SinoCoking Coal and Coke Chemical Industries Inc a vertically integrated coal and coke processor announced its financial results for the fourth quarter and fiscal year ended June 30 2011.
1. Fourth Quarter 2011 vs. 2010
I. Revenue increased by 126% to USD 24,661,738 from USD 10,886,577 mainly due to increased coke sales as well as the increased overall prices for all products.
II. Pre-tax income decreased to USD 15,892,450 as compared to USD 64,831,078.
III. Net income was USD 14,277,144 or USD 0.68 per diluted share as compared to a net income of USD 64,527,083 or USD 3.08 per diluted share.
2. Fiscal Year 2011 vs. 2010
I. Total revenue increased by 26% to USD 74,287,993 from USD 59,027,490 mainly due to increased coke and washed coal sales.
II. Revenue from the sale of coal products increased by 16% to approximately USD 35 million.
III. Revenue from the sale of raw coal products decreased 34% from a year earlier, in spite of the 17% increase in average selling price. As a result of the mining moratorium, we were unable to produce or secure sufficient raw coal from other producers to sell.
IV. Revenue from the sale of washed coal products increased 180% from a year earlier, as we sold some of our washed coal inventory to take advantage of the 40% increase in average selling prices resulting from the increase in raw coal price.
V. Revenue from the sale of coke products increased by 36% to USD 10.3 million from a year earlier as a result of increased demand from steel companies that drove up both sales volume and average selling prices.
VI. Strong market demand from chemical industries also boosted our coal tar revenue for fiscal 2011, an increase of 153% from a year ago.
VII. Gross margin decreased to 36.4% as compared to 38.0%, due to increased cost of revenue.
VIII. Pre-tax income increased to USD 44,973,240 as compared to USD 43,451,521.
IX. Net income was USD 39,907,860 or USD 1.90 per diluted share as compared to USD 38,934,497 or USD 2.44 per diluted share.
X. Excluding the change of fair value of warrants, net income was USD 16,772,033 or USD 0.80 per diluted share as compared to USD 14,918,090 or USD 0.94 per diluted share.
Mr Jianhua LV chairman & CEO of SinoCoking said "In fiscal 2011, we continued to try to optimize our product mix to take advantage of favorable market opportunities. Our revenue from the sale of coke and coal products increased in response to market demands. However, raw coal sales volume declined due to the continuing supply shortage created by the provincial-wide mining moratorium in connection with the mine consolidation program. The coal supply situation is reflected in our product mix, with 53% of fiscal 2011 total revenue coming from coke products, as compared to 49% in fiscal 2010, and 47% from coal products in fiscal 2011 as compared to 51% in fiscal 2010.”
He said that "The market drivers that have been in effect for the past two years should continue to have a direct impact on our operations. These drivers are. The continuing impact of mine consolidation and mining moratorium in Henan on the availability of metallurgical coal in the region, and on the prices of coal and coke products. The acceleration of government mandated closure of small sized and less-efficient coking facilities. The central government's continuing efforts to provide economic stimulus to maintain momentum and growth in domestic consumption."
He went on to say, "Our first initiative, the construction of a new state-of-the-art USD 60 million coking facility is scheduled to be completed by December 2011 with production to begin shortly thereafter. This new facility is adjacent to our current coking plant in Pingdingshan, and as of the end of August we completed construction of the shallow foundation, an underground workshop and the furnace and chimney rack, and are in the process of building furnaces and installing equipment and machineries. When completed, the new plant should have coke-producing capacity of up to 900,000 metric tons per year, as well as the ability to generate power for its own use and/or sale, and distill chemicals such as crude benzol, sulfur and ammonium sulfate from byproducts of the coking process. We also intend to produce purified coal gas at this plant to sell as a fuel source to local residents through the state-owned gas grid."
Mr Lv added that "Additionally, we completed our acquisitions of 60% of the operators of Shuangrui and Xingsheng coal mines and 100% of the operator of Shunli coal mine in May 2011. Since then, Xingsheng coal mine, as well as our Hongchang coal mine, has received clearance to resume coal production, and we are currently preparing Shuangrui and Shunli coal mines to do the same."
Mr Sam Wu CFO of SinoCoking said "Historically, funding for our business activities has been mainly provided by cash flow from operations and short-term bank loan financing. However, our acquisitions and new coking plant have and are expected to require additional capital resources. We have access to an aggregate of approximately USD 55.7 million under a medium-term loan, and the credit to issue approximately USD 14 million bank guaranteed notes under our Hongli and Hongchang affiliates with the term of 50% cash deposit of the face value in advance. Net cash used in investing activities for fiscal 2011 was USD 65.2 million including approximately USD 34.9 million in connection with acquisitions approximately USD 3.6 million for site expansion of our new coking plant and approximately USD 15.5 million towards equipment and machinery purchases for the new coking plant."
Mr Lv noted that "We remain committed to implement our ambitious business plan and continue to profitably grow our Company. We look forward to report our progress in the upcoming months."
