China Carbon Graphite Group Reports Second Quarter 2013 Financial Results
INNER MONGOLIA, China, Aug. 15, 2013 /PRNewswire/ -- China Carbon Graphite Group, Inc. (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 second quarter ended June 30, 2013.
Mr. Donghai Yu, Chief Executive Officer of China Carbon, commented, "As China's steel industry continued to battle with over-capacity, slowing demand growth, and deteriorating steel prices, the graphite industry remained challenged during the second quarter of 2013. The difficult industry environment was reflected in our disappointing financial results for the second quarter. However, graphite prices had stabilized during the second quarter and likely bottomed in our view. Looking ahead, we expect the graphite industry to recover in 2014 as demand increases and competition eases when more small players are forced to exit the market during this downturn."
Second Quarter 2013 Financial Results
| Three Months Ended June 30 |
|||||||
| 2013 |
2012 |
||||||
| Sales |
% of Total |
Sales |
% of Total |
||||
| Graphite Electrodes |
$1,579,942 |
58.2% |
$1,497,743 |
12.6% |
|||
| Fine Grain Graphite |
916,953 |
33.8% |
5,307,387 |
44.7% |
|||
| High Purity Graphite |
13,574 |
0.5% |
4,902,424 |
41.3% |
|||
| Others |
203,784 |
7.5% |
169,989 |
1.4% |
|||
| Total |
$2,714,254 |
100.0% |
$11,877,543 |
100.0% |
|||
Sales: For the three months ended June 30, 2013, sales decreased by $9.16 million, or 77.1%, to $2.71 million from $11.88 million for the second quarter of 2012. The decrease in sales was mainly due to industry-wide demand weakness for our products as a result of continued struggles of steel manufacturers. Demand for our fine grain graphite and high purity graphite products was particularly weak during the second quarter with sales decreasing 82.7% and 99.7% to $0.92 million and $0.01 million, respectively. Sales of graphite electrodes increased 5.5% to $1.58 million while sales of semi-processed and other types of products grew 19.9% to $0.20 million.
Gross Income (Loss): Gross profit for the second quarter of 2013 was ($1.03) million, compared to gross profit of $2.89 million for the same period of last year. Gross margin decreased to (38.1%) for the second quarter of 2013 from 24.4% for the same period of last year. The decrease in gross margin was mainly due to increased percentage of low margin product sales, increased depreciation allocated to the cost of goods sold due to the transfer of construction in progress to property and equipment since the end of 2012, and increased fixed cost allocation as a result of decreased production volume.
Operating Income (Loss):
Selling Expenses:
Selling expenses decreased by 31.8% to $0.03 million for the second quarter of 2013 from $0.02 million for the same period of last year. The decrease was mainly due to decreased sales commission and lower shipping and handling expenses during the three months ended June 30, 2013 as compared to the three months ended June 30, 2012, which was resulted from lower sales.
General and Administrative Expenses:
General and administrative expenses increased by $6.23 million, or 532.4%, to $7.40 million for the second quarter of 2013 from $1.17 million for the same period of last year. The increase in general and administrative expenses was mainly due to increased consulting expenses and increased inventory impairment expenses for the three months ended June 30, 2013 compared to the three months ended June 30, 2012.
Depreciation and Amortization Expenses:
Depreciation and amortization expenses increased by $0.19 million, or 33.3%, to $0.74 million for the second quarter of 2013 from $0.56 million for the same period of last year. The increase in depreciation and amortization expenses was due to additional fixed assets placed in service.
Operating expenses totaled $7.47 million for the second quarter of 2013, compared to $1.25 million for the same period of 2012, an increase of $6.23 million, or 499.6%. Operating income decreased by $10.15 million, or 616.9%, to ($8.51) million for the second quarter of 2013 from $1.65 million for the same period of last year. As a result of the factors described above, operating income (loss) margin was (313.4%) for the second quarter of 3013, compared to 13.9% for the second quarter of last year.
Net Income (Loss): Net loss available to common stockholders was ($9.45) million, or ($0.37) per diluted share, for the second quarter of 2013, compared to net income available to common stockholders of $0.87 million, or $0.04 per diluted share, for the second quarter of 2012.
Six Months Ended June 30, 2013 Financial Results
| Six Months Ended June 30 |
|||||||
| 2013 |
2012 |
||||||
| Sales |
% of Total |
Sales |
% of Total |
||||
| Graphite Electrodes |
$1,660,902 |
28.8% |
$2,645,516 |
12.1% |
|||
| Fine Grain Graphite |
2,331,909 |
40.4% |
9,776,198 |
44.6% |
|||
| High Purity Graphite |
1,505,095 |
26.1% |
9,260,948 |
42.2% |
|||
| Others |
297,266 |
5.1% |
256,091 |
1.2% |
|||
| Total |
$5,775,172 |
100.0% |
$21,938,753 |
100.0% |
|||
Sales: For the six months ended June 30, 2013, sales decreased by $16.16 million, or 73.7%, to $5.78 million from $21.94 million for same period of last year. The decrease in sales was mainly due to industry-wide demand weakness for our products as a result of continued struggles of steel manufacturers. Demand for our fine grain graphite and high purity graphite products was particularly weak for the six months ended June 30, 2013 with sales decreasing 76.1% and 83.7% to $2.33 million and $1.51 million, respectively. Sales of graphite electrodes also decreased by 37.2% to $1.66 million. Sales of semi-processed and other types of products grew 16.1% to $0.30 million.
Gross Income (Loss): Gross profit (loss) for the six months ended June 30, 2013 was ($1.29) million, compared to gross profit of $5.81 million for the same period of last year. Gross margin decreased to (22.4%) for the six months ended June 30, 2013 from 26.5% for the same period of last year. The decrease in gross margin was mainly due to increased percentage of low margin product sales, increased depreciation allocated to the cost of goods sold due to the transfer of construction in progress to property and equipment since the end of 2012, and increased fixed cost allocation as a result of decreased production volume.
Operating Income (Loss):
Selling Expenses:
Selling expenses decreased by $0.04 million, or 50.2%, to $0.04 million for the six months ended June 30, 2013 from $0.08 million for the same period of last year. The decrease was mainly due to decreased sales commission and lower shipping and handling expenses during the six months ended June 30, 2013 as compared to the same period of last year, which resulted from lower sales.
General and Administrative Expenses:
General and administrative expenses increased by $5.76 million, or 285.1%, to $7.79 million for the six months ended June 30, 2013 from $2.02 million for the same period of last year. The increase in general and administrative expenses was mainly due to increased consulting expenses and increased inventory impairment expenses for the six months ended June 30, 2013 compared to the same period of last year.
Depreciation and Amortization Expenses:
Depreciation and amortization expenses increased by $0.04 million, or 2.58%, to $1.40 million for the six months ended June 30, 2013 from $1.36 million for the same period of last year. The increase in depreciation and amortization expenses was due to additional fixed assets placed in service.
Operating expenses totaled $7.94 million for the six months ended June 30, 2013, compared to $2.20 million for the same period of last year, an increase of $5.74 million, or 260.8%. Operating income decreased by $12.85 million, or 356.0%, to ($9.24) million for the six months ended June 30, 2013 from $3.61 million for the same period of last year. As a result of the factors described above, operating income (loss) margin was (159.9%) for the six months ended June 30, 2013, compared to 16.4% for the same period of last year.
Net Income (Loss): Net loss available to common stockholders was ($10.96) million, or ($0.43) per diluted share, for the six months ended June 30, 2013, compared to net income available to common stockholders of $1.11 million, or $0.05 per diluted share, for the same period of 2012.
Financial Position
As of June 30, 2013, the Company had cash and cash equivalents of $0.36 million, restricted cash of $27.37 million, and short-term bank loans of $45.78 million. Net cash used in operating activities was ($5.23) million for the six months ended June 30, 2013, compared to net cash provided by operating activities of $1.83 million for the same period of last year.
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 Group Inc. is the only non-state-owned company to receive this honor. For more information, please visit http://www.chinacarboninc.com.
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.
Company Contact:
Donghai Yu, CEO
China Carbon Graphite Group Inc.
Email: [email protected]
Website: http://www.chinacarboninc.com
Investor Relations Contact:
Tina Xiao
Weitian Group LLC
Tel: +1-917-609-0333
Email: [email protected],
Website: http://www.weitian-ir.com
| China Carbon Graphite Group, Inc.and subsidiaries |
|||||
| Consolidated Balance Sheets |
|||||
| June 30, 2013 |
December 31, 2012 |
||||
| (Unaudited) |
(Audited) |
||||
| ASSETS |
|||||
| Current Assets |
|||||
| Cash and cash equivalents |
$ |
356,102 |
$ |
129,746 |
|
| Restricted cash |
27,373,155 |
22,149,000 |
|||
| Accounts receivable, Net |
8,063,402 |
11,239,002 |
|||
| Notes receivable |
5,526,864 |
- |
|||
| Advance to suppliers |
1,840,782 |
1,177,462 |
|||
| Inventories |
42,787,195 |
48,417,875 |
|||
| Prepaid expenses |
981,809 |
280,779 |
|||
| Other receivables, net of allowance of $223,683 and $220,339, respectively |
122,465 |
35,655 |
|||
| Total current assets |
87,051,774 |
83,429,520 |
|||
| Property And Equipment, Net |
40,348,619 |
40,964,363 |
|||
| Construction In Progress |
24,434,608 |
7,324,379 |
|||
| Land Use Rights, Net |
9,753,620 |
9,657,419 |
|||
| Total Assets |
$ |
161,588,621 |
$ |
141,375,681 |
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
| Current Liabilities |
|||||
| Accounts payable and accrued expenses |
$ |
2,359,879 |
$ |
2,250,745 |
|
| Advance from customers |
1,779,550 |
1,368,525 |
|||
| Short term bank loans |
45,784,860 |
38,680,500 |
|||
| Notes payable |
50,998,794 |
40,606,500 |
|||
| Other payables |
1,604,246 |
630,179 |
|||
| Loan from unrelated parties |
265,073 |
338,002 |
|||
| Dividends payable |
55,841 |
46,816 |
|||
| Total current liabilities |
102,848,243 |
83,921,267 |
|||
| Amount due to related parties |
4,748,375 |
4,795,593 |
|||
| Long Term Bank Loan |
16,260,957 |
4,782,900 |
|||
| Accounts Payable - Long Term |
- |
||||
| Warrant Liabilities |
78,654 |
224,362 |
|||
| Total Liabilities |
123,936,229 |
93,724,122 |
|||
| Redeemable convertible series B preferred stock, $0.001 par value; 3,000,000 shares authorized; 300,000 and 300,000 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively |
360,000 |
360,000 |
|||
| Stockholders' Equity |
|||||
| Common stock, $0.001 par value; 100,000,000 shares authorized 26,282,518 and 25,077,518 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively |
26,282 |
25,077 |
|||
| Additional paid-in capital |
18,540,025 |
18,223,781 |
|||
| Accumulated other comprehensive income |
9,621,604 |
8,982,925 |
|||
| Retained earnings |
9,104,481 |
20,059,777 |
|||
| Total stockholders' equity |
37,292,392 |
47,291,558 |
|||
| Total Liabilities and Stockholders' Equity |
$ |
161,588,621 |
$ |
141,375,681 |
|
| China Carbon Graphite Group, Inc and subsidiaries |
|||||||||||
| Consolidated Statements of Operations and Comprehensive Income |
|||||||||||
| For the Three and Six Months Ended June 30, 2013 and 2012 |
|||||||||||
| (Unaudited) |
|||||||||||
| Three months ended June 30, |
Six months ended June 30, |
||||||||||
| 2013 |
2012 |
2013 |
2012 |
||||||||
| Sales |
$ |
2,714,252 |
$ |
11,877,543 |
$ |
5,775,170 |
$ |
21,938,753 |
|||
| Cost of Goods Sold |
3,748,027 |
8,985,125 |
7,068,347 |
16,128,731 |
|||||||
| Gross Profit (Loss) |
(1,033,775) |
2,892,418 |
(1,293,177) |
5,810,022 |
|||||||
| Operating Expenses |
|||||||||||
| Selling expenses |
19,895 |
29,152 |
37,836 |
75,950 |
|||||||
| General and administrative |
7,402,091 |
1,170,462 |
7,786,673 |
2,021,861 |
|||||||
| Depreciation and amortization |
51,814 |
46,826 |
119,702 |
103,830 |
|||||||
| Total operating expenses |
7,473,800 |
1,246,440 |
7,944,211 |
2,201,641 |
|||||||
| Operating (Loss) Income Before Other Income (Expense) |
(8,507,575) |
1,645,978 |
(9,237,388) |
3,608,381 |
|||||||
| Other Income (Expense) |
|||||||||||
| Interest expense |
(1,054,202) |
(1,220,173) |
(1,916,650) |
(2,449,918) |
|||||||
| Interest income |
16,502 |
21 |
61,806 |
43 |
|||||||
| Other expense |
- |
(215,468) |
- |
(215,468) |
|||||||
| Other income (expense), net |
(68) |
215,190 |
253 |
215,190 |
|||||||
| Change in fair value of warrants |
101,340 |
445,763 |
145,708 |
(33,800) |
|||||||
| Total other expense (income), net |
936,428 |
(774,667) |
1,708,883 |
(2,483,953) |
|||||||
| (Loss) Income Before Income Tax Expense |
(9,444,003) |
871,311 |
(10,946,271) |
1,124,428 |
|||||||
| Income Tax Expense |
- |
- |
- |
- |
|||||||
| Net Income (Loss) |
(9,444,003) |
871,311 |
(10,946,271) |
1,124,428 |
|||||||
| Preferred Stock Dividends |
(4,488) |
(4,625) |
(9,025) |
(9,643) |
|||||||
| Net Income (Loss) Available To Common Shareholders |
(9,448,491) |
866,686 |
(10,955,296) |
1,114,785 |
|||||||
| Other Comprehensive Income |
|||||||||||
| Foreign currency translation gain |
492,402 |
(433,954) |
638,679 |
(10,057) |
|||||||
| Total Comprehensive Income (Loss) |
$ |
(8,951,601) |
$ |
437,357 |
$ |
(10,307,592) |
$ |
1,114,371 |
|||
| Share Data |
|||||||||||
| Basic earnings (loss) per share |
$ |
(0.37) |
$ |
0.04 |
$ |
(0.43) |
$ |
0.05 |
|||
| Diluted earnings (loss) per share |
$ |
(0.37) |
$ |
0.04 |
$ |
(0.43) |
$ |
0.05 |
|||
| Weighted average common shares outstanding, basic |
25,810,980 |
23,948,851 |
25,459,203 |
23,632,248 |
|||||||
| Weighted average common shares outstanding, diluted |
25,810,980 |
24,254,661 |
25,459,203 |
23,938,058 |
|||||||
| China Carbon Graphite Group, Inc and subsidiaries |
|||||
| Consolidated Statements of Cash Flows |
|||||
| (Unaudited) |
|||||
| Six months ended June 30, |
|||||
| 2013 |
2012 |
||||
| Cash Flows from Operating Activities |
|||||
| Net income (loss) |
$ |
(10,946,271) |
$ |
1,124,428 |
|
| Adjustments to reconcile net cash provided by (used in) operating activities |
|||||
| Depreciation and Amortization |
1,395,836 |
1,360,692 |
|||
| Related party interest expenses contribution |
- |
222,860 |
|||
| Stock compensation |
317,450 |
374,333 |
|||
| Change in fair value of warrants |
(145,708) |
33,800 |
|||
| Bad debt expenses |
- |
- |
|||
| Inventory impairment |
5,328,291 |
- |
|||
| Changes in operating assets and liabilities |
|||||
| Accounts receivable |
3,318,834 |
(557,196) |
|||
| Notes receivable |
(5,481,758) |
(257,316) |
|||
| Other receivables |
(85,565) |
(31,808) |
|||
| Advance to suppliers |
(640,186) |
3,529,409 |
|||
| Inventory |
985,140 |
(6,755,136) |
|||
| Prepaid expenses |
(691,743) |
(2,719) |
|||
| Accounts payable and accrued liabilities |
77,525 |
2,684,917 |
|||
| Advance from customers |
387,073 |
192,640 |
|||
| Taxes payable |
110,025 |
(444,341) |
|||
| Other payables |
844,271 |
353,241 |
|||
| Net cash (used in) provided by operating activities |
(5,226,786) |
1,827,804 |
|||
| Cash flows from investing activities |
|||||
| Acquisition of property, plant and equipment |
(2,434) |
(37,756) |
|||
| Increase of land use rights |
(116,227) |
- |
|||
| Addition of construction in progress |
(16,860,357) |
(1,109,403) |
|||
| Net cash used in investing activities |
(16,979,018) |
(1,147,159) |
|||
| Cash flows from financing activities |
|||||
| Proceeds from issuing common stock |
- |
472,000 |
|||
| Proceeds from short term loans |
11,312,400 |
11,074,000 |
|||
| Repayments for short term loans |
(4,848,171) |
(17,876,600) |
|||
| Proceeds from long term loans |
21,008,743 |
4,714,360 |
|||
| Proceeds from loan from unrelated parties |
(77,421) |
9,162,944 |
|||
| Payment of loans from unrelated parties |
- |
(9,162,944) |
|||
| Proceeds from loan from related parties |
451,524 |
31,640 |
|||
| Repayments to related parties |
(570,533) |
(142,380) |
|||
| Proceeds from stock not yet issued |
- |
(145,000) |
|||
| Restrict cash |
(4,848,171) |
996,660 |
|||
| Proceeds from notes payable |
17,776,629 |
17,876,600 |
|||
| Repayments to notes payable |
(17,776,629) |
(16,848,300) |
|||
| Net cash provided by financing activities |
22,428,371 |
152,980 |
|||
| Effect of exchange rate fluctuation |
3,787 |
(4,185) |
|||
| Net increase in cash |
226,354 |
829,440 |
|||
| Cash and cash equivalents at beginning of period |
129,746 |
521,450 |
|||
| Cash and cash equivalents at ending of period |
$ |
356,100 |
$ |
1,350,890 |
|
| Supplemental disclosure of cash flow information |
|||||
| Interest paid |
$ |
2,451,059 |
$ |
1,643,371 |
|
| Income taxes paid |
$ |
- |
$ |
- |
|
| Non-cash activities: |
|||||
| Preferred stock conversion to common stock |
$ |
- |
$ |
144 |
|
| Issuance of common stock for compensation |
$ |
317,450 |
$ |
153,800 |
|
SOURCE China Carbon Graphite Group, Inc.
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