China Sun Group Announces Third Quarter Fiscal Year 2010 Financial Results
DALIAN, China, April 15 /PRNewswire-Asia-FirstCall/ -- China Sun Group High-Tech Co., Ltd. (OTC Bulletin Board: CSGH) ("China Sun Group" or the "Company"), a leading vertically integrated supplier of cobalt-based raw materials for rechargeable Lithium-ion (Li) batteries in China today announced its financial results for the third quarter ended February 28, 2010.
Third Quarter Fiscal Year 2010 Highlights
-- Revenue increased 22.7% to $10.8 million from $8.8 million in the
quarter ended February 28, 2009
-- Gross profit increased 4.2% to $3.4 million from $3.2 million in same
period 2009
-- Operating income increased 6.6% year-over-year to $3.4 million from
$3.2 million
-- Net income increased 8.2% year-over-year to $2.2 million, or $0.04 per
diluted share
-- Lithium iron phosphate (LIP) anode materials made by China Sun have
been used in the manufacture of LIP power batteries manufactured by
Beijing Shuangsheng Technology Company.
-- The batteries passed all 32 tests required by the Chinese government on
Feb 26, 2010. This is a strong endorsement of China Sun as a key
component vendor for a new energy-saving vehicle.
"In the third quarter of fiscal year 2010, selling prices of our cobalt oxide product declined in tandem with the falling cobalt prices. Our cobalt inventory was purchased in advance of the drop in cobalt prices, which impacted gross margin. While some domestic competitors turned unprofitable due to this factor, we were able to maintain profitability due to higher yields and better capacity utilization," stated Mr. Bin Wang, Chairman of China Sun Group.
"We also launched our LIP product, which is expected to become an important revenue contributor in our future business operations. The urgent need to develop low emission vehicles to reduce air pollution in China has and will continue create huge demand for clean energy and related products. Our LIP product is a core material of lithium power batteries for zero emission automobiles. As one of the few major LIP manufacturers in China, we believe we are well positioned to achieve rapid and profitable growth over the time."
Third Quarter Fiscal Year 2010 Results
Revenue for the three months ended February 28, 2010 increased 22.7% year over year to $10.8 million compared to $8.8 million for the same period in 2009. The increase in revenue was mainly due to sales of the Company's newly launched LIP product, which accounted for about 19.7% of total sales in the quarter.
During the quarter ended February 28, 2010, China Sun Group started to produce and sell LIP, the core material of lithium power batteries for the automotive market. China Sun Group acquired the advanced LIP patent in early 2009 and has become one of the few domestic manufacturers that can independently produce LIP. Currently China Sun Group has two LIP production lines with annual production capacity of 500 tons. Gross margins of the Company's LIP business lies between 38%-42% is above the 30%-33% gross margin of the Company's cobalt-based products. The Company anticipates its LIP business segment to grow rapidly in calendar year 2010 and beyond.
Gross profit was $3.4 million compared to $3.2 million for the three months ended February 28, 2009, an increase of 4.2% year over year. Gross margin was 31.3% compared to 36.9% in the same period last year. The decrease in gross margin was due primarily to a decrease in the selling prices of cobalt-based products sold by the Company driven by a decline in the market price of cobalt, while the cobalt raw materials held in inventory were purchased a quarter in advance of production and in advance of the market price decline of cobalt. The Company expects gross margins to recover in the fourth quarter of fiscal 2010 once the higher cost raw materials held in inventory are used.
Selling, general and administrative expenses decreased to $0.3 million in the third quarter of 2010, compared to $0.9 million in the same period last year.
Operating income increased slightly to $2.9 million in the third quarter 2010, compared to $2.8 million in the same period last year.
Net income was $2.2 million in the three months ended February 28, 2010, or $0.04 per fully diluted share, compared with net income of $2.0 million, or $0.04 per fully diluted share, during the same period of 2009. The diluted weighted average number of shares outstanding was 53.4 million in the quarter ended February 28, 2010.
Nine Months 2010 Results
Net revenue was $30.2 million in the nine months ended February 28, 2010, up 10.3% from $27.4 million in the same period last year. Gross profit was $9.5 million equivalent to a gross margin of 31.3%, down 7.0% from $10.2 million and a gross margin of 37.2% in the nine months ended February 28, 2009. The overall decline in gross profit and gross margin was due to the consistent decline in selling prices of cobalt-based products ahead of the decrease in the cost of cobalt-based raw materials held in inventory.
Operating income was $8.4 million, up slightly from the same period last year. Net income was $6.3 million, or $0.12 per fully diluted share, up slightly from $6.2 million, or $0.12 per fully diluted share in the nine months ended February 28, 2009. The diluted weighted average number of shares outstanding was 53.4 million in the nine months ended February 28, 2010.
Financial Condition
At the end of third quarter of fiscal 2010 on February 28, 2010, cash reached $12.5 million, up 35.5% from $9.2 million on May 31, 2009. Account receivables were $2.7 million at the end of the quarter, as compared to $1.6 million at the end of May 2009. The increase of cash and account receivable were mainly due to an increase in sales and net income compared with the same period of 2009. At the end of February 2010, China Sun Group had no accounts receivable outstanding over 180 days, as the Company applies a strict collections practice and normally collects over 80% of its accounts receivables within 90 days. The Company had working capital of $14.7 million and a current ratio of 7.2 to 1. Stockholders' equity totaled $38.1 million, up from $31.9 million on May 31, 2009.
Net cash provided by operations was $5.6 million for the nine months ended February 28, 2010, compared with net cash provided from operations of $9.3 million for the same period in 2009.
Business Outlook
"Having been a leader in the cobalt oxide manufacturing industry for years, China Sun Group has recently expanded our business to the more advanced and profitable LIP segment. We will strategically increase our productivity and research efforts of LIP over the next few years to achieve long term sustainable growth for our shareholders. We will also significantly improve our corporate governance and communications with the investment community going forward and look forward to listing our shares on a senior stock exchange soon," concluded Mr. Wang.
For the quarter ended May 31st, 2010, China Sun Group anticipates to generate approximately $11.0-$12.0 million in revenue and $2.0-$2.5 million in net income.
About China Sun Group High-Tech Co., Ltd.
China Sun Group High-Tech Co., ("China Sun Group") produces anode materials used in Li batteries. Through its wholly-owned operating subsidiary, Dalian Xinyang High-Tech Development Co. Ltd ("DLX"), the Company primarily produces cobaltosic oxide and lithium cobalt oxide. According to the China Battery Industry Association, DLX has the second largest cobalt series production capacity in the People's Republic of China. Through its research and development division, DLX owns a proprietary series of nanometer technologies that supply state-of-the-art components for advanced Li batteries. Leveraging its state-of-the-art technology, high-quality product line and scalable production capacity, the Company plans to create a fully integrated supply chain from the primary manufacturing of cobalt ore to finished products, including Li batteries. For more information, visit http://www.china-sun.cn .
Safe Harbor Statement
The statements contained herein that are not historical facts are considered "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, statements regarding the potential growth of the markets are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including, but not limited to, the Company's ability to successfully expand its presence in the LIP market, achieve anticipated revenue and net income targets, the effect of political, economic, and market conditions and geopolitical events; legislative and regulatory changes that affect our business; the availability of funds and working capital; the actions and initiatives of current and potential competitors; investor sentiment; and our reputation. We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by any forward-looking statements. The factors discussed herein are expressed from time to time in our filings with the Securities and Exchange Commission available at http://www.sec.gov.
-FINANCIAL TABLES FOLLOW-
CHINA SUN GROUP HIGH-TECH Co., Ltd.
CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE THREE MONTHS AND NINE MONTHS
ENDED FEBRUARY 28, 2010 AND 2009
Three months ended Nine months ended
February 28, February 28,
2010 2009 2010 2009
Revenue, net $10,808,702 $8,807,184 $30,232,058 $27,400,292
Cost of revenue
(inclusive of
depreciation and
amortization) 7,427,144 5,561,556 20,760,441 17,211,727
Gross profit 3,381,558 3,245,628 9,471,617 10,188,565
Gross Margin 31.3% 36.9% 31.3% 37.2%
Operating expenses:
Sales and marketing 30,057 94,586 83,195 559,881
Research and development 26,328 25,536 77,501 75,823
Depreciation 64,612 64,371 193,709 192,785
General and administrative 311,932 296,307 700,991 978,798
Total operating expenses 432,929 480,800 1,055,396 1,807,287
Income from operations 2,948,629 2,764,828 8,416,221 8,381,278
27.3% 31.4% 27.8% 30.6%
Other income:
Interest income 9,414 6,372 26,228 24,988
Income before
income taxes 2,958,043 2,771,200 8,442,449 8,406,266
Income tax expense -756,920 -737,536 -2,160,300 -2,173,840
NET INCOME 2,201,123 2,033,664 6,282,149 6,232,426
20.4% 23.1% 20.8% 22.7%
Other comprehensive
income:
- Foreign currency
translation (loss)
gain -41,340 -50,599 -52,300 364,445
COMPREHENSIVE INCOME $2,159,783 $1,983,065 $6,229,849 $6,596,871
Net income per share -
Basic and diluted $0.04 $0.04 $0.12 $0.12
Weighted average number
of shares outstanding
during the period -
Basic and diluted 53,422,971 53,422,971 53,422,971 53,422,971
CHINA SUN GROUP HIGH-TECH Co., Ltd.
CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 28, 2010 AND 2009
28-Feb-10 31-May-09
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $12,481,120 $ 9,209,953
Accounts receivable, trade 2,670,876 1,580,220
Inventories 1,217,252 1,657,023
Value-added tax receivable -- 124,627
Deposits and prepayments 681,615 439,560
Total current assets 17,050,863 13,011,383
Non-current assets:
Technical know-how, net 2,516,809 2,608,059
Property, plant and equipment, net 20,947,981 19,630,119
TOTAL ASSETS $40,515,653 $35,249,561
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ -- $ 847,796
Income tax payable 1,506,309 1,476,030
Other payables and accrued liabilities 876,063 1,022,303
Total liabilities 2,382,372 3,346,129
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.001
par value; 2,000,000 shares authorized;
none of shares issued and outstanding
as of February 28, 2010 and May 31, 2009 -- --
Common stock, $0.001 par value; 100,000,000
shares authorized; 53,422,971 shares
issued and outstanding as of February 28,
2010 and May 31, 2009 53,423 53,423
Additional paid-in capital 9,585,204 9,585,204
Accumulated other comprehensive income 3,015,249 3,067,549
Statutory reserve 2,277,248 1,387,775
Retained earnings 23,202,157 17,809,481
Total stockholders' equity 38,133,281 31,903,432
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $40,515,653 $35,249,561
CHINA SUN GROUP HIGH-TECH Co., Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 2010 AND 2009
Nine months ended February 28,
2010 2009
Cash flows from operating activities:
Net income $6,282,149 $6,232,426
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation of property, plant and equipment 971,821 499,419
Amortization of technical know-how 86,762 --
Changes in operating assets and liabilities:
Accounts receivable, trade -1,093,057 -1,560,900
Inventories 436,813 3,425,615
Deposits and prepayments -242,740 -873,536
Accounts payable, trade -846,110 72,913
Customer deposits -- -343
Value-added tax, net 402,760 854,534
Income tax payable 32,795 547,321
Other payables and accrued liabilities -423,155 98,206
Net cash provided by operating activities 5,608,038 9,295,655
Cash flows from investing activities:
Purchase of plant and equipment -1,298,131 -1,065,334
Addition of construction in progress -1,024,771 --
Net cash used in investing activities -2,322,902 -1,065,334
Effect of exchange rate changes on
cash and cash equivalents -13,969 75,968
NET CHANGE IN CASH AND CASH
EQUIVALENTS 3,271,167 8,306,289
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 9,209,953 3,879,114
CASH AND CASH EQUIVALENTS, END OF
PERIOD $12,481,120 $12,185,403
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for income taxes $ 2,127,504 $ 1,626,155
Cash paid for interest $ -- $ --
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Transfer from construction in progress
to property, plant and equipment $ 2,560,385 $ --
For more information, please contact:
Company Contact:
Mr. Guosheng Fu, Vice President
China Sun Group High-Tech Co., Ltd.
Tel: +86-411-8288-9800/8289-2736 (China)
Email: [email protected]
Investor Relations Contact:
Mr. Pierre Maccagno, Account Manager
Email: [email protected]
Tel: +1-646-833-3422
Mr. Crocker Coulson, President
Email: [email protected]
Tel: +1-646-213-1915
CCG Investor Relations
Web: http://www.ccgirasia.com
SOURCE China Sun Group High-Tech Co., Ltd.
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