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 issued the
Company's financial results for Fiscal Year 2010 ended December 31,
2010.
2010 Fiscal Year Financial Highlights:
- Revenue increased 102%, from $15.4 million in 2009 to $31.0
million in 2010
- Gross profit increased 218%, from $2.2 million in 2009 to $6.9
million in 2010
- Gross profit rate increased 57.86%, from 14.17% in 2009 to
22.36% in 2010
- Operating income increased 383%, from operating loss of ($0.9
million) in 2009 to operating income of $2.4 million in 2010
- Net income increased 194%, from net loss of ($1.5 million) in
2009 to net income of $1.4 million in 2010
Summarized Full Fiscal Year 2010 Results compared with Full
Fiscal Year 2009 Results Ended December 31:
|
2010 |
2009 |
CHANGE |
Revenue |
$30.99 million |
$15.37 million |
102% |
Gross profit |
$6.93 million |
$2.18 million |
218% |
Operating Income |
$2.43 million |
($0.86) million |
383% |
Net Income (Loss) * |
$1.38 million |
($1.47) million |
194% |
Earnings (Loss) Per Share (Diluted)** |
$0.06 |
($0.16) |
138% |
* Net Income in fiscal year 2010
includes non-cash charges of $0.9 million stock compensation
expenses, depreciation and amortization expenses of $0.2 million,
and a $1.3 million bad debt expense which is reserved as an
accounts receivable allowance. In 2010, these expenses totaled $2.4
million and in 2009 were $1.3 million. The accounts receivable
allowance amounted to $2.5 million as of December 31, 2010. By
April 18, 2011, the Company has collected the majority of December
31, 2010 accounts receivable balance. Thus as of April 18, 2011,
the uncollected December 31, 2010 accounts receivable is less than
the accounts receivable allowance reserved. * *Fully diluted
earnings per share for FY 2010 were $0.06 and fully diluted loss
per share for FY 2009 were ($0.16). These results were achieved at
the same time diluted weighted shares outstanding grew from 14.4
million shares in 2009 to 18.5 million shares in 2010. |
"We are thoroughly pleased that the Company's operations
generated such robust growth and excellent results in 2010," said
Donghai Yu, Chief Executive Officer of China Carbon. "We are
especially proud to have increased our net income by over 190
percent and operating income by over 380 percent compared to 2009.
We are glad to see increased revenue from expanded customer base
due to market recovery and doubled production capacity, improved
margin due to a higher margin product mix, as well as strong
financing support from banks."
"We saw 2010 sales to both established and new customers, with
about 45 percent of our total sales in 2010 resulting from our new
customers. We have increased our production capacity from 15,000
metric tons to 30,000 metric tons in 2010. We are also currently
operating at 100% production capacity. The increased capacity
allowed us to fulfill more demand from customers. Before we were
constraint from our production capacity," Mr. Yu continued.
"It proved that our strategic decision to double our production
capacity and to purchase additional levels of inventories was
effective, as we were better prepared to supply the heightened
demand for our products."
Mr. Yu further added, "Our core products all sold extremely well
in 2010. Notably, we sold a greater proportion of our higher margin
products. Graphite electrodes sales increased over 37 percent, fine
grain graphite sales grew over 100 percent and high purity graphite
sales rose over 500 percent. We look forward to further gains in
revenue as we expect the demand for and our supply of our higher
margin graphite products to both continue to rise in 2011."
2010 Full Year Financial Results
Revenue
China Carbon's revenues more than doubled, from $15,369,978 in
2009 to $30,994,150 in 2010, an increase of $15,624,172 or
approximately 102%. The Company's revenue was generated mainly from
sales of fine grain graphite, graphite electrodes, high purity
graphite and semi-processed graphite products. Sales rose in 2010
due to a significant increase in the demand of the Company's
products, which is attributable to the market recovery and new
client development. The increased production capacity and increased
unit prices also contributed to the boost of total sales.
Cost of Goods Sold
The Company's cost of goods sold increased from $13,192,496 in
2009 to $24,062,354 in 2010, an increase of $10,869,858 or
approximately 82%. This increase reflects the growth in sales in
2010. China Carbon's cost of goods sold consists of cost of raw
materials, utility, labor cost and depreciation expenses on
manufacturing facilities.
Gross Profit and Gross Profit Margin
China Carbon's gross profit increased $4,754,314, or 218%, from
$2,177,482 in 2009 to $6,931,796 in 2010. The Company's gross
margin increased from 14% in 2009 to 22% in 2010 due to the
variance in its production mix—in 2010, China Carbon sold a greater
proportion of higher margin products.
Selling, General and Administrative
Expenses
China Carbon's selling, general and administrative expenses
totaled $4,342,274 in 2010 compared to $2,960,578 in 2009, an
increase of $1,381,696 or approximately 47%.
The Company's selling expenses consist of shipping and handling
expenses and exhibition expenses. Selling expenses decreased
from $365,865 in 2009 to $186,693 in 2010, or (49 %). The decrease
was due to a reduction in shipping and handling fees in 2010
compared to 2009. In 2010, customers picked up more products, which
is customary in the industry for some of China Carbon's higher
margin products, resulting in less shipping and handling fees.
China Carbon's general and administrative expenses consist of
salaries, office expenses, utilities, business travel, amortization
expenses and public company expenses such as legal, accounting,
investor relations as well as stock compensation. General and
administrative expenses were $4,155,581 in 2010 compared to
$2,594,713 in 2009. The increase of the general and administrative
expenses is due primarily to increased professional expenses as a
public company and to a $1.3 million bad debt expense, which is
reserved as an accounts receivable allowance. The increased
receivable allowance is in line with increased accounts receivable.
The accounts receivable allowance amounted to $2.5 million as of
December 31, 2010. By April 18, 2011, the Company has collected the
majority of December 31, 2010 accounts receivable balance. Thus as
of April 18, 2011, the uncollected December 31, 2010 accounts
receivable is less than the accounts receivable allowance
reserved.
Net Income
China Carbon's net income for 2010 was $1,383,391 compared to a
net loss of ($1,474,276) in 2009, an improvement of $2,857,667 or
194%.
Liquidity and Capital Resources
China Carbon's primary capital needs have been to fund its
working capital requirements. The Company's primary sources of
financing have been cash generated from operations, short-term and
long-term loans from banks in China, and loans from a related
party. As of December 31, 2010, the Company had short-term loans in
the aggregate amount of $33 million outstanding, which the Company
believes to be renewable. China Carbon entered into four short-term
bank loans with China Construction Bank for a total of $27 million
between August 6 and September 16, 2010. On January 11, 2011,
we entered into a short-term bank loan with China Construction Bank
for a total of $4.6 million. The loan has an interest rate of
6.06%, due in January 11, 2012, and secured by property and
equipment and land use rights. In February 2011, the Company
returned $682,650 of a bank loan from a Credit Union. The Company
expects that anticipated cash flows from operations, short-term and
bank loans will be sufficient to fund its operations through at
least the next twelve months.
Financial Outlook
Mr. Yu explained that China Carbon is positioned for excellent
results in 2011 and for future growth in the coming years as the
Company plans to expand production capacity by as much as 100% in
2011. Mr. Yu stated, "Our new facility which is expected to start
operating around August 2011 will increase the production capacity
of our higher margin products. The Company also has plan to
actively seek opportunities to integrate vertically with raw
material providers to help to save the raw material cost and thus
to improve the gross profits."
The Company expects that the increased demand for its higher
margin products of fine grain graphite and high purity graphite
will extend through 2011, primarily due to anticipated growth
in China's automobile, aerospace, defense, iron and steel
industries. China Carbon also expects that relatively lower margin
products of graphite electrodes will continue to experience
increased demand in 2011. The Company anticipates that cash flow
from operations will continue to increase with enhanced sales,
improved accounts receivable collection and less bad debt expenses
for accounts receivable allowances.
Business Outlook
"The future looks bright for China Carbon," said Mr. Yu. "Our
technology is applicable to some of China's most rapidly developing
industries and we are well positioned in our marketplace. We plan
to continue surveying the market before we make any decisions
regarding changing our current product mix and regarding the
product mix of the new facility under construction. To better
position ourselves to fulfill potential increased demand for our
products, we are currently doubling our annual production capacity
from 30,000 metric tons to 60,000 metric tons. China Carbon
anticipates that its new plant will emphasize production of the
Company's higher margin products."
China Carbon is also poised to take advantage China's nuclear
graphite needs. Through the Company's development of isostatic
graphite—including nuclear, solar and semiconductor graphite—China
Carbon looks to provide China's existing nuclear power reactors as
well as the nation's reactors under construction with nuclear
graphite in the near future. China Carbon is also currently
developing ultra-high purity graphite with a diameter of 840 mm,
which is required for nuclear plants. Additionally, steel plants in
China have been upgrading their furnace facilities, creating a high
demand for large size ultra-high grade graphite electrodes. China
Carbon expects that operations will commence at its new facility in
June 2011. The Company believes that it will become China's first
domestic producer of 800 mm diameter ultra-high grade
electrodes.
Mr. Yu stated, "We expect that by August 2011, our production
capacity will be doubled from 30,000 metric tons to 60,000 metric
tons. Since now we are operating at 100% and cannot fulfill current
demand of our products, we estimate that our new production
facility which will start operating in August 2011 will reach its
100% utilization rate in one to two years after its initial
operation. This is further strengthening our high end graphite
product mix and leader position. We aspire to strengthen our
position in China's graphite and carbon industries and to grow the
Company even further. Each day we strive to improve the Company and
our products. Our goal is to become a world-leader in the graphite
and carbon industries."
Please find more information at our brand new website:
www.chinacarboninc.com.
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
which 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.
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.
|
China Carbon Graphite
Group, Inc. and subsidiaries |
Consolidated Balance
Sheets |
|
|
|
|
|
|
|
December 31,
2010 |
December 31,
2009 |
ASSETS |
|
|
|
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 296,312 |
$ 2,709,127 |
Trade accounts receivable, net of
allowance of $2,505,867 |
6,222,112 |
5,170,419 |
Notes receivable |
460,856 |
248,452 |
Advance to suppliers |
10,198,602 |
790,767 |
Inventories |
26,432,217 |
16,430,754 |
Prepaid expenses |
573,094 |
50,000 |
Other receivables |
335,986 |
1,130,795 |
Total current
assets |
44,519,179 |
26,530,314 |
|
|
|
Property And Equipment,
net |
24,127,189 |
23,913,965 |
|
|
|
Construction In
Progress |
10,265,888 |
2,045,176 |
|
|
|
Land Use Rights, Net |
10,496,930 |
3,548,273 |
|
$ 89,409,186 |
$ 56,037,728 |
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current Liabilities |
|
|
Accounts payable and accrued
expenses |
$ 5,452,743 |
$ 2,005,583 |
Advance from customers |
1,060,147 |
1,084,206 |
Short term bank loan |
33,298,150 |
8,573,901 |
Long term bank loan - current
portion |
-- |
1,613,566 |
Taxes payable |
-- |
370,777 |
Other payables |
2,584,589 |
922,109 |
Dividends payable |
32,996 |
-- |
Total current
liabilities |
42,428,625 |
14,570,142 |
|
|
|
Long Term Liabilities |
|
|
Accounts payable in long term |
4,744,634 |
1,243,842 |
Long term bank loan |
-- |
1,613,566 |
Warrant liabilities |
73,121 |
708,091 |
Total liabilities |
47,246,380 |
18,135,641 |
|
|
|
Stockholders' Equity |
|
|
Convertible series A preferred stock, par
value $0.001 per share, authorized 20,000,000 shares, issued and
outstanding 125,000 shares at December 31, 2009 and none at
December 31, 2010 |
-- |
125 |
Convertible series B preferred stock, par
value $0.001 per share, authorized 3,000,000 shares, issued and
outstanding 1,225,000 and 2,160,500 shares at December 31, 2010 and
2009, respectively. |
1,225 |
2,161 |
Common stock, par value $0.001 per share,
authorized 100,000,000 shares, issued and outstanding 20,520,161
and 18,121,661 shares at December 31, 2010 and 2009,
respectively |
20,521 |
18,122 |
Deferred consulting fee |
(57,500) |
-- |
Additional paid-in capital |
15,158,291 |
13,298,332 |
Accumulated other comprehensive
income |
6,344,414 |
5,037,062 |
Retained earnings |
20,695,855 |
19,546,285 |
Total stockholders'
equity |
42,162,806 |
37,902,087 |
Total liabilities and
stockholders' equity |
$ 89,409,186 |
$ 56,037,728 |
|
|
China Carbon Graphite
Group, Inc and subsidiaries |
Consolidated Statements
of Income (Loss) and Comprehensive Income |
For the Years Ended
December 31, 2010 and 2009 |
|
|
|
|
2010 |
2009 |
|
|
|
Sales |
$ 30,994,150 |
$ 15,369,978 |
|
|
|
Cost of Goods Sold |
24,062,354 |
13,192,496 |
Gross Profit |
6,931,796 |
2,177,482 |
|
|
|
Operating Expenses |
|
|
Selling expenses |
186,693 |
365,865 |
General and administrative |
4,155,581 |
2,594,713 |
Depreciation and amortization |
163,310 |
75,352 |
|
4,505,584 |
3,035,930 |
Operating Income (Loss) Before Other
Income (Expense) and Income Tax Expense |
2,426,212 |
(858,448) |
|
|
|
Other Income (Expense) |
|
|
Interest expense |
(1,366,104) |
(833,854) |
Interest income |
-- |
-- |
Other expense |
(86,967) |
(117,341) |
Other income |
24,589 |
644,654 |
Change in fair value of warrants |
385,661 |
(309,287) |
|
(1,042,821) |
(615,828) |
|
|
|
Income (Loss) Before Income Tax
Expense |
1,383,391 |
(1,474,276) |
|
|
|
Income Tax Expense |
-- |
-- |
|
|
|
Net Income (Loss) |
$ 1,383,391 |
$ (1,474,276) |
|
|
|
Deemed Preferred Stock
Dividend |
(132,778) |
(772,982) |
|
|
|
Dividend |
(101,043) |
-- |
|
|
|
Net Income (Loss) Available To Common
Shareholders |
$ 1,149,570 |
$ (2,247,258) |
|
|
|
Other Comprehensive
Income |
|
|
Foreign currency translation gain |
1,307,351 |
45,949 |
Total Comprehensive
Income |
$ 2,690,742 |
$ (1,428,327) |
|
|
|
Share Data |
|
|
|
|
|
Basic earnings per share |
$ 0.07 |
$ (0.16) |
|
|
|
Diluted earnings per share |
$ 0.06 |
$ (0.16) |
|
|
|
Weighted average common shares outstanding,
basic |
17,323,979 |
13,800,052 |
|
|
|
Weighted average common shares outstanding,
diluted |
18,548,979 |
14,426,518 |
|
|
China Carbon Graphite
Group, Inc and subsidiaries |
Consolidated Statements
of Cash Flows |
For the Years Ended
December 31, 2010 and 2009 |
|
|
|
|
2010 |
2009 |
Cash flows from operating
activities |
|
|
Net Income (Loss) |
$ 1,383,391 |
$ (1,474,276) |
Adjustments to reconcile net cash
provided by (used in) operating activities |
|
|
Depreciation and amortization |
1,752,232 |
1,814,034 |
Bad debt expenses |
1,304,327 |
251,902 |
Stock compensation |
916,300 |
982,917 |
Change in fair value of warrants |
(385,661) |
309,287 |
Change in operating assets and
liabilities |
|
|
Accounts receivable |
(2,290,273) |
(1,410,144) |
Notes receivable |
(198,806) |
(219,819) |
Other receivables |
812,570 |
(975,894) |
Advance to suppliers |
(9,012,989) |
268,052 |
Inventories |
(9,203,570) |
(453,390) |
Prepaid expenses |
(126,132) |
(50,000) |
Accounts payable and accrued liabilities |
813,460 |
2,035,588 |
Non-current accounts payable |
3,371,663 |
-- |
Advance from customers |
(59,574) |
438,859 |
Taxes payable |
(760,859) |
6,490 |
Other payables |
1,547,429 |
366,750 |
Net cash provided by (used in)
operating activities |
(10,136,493) |
1,890,356 |
|
|
|
Cash flows from investing
activities |
|
|
Acquisition of property and
equipment |
(1,000,152) |
(4,525,364) |
Acquisition of land use
rights |
(6,819,702) |
-- |
Construction in progress |
(5,466,118) |
(4,367) |
Net cash used in investing
activities |
(13,285,972) |
(4,529,731) |
|
|
|
Cash flows from financing
activities |
|
|
Proceeds from issuing common stock |
166,400 |
994,460 |
Proceeds from issuing series B preferred
stock |
339,010 |
2,263,340 |
Dividends paid |
(68,047) |
-- |
Proceeds from short term loan |
27,287,550 |
5,116,630 |
Payments from short term loan |
(5,095,155) |
-- |
Advance to related parties |
-- |
290,975 |
Repayment of long term bank loans |
(1,626,900) |
(3,369,779) |
Net cash provided by financing
activities |
21,002,858 |
5,295,626 |
|
|
|
Effect of exchange rate
fluctuation |
6,791 |
1,077 |
|
|
|
Net increase (decrease) in
cash |
(2,412,816) |
2,657,328 |
|
|
|
Cash and cash equivalents at
beginning of period |
2,709,127 |
51,799 |
|
|
|
Cash and cash equivalents at end of
period |
$ 296,311 |
$ 2,709,127 |
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
Interest paid |
$ 1,366,104 |
$ 833,854 |
Income taxes paid |
$ -- |
$ -- |
|
|
|
Non-cash activities: |
|
|
|
|
|
Deemed preferred dividend reflected in
paid-in capital |
$ 132,778 |
$ 772,982 |
|
|
|
Reclassfication between warrant liability and
equity |
$ 249,309 |
$ 398,804 |
|
|
|
Reclassification from construction in
progress to fixed assets |
$ 985,781 |
$ -- |
|
|
|
Reclassification from accounts payable to
construction in progress |
$ 2,480,539 |
|
|
|
|
Issuance of common stock for consulting
fee |
$ 916,300 |
$ -- |
|
|
|
Deferred consulting fee reflected in
equity |
$ 57,500 |
$ -- |
CONTACT: Investor Contact:
Mr. Kevin Fickle
NUWA Group, LLC
Tel: +1-925-330-8315
Email: Kevin@nuwagroup.com
Company Contact:
Mr. Donghai Yu
China Carbon Graphite Group, Inc.
Tel: +1-626-589-6525
Email: ir@chinacarboninc.com
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