Huscoke FY2010 Net Profit Jumped 81.46%

Successful Vertical Integration

Mar 30, 2011, 02:42 ET from Huscoke Resources Holdings Limited

HONG KONG, March 30, 2011 /PRNewswire-Asia/ --

  • Revenue of the Group surged by 81.60% to approximately HKD 1,813.04 million
  • Gross profit of the Group soared 1.75 times to approximately HKD 422.61 million
  • EBITDA of the Group increased by 93.05% to approximately HKD 433.93 million
  • Profit attributable to owners of the parent jumped 79.07% to approximately HKD 167.86 million
  • The Board of Directors recommends the payment of a final dividend of HK 0.5 cents per share for the year ended 31 December 2010(2009: nil)

Huscoke Resources Holdings Limited ("Huscoke" or the "Company", together with its subsidiaries the "Group", 00704.hk), a company participating in coke trading, coal-related ancillary and coke production businesses, today announced its annual results for the 12 months ended 31 December 2010.

Financial Highlights

For the 12 months ended 31 December 2010

(HK$ in million)

FY2010

FY2009

% change (y-o-y)

Revenue

1,813.04

998.38

81.60%

Gross Profit

422.61

153.46

175.39%

Gross Profit Margin

23.31%

15.37%

7.94 percentage point

EBITDA

433.93

224.78

93.05%

Net Profit

194.60

107.24

81.46%

Profit Attributable to Owners of the Parent

167.86

93.74

79.07%

Basic EPS (HK cents)

2.81

1.57

78.98%



Financial Review

In 2010, the Group's revenue surged 81.60% year-on-year to approximately HK$1,813.04 million. In the year under review, the gross profit of the Group soared 1.75 times to approximately HKD 422.61 million while the gross profit margin increased from 15.37% in 2009 to 23.31% in 2010, representing an increase of 7.94 percentage point. EBITDA (Earnings before interests, tax, depreciation and amortisation) of the Group has increased from HK$224.78 million in 2009 to HK$ 433.93 million in 2010, representing an increase of 93.05%. Profit attributable to the owners of the parent rose by 79.07% to HK$167.86 million. Basic earnings per share were 2.81 HK cents, representing an increase of 78.98% as compared to last year. The Board of Directors recommends the payment of a final dividend of HK 0.5 cents per share for the year ended 31 December 2010.

Business Review

The Group's subsidiary in the PRC has obtained a new business license which extends its principle activities to include coke production business and the sale of coke in the PRC. In June 2010, the Group has completed the acquisition of a coking plant with an annual production capacity of approximately 800,000 tonnes. With the completion of this acquisition, the Group becomes an integrated coke producer and exporter in the PRC. It can purchase raw coals from local mines, process it into refined coals and ultimately into coke through the coal washing and the coke production processes.

In the first half of 2010, for coke export market, there was an indication that the international demand for PRC export coke resumed. However, due to the outbreak of a financial crisis in Europe, the recovering economy of the world was slowed and the demand for PRC's coke was immediately impacted. In an effort to reduce the reliance on the international market, management of the Group tried to develop the domestic coke market and in April 2010, the Group obtained approval from PRC authorities to trade coke in the PRC.

In coal related ancillary businesses, the external sales of refined coal in 2010 were reduced due to the use of refined coals as raw materials at the Group's recently acquired coking plant. In 2010, the production utilization rate of the Group's coal washing plant was around 85%. Being located in the Xiaoyi, Shanxi Province, the Group benefits from low transportation costs due to the large number of coal mines in the surrounding area. With an advanced coal washing facility with annual production capacity of 2.4 million tonnes, the Group has relatively better production efficiency rates and lower production costs in the coal washing process.

For coke production business, it was contributed by the newly acquired coking plant and the related coal chemicals production business. The annual production capacity of the coking plant is 800,000 tones. Contributions to the Group started in the third quarter of the year and revenue generated in this six months period was around HK$585.05 million. Most of the materials used in the coking plant have been supplied by our coal washing plant and this vertical integration of business has improved the Group's overall gross profits margin in 2010.

Looking Forward - Strong Growth Prospects

The Group will continue its efforts to control its costs of production while negotiating with more customers for Huscoke's coke business, especially in the domestic market. However, the international coke market will still be monitored closely and negotiations with our target customers will begin if demand in the international market rises.

In August and September 2010, the Group signed two non-legally-binding memorandums of understanding ("First MOU" and "Second MOU," respectively) with the Golden Rock Group ("GRG"), a non-controlling shareholder of our Joint Venture in the PRC. The First MOU dealt with the proposed acquisition of coal mines from GRG. After the signing of the First MOU, the Group has engaged in the due-diligence on the targeted coal mine and has already employed an International Competent Person to estimate the available resources according to the JORC standards. The Group plans to further expand its business into coal mining which will 1) secure the raw material supplies for our coal washing plants and 2) reduce the costs of production significantly since over 90% of production costs come from raw material costs.

The Second MOU dealt with the proposed cooperation with GRG for the construction of a new coking plant with an annual capacity of 2 million tonnes. After a consolidation in coal mine industry since 2009 in Shanxi province, the Provincial Shanxi Government has announced that there will be a consolidation in the Coking Industry under which the provincial government is targeting a reduction in total coking capacity from the existing 150 million tonnes to 120 million tonnes by 2015. GRG has already obtained the approval from the provincial government to construct a new coking plant with an annual capacity of 2 million tonnes. In order to increase market share within the Shanxi province, Huscoke is considering the opportunity to cooperate with GRG for this new project and has already engaged international financial institutions as the arrangers for the proposed projects.

"As the global economic recovery continues apace, demand for coking coal resources increases as well. This presents a very favorable medium- to long-term outlook in which coking coal and coke prices should continue to increase. With Huscoke's continuous commitment to vertical integration up the industrial chain, the Group will benefit strongly from the evolving market situation. To this end, we have full confidence in the prospects for the company.''

                                                                                                                                   Mr. Wu Jixian

                                                                                                                   Chief Executive Officer

About Huscoke Resources Holdings Limited (Stock Code: 00704.hk)

Huscoke Resources Holdings Limited, formerly as Frankie Dominion International Limited, has been listed on The Stock Exchange of Hong Kong since May 27, 1991.

In 2008, Huscoke acquired two major businesses from Shanxi Province-based Golden Rock Group, namely coke trading and coal-related ancillary operations. Following on this, Huscoke in 2010 acquired a coke production asset allowing Huscoke to have now transformed itself into high-capacity coal enterprise with operations now covering downstream coke trading to midstream coal washing and coke production to become a full-fledged enterprise in midstream and downstream activities. This has allowed Huscoke's operations to now comprise coke trading, coke production and coal-related ancillary operations including coal washing, power generation, logistics service and heat production.

Huscoke's core operational base is located in Lvliang Xiaoyi City, Shanxi Province, a positioning which brings tremendous strategic advantages. Shanxi Province is China's No.1 coal production, transport, and energy-based heavy engineering base, with logistical and government support in the region decidedly favorable to the coal industry.

Shanxi possesses the richest quantities and highest grades of coal resources and reserves, so much so that the province is often referred to as "Coal Country". Add to this the benefit of the region's geography and topography, convenient transport links and a developed infrastructure and it soon becomes evident why the region is such an important and strategic coal production, processing and transport base. Geological estimates put underground resources as being some 40% coal-rich, a ratio of coal reserves seldom seen anywhere on earth. In addition, the Lvliang District is blessed with the highest quality coking coal in all of China.

Looking ahead, Huscoke will make continuous efforts to expand its production chain to be a more comprehensive and competitive player in the coal industry via additional vertical integration and industry consolidation. Huscoke is aiming to enter into coal mine sector in the near future ensuring upstream supplies for its coal-washing business and ultimately reducing coke production costs. This will help Huscoke continue its rapid growth and industry expansion as well as becoming an integrated coal enterprise engaging in upstream, midstream and downstream of coal industry.

For more information, please visit: http://www.huscoke.com/eng/global/home.asp

For further information, please contact:

Huscoke Resources Holdings Limited

Ms Lydia Qiu, Vice President

Investor Relations & Corporate Communications

Tel: +852-2861-0704 Email: lydiaqiu@huscoke.com


Aries Consulting Limited

Mr. Terence Wong

Tel: +852-2610-0846 Email: staff@ariesconsulting.com.hk

Mr. Kent Lo

Tel: +852-2610-0846 Email: staff@ariesconsulting.com.hk

Mr. Mark Lee

Tel: +852-2610-0846 Email: staff@ariesconsulting.com.hk

Fax: +852-2610-0842




SOURCE Huscoke Resources Holdings Limited



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