China Energy Corp. Reports Record Fiscal Year 2010 Results; Revenues increase 103% to $88 million and net income increases 245% to $17.6 million

Fiscal 2010 cash flow increased 35.6% to $17.9 million

Mar 01, 2011, 07:31 ET from China Energy Corporation

HOHHOT CITY, China, March 1, 2011 /PRNewswire-Asia-FirstCall/ -- China Energy Corporation (OTC Bulletin Board: CHGY), ("China Energy" or the "Company"), a producer and trader of coal for domestic heating, electrical generation, and coking purposes and a supplier of heating and electric energy services in Inner Mongolia, today announced financial results for the fourth quarter and fiscal year ended November 30, 2010.

Summary Financials

FY 2010 Year End Results

USD

FY 2010

FY 2009

Change

Sales

$88.0 million

$43.3 million

+103.2%

Gross Profit

$33.9 million

$14.0 million

+142.1%

Net Income

$17.6 million

$5.1 million

+245.1%

EPS (fully diluted)

$0.39

$0.11

+254.5%

Fourth Quarter Results (3 months ended November 30)

USD

FY 2010

FY 2009

Change

Sales

$25.6 million

$23.9 million

+7.1%

Gross Profit

$9.9 million

$11.3 million

(12.4%)

Net Income

$4.9 million

$7.1 million

(31.0%)

EPS (fully diluted)

$0.11

$0.16

(31.3%)

Revenues for fiscal 2010 fourth quarter ended November 30 totaled $25.6 million, an increase of approximately 7.1% over $23.9 million reported in the same year ago period. China Energy produced and sold approximately 221,841 metric tons of coal at an average price of $49.4, compared to 295,168 metric tons at an average price of $39.1 in the fourth quarter of fiscal year 2009. Currently, China Energy has the capacity to produce up to 800,000 metric tons annually.

Gross profit decreased 12.4% to $9.9 million, with gross margin of 38.7% compared to 47.3% in the fourth quarter of 2009.

During the first three quarters of 2009, the Company did not have normal coal production while the long wall extraction machinery was being installed. When full production resumed in the fourth fiscal quarter, the Company ramped output above normal thresholds to make up for the shortfall which created an exceptionally strong quarter from an earnings perspective and higher margins.

Net income for the fourth quarter of fiscal year 2010 was $4.9 million, or $0.11 per diluted share, compared to $7.1 million, or $0.16 per diluted share, in the fourth quarter of fiscal year 2009. The effective tax rate was 26.0% compared to 19.7% for each respective period.

Fiscal Year 2010 Financial Results

For the year ended November 30, 2010, the Company reported revenue of $88.0 million, an increase of 103.2% over revenue of $43.3 million generated in 2009. For fiscal 2010, revenue from the coal group increased 121.2% to $71.0 million, and represented 80.7% of total sales, compared to $32.1 million, or 74.1% of total sales in fiscal year 2009. As a component of this, 39.4% of total company sales came from coal trading, and 41.3% came from coal production during fiscal year 2010. China Energy produced and sold 820.3 thousand tons of coal in 2010, a 80.9% increase from the 453.4 thousand tons in 2009, which mostly occurred during the fourth quarter. Average sales price of coal during fiscal year 2010 was $44.2 per ton, compared to $37.4 per ton in fiscal year 2009.

Revenue from the heat power group totaled $17.0 million, or 19.3% of total sales, in fiscal 2010, compared to $11.2 million, or 25.9% of total sales in fiscal year 2009. Higher revenues in this segment were due to an increase in the coverage area of Heat Power's operations of over 19%.

"We were able to report significant growth across each of our businesses," stated WenXiang Ding, chief executive officer and president. "We successfully ramped production at our Laiyegou mine, as well as capitalized on our expanded quota from the railway bureau to accelerate our coal trading volumes. Continued strong demand for energy and electricity provide both diversification and another conduit for incremental growth in 2011. As consolidation across our industry accelerates we continue to evaluate opportunities to expand our mining assets."

Cost of goods sold for fiscal year 2010 was approximately $54.1 million, compared to approximately $29.3 million for fiscal year 2009. Gross profit was $33.9 million and gross margins were 38.5% in 2010, compared to $14.0 million in gross profit and gross margins of 32.3% during 2009. The increase in overall gross profit margin was primarily attributable to the improvement of the gross profit margin of the Company's coal trading business which experienced a 1400 basis points margin improvement year-over-year. The Company benefited from the ability to sell coal at higher open market prices at the port. Heat Power benefited from a 275.2% increase in government subsidies to compensate for lower government regulated heat price and higher cost of coal.

Operating expenses for fiscal year 2010 were approximately $9.3 million, compared to $5.5 million in 2009. Selling and marketing expenses in fiscal year 2010 were $5.5 million compared to $2.2 million in 2009, which was driven by the increase of transportation and storage costs necessary to support the coal trading business. General and administration expenses totaled $3.8 million and $3.3 million in the respective periods.

Net income for fiscal year 2010 totaled approximately $17.6 million, or $0.39 per diluted, share, compared to approximately $5.1 million, or $0.11 per diluted share, in fiscal year 2009. A total of 45 million shares were utilized in the calculations for both years. Net income margins were 20.0% and 11.8% for fiscal years 2010 and 2009, respectively. The effective tax rate was 26.2% and 29.9% in fiscal 2010 and 2009, respectively.

Balance Sheet and Cash Flow

Cash and equivalents and restricted cash totaled $4.6 million on November 30, 2010 compared to $5.1 million on November 30, 2009. The Company had total stockholders' equity of $52.0 million, with total assets of $103.3 million versus total liabilities of $51.3 million on November 30, 2010. For fiscal year 2010, the Company generated $17.9 million in cash from operations versus $13.2 million in fiscal year 2009.

About China Energy Corporation

China Energy Corporation is a producer and trader of coal for domestic heating, electrical generation and coking purposes for steel production primarily in the People's Republic of China. The Company produces coal through its subsidiary Inner Mongolia Tehong Coal Group Co, Ltd. ("Coal Group") and supplies heating and electricity requirements throughout the XueJiaWan district through its subsidiary Inner Mongolia Zhunger Heat Power Co., Ltd. ("Heat Power"). Through Heat Power, China Energy operates a thermoelectric plant and 32 heat transfer stations located in XueJiaWan, Ordos City in which the Company has a monopoly for heating supply granted to the Company by the local government. For additional information on China Energy Corporation see http://www.ceccec.com .

Cautionary Statement Regarding Forward-Looking Information

This press release may contain certain "forward-looking statements" relating to the business of China Energy Corporation, and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov)

For more information, please contact:

Company:

Alex (Yuan) Gong, Chief Financial Officer

Tel:   +86-10-5203-6900

Email: alexgong08@gmail.com

Investor Relations:

HC International, Inc.

Ted Haberfield, Executive VP

Tel:  +1-760-755-2716

Email: thaberfield@hcinternational.net

CHINA ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF Income And comprehensive income FOR THE YEARS ENDED NOVEMBER 30, 2010 AND 2009

2010

2009

Revenues

$

88,045,275

$

43,348,078

Cost of revenues

54,118,119

29,357,944

Gross profit

33,927,156

13,990,134

Operating expenses:

Selling and marketing

5,509,682

2,207,042

General and administrative

3,816,461

3,256,729

Total operating expenses

9,326,143

5,463,771

Income from operations

24,601,013

8,526,363

Other income and expenses:

Finance expenses, net

(1,619,552)

(793,670)

Non-operating income

1,056,502

510,565

Non-operating expenses

(206,387)

(955,648)

Income before income taxes

23,831,576

7,287,610

Provision for income taxes

(6,236,416)

(2,181,391)

Net income

$

17,595,160

$

5,106,219

Other comprehensive income:

Foreign currency translation adjustment

1,010,025

43,559

Total comprehensive income

$

18,605,185

$

5,149,778

Net income per common share

basic and diluted

$

0.39

$

0.11

Weighted average common shares outstanding

basic and diluted

45,000,000

45,000,000

CHINA ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

November 30,

2010

2009

ASSETS

Current assets:

Cash and cash equivalents

$

4,580,540

$

5,073,645

Accounts receivables, net of allowance for doubtful accounts of $54,747

 and $120,853, respectively

5,748,007

4,600,667

Other receivables

4,091,867

4,447,272

Advance to suppliers

4,516,324

5,511,630

Inventories

3,248,605

5,574,465

Total current assets

22,185,343

25,207,679

Fixed assets, net

57,607,500

47,326,294

Other assets:

Investment property, net of accumulated depreciation of $288,735 and   $166,172, respectively

4,350,739

1,936,278

Mining right, net of amortization of $1,133,133 and $787,417, respectively

3,387,551

3,627,642

Restricted cash

546,048

149,898

Other long term assets

560,250

450,021

Notes receivable

14,679,099

7,913,100

Total other assets

23,523,687

14,076,939

TOTAL ASSETS

$

103,316,530

$

86,610,912

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short term bank loans

$

9,599,520

$

12,012,012

Accounts payable

16,000,738

10,757,128

Advance from customers

5,278,848

12,125,187

Accrued liabilities

374,530

325,539

Other payables

2,838,663

1,120,169

Shareholder loans

8,772,316

9,972,279

Current portion of deferred income

1,044,326

822,930

Total current liabilities

43,908,941

47,135,244

Non-current liabilities

Deferred income

7,451,567

6,224,033

Total liabilities

51,360,508

53,359,277

Stockholders' equity:

Common stock: authorized 200,000,000 shares of $0.001 par value;  

 45,000,000 shares issued and outstanding

45,000

45,000

Additional paid-in capital

9,070,007

8,970,805

Retained earnings

29,642,370

12,542,081

Statutory reserves

8,573,636

8,078,765

Accumulated other comprehensive income

4,625,009

3,614,984

Total stockholders' equity

51,956,022

33,251,635

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

103,316,530

$

86,610,912

SOURCE China Energy Corporation



RELATED LINKS

http://www.ceccec.com