SinoCoking Coal and Coke Chemical Industries Announces 2012 Third Quarter Financial Results Exploring Coal Resources in Northwest China in an Effort to Boost Access to Raw Coal

Quarterly Conference Call Rescheduled for Monday, May 14th at 9:00 am ET

 

PINGDINGSHAN, China, May 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, announced today its financial results for the fiscal 2012 third quarter and nine month periods ended March 31, 2012.  

Fiscal 2012 Third Quarter vs. Fiscal 2011 Third Quarter

  • Revenue decreased by 15.4% to approximately $16.8 million from approximately $19.9 million
    • Coal and coke products accounted for 48.2% and 51.8% of revenue, respectively, as compared to 55.2% and 44.8%, respectively in the same periods of last year.
    • Volume of coal products sold decreased by 42.5%, while volume of coke products sold increased by 2.7% from a year ago.
  • Gross margin decreased to 15.7%, as compared to 36.4%. 
  • Income from operations decreased to $1.9 million from $6.3 million.
  • Net income, including the foreign currency transaction adjustment, was $2.1 million or $0.07 per diluted share, as compared to $19.8 million or $0.81 per diluted share.

Fiscal 2012 Nine Months vs. Fiscal 2011 Nine Months

  • Revenue increased by 13.4% to approximately $56.3 million, due to increased sales of coke and washed coal. 
    • Coal and coke products accounted for 49.1% and 50.9%, respectively, as compared to 44.4% and 55.6%, respectively, in the same periods of last year.
    • Volume of coal products sold decreased by 9.1%, while volume of coke products sold increased by 3.0% from a year ago.
  • Gross margin decreased to 23.4%, as compared to 38.3%.  
  • Income from operations decreased to $11.0 million from $16.2 million.
  • Net income, including the foreign currency transaction adjustment, was $14.9 million or $0.59 per diluted share, as compared to $28.3 million or $1.22 per diluted share.

Discussing mining operations for the 2012 three and nine month periods, SinoCoking's Chairman and CEO, Mr. Jianhua Lv noted, "Coal supplies in Henan Province remained limited as were production activities for all producers due to the ongoing mining moratorium.  Since the provincial-wide mining moratorium imposed in June 2010, our Hongchang mine has been operating at approximately 50% capacity, while operations at our other three coal mines (acquired in August 2011) were halted as these mines were waiting to receive clearance from local authorities to commence operations.  As required by provincial guidelines, Hongchang mine also halted operations in early September 2011 to complete certain mine engineering work and safety upgrades, which were completed by the end of that month.  However, due to an accident in November 2011 at one of the mines owned by Yima Coal Group, a state-owned enterprise and one of the six provincial level consolidators in Henan, all mid-scale mines in Henan province, including our four mines, were ordered to shut down their operations and undergo additional safety checks and inspections.  Thus far, local authorities have not issued clearances to mines to resume operations and the timing as to when such clearances will be issued remains unknown." 

He continued, "Due to the inadequate raw coal supply in Henan province, and due to the halt of operations at our Hongchang mine, as of September 2011 we have met our coal requirements largely by: (a) using the raw coal and washed coal we had accumulated over the last few quarters in anticipation of the commencement of operations of new coking facility which is still under construction and (b) purchasing raw coal from other provinces, such as Gansu, Shanxi and Inner Mongolia.  As a result of these purchases, for the three and nine month periods ended March 31, 2012, our cost of raw coal increased and our margins decreased. We don't expect a return to historical margins until the mining moratorium for mid-size coal producers in Henan province is lifted." 

Mr. Lv added, "In the meantime, due to our vertically integrated business model, we have been able to continue to optimize our product mix and take advantage of market conditions for coal and coke products.  Specifically, as compared to the 2011 third quarter and nine month periods:   

  • Revenue from the sale of raw coal for the 2012 third quarter and nine months decreased by 72.9% and 53.4%, respectively, mainly due to limited supply. 
  • Revenue from the sale of washed coal for the 2012 third quarter and nine months increased by 12.5% and 96.4%, respectively, as a result of increased sales volume.  We had originally stocked up on washed coal in anticipation of the completion of the construction of our new coking plant. 
  • Revenue from sale of coal tar for the 2012 third quarter and nine months decreased by 83.0% and 34.0%, respectively.  In February 2011, our current coking plant was upgraded, which led to production of a higher-quality and higher priced coal tar.  However, since the upgrade, less coal tar is being produced while testing to achieve the best washed coal mix continues. 
  • Revenue from sale of coke for the 2012 third quarter and nine month period increased by 9.2% and 7.4%, respectively, as a result of higher sales volume, despite a slightly lower average selling price from a year ago. 

Mr. Lv continued, "Following a long period of high coke demand, demand softened during the final months of 2011 which continued into 2012, mainly due to China's inflation control policy.  Such policy directly impacted the real estate and construction industries, and indirectly downstream industries such as ours and the steel industry.  We expect the market to recover by the end of 2012 calendar year, and we have updated our business plan accordingly:

Coal operations:

  • We are currently exploring the availability of coal resources in northwest China in an effort to boost our access to raw coal and minimize the ongoing effect of the mining moratorium in Henan.

Coking operations:

  • We will continue to expand and upgrade production capacity at our existing coking facility to achieve greater energy efficiency and reduce environmental impact. 
  • We plan to complete the construction of our new coking facility by the end of the 2012 calendar year, which we believe will increase our coke production capacity to over 1.1 million metric tons per year.
  • On a longer term, our business plan includes the recapturing of additional coking by-products for refinement into useful industrial chemicals, and production of more high value-added chemical products.

Mr. Sam Wu, SinoCoking's Chief Financial Officer noted, "We continue to fund our business activities from cash flow from operations.  During the nine months period ended March 31, 2012, we used approximately $17.3 million in investing activities, and used approximately $31.1 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.  Additionally, we have access to an aggregate of approximately RMB 360 million (approximately $54.9 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 Rescheduled

Due to an unforeseen management conflict, the quarterly conference call has been rescheduled as follows:

Date:                           Monday, May 14, 2012
Time:                           9:00 am ET
Dial in number:             (201) 493-6744
Webcast link:               http://www.investorcalendar.com/IC/CEPage.asp?ID=168116

During the call, SinoCoking's Chairman and CEO, Jianhua Lv and CFO, Sam Wu will discuss third quarter 2012 financial results as well as recent corporate developments. 

Interested parties should 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

(UNAUDITED)





For the Three Months Ended         March 31,


For the Nine Months Ended       March 31,





2012


2011


2012


2011












REVENUE

$

16,804,057

$

19,872,461

$

56,252,724

$

49,626,255












COST OF REVENUE


14,166,799


12,636,751


43,122,271


30,635,815












GROSS PROFIT    


2,637,258


7,235,710


13,130,453


18,990,440












OPERATING EXPENSES:










Selling


43,602


75,894


168,469


231,808


General and administrative


648,834


870,284


1,982,620


2,541,924



Total operating expenses


692,436


946,178


2,151,089


2,773,732












INCOME FROM OPERATIONS


1,944,822


6,289,532


10,979,364


16,216,708












OTHER INCOME (EXPENSE)










Interest income


222,583


105,403


999,883


113,433


Interest expense


(302,746)


(120,401)


(1,033,768)


(393,933)


Other finance expense


(34,002)


(104,313)


(107,435)


(408,867)


Other income (expense), net


(47)


(542)


(9,136)


(109,929)


Change in fair value of warrants


163,394


12,191,235


4,526,330


13,663,378



Total other income, net


49,182


12,071,382


4,375,874


12,864,082












INCOME BEFORE INCOME TAXES


1,994,004


18,360,914


15,355,238


29,080,790












PROVISION FOR INCOME TAXES


576,341


1,222,473


2,983,158


3,450,074












NET INCOME


1,417,663


17,138,441


12,372,080


25,630,716












OTHER COMPREHENSIVE INCOME










Foreign currency translation adjustment


714,277


2,680,710


2,543,636


2,680,710












COMPREHENSIVE INCOME

$

2,131,940

$

19,819,151

$

14,915,716

$

28,311,426












WEIGHTED AVERAGE NUMBER OF COMMON SHARES


Basic


21,090,948


21,043,206


21,090,948


20,927,453


Diluted


21,090,948


21,057,332


21,090,948


20,941,252

EARNINGS PER SHARE










Basic

$

0.07

$

0.81

$

0.59

$

1.22


Diluted

$

0.07

$

0.81

$

0.59

$

1.22


 

SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

ASSETS




March 31,


June 30,




2012


2011

CURRENT ASSETS






Cash

$

3,650,347

$

26,266,687


Restricted cash


12,040,500


8,320,500


Accounts receivable, trade, net


12,220,958


8,489,272


Notes receivable, trade


1,583,000


-


Other receivables


1,661,965


232,126


Loans receivable


10,957,437


16,764,390


Receivable, mine acquisition prepayments


17,075,148


-


Inventories


7,580,251


3,010,926


Advances to suppliers


14,455,894


8,994,833


Advances to suppliers -related party


-


575,700



Total current assets


81,225,500


72,654,434








PLANT AND EQUIPMENT, net


16,515,488


17,157,542








CONSTRUCTION IN PROGRESS


39,697,825


23,204,544








OTHER ASSETS






Prepayments for land use rights


11,103,542


8,980,335


Prepayments for mine acquisitions


-


25,546,922


Prepayments for construction


21,779,538


8,134,736


Intangible - land use rights, net


1,912,966


1,919,987


Intangible - mineral rights, net


29,870,000


29,408,865


Long-term investments


2,821,015


2,753,660


Other assets


111,382


108,290



Total other assets


67,598,443


76,852,795












Total assets

$

205,037,256

$

189,869,315










 

SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

LIABILITIES AND EQUITY







CURRENT LIABILITIES






Short term loans - bank

$

5,698,800

$

4,950,400


Accounts payable, trade


4,020


144,147


Notes payable


4,749,000


-


Other payables and accrued liabilities


907,990


1,426,285


Other payables - related party


263,860


455,768


Customer deposits


90,880


127,965


Taxes payable


1,687,930


2,856,671



Total current liabilities


13,402,480


9,961,236









LONG TERM LIABILITIES






Long term loans


56,988,000


55,692,000


Warrants liability


1,042,717


5,569,047



Total long term liabilities


58,030,717


61,261,047












Total liabilities


71,433,197


71,222,283









COMMITMENTS AND CONTINGENCIES













EQUITY






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







21,090,948 issued and outstanding as of







March 31, 2012 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


110,134,963


98,004,993


Accumulated other comprehensive income


7,655,508


5,111,872



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


124,940,859


109,983,832










NONCONTROLLING INTERESTS


8,663,200


8,663,200












Total equity


133,604,059


118,647,032












Total liabilities and equity

$

205,037,256

$

189,869,315

 

SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.



RELATED LINKS
http://www.investorcalendar.com/IC/CEPage.asp?ID=168116
http://www.sinocokingchina.com

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