China Energy Corp. Reports Financial Results for First Quarter of Fiscal Year 2010
- First quarter fiscal year 2010 revenue up 314.1% to $20.8 million
- Net income of $4.0 million with EPS of $0.09 per share
HOHHOT CITY, China, April 20 /PRNewswire-Asia-FirstCall/ -- China Energy Corporation (OTC Bulletin Board: CHGY), ("China Energy" or "the Company"), a leading Inner Mongolia producer and processor of raw coal for domestic heating, electrical generation, and coking purposes for steel production in the People's Republic of China, recently announced financial results for the first quarter of its fiscal year ending November 30, 2010.
For the quarter ended February 28, 2010, the Company reported revenue of $20.8 million, an increase of 314.1% over revenue of $5.0 million generated in the first quarter of fiscal year 2009. The year-over-year increase in revenue was due to a significant increase in production resulting from a $10 million expansion and improvement program at the LaiYeGou coal mine in Inner Mongolia, PRC. The program was completed in the third quarter of 2009 and included the installation of more efficient "longwall" mining equipment. On a sequential quarterly basis, the Company reported revenue of $22.5 million in the fourth quarter of fiscal year 2009. The slight sequential decrease is due to seasonality in coal group sales in the first quarter of the fiscal year when operations are shut down for approximately two weeks during the Chinese New Year holiday and due to the above-average production volume of the fourth quarter of fiscal year 2009.
First quarter fiscal year 2010 sales from the Company's coal group increased 962% to $16.2 million, or 78.2% of total sales, compared to $1.5 million, or 30.5% of total sales in the same period in fiscal year 2009. As a component of this, 28.1% of total company sales came from coal production, and 50.1% came from coal trading during the first quarter of fiscal year 2010. China Energy produced approximately 156,000 metric tons of coal in the first quarter of 2010, compared to 17,000 metric tons in the same period of fiscal year 2009. Average sales price of coal during the first quarter fiscal year 2010 was $37 per ton, compared to $44 per ton in the same period in fiscal year 2009.
Sales of the heat power group totaled $4.5 million, or 21.8% of total sales, in first quarter fiscal year 2010, compared to $3.5 million or 69.5% of total sales in first-quarter fiscal year 2009. The higher level of sales from the heat power group was due to an increase of over 28.5% in the coverage area of the Company's heat power operations, and a slight increase in the volume of electricity sold by its electric power operations.
"Our strong operating performance in the first quarter of fiscal year 2010 reflects the efficiency of our longwall mining equipment which is now fully integrated at our LaiYeGou coal mine," stated WenXiang Ding, chief executive officer and president. "As a result of this installation we saw our recovery rate increase to 80% from 40%. Our expanded production capacity of 800,000 metric tons at our LaiYeGou coal mine coupled with the growing demand for coal used in power generation, manufacturing and heating in China should generate incremental growth in China Energy's revenue and net income through fiscal year 2010. We are also well positioned to expand our production and distribution capabilities through potential acquisition opportunities leveraging the rich coal resources in Inner Mongolia."
Cost of goods sold in the first quarter of fiscal year 2010 was approximately $13.8 million, compared to approximately $4.7 million in the first quarter of fiscal year 2009. Gross profit was $6.9 million and gross margin was 33.4% in first-quarter of fiscal year 2010, compared to $0.3 million in gross profit and gross margin of 6.5% during the same period in fiscal year 2009.
Operating expenses for the first quarter of fiscal year 2010 were approximately $1.9 million, or 9.4% of revenue, compared to $0.4 million or 8.7% of revenue in first-quarter fiscal year 2009. Selling and marketing expenses in first-quarter fiscal year 2010 were $0.8 million compared to $0.04 million in the same period in fiscal year 2009, and general and administration expenses totaled $1.1 million and $0.4 million in the respective periods. The increase in selling and marketing expenses in the first quarter of fiscal year 2010 was attributable in large part to the inclusion of $0.5 million in transportation and storage expenses incurred in the Company's proprietary coal trading business. These expenses were first incurred in the third quarter of fiscal year 2009 in conjunction with the commencement of the Company's proprietary coal trading business.
Net income in the first quarter of fiscal year 2010 totaled approximately $4.0 million, or $0.09 per share, compared to a loss of approximately $0.5 million, or $0.01 per share in the first quarter of fiscal year 2009. Net income margins were 19.3% for the first quarter of fiscal year 2010. On a sequential quarterly basis, the Company generated net income of $7.1 million, or $0.16 per share in the fourth quarter of fiscal year 2009, which included $1.5 million, or approximately $0.03 per share in government subsidies received as incentive for the Company's heat power unit to supply heat at government-regulated prices. The amount and timing of future subsidies will depend upon market pricing of coal and government pricing for heat. Per share amounts for first quarter 2010 and 2009 are based on 45.0 million shares outstanding.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled $3.7 million on February 28, 2010 compared to $5.1 million on November 30, 2009. The Company had total stockholders' equity of $37.3 million, with total assets of $85.9 million versus total liabilities of $48.6 million on February 28, 2010. For the first quarter of fiscal year 2010, the Company generated about $0.8 million in cash from operations versus cash used in operations of $5.1 million in the first quarter of fiscal year 2009.
About China Energy Corporation
China Energy Corporation produces and processes raw coal for domestic heating, electrical generation and coking purposes for steel production primarily in the People's Republic of China, and acts as a brokerage in facilitating coal trade transactions. The Company produces coal through its subsidiary Inner Mongolia Tehong Coal Group Co, Ltd. ("Coal Group") and supplies heating and electricity requirements throughout the XueJiaWan district through its subsidiary Inner Mongolia Zhunger Heat Power Co., Ltd. ("Heat Power"). Through Heat Power, China Energy operates a thermoelectric plant and 21 heat transfer stations located in XueJiaWan, Ordos City in which the Company has a monopoly for heating supply granted to the Company by the local government. For additional information on China Energy Corporation see http://www.ceccec.com .
Cautionary Statement Regarding Forward-Looking Information
This press release may contain certain "forward-looking statements" relating to the business of China Energy Corporation, and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the impact of the proceeds from the private placement on the Company's short term business and operations,; the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. 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 those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov)
For more information, please contact:
Company:
Alex (Yuan) Gong, Chief Financial Officer
Tel: +86-10-5203-6900
Email: [email protected]
Investor Relations:
HC International, Inc.
Ted Haberfield, Executive VP
Tel: +1-760-755-2716
Email: [email protected]
(Financial Tables Follow)
CHINA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
February 28, November 30,
2010 2009
(Unaudited) (Unaudited)
US$ US$
ASSETS
Current assets:
Cash and cash equivalents 3,719,015 5,073,645
Accounts receivables, net of
allowance for doubtful accounts of
$120,865 and $120,853, respectively 8,897,065 4,600,667
Other receivables 4,394,330 4,447,272
Advances to suppliers 6,893,990 5,511,630
Inventories 3,050,190 5,574,465
Total current assets 26,954,590 25,207,679
Fixed assets:
Property, plant and equipment 50,354,217 50,546,862
Construction in progress 4,472,137 4,236,281
54,826,354 54,783,143
Less: accumulated depreciation
and depletion (8,362,649) (7,456,849)
Net fixed assets 46,463,705 47,326,294
Other assets:
Investment property, net of
accumulated depreciation of $177,520
and $166,172, respectively 1,925,146 1,936,278
Mining right, net of amortization of
$829,340 and $787,417, respectively 3,586,171 3,627,642
Restricted cash 533,432 149,898
Other long term assets 429,298 450,021
Notes receivable 5,989,881 7,913,100
Total other assets 12,463,928 14,076,939
TOTAL ASSETS 85,882,223 86,610,912
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term bank loans 8,790,178 12,012,012
Accounts payable 9,411,069 11,489,568
Advances from customers 10,914,989 12,125,187
Accrued liabilities 388,887 325,539
Other payables 1,514,834 387,729
Shareholder loans 10,393,738 9,972,279
Current portion of deferred income 859,454 822,930
Total current liabilities 42,273,149 47,135,244
Non-current liabilities:
Deferred income 6,348,688 6,224,033
Total liabilities 48,621,837 53,359,277
Stockholders' equity:
Common stock: authorized 200,000,000
shares of $0.001 par value;
45,000,000 shares issued and
outstanding 45,000 45,000
Additional paid-in capital 8,655,805 8,655,805
Paid in capital - stock options 315,000 315,000
Retained earnings 16,358,708 12,542,081
Statutory reserves 8,266,424 8,078,765
Accumulated other comprehensive income 3,619,449 3,614,984
Total stockholders' equity 37,260,386 33,251,635
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY 85,882,223 86,610,912
CHINA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended
February 28,
2010 2009
US$ US$
Revenues $20,768,876 $5,014,946
Cost of revenues (13,826,407) (4,687,252)
Gross profit 6,942,469 327,694
Operating expenses:
Selling and marketing (840,717) (42,637)
General and administrative (1,103,652) (392,054)
Total operating expenses (1,944,369) (434,691)
Income (loss) from operations 4,998,100 (106,997)
Other income and expenses
Investment income -- 34,351
Non-operating income 113,463 160,401
Finance expenses, net (215,349) (95,388)
Government subsidies -- 153,024
Non-operating expenses (44,356) (700,665)
Income (loss) before income taxes 4,851,858 (555,274)
(Provision for) benefit from income taxes (847,572) 22,924
Net income (loss) 4,004,286 (532,350)
Other comprehensive income
Foreign currency translation adjustment 4,465 (52,405)
Total comprehensive income (loss) 4,008,751 $(584,755)
Net income (loss) per common share
basic and diluted 0.09 $(0.01)
Weighted average common shares
outstanding basic and diluted 45,000,000 45,000,000
CHINA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended
February 28,
2010 2009
US$ US$
Cash flows from operating activities:
Net profit (loss) 4,004,286 (532,350)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 979,126 788,961
Interest accrued on shareholder loans 51,271 49,332
Loss on disposal of property, plant
and equipment -- 694,081
Gain from short term investments -- (34,351)
Changes in operating assets and
liabilities:
Increase in restricted cash (383,534) --
Increase in accounts receivable (4,296,410) (2,413,956)
Decrease in other receivables 52,942 601,771
Increase in advances to suppliers (243,212) (388,999)
Decrease (increase) in inventories 2,524,275 (286,762)
Increase in deferred income 161,179 631,705
Decrease in accounts payable (2,078,504) (4,116,790)
Decrease in advances from customers (1,210,198) (230,923)
Increase in accrual liabilities and
other payables 1,190,453 142,165
Net cash provided by (used in)
operating activities 751,674 (5,096,116)
Cash flows from investing activities:
Purchase of property, plant and
equipment (946,503) (1,109,368)
Increase in construction in progress (235,856) (249,421)
Increase in notes receivable (29,301) --
Payments received on notes receivable 1,952,520 833,022
Net cash provided by (consumed by)
investing activities 740,860 (525,767)
Cash flows from financing activities:
Proceeds from short term bank loans -- 1,638,733
Principal payments made on short term
bank loans (3,221,834) --
Advances from shareholders 887,473 3,956,173
Repayments of shareholders loans (518,007) (212,352)
Net cash (used in) provided by
financing activities (2,852,368) 5,382,554
Effect of exchange rate changes on
cash 5,204 117,990
Net change in cash and cash
equivalents (1,354,630) (121,339)
Cash and cash equivalents, beginning
of period 5,073,645 456,802
Cash and cash equivalents, end
of period 3,719,015 335,463
Supplemental disclosure of cash
flow information
Cash paid for interest 253,914 230,401
Cash paid for income taxes 478,989 --
SOURCE China Energy Corporation
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