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 announced its
financial results for the fourth quarter and year ended December
31, 2011.
Fiscal Year (FY) 2011 Highlights:
- Sales rose 61%, from $31.0 million in FY 2010 to $49.8 million
in FY 2011
- EBITDA grew 92%, from $5.0 million in FY 2010 to $9.7 million
in FY 2011
- Net income increased 115%, from $1.4 million in FY 2010 to $3.0
million in FY 2011
- Adjusted net income improved 87%, from $2.3 million in FY 2010
to $4.3 million in FY 2011
- Adjusted EPS rose 61%, from $0.12 in FY 2010 to $0.19 in FY
2011
- Gross profit grew 67%, from $7.0 million in FY 2010 to $11.6
million in FY 2011
Fourth Quarter (Q4) 2011 Highlights:
- Net income increased $1.5 million, from a net loss of $0.4
million in Q4 2010 to a net gain of $1.1 million in Q4 2011
Summarized FY 2011 Results:
FY 2011 FY 2010 CHANGE
Revenue $49.8 million $31.0 million +61%
EBIDTA* $9.7 million $5.0 million +92%
Net Income $3.0 million $1.4 million +115%
Adjusted Net Income** $4.3 million $2.3 million +87%
EPS (Diluted)*** $0.13 $0.06 +117%
Adjusted EPS $0.19 $0.12 +52%
* Please see the accompanying Non-GAAP EBITDA and Adjusted Net measurements
below the "Business Outlook Section."
** Includes $1.3 million of other income in FY 2011.
*** Earnings per diluted share of $0.13 on 22.8 million shares. For FY 2010,
China Carbon reported fully diluted earnings per share of $0.06 on 18.5
million shares.
Summarized Q4 2011 Results:
Q4 2011 Q4 2010 CHANGE
Revenue $12.6 million $13.0 million - 2.1%
EBIDTA* $3.2 million $1.3 million - 153%
Net Income (loss) $1.1 million ($0.4 million) N/A
Adjusted Net Income** $1.5 million $0.03 million +1,100
EPS (Diluted)*** $0.05 ($0.02) N/A
Adjusted EPS $0.06 $0.001 4211%
* Please see the accompanying Non-GAAP EBITDA and Adjusted Net measurements
below the "Business Outlook Section."
** Includes $0.36 million of other income in Q4 of 2011.
*** Earnings per diluted share of $0.05 on 22.8 million shares. For Q4 2010,
China Carbon reported fully diluted earnings per share of ($0.02) on 18.5
million shares.
"Our full year results in 2011 reflect the outstanding sales
growth in our high purity and fine grain graphite products," said
Donghai Yu, Chief Executive Officer of China Carbon. "For the year,
our sales of these products rose 211 percent and 68 percent,
respectively, and both products provided us with higher margins
than our other business segment, graphite electrodes. We further
improved our gross margin by making advance deposits to suppliers,
offsetting the rises in graphite prices, and the manufacturing of
solar and mold products increased the demand for our products as
high performance raw materials."
"In 2012, we are very confident that we will boost our supply of
high purity and fine grain graphite products," continued Mr. Yu.
"We recently added a new facility that doubled our production
capacity from 30,000 to 60,000 tons and is specializing in the
manufacture of both these products. We delivered strong results
this past year, achieving tremendous growth in our overall sales,
gross profit and net income on the strength of our high purity and
fine grain graphite sales, and we believe that we are poised to
build on our success with the installation of this facility."
Fiscal Year 2011 & Fourth Quarter 2011
Financial Results
Revenue
In FY 2011, China Carbon had sales of $49.8 million compared to
sales of $31.0 million in FY 2010, an increase of $18.8 million or
61 percent. This growth reflects the significant increase in demand
China Carbon experienced for its products, which was attributable
to market improvement, new customer developments and the Company
adjusting its products mix to include more high purity graphite
products.
China Carbon's FY 2011 sales included $6.4 million in graphite
electrodes, $21.8 million in fine grain graphite, and $20.7 million
in high purity graphite. When comparing FY 2011 with FY 2010, China
Carbon's sales of its fine grain graphite improved 68 percent and
its sales of its high purity graphite rose 211 percent. When
further comparing FY 2011 with FY 2010, the Company's average unit
selling price increased 24 percent, with the average unit selling
prices of its high purity graphite products rising 58 percent,
which is a reflection of the large demand for and the rise in
prices of the raw materials of such products. The manufacturing of
solar and mold products also increased the demand for China
Carbon's products as raw materials. Additionally, the Company's
improved production capacity enabled it to better meet the rising
demand it saw for its products in 2011.
In Q4 2011, China Carbon had sales of $12.6 million compared to
sales of $13.0 million in Q4 2010, a decrease of $0.4 million.
Cost of Sales & Gross Margin
China Carbon's cost of goods sold consists of the cost of raw
materials, utilities, labor, and depreciation expenses in its
manufacturing facilities. In FY 2011, China Carbon's cost of sales
was $38.3 million compared to a cost of sales of $24.1 million in
FY 2010, an increase of $14.2 million or approximately 59 percent.
This increase is a result of the rise in the cost of raw materials,
as well as China Carbon's growth in sales and rises in the unit
selling prices of its products, in FY 2011.
China Carbon's growth margin improved from 22.4 percent in FY
2010 to 23.2 percent in FY 2011. This increase is attributable to
the Company maintaining its strategy of adjusting its products mix
to meet market demand. In FY 2011, China Carbon experienced
heightened demand for its high purity graphite products, which
provided a higher margin than graphite electrodes. As the Company
adapted its product mix to include more high purity graphite
products and improved its sales of these products, this helped
offset the decreased margin and unit price for fine grain products
China Carbon experienced in FY 2011. The decrease in the margin for
fine grain products is attributable to the shift in demand for high
purity graphite electrodes. As a result of these circumstances,
China Carbon's gross profit was $11.6 million compared to a gross
profit of $6.9 million in FY 2010, an improvement of $4.7 million
or 67 percent.
In Q4 2011, China Carbon's cost of sales was $9.4 million as
compared to $9.7 million during Q4 2010, a decrease of $0.3
million.
EBITDA
China Carbon's EBITDA in FY 2011 was $9.7 million compared to
$5.0 million in FY 2010, an increase of $4.7 million or 92 percent.
The Company's EBITDA in Q4 2011 was $3.2 million compared to $1.3
million in Q4 2010, representing a increase of $2.9 million.
Net Income
As a result of the factors described above, in FY 2011, China
Carbon's net income was $3.0 million as compared to $1.4 million in
FY 2010, an increase of $1.6 million or approximately 115 percent.
In Q4 2011, China Carbon's net income was $1.1 million as compared
to a net loss of $0.4 million in Q4 2010, a $1.5 million
improvement.
Business Outlook
"We believe that the future of graphite, especially when looking
at it from the perspective of high-tech, high-demand applications,
is very encouraging," said Mr. Yu. "Pebble-bed nuclear reactors,
lithium ion batteries and solar panels are just some of the next
generation technologies that make use of graphite's unique
properties. In China, we are seeing the demand for graphite
increase from the nation's developing iron, steel, automobile,
aerospace and defense industries. To better take advantage of this
evolving market, we are working hard to further enhance our product
line."
"Specifically, our new plant has technologically advanced
equipment capable of producing rounded fine grain electrodes with a
diameter as large as 600 millimeters and ultra-high electrodes with
a diameter as large as 800 millimeters," continued Mr. Yu. "Steel
plants in China have recently been upgrading their furnace
facilities, resulting in substantial increases in demand for large
size ultra-high power graphite electrodes. Moreover, the margin for
these products is high due to the shortage of supply compared to
demand. Accordingly, we are striving to produce 800 millimeter
diameter ultra-high graphite electrodes, as we believe selling this
product could help us further strengthen our leading position in
China's fine grain graphite market."
Mr. Yu further commented, "In 2012, we plan to continue
adjusting our product mix towards our high purity and fine grain
graphite products as a way to further improve our gross profit, and
we are also looking to develop isostatic graphite products,
including nuclear, solar and semiconductor products, to improve our
margins as well. In regards to nuclear graphite, only graphite rods
with a diameter of more than 840 millimeters and a purity of more
than 99.99 percent may be used in nuclear power reactors and to
date, we have produced samples that meet these standards. While we
look to develop nuclear graphite and other isostatic graphite
products, we are also seeking to acquire and vertically integrate a
local graphite mine to supplement our operations. In the meantime,
we will work towards maximizing our recently expanded production
capacity to better position ourselves to meet potential rises in
demand for our products. While 2011 was an excellent year for us in
terms of financial growth and our development as a company, we are
confident that we will make further progress in 2012, and solidify
our position as one of China's premier graphite companies."
Non-GAAP Financial Measures
Year Ended December 31
-------------------------
2011 2010
------------ ------------
Net income $ 2,972 $ 1,383
Stock Based Compensation $ 1,338 $ 916
Adjusted Net $ 4,310 $ 2,300
Quarter Ended December 31
-------------------------
2011 2010
------------ ------------
Net income $ 1,089 $ (396)
Interest expense $ 357 $ 423
Adjusted Net $ 1,446 $ 27
The presentation of these non-GAAP financial measures
should be considered in addition to our GAAP results
and is not intended to be considered in isolation or as
a substitute for the financial information prepared and
presented in accordance with GAAP.
Management generally compensates for limitations in the
use of non-GAAP financial measures by relying on
comparable GAAP financial measures and providing
investors with a reconciliation of non-GAAP financial
measures only in addition to and in conjunction with
results presented in accordance with GAAP. We believe
that these non-GAAP financial measures reflect an
additional way of viewing aspects of our operations
that, when viewed with our GAAP results, provide a more
complete understanding of factors and trends affecting
our business.
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 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.
Financial Statements
China Carbon Graphite Group, Inc. and Subsidiaries
Consolidated Balance Sheets
As Of December 31, 2011 and 2010
December 31, December 31,
2011 2010
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 521,450 $ 296,312
Restricted cash 11,694,820 -
Accounts receivable, net 12,541,321 6,222,112
Notes receivable 188,880 460,856
Advance to suppliers 5,921,970 10,198,602
Inventories 37,430,248 26,432,217
Prepaid expenses 452,730 573,094
Other receivables, net allowance of $24,397 and
$0, respectively 513,000 335,986
Total current assets 69,264,419 44,519,179
Property and Equipment, net 36,719,595 24,127,189
Construction in Progress 6,414,847 10,265,888
Land Use Rights, net 10,699,059 10,496,930
Total Assets $ 123,097,920 $ 89,409,186
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 1,340,498 $ 5,452,743
Advance from customers 1,360,989 1,060,147
Short term bank loans 45,488,600 33,298,150
Notes payable 16,763,100 -
Other payables 3,227,067 2,584,589
Dividends payable 28,099 32,996
Total current liabilities 68,208,353 42,428,625
Amount Due to a Related Party 5,542,855 4,744,634
Warrant Liabilities 174,805 73,121
Total Liabilities 73,926,013 47,246,380
Convertible Series B Preferred Stock, par value
$0.001 per share authorized 3,000,000 shares,
issued and outstanding 426,110 and 1,225,000
shares at December 31, 2011 and 2010,
respectively. 426 1,225
Stockholders' Equity
Common stock, par value $0.001 per share,
authorized 100,000,000 shares, issued and
outstanding 22,981,408 and 20,520,161 shares
at December 31, 2011 and 2010, respectively 22,981 20,521
Deferred consulting fee - (57,500)
Additional paid-in capital 17,564,951 15,158,291
Accumulated other comprehensive income 7,943,542 6,344,414
Retained earnings 23,640,007 20,695,855
Total stockholders' equity 49,171,481 42,161,581
Total Liabilities and Stockholders' Equity $ 123,097,920 $ 89,409,186
China Carbon Graphite Group, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended December 31, 2011 and 2010
Years ended December 31,
----------------------------
2011 2010
------------- -------------
Sales $ 49,846,744 $ 30,994,150
Cost of Goods Sold 38,261,812 24,062,354
Gross Profit 11,584,932 6,931,796
Operating Expenses
Selling expenses 597,802 186,693
General and administrative 5,420,157 4,155,581
Depreciation and amortization 224,074 163,310
6,242,033 4,505,584
Operating Income Before Other Income (Expense) 5,342,899 2,426,212
Other Income (Expense)
Interest expense (3,451,037) (1,366,104)
Interest income 3 -
Other expense - (86,967)
Other income, net 1,167,077 24,589
Change in fair value of warrants (86,691) 385,661
(2,370,648) (1,042,821)
Net Income $ 2,972,251 $ 1,383,391
Preferred Stock Deemed Dividend - (132,778)
Dividend Distribution (28,099) (101,043)
Net Income Available To Common Shareholders $ 2,944,152 $ 1,149,570
Other Comprehensive Income
Foreign currency translation gain 1,599,128 1,307,351
------------- -------------
Total Comprehensive Income $ 4,571,379 $ 2,690,742
Share Data
Basic earnings per share $ 0.13 $ 0.07
Diluted earnings per share $ 0.13 $ 0.06
Weighted average common shares outstanding,
basic 22,418,101 17,323,979
Weighted average common shares outstanding,
diluted 22,844,211 18,548,979
============ ============
China Carbon Graphite Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2011 and 2010
Years ended December 31,
----------------------------
2011 2010
------------- -------------
Cash flows from operating activities
Net Income $ 2,972,251 $ 1,383,391
Adjustments to reconcile net cash used in
operating activities
Depreciation and amortization 1,803,770 1,752,232
Bad debt expenses - 1,304,327
Stock compensation 1,891,600 916,300
Change in fair value of warrants 86,691 (385,661)
Change in operating assets and liabilities
Accounts receivable (5,992,630) (2,290,273)
Notes receivable 284,881 (198,806)
Other receivable (161,882) 812,570
Advance to suppliers 4,588,784 (9,012,989)
Inventories (10,224,660) (9,203,570)
Prepaid expenses (219,098) (126,132)
Accounts payable and accrued liabilities (4,423,066) 813,460
Advance from customers 257,028 (59,574)
VAT and other taxes payable 1,481,487 (760,859)
Other payables (601,585) 1,547,429
Net cash used in operating activities (8,256,429) (13,508,155)
Cash flows from investing activities
Acquisition of property and equipment (5,789,966) (1,000,152)
Acquisition of land use rights - (6,819,702)
Construction in progress (2,772,094) (5,466,118)
Net cash used in investing activities (8,562,060) (13,285,972)
Cash flows from financing activities
Proceeds from issuing common stock 160,000 166,400
Proceeds from issuing series B preferred stock - 339,010
Proceeds from warrants exercise 371,714 -
Dividends paid for series B preferred stock (32,997) (68,047)
Proceeds from short-term bank loans 44,795,000 27,287,550
Payment from short-term bank loans (34,022,500) (5,095,155)
Common Stock shares to be issued 160,000 -
Restricted cash (11,516,500) -
Proceeds from a related party 610,492 3,371,663
Proceeds from notes payable 16,507,500 (1,626,900)
Net cash provided by financing activities 17,032,709 24,374,521
Effect of exchange rate fluctuation 10,918 6,791
Net increase (decrease) in cash 225,138 (2,412,815)
Cash and cash equivalents at beginning of
period 296,312 2,709,127
Cash and cash equivalents at end of period $ 521,450 $ 296,312
Supplemental disclosure of cash flow
information
Interest paid $ 3,451,037 $ 1,366,104
Non-cash activities:
Deemed preferred dividend reflected in paid-in
capital $ - $ 132,778
Reclassification of warrant liability with
equity $ 14,993 $ 249,309
Reclassification from construction in progress
to fixed assets $ 7,332,116 $ 985,781
Reclassification from accounts payable to
property and equipment $ (15,500) $ 2,480,539
Issuance of common stock for compensation $ 1,891,600 $ 916,300
Deferred consulting fee reflected in equity $ - $ 57,500
Investor Contact: Mr. Kevin Fickle President 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
China Carbon Graphite (CE) (USOTC:CHGI)
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