INNER MONGOLIA, China, Nov. 14, 2012 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. (OTCBB:CHGI) ("China Carbon" or the "Company"), the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top manufacturers of carbon and graphite products, today announced its financial results for the third quarter ended September 30, 2012.
Highlights through the Third Quarter (Q3) 2012:
- Gross Profit Margin improved by 4.6% Y-O-Y, despite increased raw material costs.
- Positive non-GAAP net income. Excluding quarterly interest payments, the Company produced positive EPS.
- Company continues to hold positive Operating Income.
- Sales are expected to rebound in future quarters based on improved construction outlook and value-added carbon and graphite products.
| Summarized Q3 2012 Results: | |||
| Q3 2012 | Q3 2011 | CHANGE | |
| Revenue | $6.49 million | $13.59 million | -52.2% |
| Gross Profit | $1.77 million | $3.08 million | -42.5% |
| Gross Profit Margin | 27.25% | 22.63% | 4.62% |
| Net Income (Loss) | $(798,649) | $668,134 | -219.5% |
| EPS(Diluted) (Loss)* | $(0.03) | $0.03 | -200% |
| * Earnings per diluted share of $(0.03) on 24.56 million shares for Q3 2012. For Q3 2011, China Carbon reported fully diluted earnings per share of $0.03 on 22.75 million shares. | |||
Third Quarter 2012 Financial Results
Despite a decrease in net revenue this quarter, the Company maintained a good production mix, successfully controlling prices and gross profit, and increased their gross profit margin by 4.6% Y-O-Y. China Carbon retained a positive operating cash flow, EBIT and EPS (non-GAAP).
This quarter's drop in sales is attributable to broader economic issues and waning short-term demand. "The global economy is slowing and a slump in China's construction industry is dragging down its economy," explained Mr. Donghai Yu, CEO of China Carbon. "Certain customers requested fewer orders due to price increases. However, we expect to see revenues rebound in future quarters, and our finished products can be sent back to our inventory for more sessions of baking, dipping and graphitization for further refinement into even higher-end products."
Mr. Yu expressed confidence in his company's ability to withstand the current economic climate, stating:
"We believe that the situation will be improved in future quarters. First, China's leaders have renewed pledges to boost the economy over the next 10 years and projected a year-on-year growth rate of around 7.5 percent during meetings this week in Beijing. Secondly, China's economic growth model has long focused on exports. Now, its leaders are trying to move away from that to focus on boosting domestic consumption - or moving toward an economy where domestic consumers lead the way. The third, China's recent economic figures such as rising factory output and consumer spending might be signs of a possible recovery. The fourth, local banks will continue to support us working capital by renewing loans forward. The fifth, a more refined product has better purity and density. The higher purity and density, the stronger demand is marketplace. Therefore more refined products now will indicate more sales and profits near future. In conclusion, the Company believes that the market will grow soon, and China Carbon will continue to keep its leading market positions in high purity and fine grain fields."
Sales
During the three months ended September 30, 2012, we had sales of $6,491,133, compared to sales of $13,591,978 for the three months ended September 30, 2011, a decrease of $7,100,845, or approximately 52.2%. Sales decrease was mainly attributable to decreased market demand during the three months ended September 30, 2012 from the slowing down of China's construction industry. The decrease in tonnage sold is due to fewer orders from certain customers due to price increases and a slight drop in the Chinese construction industry. The average unit selling price of our products decreased 13% during the three months ended September 30, 2012, compared to the same period for the three months ended September 30, 2011, with the 45% decrease in tonnage sold for the period. The average unit selling price of high purity graphite products decreased 3% during the three months ended September 30, 2012, compared to the same period for the three months ended September 30, 2011, with the 50% decrease in tonnage sold for the period.
The breakdown of revenues for each of graphite electrodes, fine grain graphite and high purity graphite, during the three months ended September 30, 2012 and 2011, respectively, was as follows:
| September 30, 2012 | % of Total | September 30, 2011 | % of Total | |
| Sales | Sales | Sales | Sales | |
| Graphite Electrodes | $ 788,769 | 12.1% | $ 1,812,189 | 13.3% |
| Fine Grain Graphite | 2,666,957 | 41.1% | 5,780,071 | 42.5% |
| High Purity Graphite | 2,763,836 | 42.6% | 5,729,840 | 42.2% |
| Others (1) | 271,571 | 4.2% | 269,878 | 2.0% |
| Total | $ 6,491,133 | 100.0% | $ 13,591,978 | 100.0% |
| (1) "Other" sales represent revenue generated by sales of semi-processed products and other types of products. | ||||
About China Carbon Graphite Group, Inc.
China Carbon Graphite Group, through its affiliate, Xingyong Carbon Co., Ltd., manufactures graphite and carbon based products in China. The company is the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in smelting for colored metals and rare earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. In September 2007, the Company was approved and designated by the Ministry of Science & Technology as a "National Hi-tech Enterprise," a distinction that the Company still holds. Of the more than 400 carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor. For more information, please visit www.chinacarboninc.com.
The China Carbon Graphite Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=15754
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors set forth in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.
PART 1 - FINANCIAL INFORMATION
PART 1 - FINANCIAL INFORMATION
| Item 1. Financial Statements. | ||
| China Carbon Graphite Group, Inc. and subsidiaries | ||
| Condensed Consolidated Balance Sheets | ||
| September 30, 2012 | December 31, 2011 | |
| ASSETS | (Unaudited) | (Audited) |
| Current Assets | ||
| Cash and cash equivalents | $ 119,885 | $ 521,450 |
| Restricted cash | 13,364,400 | 11,694,820 |
| Accounts receivable, Net | 11,812,372 | 12,541,321 |
| Notes receivable | 33,566 | 188,880 |
| Advance to suppliers | 2,556,244 | 5,921,970 |
| Inventories | 47,867,399 | 37,430,248 |
| Prepaid expenses | 74,017 | 452,730 |
| Other receivables, net of allowance of $24,661 | 565,656 | 513,000 |
| Total current assets | 76,393,539 | 69,264,419 |
| Property And Equipment, Net | 35,643,025 | 36,719,595 |
| Construction In Progress | 7,973,865 | 6,414,847 |
| Land Use Rights, Net | 10,414,822 | 10,699,059 |
| Total Assets | $ 130,425,251 | $ 123,097,920 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current Liabilities | ||
| Accounts payable and accrued expenses | $ 4,699,301 | $ 1,340,498 |
| Advance from customers | 1,330,935 | 1,360,989 |
| Short term bank loans | 32,774,600 | 45,488,600 |
| Notes payable | 24,342,300 | 16,763,100 |
| Other payables | 2,655,742 | 3,227,067 |
| Loan from unrelated parties | 2,215,217 | -- |
| Dividends payable | 42,279 | 28,099 |
| Total current liabilities | 68,060,374 | 68,208,353 |
| Amount Due To A Related Party | 6,270,940 | 5,542,855 |
| Long Term Bank Loan | 4,741,180 | -- |
| Warrant Liabilities | 396,651 | 174,805 |
| Total Liabilities | 79,469,145 | 73,926,013 |
| Redeemable convertible series B preferred stock, $0.001 par value; 3,000,000 shares authorized; 300,000 and 426,110 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively. | 360,000 | 511,332 |
| Stockholders' Equity | ||
| Common stock, $0.001 par value; 100,000,000 shares authorized 24,212,518 and 22,981,408 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively | 24,212 | 22,981 |
| Additional paid-in capital | 18,158,294 | 17,054,045 |
| Accumulated other comprehensive income | 8,461,994 | 7,943,542 |
| Retained earnings | 23,951,606 | 23,640,007 |
| Total stockholders' equity | 50,596,106 | 48,660,575 |
| Total Liabilities and Stockholders' Equity | 130,425,251 | 123,097,920 |
| The accompanying notes are an integral part of these condensed consolidated financial statements. | ||
| China Carbon Graphite Group, Inc and subsidiaries | ||||
| Condensed Consolidated Statements of Operations and Comprehensive Income | ||||
| For the Three Months and Nine Months Ended September 30, 2012 and 2011 | ||||
| (Unaudited) | ||||
|
Three months ended September 30, |
Nine months ended September 30, |
|||
| 2012 | 2011 | 2012 | 2011 | |
| Sales | $ 6,491,133 | $ 13,591,978 | $ 28,429,886 | $ 37,200,337 |
| Cost of Goods Sold | 4,722,151 | 10,515,933 | 20,850,882 | 28,855,956 |
| Gross Profit | 1,768,982 | 3,076,045 | 7,579,004 | 8,344,381 |
| Operating Expenses | ||||
| Selling expenses | 64,487 | 51,223 | 140,437 | 158,398 |
| General and administrative | 1,056,283 | 1,316,048 | 3,078,144 | 3,919,776 |
| Depreciation and amortization | 56,198 | 97,832 | 160,028 | 191,586 |
| Total operating expenses | 1,176,968 | 1,465,103 | 3,378,609 | 4,269,760 |
| Operating Income Before Other Income (Expense) | 592,014 | 1,610,942 | 4,200,395 | 4,074,621 |
| Other Income (Expense) | ||||
| Interest expense | (1,208,969) | (957,434) | (3,658,844) | (2,364,238) |
| Other expense | 272 | -- | (215,196) | -- |
| Other income, net | 6,080 | 14,118 | 221,270 | 89,902 |
| Change in fair value of warrants | (188,046) | 508 | (221,846) | 83,200 |
| Total other expense | (1,390,663) | (942,808) | (3,874,616) | (2,191,136) |
| Net Income (Loss) | $ (798,649) | $ 668,134 | $ 325,779 | $ 1,883,485 |
| Dividend Distribution | (4,537) | (13,525) | (14,180) | (21,654) |
| Net Income (Loss) Available To Common Shareholders | $ (803,186) | $ 654,609 | $ 311,599 | $ 1,861,831 |
| Other Comprehensive Income (Loss) | ||||
| Foreign currency translation gain | 528,509 | 508,300 | 518,452 | 1,329,748 |
| Total Comprehensive Income (Loss) | $ (270,140) | $ 1,176,434 | $ 844,231 | $ 3,213,233 |
| Share Data | ||||
| Basic earnings (loss) per share | $ (0.03) | $ 0.03 | $ 0.01 | $ 0.08 |
| Diluted earnings (loss) per share | $ (0.03) | $ 0.03 | $ 0.01 | $ 0.08 |
| Weighted average common shares outstanding, basic | 24,260,834 | 22,307,980 | 23,843,306 | 22,231,842 |
| Weighted average common shares outstanding, diluted | 24,560,834 | 22,749,990 | 24,143,306 | 22,766,260 |
| The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||
| Nine months ended September 30, | ||
| 2012 | 2011 | |
| Cash flows from operating activities | ||
| Net Income | $ 325,779 | $ 1,883,485 |
| Adjustments to reconcile net cash provided by operating activities | ||
| Depreciation and amortization | 1,925,159 | 1,328,990 |
| Related party interest expenses contribution | 344,401 | -- |
| Stock compensation | 512,158 | 980,800 |
| Change in fair value of warrants | 221,846 | (83,200) |
| Change in operating assets and liabilities | ||
| Accounts receivable | 858,426 | (5,507,003) |
| Notes receivable | 156,266 | (10,951) |
| Other receivable | (46,790) | (2,075,385) |
| Advance to suppliers | 3,405,974 | (1,866,969) |
| Inventories | (9,963,519) | (6,664,546) |
| Prepaid expenses | 1,906 | 231,613 |
| Accounts payable and accrued liabilities | 3,460,160 | (2,682,072) |
| Advance from customers | (44,443) | 3,027,518 |
| Taxes payable | (760,615) | -- |
| Other payables | 141,370 | 1,521,693 |
| Net cash provided by (used in) operating activities | 538,078 | (9,916,027) |
| Cash flows from investing activities | ||
| Acquisition of property and equipment | (65,156) | (27,265) |
| Construction in progress | (1,479,435) | (7,110,556) |
| Net cash used in investing activities | (1,544,591) | (7,137,821) |
| Cash flows from financing activities | ||
| Proceeds from issuing common stock | 472,000 | 160,000 |
| Proceeds from warrants exercise | -- | 371,714 |
| Dividends paid for series B preferred stock | -- | (32,996) |
| Proceeds from short-term bank loans | 37,256,400 | 44,534,900 |
| Payment to short-term bank loans | (50,370,400) | (33,824,950) |
| Proceeds from long-term bank loans | 4,708,400 | -- |
| Proceeds from loans from unrelated parties | 11,351,261 | -- |
| Payment of loans from unrelated parties | (9,151,360) | -- |
| Payments to an related party | (158,000) | -- |
| Proceeds from an related party | 821,600 | 1,327,928 |
| Proceeds from stock not yet issued | (137,000) | -- |
| Restricted cash | (1,532,600) | (14,392,940) |
| Proceeds from notes payable | 35,234,000 | 19,647,750 |
| Payment to notes payable | (27,887,000) | -- |
| Net cash provided by financing activities | 607,301 | 17,791,406 |
| Effect of exchange rate fluctuation | (2,353) | 17,369 |
| Net increase (decrease) in cash | (401,565) | 754,927 |
| Cash and cash equivalents at beginning of period | 521,450 | 296,311 |
| Cash and cash equivalents at end of period | 119,885 | 1,051,238 |
| Supplemental disclosure of cash flow information | ||
| Interest paid | $ 3,358,169 | $ 2,364,238 |
| Non-cash activities: | ||
| Preferred stock conversion to common stock | $ 151 | $ 813 |
| Reclassfication of warrant liability with equity | -- | $ 14,993 |
| Issuance of common stock for compensation | $ 135,350 | $ 1,787,600 |