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China Armco announces Q3 and 9M 2012 financial results
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Saturday, 17 Nov 2012

China Armco Metals Inc, a distributor of imported metal ore and metal recycler with a new state of the art scrap metal recycling facility in China, has announced its financial results for the third quarter and the first nine months of 2012.

Summary financials

Q3 '12Q3 '11YoY
Gross Profit1.90.8137%
Net Income0.13-1.1N/A
EPS (Fully Diluted)0.01-0.07N/A

In USD million

Third quarter of 2012 financial results
For the quarter ended September 30th 2012, net revenue decreased by 5% to USD 15.4 million, of which the metal recycling sales increased by 60% to USD 13.4 million from USD 8.3 million and the metal ores trading sales decreased by 74% to USD 2.0 million from USD 7.7 million, respectively, compared to the same period of 2011. The company sold 38,752 tonnes of recycled scrap metal compared to 16,592 tonnes sold in the third quarter of 2011, and the production of recycled scrap metal increased by 232% to 44,793 tonnes from 13,500 tonnes in the third quarter of 2011. The decrease in the trading business sales was caused by a USD 3.9 million decrease in sales of iron ore and a USD 4.1 million decrease in sales of chromium ore, and the decrease was partially offset by a USD 0.37 million increase in sales of manages ore.

Mr Kexuan Yao chairman & CEO of China Armco said that "We are pleased to report a consolidated net income in this quarter after consecutive losses in previous quarters and this is important to us. We made significant progress in our metal recycling business this quarter. In response to the market rebound in the third quarter, we significantly expanded our metal recycling business activities and our production and sales increased by 232% and 134% in quantities, respectively, compared to same period of 2011. Our gross profit margin for recycling business in the third quarter was 14%, signifying significant improvement of our recycling business operation efficiency and capacity. Encouraged by the result, our management is more confident about our business model and operation. We are having active discussions with prospective new customers to further expand our client and business partner base."

He added that "Gross profit for the third quarter of 2012 was USD 1.9 million compared to USD 0.8 million in the third quarter of 2011. Gross margin was 12.5% compared to 5.0% for same period of last year. The increase in profit margin was primarily due to a significant increase of gross margin in our scrap recycling business from 8% to 14% as result of market rebound and our quick and proactive reaction to the market change in the quarter during which we accumulated raw materials at a low cost during market downturn and sold the products at higher price quickly when market rebounded."

Mr Yao said that "Our operating expenses decreased to USD 1.4 million from USD 1.7 million a year ago. The decrease in operating expenses was primarily due to decreased professional fees and selling expenses associated with lower level of sales in our trading business. Our operating income for the third quarter of 2012 was a USD 0.54 million income compared to a USD 0.92 million loss in the third quarter of 2011. Our net income for the third quarter of 2012 was USD 0.13 million or USD 0.01 per diluted share as compared to a USD 1.1 million loss or USD 0.07 loss per diluted share, in the same period last year. The weighted average diluted shares outstanding increased from 15.4 million in the third quarter of 2011 to 19.5 million in the third quarter of 2012."

First nine months of 2012 financial results

YTD '12YTD '11YoY
Gross Profit4.15.3-23%
Net Income-3.2-1.8N/A
EPS (Fully Diluted)-0.18-0.12N/A

In USD million

China Armco's sales decreased in the first nine months of 2012, from USD 96.8 million a year ago to USD 68.9 million. Sales in the metal recycling business were USD 25.0 million, a decrease of USD 11.8 million from the same period last year. Metal ores trading generated USD 43.9 million of sales compared to USD 59.9 million in the comparable period a year ago. In response to the deteriorating market due to the China economy slowdown in the first half of 2012, the company significantly reduced its trading and production activities to control market risks. The metal recycling sales and activities increased in the third quarter in response to the market rebound. While expanding its sources of raw material and developing a supply chain network locally to increase and stabilize the availability of raw materials, China Armco is also seeking to expand its overseas supply channels and a recent development included negotiations on business cooperation with US and Japan suppliers.

Mr Yao said that "Our gross profit decreased by USD 1.2 million to USD 4.1 million, with a gross margin of 6% compared to USD 4.5 million with a gross margin of 5.5% for the first nine months of 2011. Our operating expenses decreased from USD 5.6 million to USD 5.0 million, primarily due to a decrease in professional fees and selling expenses. Net loss and net loss per share were USD 3.2 million and USD 0.18, respectively, in the first nine months of 2012. The weighted average diluted shares outstanding were 18.2 million, a 19% increase from 15.3 million in the first nine months of 2011."

Source - China Armco Metals Inc


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