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

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
http://www.investorcalendar.com/conferences/event.asp?ID=170239

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