8.4 million, despite a 16.3% decrease in total metric tons sold.  Coal revenue accounted for 48.7% of total revenue for the quarter as compared to 43.0% of total revenue last year.  
    • Raw coal revenue decreased by 74.4% as a result of a 2.7% decrease in average selling prices and a 73.9% decrease in 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 by 76.7% due to the increase in sales volume and average selling price.
  • Due to weaker demand from steel mills, revenue from the sale of coke products decreased by 7.0% to approximately $8.9 million and comprised 51% of total revenue for the quarter as compared to 57% a year ago.
    • Total metric tons of coke products sold decreased 1.6% while average selling prices decreased by 1.7%.
    • Total metric tons of coal tar sold decreased 50.1% while average selling prices for coal tar increased by 5.8%.
  • Gross margin decreased to 19.0% as compared to 42.5%, due to significantly increased average prices of raw coal purchased by the Company as a result of coal supply shortages.  
  • Income from operations decreased to $2.3 million from $6.3 million.
  • Pre-tax income, including the change in fair value of warrants, increased to $3.6 million as compared to a loss of $5.7 million. (1)
  • Net income, including the change in fair value of warrants, was $2.6 million, as compared to a loss $7.0 million. (1)
  • Excluding the change of fair value of warrants, net income was $1.3 million, or $0.06 per diluted share as compared to a loss $4.5 million, or $0.21 per share. (1)

Fiscal 2012 Six Months vs. Fiscal 2011 Six Months

  • Revenue increased by 32.6% to approximately $39.5 million, primarily due to increased coke and coal sales.
  • 50.0% of the revenue came from the sale of coke products and 50.0% from coal products, as compared to 62.7% from coke products and 37.3% from coal products for the same period a year ago.  The percentage changes reflect the decreased demand of the coke products and increased demand of coal products.
  • Volume of coke and coal products sold increased by 3.1% and 18.1%, respectively, due to increased sales for both product categories.
  • Gross margin decreased to 26.6% as compared to 39.5%, due to significantly increased average prices of raw coal purchased by the Company driven as a result of coal supply shortages.  
  • Income from operations decreased to $9.0 million from $9.9 million.
  • Pre-tax income, including the change in fair value of warrants, increased to $13.4 million from $10.7 million. (1)
  • Net income, including the change in fair value of warrants, was $11.0 million, as compared to $8.5 million. (1)
  • Excluding the change of fair value of warrants, net income was $6.68 million, or $0.31 per diluted share as compared to $7.0 million, or $0.33 per diluted share. (1)

(1) Change in fair value of warrants amounted to $1,343,214 and $4,362,936 in gain for the three and six months ended December 31, 2011, respectively, as compared to $11,447,532 in losses and $1,472,143 in gain for the three and six months ended December 31, 2010.

Discussing the mining operations, SinoCoking's Chairman and CEO, Mr. Jianhua Lv noted, "During the second quarter of fiscal 2012, coal supplies in Henan Province remained limited as production activities continued to be well below capacity due to the ongoing mining moratorium.  Since the shutdown of mining operations in late June 2010, our Hongchang coal mine had been operating at approximately 50% capacity until it halted operations in September 2011 to complete certain mine engineering work and safety upgrades, which were completed by the end of September 2011.  As a result, volume of coke and coal products sold (other than washed coal) decreased in the second quarter of fiscal 2012.  However, due to a significant increase in sales volume and average selling price of washed coal, our overall revenue for the three and six months ended December 31, 2011 increased by 3.3% and 32.6%, respectively.  As of December 31, 2011 and the date of this release, all our coal mines were awaiting governmental confirmation to resume operations.  We are working closely with authorities to expedite permits and clearance notices for our four mines so that we can resume mining operations at full capacity."

Discussing the new coking facility, Mr. Lv went on to say, "As previously announced, during the quarter ended December 31, 2011, we completed the construction of the coking ovens and coking chambers, which are the heart of the facility.  Severe rain during the months of September to November slowed the pace of construction as we were required to build rain- and wind-proof sheds or canopies, which enabled us to complete the construction of coking ovens through the inclement weather.  Additionally, during the quarter, we completed the construction of another key component of the facility, the quench tower, which is designed and engineered to clean and cool exhaust gases to the saturation temperature using water vapor.  We are currently working to complete the coal blending and screening portions of the facility.  Following equipment installation and testing, the Company will begin its work on the by-product recovery portion of the facility (i.e., benzene, tar and thiamine)."

Mr. Lv added, "The completion of the construction of our new coking facility was delayed due to another factor which resulted in a shift of our short-term strategic priorities.  During 2011 calendar year, we noted a weaker demand for metallurgical coke from steel mills which we believe will continue in the 2012 calendar year.  As a result, since mid of 2011, we focused our efforts on strategic alternatives and increased our trading activities by purchasing unprocessed coal from other provinces which we processed and sold as washed coal.  Additionally, we believe that our coal mines should be able to resume mining operations at full capacity in the spring of 2012, which would supply us with sufficient coal to sell, and to generate cash to fund our operations.  Despite the current weak market conditions for coke, we expect the market to recover by the end of 2012, and we continue to remain focused on our long-term business plan which includes: (1) expanding and upgrading our existing production capacity to achieve greater energy efficiency and reduce environmental impact; (2) recapturing more coking by-products for refinement into useful industrial chemicals, and production of more high value-added chemical products; (3) the acquisition of other coal mines to source raw materials; and (4) strategic cooperation with state-owned coal companies including Zhengzhou Coal Group to indirectly control coal resources, secure our internal material requirements including those for our new coking facility and ensure stable supply for coal trading, although our arrangement with Zhengzhou Coal is currently halted due to its lack of coal supply.

"We will continue to provide investors with updates related to the progress made in the construction of our new coking facility and the resumption of our coal mining operations.  Pictures of the construction of the facility are available on our website www.sinocokingchina.com."

Mr. Sam Wu, SinoCoking's Chief Financial Officer noted, "We continue to fund our business activities from cash flow from operations.  During the six months period ended December 31, 2011, we used approximately $15.8 million in investing activities, and used approximately $28.6 million in purchasing and advanced payments for the equipment and machinery for our new coking facilities. We prepaid approximately $1.9 million to purchase the land use rights for expanding our current coking site in order to accommodate the coal preparation system. For the six months period ended December 31, 2011, we received repayments of loans from two individual borrowers of approximately $8.75 million, and a refund of prepayment for mine acquisitions of approximately $7.86 million. Additionally, we have access to an aggregate of approximately RMB 360 million (approximately $56.6 million) under a medium-term loan, and also through our arrangement with Pingdingshan Rural Cooperative Bank, we have access to a $30.3 million line of credit.  We believe that cash on hand and our credit lines are sufficient for our current needs for capital."

Conference Call

SinoCoking's Chairman and CEO, Jianhua Lv, and CFO, Sam Wu, will host a conference call on Monday, February 13, 2012 at 9:00 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)





For the Three Months Ended December 31,


For the Six Months Ended December 31,





2011


2010


2011


2010












REVENUE

$

17,297,333

$

16,745,332

$

39,448,667

$

29,753,794












COST OF REVENUE


14,008,015


9,634,955


28,955,472


17,999,064












GROSS PROFIT    


3,289,318


7,110,377


10,493,195


11,754,730












OPERATING EXPENSES:










Selling


43,324


71,447


124,867


155,914


General and administrative


906,367


736,493


1,333,786


1,671,640



Total operating expenses


949,691


807,940


1,458,653


1,827,554












INCOME FROM OPERATIONS


2,339,627


6,302,437


9,034,542


9,927,176












OTHER INCOME (EXPENSE)










Interest income


218,749


943


777,300


8,030


Interest expense


(315,463)


(230,937)


(731,022)


(273,532)


Other finance expense


(37,767)


(283,112)


(73,433)


(304,554)


Other income (expense), net


8,492


(52,689)


(9,089)


(109,387)


Change in fair value of warrants


1,343,214


(11,447,532)


4,362,936


1,472,143



Total other income (loss)


1,217,225


(12,013,327)


4,326,692


792,700












INCOME (LOSS) BEFORE INCOME TAXES


3,556,852


(5,710,890)


13,361,234


10,719,876












PROVISION FOR INCOME TAXES


911,148


1,278,833


2,406,817


2,227,601












NET INCOME (LOSS)


2,645,704


(6,989,723)


10,954,417


8,492,275












OTHER COMPREHENSIVE INCOME










Foreign currency translation adjustment


640,615


1,055,897


1,829,359


2,202,196












COMPREHENSIVE INCOME (LOSS)

$

3,286,319

$

(5,933,826)

$

12,783,776

$

10,694,471












WEIGHTED AVERAGE NUMBER OF COMMON SHARES










Basic


21,090,948


20,871,725


21,090,948


20,871,458


Diluted


21,090,948


20,871,725


21,090,948


20,984,101












EARNINGS (LOSS) PER SHARE










Basic

$

0.13

$

(0.33)

$

0.52

$

0.41


Diluted

$

0.13

$

(0.33)

$

0.52

$

0.40




SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

ASSETS






December 31,


June 30,






2011


2011

CURRENT ASSETS








Cash


$

4,284,601


$

26,266,687


Restricted cash



10,432,500



8,320,500


Accounts receivable, trade, net



11,855,965



8,489,272


Loans receivable



10,000,637



16,764,390


Notes receivable, trade



5,112,250



-


Other receivables



1,487,951



232,126


Receivable, mine acquisition prepayments



12,248,282



-


Inventories



8,731,766



3,010,926


Advances to suppliers



9,854,042



8,994,833


Advances to suppliers -related party



-



575,700



Total current assets



74,007,994



72,654,434











PLANT AND EQUIPMENT, net



16,723,340



17,157,542











CONSTRUCTION IN PROGRESS



38,983,421



23,204,544











OTHER ASSETS








Prepayments for land use rights



11,033,400



8,980,335


Prepayments for mine acquisitions



4,719,000



25,546,922


Prepayments for construction



21,641,955



8,134,736


Intangible - land use rights, net



1,918,006



1,919,987


Intangible - mineral rights, net



29,681,308



29,408,865


Long-term investments



2,803,195



2,753,660


Other assets



110,682



108,290



Total other assets



71,907,546



76,852,795














Total assets


$

201,622,301


$

189,869,315




SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

LIABILITIES AND EQUITY






December 31,

2011


June 30,

2011

CURRENT LIABILITIES






Short term loans - bank

$

5,033,600

$

4,950,400


Accounts payable, trade


3,995


144,147


Notes payable, trade


3,146,000


-


Other payables and accrued liabilities


811,608


1,426,285


Other payables - related party


409,048


455,768


Customer deposits


90,306


127,965


Taxes payable


2,820,436


2,856,671



Total current liabilities


12,314,993


9,961,236









LONG TERM LIABILITIES






Long term loans


56,628,000


55,692,000


Warrants liability


1,206,111


5,569,047



Total long term liabilities


57,834,111


61,261,047












Total liabilities


70,149,104


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 December 31 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


108,718,378


98,004,993


Accumulated other comprehensive income


6,941,231


5,111,872



Total SinoCoking Coal and Coke

Chemicals Industries, Inc's equity


122,809,997


109,983,832










NONCONTROLLING INTERESTS


8,663,200


8,663,200












Total equity


131,473,197


118,647,032












Total liabilities and equity

$

201,622,301

$

189,869,315




SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.



RELATED LINKS
http://www.sinocokingchina.com

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