ZHAOYUAN CITY, China, Nov. 25, 2009 (GLOBE NEWSWIRE) -- China Shuangji Cement, Ltd. (OTCBB:CSGJ) ("China Shuangji" or the "Company"), a leading producer of high quality Portland cement in Shandong and Hainan Provinces, PRC, today announced its financial results for the third quarter ended September 30, 2009, which included an increase in both revenues and net income for the period.
Third Quarter Highlights:
* Revenues for the three month period ended September 30, 2009 increased $935,481, or 7.07%, from $13,225,008 to $14,160,489 for the comparable period in 2008; * Net income was $807,827 for the three month period ended September 30, 2009, compared to $761,400 for the three month period ended September 30, 2008, an increase of $46,427, or 6.10%; * Cement sales increased approximately 0.64% from 407,244 metric tons to 409,832 metric tons from the prior period in 2008; * Selling and Administrative expenses for the three month period ended September 30, 2009 decreased $88,836, or 19.24%, from $461,838 to $373,002 for the comparable period in 2008; * Other Income Expense was reduced to $22,241 for the 3rd quarter from $287,468 for the same period in 2008, a reduction of 92%; * Shareholder equity increased to $35,380,889 at September 30, 2009 from $30,907,077 at December 31, 2008; * The Company's newly acquired plant at Longkou increased its annualized production rate from 300,000 metric tons to 500,000 metric tons.
Mr. Wenji Song, Chairman and President of China Shuangji Cement, Ltd., commented, "We were pleased with our results for the third quarter. The challenging economic climate, combined with the closing of our Zhaoyuan plant had a slight impact on results. However, our new plant in Longkou and sales from inventory were able to offset the impact."
He added, "Since the Chinese government has mandated the elimination of 250 million tons of outdated cement production capacity by 2010, we expect that industry consolidation will accelerate and market share and industry profits will be further consolidated among stronger companies, like China Shuangji Cement, Ltd. Organic growth of the cement industry in PRC should deliver solid operating results in the coming years. Approximately 300 cement plants will be closed in Shandong Province. Therefore, we expect that additional value will be created through acquisition opportunities. Management is positioning the Company accordingly," concluded Mr. Song.
"Our financial results reflect our continued efforts to reduce our costs while maximizing profits for our shareholders," stated Mr. Jun Song, CEO of China Shuangji Cement, Ltd. "We dramatically reduced administrative costs and slashed our interest expense. Our top priorities, which include the modernization of our physical plant operations and our financial control systems, are key to creating the long-term growth we expect for our Company."
China's cement output is forecast to grow 10% per annum between 2008 and 2010. Due to the regulatory guidance of 'eliminating old capacity before establishing new capacity,' growth of new cement production capacity should slow down in the next few years. This may even result in supply shortages in some regional markets. Overall, cement prices are expected to climb steadily upwards, due to factors such as the supply-demand structure, and higher costs of coal and electricity. Also, the recently announced 4 trillion RMB stimulus program by the PRC government should result in increased demand for cement, and may increase commodity prices for cement as well.
Update on the Zhaoyuan City Plant
The Company is currently building a new 1 million metric ton cement plant outside Zhaoyuan City to replace the old Zhaoyuan plant. Previously, the Company stated that the cement plant in Zhaoyuan, which we were required to relocate by the government, would be completed by Q3 2009. This statement was based upon expectations of financing to complete this plant. However, because of the world-wide economic crisis, the Company's fundraising activities have been curtailed. While there can be no guarantee of success, management now anticipates acquiring financing in early 2010. After receipt of capital, the company estimates that it will take approximately 3-4 months to have Zhaoyuan producing cement.
Results of Operations
On April 15, 2009, the Company acquired fifty-one percent of a joint venture that owns a 300,000 metric ton plant in nearby Longkou, Shandong. The Company has upgraded that capacity to 500,000 metric tons.
The Company is currently building a new 1 million metric ton cement plant outside Zhaoyuan City to replace the old Zhaoyuan plant. Previously, the Company had stated that the cement plant in Zhaoyuan, which was required to relocate by the government, would be completed by Q3 2009. This statement was based upon expectations of financing to complete this plant. However, because of the world-wide economic crisis, the fundraising activities have been curtailed. While there can be no guarantee of success, the Company now anticipates acquiring such financing in early 2010.
The Company foresees positive business sales in the fiscal fourth quarter and beyond due to a Chinese government decision to shut down a collection of small cement plants by the end of 2010 and from the recently announced 4 trillion RMB stimulus program by the PRC government. They expect that this program will result in increased demand for cement and may increase commodity price for cement.
China's cement output is forecast to grow 10% per annum between 2008 and 2010. Due to the regulatory guidance of "eliminating old capacity before establishing capacity," growth of new cement production capacity may somehow slow down in the next few years, and it may even result in supply shortage in some regional markets at some stage. Overall, cement prices are expected to climb steadily upwards, due to factors such as supply-demand structure, and higher costs of coal and electricity. Organic growth of the cement industry in PRC should be able to deliver satisfactory operating results in the coming years.
The Chinese government has mandated the elimination of 250 million tons of outdated cement production capacity by 2010, so it is expected that industry consolidation will accelerate and market shares and industry profits will be further concentrated to strong companies. There are close to 300 cement plants to be closed in Shandong Province. Therefore, they expect that additional value will be created by acquisition opportunities due to this industry consolidation.
Three month Period Ended September 30, 2009 Compared to Three Month Period Ended September 30, 2008:
Sales. Revenues for the three-month period ended September 30, 2009 increased $935,481, or 7.07%, from $13,225,008 to $14,160,489 for the comparable period in 2008. During the 2009 period, cement sales increased approximately 0.64% from 407,244 metric tons to 409,832 metric tons from the prior period, and cement production decreased 0.26% from 413,880 metric tons to 414,386 metric tons from the prior period. This decrease tonnage was due to the shutdown and relocation of the Zhaoyuan plant as mentioned above. The decrease in revenues is due to the loss of production from the Zhaoyuan plant which was offset partially by sales from inventory and production from the new Longkou Cement plant.
Cost of Sales. The cost of sales for the three month period ended September 30, 2009 increased $1,198,371, or 10.58%, from $11,326,923 to $12,525,294 for the comparable period in 2008. The increase was due to increase in raw materials. Cost of sales as a percentage of total sales was 88.45% for the 2009 period compared with 85.65% for the comparable 2008 period.
Gross Profit. Gross profit for the three month period ended September 30, 2009 decreased $262,890 or 13.85%, from $1,898,085 to $1,635,195 for the comparable period in 2008. The decrease is due to the reasons discussed above.
Selling and Administrative. Selling and administrative expenses for the three month period ended September 30, 2009 decreased $88,836, or 19.24%, from $461,838 to $373,002 for comparable period in 2008.
Operating Income. Operating income was $1,262,193 for the three month period ended September 30, 2009 compared with $1,436,247 for the three month period ended September 30, 2008, representing a 12.12% decrease. The decrease in operating income for the 2009 period is due to a decrease in gross profit which is discussed above.
Other Income (Expense). During the 2009 period, the Company had no subsidy income compared to the $69,214 subsidy income for the comparable period in 2008. During the last two fiscal years, they were eligible for refund of value added taxes under a materials utilization program of the Shandong Economic and Trades Commission. This program encourages use in the manufacturing process of materials which might otherwise be discarded. It is available only for production at the Zhaoyuan plant and will continue into 2009. Interest expense, which represents interest on outstanding loans, for the three month period ended September 30, 2009 was $22,006 compared to $254,893 for the three month period ended September 30, 2008. The decrease of $232,887, or 91.37% is due to the forgiveness of a $13,395,095 loan by their major lending bank which occurred during the fiscal 2008 year as a result of the relocation of the Zhaoyuan plant.
Income Before Income Taxes. Income before income taxes was $1,120,714 for the three month period ended September 30, 2009, compared to income before income taxes of $1,148,779 for the three month period ended September 30, 2008. The decrease of $28,065, or 2.44%, was due to the reasons discussed above.
Provision for Income Taxes. Income taxes decreased $74,492, or 19.23%, to $312,887 for the three month period ended September 30, 2009, compared to $387,379 for the three month period ended September 30, 2008.
Net Income. Net income was $807,827 for the three month period ended September 30, 2009, compared to $761,400 for the three month period ended September 30, 2008, an increase of $46,427, or 6.10%.
Earning per share (basic and diluted). Earnings applicable to common stock were $ .03 per share for the three month period ended September 30, 2009 compared with $0.11 for the three month period ended September 30, 2008.
Nine Month Period Ended September 30, 2009 Compared to Nine Month Period Ended September 30, 2008:
Sales. Revenues for the nine month period ended September 30, 2009 decreased $1,108,418, or 2.74%, to $39,307,017 from $40,415,435 for the comparable period in 2008. During the 2009 period, cement production decreased approximately 1.96% from 1,109,675 metric tons to 1,087,932 metric tons from the prior period. This decrease tonnage was due to the shutdown and relocation of the Zhaoyuan plant as mentioned above partially offset by the production from the new Longkou Cement plant which commenced in 2009. The decrease in revenues is due to the loss of production from the Zhaoyuan plant partially offset by sales from existing inventory, and production from the new Longkou Cement plant.
Cost of Sales. The cost of sales for the nine month period ended September 30, 2009 decreased $306,662, or 0.88%, from $34,780,562 to $34,473,900 for the comparable period in 2008. The decrease was due to the lower production levels. Cost of sales as a percentage of total sales was 87.70% for the 2009 period compared with 86.06% for the comparable 2008 period.
Gross Profit. Gross profit for the nine month period ended September 30, 2009 decreased $801,756 or 14.23%, from $5,634,873 to $4,833,117 for the comparable period in 2008. The decrease is due to the reasons discussed above.
Selling and Administrative. Selling and administrative expenses for the nine month period ended September 30, 2009 decreased $77,828, or 8.48%, from $917,718 to $839,890 for comparable period in 2008.
Operating Income. Operating income was $3,993,227 for the nine month period ended September 30, 2009 compared with $4,717,155 for the nine month period ended September 30, 2008, representing a 15.35% decrease. The decrease in operating income for the 2009 period is due to the decrease in gross profit and offset by a decrease in selling and administrative expenses.
Other Income (Expense). During the 2009 period, there was no subsidy income compared to the $239,119 subsidy income for the comparable period in 2008. During the last two fiscal years, there was eligibility for refund of value added taxes under a materials utilization program of the Shandong Economic and Trades Commission. This program encourages use in the manufacturing process of materials which might otherwise be discarded. It is available only for production at the Zhaoyuan plant. Interest expense, which represents interest on outstanding loans, for the nine month period ended September 30, 2009, was $96,320 compared to $1,193,251 for the nine month period ended September 30, 2008. The decrease of $1,096,931, or 91.93% is due to the forgiveness of a $13,395,095 loan by their major lending bank which occurred during the fiscal 2008 year as a result of the relocation of the Zhaoyuan plant.
Income Before Income Taxes. Income before income taxes was $3,765,421 for the nine month period ended September 30, 2009, compared to income before income taxes of $3,660,602 for the nine month period ended September 30, 2008. The increase of $104,819, or 2.86%, was due to the reasons discussed above.
Provision for Income Taxes. Income taxes decreased $116,978, or 10.35%, to $1,013,638 for the nine month period ended September 30, 2009, compared to $1,130,616 for the nine month period ended September 30, 2008. The decrease is primarily due to a decrease in net income and gross profit, during the period which is discussed above.
Net Income. Net income was $2,751,783 for the nine month period ended September 30, 2009, compared to $2,529,986 for the nine month period ended September 30, 2008, an increase of $221,797, or 8.77%.
Earning per share (basic and diluted). Earnings per share-(basic) applicable to common stock were $ .19 per share for the nine month period ended September 30, 2009 compared with $0.38 for the nine month period ended September 30, 2008.
Liquidity and Capital Resources
As of September 30, 2009, the current assets of $24,233,829, compared with $26,240,086 as of December 31, 2008. The working capital as of September 30, 2009 was $14,444,347 compared with working capital of $15,957,068 as of December 31, 2008.
The Company has historically financed operations from bank loans and cash flow from operations.
Net cash provided by operating activities was $5,813,889 for the nine months period ended September 30, 2009, compared to net cash provided of $1,288,964 for the nine months period ended September 30, 2008, an improvement of $ 4,524,925, primarily reflecting lower receivables.
Net cash consumed by investing activities of $4,753,998 for the nine months period ended September 30, 2009 was primarily related to the acquisition of the Longkou plant, construction of the new Zhaoyuan plant, addition to loans, and purchases of fixed assets, offset by the proceeds from sales of inventory and fixed assets. Net cash consumed by investing activities of $310,937 for the nine months period ended September 30, 2008 was related to purchase of fixed assets and additions to business loans.
Net cash consumed by financing activities of $1,012,180 for the nine months period ended September 30, 2009 represents repayment of bank loans. Net cash provided by financing activities of $ 3,818,777 for the nine months period ended September 30, 2008 was related to the borrowings under bank loans and cash received to move the Zhaoyuan plant.
About China Shuangji Cement, Ltd.
China Shuangji Cement, Ltd., through its affiliates and controlled entities, is a supplier of high-grade cement to the industrial sector in the People's Republic of China and to international markets. Its processed cement products are primarily purchased by the cement industry for the purpose of making the cement required for the construction of buildings, roads, and other infrastructure projects. The Company currently produces approximately 1,500,000 tons of Portland cement annually and they expect their output will increase by 1,000,000 tons when the new Zhaoyuan plant and upgrades are completed. http://www.shuangjicement.com
Safe Harbor Statement
The information contained herein includes forward-looking statements. These statements relate to future events or to our future anticipated financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development and market conditions. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We do not intend to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act. In addition, please refer to the Risk Factor section of our 2008 Form 10-K filed with the Securities and Exchange Commission on May 13, 2009 and detailed in other reports filed with the Securities and Exchange Commission from time to time.
CHINA SHUANGJI CEMENT, LTD.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
ASSETS September 30, December 31,
------ 2009 2008
Current Assets: ------------ ------------
(unaudited) (audited)
------------ ------------
Cash $ 556,571 $ 504,599
Accounts receivables, less allowance
for doubtful accounts 4,087,247 3,736,085
Other receivables 7,007,403 9,028,968
Advances to suppliers 2,434 2,433
Inventory 12,580,174 12,968,001
------------ ------------
Total current
assets 24,233,829 26,240,086
------------ ------------
Fixed Assets:
Land use rights 3,132,643 3,125,056
Mining rights 1,555,175 1,551,408
Buildings 3,880,911 3,880,911
Equipment 9,998,355 8,508,827
Vehicles 48,584 48,584
Construction in progress 4,731,830 197,596
------------ ------------
Total fixed assets 23,347,498 17,312,382
Less accumulated depreciation and
amortization 5,182,059 4,557,771
------------ ------------
Net fixed assets 18,165,439 12,754,611
------------ ------------
Other Assets:
Long term receivable 1,750,399 1,177,166
Loans receivable 1,020,704 1,018,232
------------ ------------
Total other
assets 2,771,103 2,195,398
------------ ------------
Total Assets $ 45,170,371 $ 41,190,095
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes payable - banks $ 945,718 $ 1,953,988
Accounts payable 3,583,965 3,578,122
Advances from customers 719,514 717,771
Accrued liabilities 646,828 951,821
Other liabilities 2,341,478 3,032,096
Shareholder loan 2,220 49,220
Non controlling interest 1,549,759 --
------------ ------------
Total current
liabilities 9,789,482 10,283,018
------------ ------------
Stockholders' Equity:
Preferred stock - authorized,
100,000,000 shares, $.0001 par value;
0 and 20,250,000 shares issued and
outstanding, respectively -- 2025
Common stock - authorized, 100,000,000
shares, $.0001 par value; 26,983,042
and 6,733,042 shares issued and
outstanding, respectively 2,698 6,733
Capital in excess of par value 2,372,821 2,366,761
Retained Earnings 33,487,942 30,736,148
Earnings appropriated for statutory
reserves 1,205,931 1,205,931
Accumulated other comprehensive
income (1,688,503) (3,410,521)
------------ ------------
Total Stockholders'
equity 35,380,889 30,907,077
------------ ------------
Total Liabilities and Stockholders'
Equity $ 45,170,371 $ 41,190,095
============ ============
CHINA SHUANGJI CEMENT, LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Month Periods Ended September 30,
(unaudited)
2009 2008
------------ ------------
Sales $ 14,160,489 $ 13,225,008
Cost of Sales 12,525,294 11,326,923
------------ ------------
Gross Profit 1,635,195 1,898,085
Selling and Administrative
Expenses 373,002 461,838
------------ ------------
Operating Income 1,262,193 1,436,247
Other Income (Expense):
Subsidy Income -- 69,214
Other Income (235) 1,924
Interest Expense (22,006) (254,893)
Other Expense -- (103,713)
------------ ------------
(22,241) (287,468)
------------ ------------
Non Controlling Interest (119,238) --
------------ ------------
Income Before Income Taxes 1,120,714 1,148,779
Provision for Income Taxes:
Current Provision 312,887 387,379
------------ ------------
Net Income for the Period 807,827 761,400
Other Comprehensive Income (Loss) 1,511,736 77,520
------------ ------------
Total Comprehensive
Income $ 2,319,563 $ 838,920
============ ============
Earnings Per Share - basic and
diluted $ .03 $ .11
Weighted Average Number of Shares
Outstanding 26,983,042 6,733,042
CHINA SHUANGJI CEMENT, LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Nine Month Periods Ended September 30,
(unaudited)
2009 2008
------------ ------------
Sales $ 39,307,017 $ 40,415,435
Cost of Sales 34,473,900 34,780,562
------------ ------------
Gross Profit 4,833,117 5,634,873
Selling and Administrative
Expenses 839,890 917,718
------------ ------------
Operating Income 3,993,227 4,717,155
Other Income (Expense):
Subsidy Income -- 239,119
Other Income 13,023 1,924
Interest Expense (96,320) (1,193,251)
Other Expense -- (104,345)
------------ ------------
(83,297) (1,056,553)
------------ ------------
Non Controlling Interest (144,509) --
------------ ------------
Income Before Income Taxes 3,765,421 3,660,602
Provision for Income Taxes:
Current Provision 1,013,638 1,130,616
------------ ------------
Net Income for the Period 2,751,783 2,529,986
Other Comprehensive Income Loss
On foreign currency conversion 1,722,018 (284,503)
------------ ------------
Total Comprehensive
Income $ 4,473,801 $ 2,245,483
============ ============
Earnings per share - basic
and diluted $ .19 $ .38
Weighted Average Number of Shares
Outstanding 14,744,031 6,733,042
CHINA SHUANGJI CEMENT, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30,
(unaudited)
2009 2008
----------- -----------
CASH FLOWS FROM OPERATIONS:
Net income (loss) $ 2,751,783 $ 2,529,986
Adjustments to reconcile net income
to net cash provided by operating
activities:
Charges and credits not involving
the use of cash:
Depreciation and amortization 1,059,010 1,305,837
Non-controlling interest in
net income 144,509 --
Amortization of deferred interest -- 481,112
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable 1,043,534 (857,781)
Decrease in other receivables 2,027,990 91,848
Decrease in advances to suppliers -- 52,716
Decrease (increase) in subsidy
receivable -- (11,001)
Increase in inventory (110,996) (1,332,408)
Decrease in accounts payable (78,133) (221,402)
Increase (decrease) in advances
from customers -- (67,552)
Increase (decrease) in other
payables (780,963) (286,562)
Decrease in accrued liabilities (242,845) (395,829)
----------- -----------
Net Cash Provided (Consumed) By
Operating Activities 5,813,889 1,288,964
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of acquisition of Longkou (569,966) --
Purchases of fixed assets (1,651,171) (392,069)
Increase in construction in progress (4,530,502) --
Additions to business loans (563,585) (18,572)
Returns of business loans 9,642 99,704
Cash proceeds of inventory sale 673,891 --
Cash proceeds of equipment sale 1,877,693 --
----------- -----------
Net Cash Consumed By Investing
Activities (4,753,998) (310,937)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of preferred stock -- 4,250
Shareholder advance -- 30,000
Borrowings under bank loans -- 2,345,491
Repayments of bank loans (1,012,180) (3,229,021)
Cash received to move Zhaoyuan plant -- 4,668,057
Net Cash Consumed By Financing
Activities (1,012,180) 3,818,777
----------- -----------
Effect on cash of foreign exchange
conversion 4,261 (284,503)
----------- -----------
Net change in cash 51,972 4,512,301
Cash balance, beginning of period 504,599 802,235
----------- -----------
Cash balance, end of period $ 556,571 $ 5,314,536
----------- -----------