China Sun Group High-Tech Co. Announces First Quarter Fiscal Year 2012 Results

Oct 14, 2011, 09:00 ET from China Sun Group High-Tech Co.

DALIAN, China, Oct. 14, 2011 /PRNewswire-Asia/ -- China Sun Group High-Tech Co., Ltd. (OTC Bulletin Board: CSGH) ("China Sun Group" or the "Company"), a vertically integrated supplier of raw materials for rechargeable Lithium–ion (Li-ion) batteries in China, today announced its financial results for the quarter ended August 31, 2011.

First Quarter Fiscal Year 2012 Financial Results Highlights

  • First quarter fiscal year 2012 revenue declined by 2.2% to $11.5 million compared to $11.8 million for the comparable period in fiscal 2011
  • Gross profit increased by 3.9% to $3.9 million compared to $3.7 million for the comparable period in fiscal 2011
  • Income from operations increased by 2.5% to $3.3 million with an operating margin of 29.0%
  • Net income increased by 2.2% to $2.5 million, or $0.04 per diluted share, compared to $2.4 million, or $0.05 per diluted share, for the comparable period in fiscal 2011
  • In July 2011, China Sun Group launched its new corporate and investor relations web site to strengthen its communication with customers and investors

"During the first quarter of fiscal 2012, we sold lower volumes of our cobaltosic oxide and higher volumes of our higher-margin lithium iron phosphate (LIP). The change in our product mix is largely due to our focus on expanding sales and increasing production of our higher profit margin and increasingly popular LIP product," commented Chief Executive Officer, Mr. Guosheng Fu. "LIP is quickly becoming the preferred cathode material for lithium ion batteries and we plan to continue to increase our LIP production capacity by converting two additional production lines to the production of LIP. We believe this will enable us to expand our market share and will enhance our overall profitability."

Fiscal First Quarter 2012 Results

Net Revenue

Net revenue for the three months ended August 31, 2011 was $11.5 million, down 2.2% from $11.8 million for the comparable period in 2011. The decline in revenue for the first fiscal quarter was due to reduced sales of cobaltosic oxide, partly offset by a significant increase in sales of lithium iron phosphate. In addition, typically the first and fourth fiscal quarter marks a period of lower demand for the Company's cobaltosic oxide, which is primarily used in mobile phone batteries, as many consumers purchase mobile phones in advance of the Chinese Spring Festival. On a quarter over quarter basis, net revenue for the first quarter of fiscal 2012 increased 6.2% compared to the fourth quarter of fiscal 2011, due to increased sales of lithium iron phosphate.

Quarter ended August 31, tons sold              

2011

2010

Cobaltosic oxide

240

288

Lithium iron phosphate

217

133

Gross Profit

Gross profit for the three months ended August 31, 2011 was $3.9 million, an increase of 3.9% from $3.7 million for the comparable period in fiscal 2011. The increase in gross profit was due to increased sales of the Company's higher-margin product, lithium iron phosphate. Gross margin for the quarter ended August 31, 2011 was 33.5% compared to 31.5% for the same quarter in fiscal 2011. During the quarter, the gross profit margins for cobaltosic oxide and lithium iron phosphate were 23% and 52%, respectively.  

Sales and Marketing Expenses

Sales and marketing expenses for the three months ended August 31, 2011 increased to $0.04 million compared to $0.03 million for the comparable period in fiscal 2011 primarily as a result of an increase in compensation paid to sales personnel.

Research and Development Expenses

Research and development expenses for the three months ended August 31, 2011 increased to $0.03 million compared to $0.02 million for the comparable period in fiscal 2011 primarily as a result of an increase in compensation paid to research and development personnel.

General and Administrative Expenses

General and administrative expenses for the quarter ended August 31, 2011 increased 10.8% to $0.44 million compared to $0.40 million for the comparable period in fiscal 2011. The increase in general and administrative expenses is attributable to increase in expenses related to consulting services and director fees.

Income from Operations

Income from operations for the three months ended August 31, 2011 was $3.34 million, up 2.5% from $3.25 million for the comparable period in fiscal 2011.

Net Income

Net income for the three months ended August 31, 2011 was $2.5 million, or $0.04 per diluted share, up 2.2% from $2.4 million, or $0.05 per diluted share, for the comparable period in fiscal 2011. The Company's basic and diluted shares outstanding were 56.0 million for the quarter ended August 31, 2011 compared to 53.4 million for the comparable period in fiscal 2011.

Financial Condition

As of August 31, 2011, China Sun Group held cash and cash equivalents of $22.7 million, up from $21.8 million at May 31, 2011. The Company's working capital was $26.7 million as of August 31, 2011. Accounts receivable were $4.7 million and total current assets were $28.6 million. The Company had $1.9 million in current liabilities, no long-term debt and stockholders' equity stood at $56.9 million. In the three months ended August 31, 2011, the Company generated $0.5 million in cash flow from operating activities.

The Company's decision to maintain high cash reserves is mainly due to (1) the projected need for new manufacturing equipment for LIP production in fiscal year 2012 estimated to cost approximately $7.44 million, (2) the projected conversion of two additional LIP production lines during the second quarter of fiscal year 2012 and the relevant capital expenditure forecasted to cost approximately $8.0 million, and (3) the projected purchase of new R&D equipment for approximately $3.0 million. The Company believes it has sufficient cash resources to fund the expansion of its lithium iron phosphate annual production capacity from 700 tons to 1,000 tons.

Fiscal Year 2012 Outlook

Mr. Fu commented, "We will continue to maintain our focus on expanding sales and increasing production of LIP in fiscal year 2012. We plan to increase the manufacturing capacity for LIP by converting two additional production lines, if market conditions allow. In fiscal 2012, we expect sales of cobaltosic oxide to remain stable and sales of lithium iron phosphate to continue to grow as our new LIP product further penetrates into the market. We believe that sales from LIP will continue to represent a larger percentage of our revenues and gross margins in the near future."

About China Sun Group High-Tech Co.

China Sun Group High-Tech Co. ("China Sun Group") produces cathode materials used in lithium ion batteries. Through its wholly-owned operating subsidiary, Dalian Xinyang High-Tech Development Co. Ltd ("DLX"), the Company primarily produces cobaltosic oxide and lithium ion phosphate. 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 lithium ion batteries. Leveraging its state-of-the-art technology, high-quality product line and scalable production capacity, the Company diversified into the manufacture of LIP. For more information, visit http://www.chinasungrouphightech.com.

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. The forward-looking statements involve risks and uncertainties, including, but not limited to, 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.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF AUGUST 31, 2011 AND MAY 31, 2011

(Currency expressed in United States Dollars ("US$"), except for number of shares)

August 31, 2011

May 31, 2011

(Unaudited)

(Audited)

ASSETS

Current assets:

   Cash and cash equivalents

$

22,685,197

$

21,810,394

   Accounts receivable, trade

4,716,245

2,465,862

   Inventories

706,437

610,025

   Deposits and prepayments

463,420

1,026

Total current assets

28,571,299

24,887,307

Non-current assets:

Technical know-how, net

2,417,935

2,420,278

Property, plant and equipment, net

27,771,575

27,805,208

TOTAL ASSETS

$

58,760,809

$

55,112,793

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable, trade

$

150,819

$

-

   Income tax payable

593,225

536,647

   Other payables and accrued liabilities

1,113,046

1,163,324

Total liabilities

1,857,090

1,699,971

Commitments and contingencies

Stockholders' equity:

   Preferred stock, $0.001 par value; 2,000,000 shares      authorized; none of shares issued and outstanding

-

-

   Common stock, $0.001 par value; 100,000,000 shares      authorized; 55,962,971 shares issued and outstanding as of      August 31, 2011 and May 31, 2011

55,963

55,963

   Additional paid-in capital

11,790,789

11,790,789

   Accumulated other comprehensive income

6,463,022

5,457,233

   Statutory reserve

3,342,358

3,342,358

   Deferred compensation

(96,000)

(96,000)

   Retained earnings

35,347,587

32,862,479

Total stockholders' equity

56,903,719

53,412,822

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

58,760,809

$

55,112,793

CHINA SUN GROUP HIGH-TECH CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED AUGUST 31, 2011 AND 2010

(Currency expressed in United States Dollars ("US$"), except for number of shares)

(Unaudited)

Three months ended August 31,

2011

2010

Revenues, net

$

11,489,266

$

11,753,459

Cost of revenue (inclusive of depreciation and amortization)

7,637,851

8,046,456

Gross profit

3,851,415

3,707,003

Operating expenses:

   Sales and marketing

37,199

31,326

   Research and development

33,955

20,933

   General and administrative

443,606

400,385

Total operating expenses

514,760

452,644

INCOME FROM OPERATIONS

3,336,655

3,254,359

Other income:

   Interest income

13,573

10,639

INCOME BEFORE INCOME TAXES

3,350,228

3,264,998

Income tax expense

(865,120)

(834,263)

NET INCOME

$

2,485,108

$

2,430,735

Other comprehensive income:

- Foreign currency translation gain

1,005,789

107,243

COMPREHENSIVE INCOME

$

3,490,897

$

2,537,978

Net income per share – Basic and diluted

$

0.04

$

0.05

Weighted average common shares outstanding – Basic and diluted

55,962,971

53,422,971

CHINA SUN GROUP HIGH-TECH CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED AUGUST 31, 2011 AND 2010

(Currency expressed in United States Dollars ("US$"))

(Unaudited)

Three months ended August 31,

2011

2010

Cash flows from operating activities:

Net income

$

2,485,108

$

2,430,735

Adjustments to reconcile net income to net cash provided by  operating activities:

   Depreciation of property, plant and equipment

540,221

401,323

   Amortization of technical know-how

45,996

43,601

Changes in operating assets and liabilities:

   Accounts receivable, trade

(2,181,553)

(106,097)

   Inventories

(84,361)

630,519

   Deposits and prepayments

(457,376)

(6,736)

   Accounts payable, trade

149,188

(1,738,029)

   Income tax payable

46,282

(407,449)

   Other payables and accrued liabilities

(67,717)

105,284

Net cash provided by operating activities

475,788

1,353,151

Cash flows from investing activities:

   Purchase of plant and equipment

(5,151)

(48,486)

Net cash used in investing activities

(5,151)

(48,486)

Effect of exchange rate changes on cash and cash equivalents

404,166

47,228

NET CHANGE IN CASH AND CASH EQUIVALENTS

874,803

1,351,893

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

21,810,394

18,017,266

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

22,685,197

$

19,369,159

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash paid for income taxes

$

818,838

$

1,241,712

   Cash paid for interest

$

-

$

-

Company Contact:

Mr. Guosheng Fu, Chief Executive Officer

China Sun Group High-Tech Co.

Tel: 86 411 8288 9800/8289 2736 (China)                

Email: ir@china-sun.cn

Website: www.chinaSungrouphightec.com

Investor Relations Contact:

Mr. Mark Collinson, Partner

CCG Investor Relations

Tel: 310-954-1343

Email: mark.collinson@ccgir.com

Website: www.ccgirasia.com

SOURCE China Sun Group High-Tech Co.



RELATED LINKS

http://www.chinasungrouphightech.com