JINJIANG, China, Sept. 25, 2019 /PRNewswire/ -- China Ceramics
Co., Ltd. (NASDAQ Capital Market: CCCL) ("China Ceramics" or the
"Company"), a leading Chinese manufacturer of ceramic tiles used
for exterior siding and for interior flooring and design in
residential and commercial buildings, today announced its financial
results for the six months ended June 30,
2019.
First Half 2019 Summary
- Revenue was RMB 177.4 million
(US$ 26.2 million) for the six months
ended June 30, 2019, as compared to
RMB 355.6 million (US$ 55.9 million) for the same period of
2018.
- Gross profit was RMB 15.3 million
(US$ 2.3 million) for the six months
ended June 30, 2019, as compared to a
gross profit of RMB 44.8 million
(US$ 7.0 million) for the same period
of 2018.
- Operating results were affected by bad debt expense of
RMB 193.9 million (US$ 28.6 million) for the six months ended
June 30, 2019, as compared to bad
debt expense of RMB 106.4 million
(US$ 16.7 million) for the same
period of 2018.
- Net loss was RMB 193.1 million
(US$ 28.5 million) for the six months
ended June 30, 2019, as compared to a
net loss of RMB 71.9 million
(US$ 11.3 million) for the same
period of 2018.
- Loss per share both on a basic and fully diluted basis were
RMB 32.23 (US$
4.75) for the six months ended June
30, 2019, as compared to loss per share on a basic and fully
diluted basis of RMB 17.23
(US$ 2.71) for the six months ended
June 30, 2018.
"For the first half of 2019, we continued to experience
difficult market conditions as occurred during the second half of
2018. Our revenue fell by one-half as a result of a corresponding
decrease in sales volume, while our ability to implement price
changes to increase our sales volume diminished due to the
currently challenging market environment," said Meishuang Huang,
Chief Executive Officer of China Ceramics.
"During the six months ended June 30,
2019, we utilized production facilities capable of producing
6 million square meters of ceramic tiles per year out of the
Company's effective total annual production capacity of 56.5
million square meters of ceramic tiles. Consistent with our
practices in past quarters, we maintained a reduced utilization of
existing plant capacity based on the current market environment to
keep our operating costs low. We intend to bring additional
capacity online as the business environment improves."
"For the second half of 2019, we believe that market conditions
will continue to be challenging due to the slowdown of China's economy and possible government
regulations intended to rein in real estate speculation. However,
we believe that our building materials sector will continue to
benefit from urbanization and real estate property development
which are both vital to China's
continued growth. Our strategic plan is to focus on targeted cities
in China as well as to grow our
new products portfolio by bolstering our research and development
efforts in order to expand our market. As announced, we intend to
enter new markets in Southeast
Asia where we believe that the marketing of our existing
products and our new ceramic tiles that cool building interiors
will be successful," concluded Ms. Huang.
Fiscal Six Months Results Ended June
30, 2019
Revenue for the six months ended June 30, 2019 was RMB
177.4 million (US$ 26.2
million), as compared to RMB 355.6
million (US$ 55.9 million) for
the same period of 2018. The 50.1% year-over-year decrease in
revenue was due to the 48.0% decrease in our sales volume to 6.6
million square meters of ceramic tiles for the six months ended
June 30, 2019 compared to 12.7
million square meters of ceramic tiles for the same period of
2018.
Gross profit for the six months ended June 30, 2019 was RMB 15.3
million (US$ 2.3 million), as
compared to gross profit of RMB 44.8
million (US$ 7.0 million) for
the same period of 2018. The gross profit margin was 8.6% as
compared to a 12.6% gross profit margin for the same period of
2018. The decrease in gross profit margin for the six months ending
June 30, 2019 was due to the 48.0%
decrease in sales volume from period to period.
Other income for the six months ended June 30, 2019 was RMB 7.1
million ($1.1 million), the
same as the RMB 7.1 million
($1.1 million) for the comparable
period of 2018. Other income is primarily comprised of rental
income that the Company received by leasing out one of its
production lines from its Hengdali facility pursuant to an
eight-year lease contract.
Selling and distribution expenses for the six months
ended June 30, 2019 were RMB 5.7 million (US$ 0.8
million), the same as the RMB 5.7
million (US$ 0.8 million) for
the comparable period of 2018.
Administrative expenses for the six months ended
June 30, 2019 were RMB 15.9 million (US$ 2.3
million), as compared to RMB 10.5
million (US$ 1.6 million), for
the same period of 2018. The increase in administrative expenses
was primarily due to an increase in research and development
expenses of RMB 6.4 million, which
was partly offset by an RMB 0.4
million decrease in legal expenses and an RMB 0.5 million decrease in payroll expenses.
Bad debt expense for the six months ended June 30, 2019 was RMB
193.9 million (US$ 28.6
million), as compared to RMB 106.4
million (US$ 16.7 million) for
the same period of 2018, with the increase due to a rise in the
provision for uncollectible debt associated with our customers. We
recognized a loss allowance for an expected credit loss on
financial assets, primarily on our trade receivables, which are
subject to impairment under International Financial Reporting
Standards (IFRS). We believe that we have undertaken appropriate
measures to resolve bad debt expense going forward. We will
continue to review credit worthiness of each of our customers and
continuously test our trade receivables balance in each upcoming
fiscal period.
Other expenses for the six months ended June 30, 2019 were RMB
9,000 (US$ 1,330), as compared
to RMB 1.3 million (US$ 0.2 million) for the same period of 2018. The
decrease in other expenses was mainly due to a decrease in
depreciation expense resulting from the impairment of fixed assets
and land use rights that occurred in the six months ended
December 31, 2018.
Net loss for the six months ended June 30, 2019 was RMB
193.1 million (US$ 28.5
million), as compared to a net loss of RMB 71.9 million (US$ 11.3
million) for the same period of 2018. The increase in net
loss was mainly due to lower sales, an increase in bad debt expense
and an increase in administrative expenses for the six months ended
June 30, 2019 as compared to the same
period of 2018.
Loss per basic share and fully diluted share for the six
months ended June 30, 2019 were
RMB 32.23 (US$
4.75), as compared to loss per basic and fully diluted share
of RMB 17.23 (US$ 2.71) for the same period of 2018. Basic and
fully diluted per share calculations for the six months ended
June 30, 2019 was computed using
5,993,605 ordinary shares outstanding, and the basic and fully
diluted per share calculations for the same period of 2018 was
computed using 4,172,926 ordinary shares outstanding.
Statements of Selected Financial Position Items for the Six
Months Ended June 30, 2019
- Cash and bank balances were RMB 9.4
million (US$ 1.4 million) as
of June 30, 2019, compared with
RMB 9.0 million (US$ 1.3 million) as of December 31, 2018.
- Inventory turnover was 122 days as of June 30, 2019, as compared to 117 days as of
December 31, 2018. The increase in
inventory turnover days was primarily due to the 48.0% decrease in
our sales volume in the first half of 2019 as compared to the same
period of 2018. We believe that the currently challenging economic
environment has, in general, caused a lower turnover than normal
and we will make a continuous effort to deplete our slow-moving
stocks as began in October 2016 when
we reduced the prices of our slow-moving products.
- Trade receivables turnover, net of value added tax, was 134
days as of June 30, 2019, as compared
with 233 days as of December 31,
2018. We wrote off bad debt expense of RMB 193.9 million in the first half of 2019,
which caused significant lower net trade receivables at
June 30, 2019 and accordingly the
less turnover days.
- Trade payables turnover, net of value added tax, was 32 days as
of June 30, 2019 as compared with 26
days as of December 31, 2018. The
average turnover days was within the normal credit period of one to
four months granted by our suppliers.
Liquidity and Capital Resources
Cash flow generated from operating activities was
RMB 9.8 million (US$ 1.4 million) for the six months ended
June 30, 2019, as compared to cash
used in operating activities of RMB 3.8
million (US$ 0.6 million) in
the same period of 2018. The increase in cash inflow was mainly due
to increased cash inflow from inventories and decreased cash
outflow on trade receivables.
Cash flow generated from investing activities was
RMB 1.7 million (US$ 0.3 million) for the six months ended
June 30, 2019, as compared to cash
flow used in investing activities of nil for the same period of
2018. The increase of cash inflow was mainly due to decrease in
restricted cash.
Cash flow used in financing activities was RMB 11.0 million (US$ 1.6
million) for the six months ended June 30, 2019, as compared to cash flow generated
from financing activities of RMB 8.0
million (US$ 1.2 million) in
the same period of 2018. The increase in cash outflow of financing
activities is due to the payment for lease liabilities of
RMB 13.9 million.
Plant Capacity and Capital Expenditures Update
We utilized plant capacity capable of producing 6.0 million
square meters of ceramic tiles for the six months ended
June 30, 2019 out of a total annual
production capacity of 56.5 million square meters. Our annual
production capacity has been reduced from 66 million square meters
of ceramic tiles as of December 31,
2017 to 56.5 million square meters of ceramic tiles due to
our having retired two old furnaces at the Hengda facility in July
of 2018.
Our Hengda facility has an annual production capacity of 27.7
million square meters of ceramic tiles as a result of two old
furnaces having been put out of use at the facility. The Company
utilized production capacity at our Hengda facility capable of
producing 3.2 million square meters of ceramic tiles for the six
months ended June 30, 2019.
Our Hengdali facility has an annual production capacity of 28.8
million square meters (which excludes our leasing out 10 million
square meters of production capacity to a third party) and we
utilized production capacity at our Hengdali facility capable of
producing 2.8 million square meters of ceramic tiles for the six
months ended June 30, 2019.
We will bring our unused production capacity online as customer
demand dictates and when there are signs of improvement in
China's real estate and
construction sectors.
We review the level of capital expenditures throughout the year
and make adjustments subject to market conditions. Although
business conditions are subject to change, we anticipate a modest
level of capital expenditures for the remainder of 2019 other than
those associated with minimal upgrades, small repairs and the
maintenance of equipment.
Business Outlook
In an effort to bolster sales, in July of 2018 we decreased the
pricing of our ceramic tile products by an average of 10%. This
followed a pricing increase of 5% that we instituted in April of
2018 following three price raises beginning in April of 2017.
However, the 10% price decrease in July
2018 did not offset the fall in our sales volume due to
deteriorating market conditions that persisted through the second
half of 2018, and we do not believe that further price decreases
would have had a beneficial effect upon sales volume. Accordingly,
we did not implement any price adjustments for our ceramic tile
products in the first half of 2019.
To address the current market environment, we have announced
plans to enter the ceramic tile market in Southeast Asia and that we are negotiating
with customers in the first target market of Malaysia. We also plan to expand our sales
force to procure new customers and to increase our marketing to
large property developers in targeted cities. In addition, we have
bolstered our research and development efforts with the goal of
developing new products in order to expand our market. As a result
of this last initiative, we have recently announced that we
developed a new type of exterior ceramic tile designed to cool
temperatures of buildings which, once fully tested and certified,
will target the Southeast Asia
market.
Looking ahead to the remainder of 2019, and based on the
information currently available to us, we expect market conditions
to continue to be challenging due to a slowing domestic economy as
well as an excess supply of housing stock in some of China's cities. Also, the current trade war
between China and the US could
lead to slower growth in China
which could have the effect of contracting real estate
development.
As has occurred in the past, the central Chinese government will
likely continue to balance imposing restrictions to prevent any
overheating of the real estate sector with providing incentives to
encourage stable demand. The Chinese government continues to
discourage real estate speculation and is therefore advocating for
more rental housing and "joint-ownership housing", homes that are
co-owned by individuals and the state.
The Company believes that real estate in China is sustainable on a long-term basis as
it accounts for an estimated 25% of GDP and is the most important
asset for a high proportion of Chinese households. Therefore,
active property development and a vibrant building materials sector
continue to be a vital component of China's growth. As property developers
were very active in terms of land acquisitions in the first half of
2019, we may see an increase in new construction in the second half
of the year, though the central Chinese government may eventually
tighten developers' financing to curb a possible overheating of the
land market.
We believe that as China's
urbanization trend underpins its continued economic growth, we
anticipate the continued growth of urban housing and a sustained
demand for our building materials products. We believe that we
retain a competitive advantage in our sector due to our brand name
recognition, innovative ceramic tile products, customization
capabilities, and our ability to quickly and expertly meet our
customers' needs.
This business outlook reflects the Company's current and
preliminary views, which are subject to change and is subject to
risks and uncertainties, as well as risks and uncertainties
identified in the Company's public filings.
Conference Call Information
We will host a conference call at 8:00 am ET on Wednesday, September 25, 2019. Listeners may
access the call by dialing +1 (877) 275-8968 five to ten minutes
prior to the scheduled conference call time. International callers
should dial +1 (706) 643-1666. The conference participant pass code
is 2368849. A replay of the conference call will be available for
14 days starting from 11:00 am ET on
September 25, 2019. To access the
replay, dial +1 (855) 859-2056. International callers should dial
+1 (404) 537-3406. The pass code is 2368849 for the replay.
About China Ceramics Co., Ltd.
China Ceramics Co., Ltd. is a leading manufacturer of ceramic
tiles in China. The Company's
ceramic tiles are used for exterior siding, interior flooring, and
design in residential and commercial buildings. China Ceramics'
products, sold under the "Hengda" or "HD", "Hengdali" or "HDL", the
"TOERTO" and "WULIQIAO" brands, and the "Pottery Capital of Tang
Dynasty" brands, are available in over 2,000 style, color and size
combinations and are distributed through a network of exclusive
distributors as well as directly to large property developers. For
more information, please visit http://www.cceramics.com.
Currency Convenience Translation
The Company's financial information is stated in Renminbi
("RMB"). Translations of amounts from RMB into United States dollars ("US$") in this earnings
release are solely for the convenience of the readers and were
calculated at the rate of US$1.00 =
RMB 6.8650 for balance sheet accounts
at the balance sheet date, US$1.00 =
RMB 6.7836 for the P&L accounts
for the six months ended June 30,
2019. The exchange rate refers to the historical rate as set
forth in the H.10 statistical release published by
www.federalreserve.gov on June 30,
2019. Such translations should not be construed as
representations that RMB amounts could have been, or could be,
converted realized or settled into US$ at that rate on June 30, 2019 or any other rate.
Safe Harbor Statement
Certain of the statements made in this press release are
"forward-looking statements" within the meaning and protections of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements include statements with respect to our
beliefs, plans, objectives, goals, expectations, anticipations,
assumptions, estimates, intentions, and future performance, and
involve known and unknown risks, uncertainties and other factors,
which may be beyond our control, and which may cause the actual
results, performance, capital, ownership or achievements of the
Company to be materially different from future results, performance
or achievements expressed or implied by such forward-looking
statements. Forward-looking statements in this press release
include, without limitation, the continued stable macroeconomic
environment in the PRC, the PRC real estate and construction
sectors continuing to exhibit sound long-term fundamentals, our
ability to bring additional capacity online going forward as our
business improves, our customers continuing to adjust to our
product price increases, our ability to sustain our average selling
price increases and to continue to build volume in the quarters
ahead, and whether our enhanced marketing efforts will help to
produce wider customer acceptance of the new price points. All
statements other than statements of historical fact are statements
that could be forward-looking statements. You can identify these
forward-looking statements through our use of words such as "may,"
"will," "anticipate," "assume," "should," "indicate," "would,"
"believe," "contemplate," "expect," "estimate," "continue," "plan,"
"point to," "project," "could," "intend," "target" and other
similar words and expressions of the future.
All written or oral forward-looking statements attributable
to us are expressly qualified in their entirety by this cautionary
notice, including, without limitation, those risks and
uncertainties described in our annual report on Form 20-F for the
year ended December 31, 2018 and
otherwise in our SEC reports and filings. Such reports are
available upon request from the Company, or from the Securities and
Exchange Commission, including through the SEC's Internet website
at http://www.sec.gov. We have no obligation and do not undertake
to update, revise or correct any of the forward-looking statements
after the date hereof, or after the respective dates on which any
such statements otherwise are made.
FINANCIAL TABLES
CHINA CERAMICS
CO., LTD AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
|
As of
June 30, 2019
|
|
As of December 31,
2018
|
|
US$'000
|
|
RMB'000
|
|
RMB'000
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
ASSETS AND
LIABILITIES
|
|
|
|
|
|
NONCURRENT
ASSETS
|
|
|
|
|
|
Property, plant and
equipment, net
|
6
|
|
40
|
|
46
|
Total noncurrent
assets
|
6
|
|
40
|
|
46
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Right-of-use assets,
net
|
1,627
|
|
11,172
|
|
-
|
Inventories
|
13,331
|
|
91,519
|
|
127,346
|
Trade
receivables
|
11,479
|
|
78,800
|
|
224,114
|
Other receivables and
prepayments
|
4
|
|
30
|
|
4,673
|
Income tax
refundable
|
-
|
|
-
|
|
27
|
Prepayments
|
919
|
|
6,305
|
|
-
|
Restricted
Cash
|
-
|
|
-
|
|
1,719
|
Cash and bank
balances
|
1,376
|
|
9,445
|
|
9,016
|
Total current
assets
|
28,736
|
|
197,271
|
|
366,895
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
Trade
payables
|
6,074
|
|
41,699
|
|
24,329
|
Accrued liabilities
and other payables
|
4,040
|
|
27,733
|
|
25,894
|
Amounts owed to
related parties
|
5,273
|
|
36,201
|
|
36,203
|
Lease
liabilities
|
821
|
|
5,635
|
|
-
|
Taxes
payable
|
313
|
|
2,150
|
|
4,497
|
Total current
liabilities
|
16,521
|
|
113,418
|
|
90,923
|
|
|
|
|
|
|
NET CURRENT
ASSETS
|
12,215
|
|
83,853
|
|
275,972
|
|
|
|
|
|
|
NET ASSETS
|
12,221
|
|
83,893
|
|
276,018
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
48
|
|
327
|
|
306
|
Reserves
|
12,173
|
|
83,566
|
|
275,712
|
Total stockholders'
equity
|
12,221
|
|
83,893
|
|
276,018
|
CHINA CERAMICS
CO., LTD AND ITS SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
(Unaudited)
|
|
|
Six months
ended June 30,
|
|
2019
|
|
2018
|
|
USD'000
|
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
|
Net sales
|
26,156
|
|
177,431
|
|
355,630
|
|
|
|
|
|
|
Cost of goods
sold
|
23,899
|
|
162,119
|
|
310,785
|
|
|
|
|
|
|
Gross
profit
|
2,257
|
|
15,312
|
|
44,845
|
|
|
|
|
|
|
Other
income
|
1,050
|
|
7,121
|
|
7,088
|
Selling and
distribution expenses
|
(836)
|
|
(5,672)
|
|
(5,692)
|
Administrative
expenses
|
(2,342)
|
|
(15,885)
|
|
(10,474)
|
Finance
costs
|
(23)
|
|
(157)
|
|
-
|
Bad debt
expense
|
(28,578)
|
|
(193,859)
|
|
(106,380)
|
Other
expenses
|
(1)
|
|
(9)
|
|
(1,293)
|
|
|
|
|
|
|
Loss before
taxation
|
(28,473)
|
|
(193,149)
|
|
(71,906)
|
|
|
|
|
|
|
Income tax
expense
|
(4)
|
|
(27)
|
|
-
|
|
|
|
|
|
|
Loss attributable to
shareholders
|
(28,477)
|
|
(193,176)
|
|
(71,906)
|
|
|
|
|
|
|
Loss per
share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
(4.75)
|
|
(32.23)
|
|
(17.23)
|
Diluted
|
(4.75)
|
|
(32.23)
|
|
(17.23)
|
CHINA CERAMICS
CO., LTD AND ITS SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six months ended
June 30
|
|
2019
|
|
2018
|
|
USD'000
|
RMB'000
|
|
RMB'000
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
Loss before
taxation
|
(28,473)
|
(193,149)
|
|
(71,906)
|
Adjustments
for
|
|
|
|
|
Amortization of land
use rights
|
-
|
-
|
|
54
|
Depreciation of
property, plant and equipment
|
1
|
6
|
|
5,753
|
Depreciation of
right-of-use-assets
|
898
|
6,094
|
|
-
|
Bad debt provision of
trade receivables
|
28,578
|
193,859
|
|
106,380
|
Share based
compensation
|
46
|
309
|
|
298
|
Interest expense on
lease liabilities
|
23
|
157
|
|
-
|
Operating cash flows
before working capital changes
|
1,073
|
7,276
|
|
40,579
|
Decrease in
inventories
|
5,281
|
35,826
|
|
7,926
|
Increase in trade
receivables
|
(7,156)
|
(48,546)
|
|
(68,528)
|
Increase in other
receivables and prepayments
|
(245)
|
(1,661)
|
|
(8,076)
|
Increase in trade
payables
|
2,561
|
17,373
|
|
20,794
|
(Decrease) increase
in taxes payable
|
(346)
|
(2,348)
|
|
1,047
|
Increase in accrued
liabilities, other payables and amounts owned to related
parties
|
271
|
1,836
|
|
2,419
|
Cash used in
operations
|
1,438
|
9,756
|
|
(3,839)
|
Interest
paid
|
-
|
-
|
|
-
|
Income tax
paid
|
-
|
-
|
|
-
|
|
|
|
|
|
Net cash generated
from (used in) operating activities
|
1,438
|
9,756
|
|
(3,839)
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
Decrease in
restricted cash
|
253
|
1,719
|
|
-
|
|
|
|
|
|
Net cash generated
from investing activities
|
253
|
1,719
|
|
-
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
Payment for lease
liabilities
|
(2,049)
|
(13,902)
|
|
-
|
Warrants
exercised
|
429
|
2,907
|
|
7,952
|
|
|
|
|
|
Net cash (used in)
generated from financing activities
|
(1,620)
|
(10,995)
|
|
7,952
|
|
|
|
|
|
NET INCREASE IN
CASH & EQUIVALENTS
|
71
|
480
|
|
4,113
|
CASH &
EQUIVALENTS, BEGINNING OF PERIOD
|
1,329
|
9,016
|
|
2,328
|
EFFECT OF FOREIGN
EXCHANGE RATE DIFFERENCES
|
(8)
|
(51)
|
|
(399)
|
|
|
|
|
|
CASH &
EQUIVALENTS, END OF PERIOD
|
1,392
|
9,445
|
|
6,042
|
|
|
|
|
|
CHINA CERAMICS
CO., LTD. AND ITS SUBSIDIARIES
|
SALES VOLUME
AND AVERAGE SELLING PRICE (UNAUDITED)
|
|
|
|
|
Six months ended
June 30,
|
|
2019
|
2018
|
Sales volume
(square meters)
|
6,623,820
|
12,659,957
|
Average Selling
Price (in RMB/square meter)
|
26.79
|
28.09
|
View original
content:http://www.prnewswire.com/news-releases/china-ceramics-announces-first-half-2019-financial-results-300924800.html
SOURCE China Ceramics Co., Ltd.