SinoCoking Coal and Coke Chemical Industries Announces Fiscal 2013 First Quarter Financial Results

14 Nov, 2012, 16:13 ET from SinoCoking Coal and Coke Chemical Industries, Inc.

PINGDINGSHAN, China, Nov. 14, 2012 /PRNewswire-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 2013 first quarter ended September 30, 2012.

Fiscal 2013 First Quarter vs. Fiscal 2012 First Quarter

  • Total revenue decreased by 20.7% to $17.6 million, as compared to $22.2 million.
  • Gross margin decreased to 10.9%, as compared to 32.5%.
  • Net income, including foreign currency transaction adjustment, was $0.7 million or $0.03 per diluted share, as compared to net income of $8.3 million or $0.39 per diluted share.

Product type

 

Fiscal 2013 First Quarter

Fiscal 2012 First Quarter

MT* Sold

Revenue (million)

% of Total Revenue

Weighted Average Price/MT*

MT* Sold

Revenue (million)

% of Total Revenue

Weighted Average Price/MT*

Coke

47,848

$  9.2

53%

$ 193

42,272

$ 10.1

45%

$  240

Washed Coal

40,187

$  7.1

40%

$ 175

44,725

$   8.3

38%

$  185

Raw Coal

16,056

$  0.9

5%

$   58

39,360

$   3.0

14%

$    77

Coal Tar

1,433

$  0.4

2%

$ 256

2,788

$   0.7

3%

$  252

*metric ton

Discussing fiscal 2013 first quarter financial results, SinoCoking's Chairman and CEO, Mr. Jianhua Lv, noted, "Sales volume of coke increased by 13.2%, as we produced and sold coke powder especially suitable for the non-ferrous metallurgical and special steel industries. Lower demand for grade II coke resulted in lower revenues for coke. Sales volume for raw and washed coal decreased from a year ago, due to insufficient amounts of coal in stock for both categories in the fiscal 2013 first quarter, as compared to the same period of 2012."

Mr. Lv continued, "As was the case in fiscal 2012, during the fiscal 2013 first quarter we met our coal requirements largely by purchasing raw coal from other provinces. Due to the ongoing mining moratorium, coal supplies in Henan Province remained limited as were production activities for all producers other than state-owned enterprises. Operations at our four coal mines remain halted as we continue to wait for clearance to resume operations. Thus far, no private coal mine operators have received clearance, and although we anticipate the mining moratorium will end sometime in the first half of the 2013 calendar year, there can be no assurance as to exactly when the mining moratorium will end and as to when we will receive such clearance."

He continued, "Our gross margin for the quarter declined due to product mix as we purchased more coking coal in the open market, at higher prices, for both coking and coal processing. We expect our gross margin to remain depressed until the mining moratorium for mid-size coal producers in Henan Province is lifted."

Mr. Lv added, "Demand for coke remains soft as a result of the weak demand for steel, due to tighter governmental control of real estate and land development. As a reaction to the weak demand for coke, we have slowed construction of our new state-of-the-art coking plant, which is located on a 460,000 square meter site adjacent to our current plant in Pingdingshan. We expect to ramp up construction once the coke market shows signs of improvement. When completed as designed, the plant is expected to have an estimated coke-producing capacity of up to 900,000 metric tons per year, as well as the ability to generate power and distill chemicals such as crude benzol, sulfur and ammonium sulfate from the coking process. The plant is also expected to produce purified coal gas, which we plan to sell as a fuel source to local residents through the state-owned gas grid, at a 20% lower price than liquid natural gas currently used by local residents."

Mr. Sam Wu, SinoCoking's Chief Financial Officer noted, "We continue to fund our business activities from cash flow from operations and bank loans. As required by the Henan government, we are in process of upgrading safety-related systems at our coal mines in order to be approved to resume our mining operations and we are also in process of merging the operations of Hongchang mine, Shunli mine and Shuangrui mine into a fully integrated mining operation. In the first quarter of fiscal 2013, we invested approximately $24.6 million in these mine upgrading and consolidation projects. To date, we have invested a total of approximately $27.8 million as follows:

  • Mine upgrading: total estimated cost of approximately $35.0 million; 70% or approximately $24.5 million to be paid by SinoCoking and the remainder by Henan Coal Seam Gas, our joint-venture partner. To date, we have paid approximately $16.9 million for these safety upgrades which are expected to be completed in calendar 2013.
  • Mine consolidation: total estimated cost of approximately $32.0 million. To date, we have paid approximately $10.9 million toward such integration. We expect to complete such integration 4-6 months after we obtain clearance from local authorities to resume our mining operations, which clearance we expect to receive in calendar year 2013.

We have access to an aggregate of approximately RMB 360 million under a medium-term loan from Bairui Trust. Additionally, we have applied for a RMB 270 million line of credit from Shanghai Pudong Development Bank, which we expect to obtain before 2012 year-end, although there is no assurance that we will be able to obtain such line of credit. We believe that cash on hand and our credit lines are sufficient for our current needs for capital."

Mr. Lv. concluded, "We believe that SinoCoking is well positioned to take advantage of growth opportunities once the coke market recovers in 2013. Our business plan is to:

  • Continue the modernization of our existing production facilities; complete the construction of our new coking facility and achieve greater energy efficiency while reducing environmental impacts;
  • Recapture more coking by-products for refinement into useful industrial chemicals, and produce more high value-added chemical products;
  • Acquire other coal mines to source raw materials; and,
  • Search for opportunities to establish long-term strategic business relationships with quality mining companies to expand our coal trading business.

Conference Call

Mr. Lv and Mr. Wu will host a conference call on Thursday, November 15, 2012 at 9:00 am ET / 10:00 pm China time 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 http://www.investorcalendar.com/conferences/event.asp?ID=170239 or visit the Company's website www.sinocokingchina.com and then go to 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 Shuangri Coal Mining Co., Ltd., and Baofeng Xingsheng 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 INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

For the Three Months Ended  September 30,

2012

2011

REVENUE

$

17,562,194

$

22,151,334

COST OF REVENUE

15,652,938

14,947,457

GROSS PROFIT    

1,909,256

7,203,877

OPERATING EXPENSES:

Selling

43,581

81,543

General and administrative

626,828

427,419

Total operating expenses

670,409

508,962

INCOME FROM OPERATIONS

1,238,847

6,694,915

OTHER INCOME (EXPENSE)

Interest income

222,640

558,551

Interest expense

(1,021,604)

(415,559)

Other finance expense

(72,244)

(35,666)

Other (expense) income, net

-

(17,581)

Change in fair value of warrants

673,530

3,019,722

Total other (expense) income, net

(197,678)

3,109,467

INCOME BEFORE INCOME TAXES

1,041,169

9,804,382

PROVISION FOR INCOME TAXES

381,256

1,495,669

NET INCOME

659,913

8,308,713

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment

(288,695)

1,188,744

COMPREHENSIVE INCOME

$

371,218

$

9,497,457

WEIGHTED AVERAGE NUMBER OF COMMON SHARES

Basic

21,121,372

21,090,948

Diluted

21,121,372

21,090,948

EARNINGS PER SHARE

Basic

$

0.03

$

0.39

Diluted

$

0.03

$

0.39

 

SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

ASSETS

September 30,

June 30,

2012

2012

CURRENT ASSETS

Cash

$

410,594

$

2,366,718

Restricted cash

8,081,000

9,668,000

Accounts receivable, trade, net

11,632,935

12,017,231

Notes receivable, trade

6,388,164

14,176,800

Notes receivable, mine acquisition

-

9,155,520

Other receivables

635,932

1,412,008

Loans receivable

8,933,037

9,849,937

Refundable deposit

4,743,000

4,752,000

Inventories

3,543,090

2,382,444

Advances to suppliers

7,344,232

12,267,806

Prepaid expenses

391,870

633,313

Total current assets

52,103,854

78,681,777

PLANT AND EQUIPMENT, net

15,861,813

16,211,984

CONSTRUCTION IN PROGRESS

39,304,970

39,379,553

OTHER ASSETS

Prepayments

60,635,515

36,071,853

Intangible assets, net

31,558,360

31,635,487

Long-term investments

2,820,378

2,825,730

Other assets

110,670

110,880

Total other assets

95,124,923

70,643,950

Total assets

$

202,395,560

$

204,917,264

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Short term loans - banks

$

26,244,600

$

26,294,400

Accounts payable, trade

570

4,023

Notes payable

3,162,000

4,752,000

Other payables and accrued liabilities

878,330

802,028

Other payables - related parties

188,829

156,227

Acquisition payable

4,584,900

4,593,600

Customer deposits

138,195

138,457

Taxes payable

914,981

1,522,062

Total current liabilities

36,112,405

38,262,797

LONG TERM LIABILITIES

Long term loans

36,363,000

36,432,000

Warrants liability

43,118

716,648

Total long term liabilities

36,406,118

37,148,648

Total liabilities

72,518,523

75,411,445

COMMITMENTS AND CONTINGENCIES

EQUITY

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

21,121,372 issued and outstanding as of

September 30, 2012 and June 30, 2012

21,121

21,121

Additional paid-in capital

3,592,053

3,592,053

Statutory reserves

3,689,941

3,689,941

Retained earnings

110,917,045

110,257,132

Accumulated other comprehensive income

7,325,277

7,613,972

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

125,545,437

125,174,219

NONCONTROLLING INTERESTS

4,331,600

4,331,600

Total equity

129,877,037

129,505,819

Total liabilities and equity

$

202,395,560

$

204,917,264

SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.



RELATED LINKS

http://www.sinocokingchina.com


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