China Carbon Graphite Group, Inc. (OTCQB: CHGI) (PINKSHEETS: 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, 2012.
Second Quarter (Q2) 2012 Highlights:
- Gross profit grew 7.6%, from $2.69 million in Q2 2011 to $2.89
million in Q2 2012
- Gross profit rate grew 10.0%, from 22.1% in Q2 2011 to 24.4% in
Q2, 2012
- Further advanced its product mix optimization process, with
higher margin products made from fine grain and high purity
graphite still key development priorities
- Our working capital increased from $1.06 million as of December
31, 2011 to $7.83 million as of June 30, 2012
Summarized Q2 2012 Results:
Q2 2012 Q2 2011 CHANGE
Revenue $11.88 million $12.15 million -2.2%
Gross Profit $2.89 million $2.69 million +7.6%
Net Income $0.87 million $0.88 million -1.3%
EPS(Diluted) * $0.04 $0.04 -
* Earnings per diluted share of $0.04 on 24.25 million shares for Q2 2012.
For Q2 2011, China Carbon reported fully diluted earnings per share of
$0.04 on 23.19 million shares.
"We further ramped-up our higher margin business this past
quarter," said Donghai Yu, Chief Executive Officer of China Carbon.
"Notably, we were able to sustain growth in the percentage of sales
of our higher margin products made from fine grain and high purity
graphite products. This strategy together with our effort in price
and profit control allowed us to increase our gross profit rate
during the three months ended June 30, 2012 compared to the same
period last year."
Second Quarter 2012 Financial Results
Revenue
China Carbon had sales of $11.88 million in Q2 2012 compared to
sales of $12.14 million in Q2 2011, a decrease of $0.27 million or
2.2%. This decrease was mainly attributable to a decrease of
$424,116 in the sales of the Company's low-end graphite electrodes
products during Q2 2012, which is a reflection of the Company's
decision to continue focusing on the manufacturing and selling of
its higher margin products.
China Carbon's Q2 2012 sales included $1.50 million in graphite
electrodes, $5.31 million in fine grain graphite, and $5.07 million
in high purity graphite. In Q2 2011, the Company's sales included
$1.92 million in graphite electrodes, $5.28 million in fine grain
graphite, and $4.94 million in high purity graphite.
When further comparing Q2 2011 with Q2 2012, the average
unit-selling price of China Carbon's products increased 6%, which
was offset by the 10% decrease in tonnage sold for the period.
During this period, the average unit-selling price of its high
purity graphite products, in particular, increased 8%, which is a
reflection of an increase in the cost for raw materials for such
products. This increase in the average unit-selling price of high
purity graphite products was offset by the 7% decrease in tonnage
sold for the period as a result of less orders from certain
customers due to price increases and a slight dip in the Chinese
construction industry. The main reason for the Company's lower
sales was due to the average unit-selling price of graphite
electrodes products decreased 14%, combined with a 12% decrease in
tonnage sold, from Q2 2011 to Q2 2012. The decrease in the average
unit selling price and tonnage sold of graphite electrodes products
is mainly due to decreased demand on the lower end products.
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. The Company's cost of goods sold was
$8.99 million in Q2 2012 compared to cost of goods sold of $9.46
million in Q2 2011, a decrease of $0.47 million or 4.99%. This
decrease was directly associated with the decrease in China
Carbon's sales.
China Carbon's gross margin however increased from 22.1% for Q2
2011 to 24.4% for Q2 2012. This increase reflects the variance in
China Carbon's product mix, which is attributable to an increase of
percentage in the Company's sales of fine grain graphite and high
purity graphite products, which are higher margin products compared
to graphite electrodes and other products.
Net Income
As a result of the factors described above, China Carbon's net
income was $0.87 million in Q2 2012 as compared to $0.88 million in
Q2 2011, a decrease of $0.01 million.
Business Outlook
"As we continue to refine our strategy of focusing on our higher
margin products made from fine grain and high purity graphite, we
will see improved financial results in upcoming quarters," remarked
Mr. Yu. "This strategy enables us to maintain profitability while
also exploring the significant potential market for these products.
High purity and fine grain graphite products have numerous
applications in fast developing fields like the nuclear, solar and
defense industries, and we are working hard to be in a better
position to meet any potential rises in demand for these products,
including getting our new facility that will specialize in the
manufacture of fine grain and high purity graphite products, plus
double our annual production capacity to 60,000 tons, completely up
and running."
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.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
China Carbon Graphite Group, Inc. and subsidiaries
Condensed Consolidated Balance Sheets
June 30, December 31,
2012 2011
------------- -------------
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $ 1,350,890 $ 521,450
Restricted cash 10,703,200 11,694,820
Accounts receivable, Net 13,095,700 12,541,321
Notes receivable 444,895 188,880
Advance to suppliers 2,410,409 5,921,970
Inventories 44,151,224 37,430,248
Prepaid expenses 234,917 452,730
Other receivables, net of allowance of $24,397 544,646 513,000
Total current assets 72,935,881 69,264,419
Property And Equipment, Net 35,742,753 36,719,595
Construction In Progress 7,518,640 6,220,451
Land Use Rights, Net 10,359,654 10,699,059
Total Assets $ 126,556,928 $ 122,903,524
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 3,866,990 $ 1,340,498
Advance from customers 1,552,654 1,360,989
Short term bank loans 38,720,400 45,488,600
Notes payable 17,786,200 16,763,100
Other payables 2,951,364 3,032,671
Loan from unrelated parties 185,610 -
Dividends payable 37,742 28,099
Total current liabilities 65,100,960 68,013,957
Amount Due To A Related Party 5,432,675 5,542,855
Long term bank loan 4,690,520 -
Warrant Liabilities 208,605 174,805
Total Liabilities 75,432,760 73,731,617
Redeemable convertible series B preferred stock,
$0.001 par value; 3,000,000 shares authorized;
305,810 and 426,110 shares issuedand
outstanding at June 30, 2012 and December 31,
2011, respectively. 366,972 511,332
Stockholders' Equity
Common stock, $0.001 par value; 100,000,000
shares authorized 24,231,708 and 22,981,408
shares issued and outstanding at June 30, 2012
and December 31, 2011, respectively 24,231 22,981
Additional paid-in capital 18,044,688 17,054,045
Accumulated other comprehensive income 7,933,485 7,943,542
Retained earnings 24,754,792 23,640,007
Total stockholders' equity 50,757,196 48,660,575
Total Liabilities and Stockholders' Equity $ 126,556,928 $ 122,903,524
============= =============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
China Carbon Graphite Group, Inc and subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
For the Three Months and Six Months Ended June 30, 2012 and 2011
(Unaudited)
Three months ended June Six months ended June
30, 30,
------------------------ ------------------------
2012 2011 2012 2011
----------- ----------- ----------- -----------
Sales $11,877,543 $12,145,024 $21,938,753 $23,608,359
Cost of Goods Sold 8,985,125 9,456,762 16,128,731 18,340,023
Gross Profit 2,892,418 2,688,262 5,810,022 5,268,336
Operating Expenses
Selling expenses 29,152 57,312 75,950 107,175
General and
administrative 1,170,462 1,049,666 2,021,861 2,603,728
Depreciation and
amortization 46,826 47,152 103,830 93,754
Total operating
expenses 1,246,440 1,154,130 2,201,641 2,804,657
Operating Income Before
Other Income (Expense) 1,645,978 1,534,132 3,608,381 2,463,679
Other Income (Expense)
Interest expense (1,220,173) (693,274) (2,449,918) (1,406,804)
Interest income 21 - 43 -
Other expense (215,468) (765) (215,468) (766)
Other income, net 215,190 15,670 215,190 76,550
Change in fair value
of warrants 445,763 26,540 (33,800) 82,692
Total other expense (774,667) (651,829) (2,483,953) (1,248,328)
Net Income $ 871,311 $ 882,303 $ 1,124,428 $ 1,215,351
Dividend Distribution (4,625) (6,985) (9,643) 17,882
Net Income Available To
Common Shareholders $ 866,686 $ 875,318 $ 1,114,785 $ 1,233,233
Other Comprehensive
Income (Loss)
Foreign currency
translation gain (loss) (433,954) 553,200 (10,057) 821,448
Total Comprehensive
Income $ 437,357 $ 1,435,503 $ 1,114,371 $ 2,036,799
Share Data
Basic earnings per
share $ 0.04 $ 0.04 $ 0.05 $ 0.05
Diluted earnings per
share $ 0.04 $ 0.04 $ 0.05 $ 0.05
Weighted average
common shares
outstanding, basic 23,948,851 22,350,263 23,632,248 21,993,435
Weighted average
common shares
outstanding,
diluted 24,254,661 23,194,542 23,938,058 22,671,285
The accompanying notes are an integral part of these condensed
consolidated financial statements.
China Carbon Graphite Group, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
Six months ended June 30,
--------------------------
2012 2011
------------ ------------
Cash flows from operating activities
Net Income $ 1,124,428 $ 1,215,351
Adjustments to reconcile net cash provided by
operating activities
Depreciation and amortization 1,360,692 870,310
Related party interest expenses
contribution 222,860 -
Stock compensation 374,333 623,450
Change in fair value of warrants 33,800 (82,692)
Change in operating assets and liabilities
Accounts receivable (557,196) (4,308,178)
Notes receivable (257,316) 173,556
Other receivable (31,808) (1,107,235)
Advance to suppliers 3,529,409 (889,008)
Inventories (6,755,136) (4,121,825)
Prepaid expenses (2,719) 226,703
Accounts payable and accrued liabilities 2,684,917 (141,785)
Advance from customers 192,640 2,807,114
Taxes payable (444,341) 1,476,262
Other payables 353,241 90,132
Net cash provided by (used in) operating
activities 1,827,804 (3,167,845)
Cash flows from investing activities
Acquisition of property and equipment (37,756) (27,088)
Construction in progress (1,109,403) (2,459,521)
Net cash used in investing activities (1,147,159) (2,486,609)
Cash flows from financing activities
Proceeds from issuing common stock 472,000 -
Proceeds from warrants exercise - 371,714
Dividends paid for series B preferred stock - (32,996)
Proceeds from short-term bank loans 11,074,000 11,176,300
Payment to short-term bank loans (17,876,600) (6,047,450)
Proceeds from long-term bank loans 4,714,360
Proceeds from loans from unrelated parties 9,162,944 -
Payment of loans from unrelated parties (9,162,944)
Payments to an related party (142,380) -
Proceeds from an related party 31,640 -
Proceeds from stock not yet issued (145,000) -
Restricted cash 996,660 (6,491,440)
Proceeds from notes payable 17,876,600 10,410,800
Payment to notes payable (16,848,300) -
Net cash provided by financing activities 152,980 9,386,928
Effect of exchange rate fluctuation (4,185) 42,368
Net increase in cash 829,440 3,774,842
Cash and cash equivalents at beginning of period 521,450 296,312
Cash and cash equivalents at end of period $ 1,350,890 $ 4,071,154
Supplemental disclosure of cash flow information
Interest paid $ 1,643,371 $ 1,406,804
Non-cash activities:
Preferred stock conversion to common stock $ 144 $ 753
Reclassfication of warrant liability with
equity $ - $ 14,993
Issuance of common stock for compensation $ 153,800 $ 1,787,600
============ ============
Investor Contact: Mr. Kevin Fickle President NUWA Group, LLC
Tel: +1-925-330-8315 Email: kevin@nuwagroup.com Company Contact:
Mr. Donghai Yu Chief Executive Officer China Carbon Graphite Group
Inc. Tel: +1-626-589-6525 Email: ir@chinacarboninc.com
China Carbon Graphite (CE) (USOTC:CHGI)
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