2014

SinoCoking Coal and Coke Chemical Industries Announces Fiscal 2014 First Quarter Financial Results

PINGDINGSHAN, China, Nov. 14, 2013 /PRNewswire-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 2014 first quarter ended September 30, 2013.  

Fiscal 2014 First Quarter vs. Fiscal 2013 First Quarter

  • Total revenue slightly decreased to $17.5 million, as compared to $17.6 million
  • Gross margin improved to 17.7%, as compared to 10.9%. 
  • Income from operations increased by 98% to $2.5 million, as compared to $1.2 million.
  • Net income increased by 75.9% to $1.2 million or $0.05 per diluted share, as compared to $0.7 million or $0.03 per diluted share.

SinoCoking's Chairman and CEO, Mr. Jianhua Lv, commented, "The slight decrease in fiscal 2014 first quarter revenue was mainly due to decreased sales of coal products, offset by increased sales of coke products.  Due to the ongoing mining moratorium, raw coal supply has been very limited and we continued to meet our coal requirements largely by purchasing coal, including from other provinces, at a higher cost driven by the supply shortage.  We did not sell any raw coal and used all purchased coal (mainly washed coal) to manufacture coke and coke byproducts. While we currently anticipate the moratorium to end sometime in the first half of calendar 2014, there cannot be any assurance as to the exact timing. Demands for all other coal products were also soft, resulting in lower revenue from coal products overall.

For the first quarter of fiscal 2014 as compared to same period of fiscal 2013:

  • Due to slightly improved market conditions for coke, the Company sold more coke and coke byproducts which generated approximately 73.1% of the total revenue as compared to 54.6%. 
  • Revenue from the sale of coal products generated approximately 26.9% of total revenue, as compared to 45.4%. 

"Our cost of revenue for the current fiscal first quarter decreased by 8.1%, mainly due to lower purchase price for washed coal used to manufacture coke and byproducts," continued Mr. Lv. "Lower cost of revenue resulted in substantially improved gross margin for the fiscal 2014 first quarter as compared to the same quarter of fiscal 2013. Additionally our selling, general and administrative expenses decreased by approximately 3.9% as compared to the same period of last year, due to lower consulting fees for the period."

Recent business highlights:

Mr. Lv added, "Our business plan involves growing our business through the:

  • Expansion of our current production capacity and product mix at the Hongfeng plant. In early 2013, we signed a leasing agreement to operate the Hongfeng plant for a period of one year. We are currently producing coke and coke byproducts such as crude benzol (since April) and purified coal gas (trial stage with commercial production to commence shortly), while additional byproducts such as sulfur and sulfur ammonia will be produced as we gradually increase production to full capacity.
  • Increase of market share for our clean coke product produced at the Baofeng plant.  We upgraded technical capabilities at our Baofeng plant to reduce dependency on high-cost raw materials such as coking coal.  The plant can now produce high quality coke and by-products using low cost raw coal, such as long flame coal. We also upgraded oven capabilities to improve their energy efficiency, capture additional by-products for refinement into high value-added chemical products, and conform to environmental requirements.
  • Completion of our new coking plant once market conditions improve.  We anticipate that the new plant will enable us to capture more coke by-products for refinement into useful industrial chemicals, and production of more high value-added chemical products.
  • Acquisition of other coal mines and building long term strategic relations with other mining operators to source raw coal.

The following projects are expected to require capital resources:

  • New Coking Plant. We intend to use existing cash, cash flow from operations, bank loans, collection of our loan receivables, along with other finance arrangements such as extending our long term loan from Bairui Trust, to complete the construction of our new coking plant. Due to ongoing market conditions, however, we have once again slowed down constriction, but plan to resume at full pace if and when market improves.
  • Coal Mine Safety Improvement Projects. The total estimated cost for government-mandated safety upgrades is approximately $31.5 million. We will be responsible for approximately 70% of the total estimated cost, approximately $22.0 million, under the structure of our joint-venture with Henan Coal Seam Gas. We also intend to use our line of credit from Pingdingshan Rural Cooperative Bank to complete these projects. These projects have not commenced as of yet, although we currently expect to complete them sometime in first half of calendar year 2014.

Mr. Lv noted, "Our business plan fits well with our near- and mid-term strategy of increasing our market share in China's coal chemical industry which has been growing rapidly."

Conference Call

Mr. Lv and Mr. Sam Wu, CFO, will host a conference call on Monday, November 18, 2013 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 http://www.investorcalendar.com/IC/CEPage.asp?ID=171932 or visit the Company's website www.scokchina.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.scokchina.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,





2013


2012








REVENUE

$

17,475,970

$

17,562,194








COST OF REVENUE


14,378,669


15,652,938








GROSS PROFIT    


3,097,301


1,909,256








OPERATING EXPENSES:






Selling


40,874


43,581


General and administrative


603,581


626,828



Total operating expenses


644,455


670,409








INCOME FROM OPERATIONS


2,452,846


1,238,847








OTHER INCOME (EXPENSE)






Interest income


183,093


222,640


Interest expense


(778,767)


(1,021,604)


Other finance expense


(62,543)


(72,244)


Change in fair value of warrants


12


673,530



Total other expense, net


(658,205)


(197,678)








INCOME BEFORE INCOME TAXES


1,794,641


1,041,169








PROVISION FOR INCOME TAXES


633,757


381,256








NET INCOME


1,160,884


659,913








OTHER COMPREHENSIVE INCOME






Foreign currency translation adjustment


845,447


(288,695)








COMPREHENSIVE INCOME

$

2,006,331

$

371,218








WEIGHTED AVERAGE NUMBER OF COMMON SHARES






Basic and diluted


21,121,372


21,121,372








EARNINGS PER SHARE






Basic and diluted

$

0.05

$

0.03

 

 

 

SINOCOKING COAL AND COKE CHEMICAL INDUSTRIES, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS








September 30,


June 30,






2013


2013

CURRENT ASSETS






Cash

$

289,045

$

782,018


Restricted cash


-


9,708,000


Accounts receivable, trade


9,278,327


9,474,197


Other receivables


5,609,859


4,334,370


Loans receivable


8,032,037


8,032,037


Inventories


2,281,139


3,018,909


Advances to suppliers


9,449,497


8,791,837


Prepaid expenses


270,655


-



Total current assets


35,210,559


44,141,368









PLANT AND EQUIPMENT, net


15,082,867


15,269,766









CONSTRUCTION IN PROGRESS


40,473,429


40,224,821









OTHER ASSETS






Refundable deposit


4,884,000


4,854,000


Prepayments


61,943,378


61,562,890


Intangible assets, net


32,425,631


32,244,071


Long-term investments


2,904,223


2,886,383


Other assets


113,960


113,260



Total other assets


102,271,192


101,660,604












Total assets

$

193,038,047

$

201,296,559









LIABILITIES AND EQUITY









CURRENT LIABILITIES






Current maturity of long term loan

$

-

$

50,158,000


Accounts payable, trade


379,657


183,504


Notes payable


-


9,708,000


Other payables and accrued liabilities


901,107


2,229,362


Other payables - related parties


379,182


140,465


Acquisition payable


4,721,200


4,692,200


Customer deposits


128,706


208,815


Taxes payable


1,211,101


1,133,450



Total current liabilities


7,720,953


68,453,796









LONG TERM LIABILITIES






Long term loan


50,468,000


-



Total long term liabilities


50,468,000


-












Total liabilities


58,188,953


68,453,796









COMMITMENTS AND CONTINGENCIES













EQUITY






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







21,121,372 shares issued and outstanding


21,121


21,121


Additional paid-in capital


3,592,053


3,592,053


Statutory reserves


3,689,941


3,689,941


Retained earnings


112,465,709


111,304,825


Accumulated other comprehensive income


10,748,670


9,903,223



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


130,517,494


128,511,163










NONCONTROLLING INTERESTS


4,331,600


4,331,600












Total equity


134,849,094


132,842,763












Total liabilities and equity

$

193,038,047

$

201,296,559











 

 

SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.



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