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 first quarter ended March 31, 2013.
"The recession of China's steel industry continues to impact our
sales this quarter. We strongly believe the market demand will
return very soon just as the last recession in 2008 ended the
following year. I am glad our management decided to not only
dedicate most of our resources to produce high-grade and high
margin graphite products like fine grain and high purity graphite
but also continue to explore more applications of our products in
order to diversify our risks. I believe this effort will be
reflected on our future financials," said Donghai Yu, Chief
Executive Officer of China Carbon Graphite Group Inc.
Sales
During the three months ended March 31, 2013, we had sales of
$3,060,918, compared to sales of $10,061,210 for the three months
ended March 31, 2012, a decrease of $7,000,292, or approximately
69.6%. The sales decrease was mainly attributable to a significant
decline in the demand for our products during the three months
ended March 31, 2013, which resulted from the struggle of steel
companies.
The breakdown of revenues for each of graphite electrodes, fine
grain graphite and high purity graphite, during the three months
ended March 31, 2013 and 2012, respectively, is as follows:
|
March 31, 2013
Sales |
% of Total
Sales |
March 31, 2012
Sales |
% of Total
Sales |
Graphite Electrodes |
$ 80,960 |
2.6% |
$ 456,647 |
4.5% |
Fine Grain Graphite |
1,394,956 |
45.6% |
4,467,350 |
44.4% |
High Purity Graphite |
1,491,521 |
48.7% |
5,051,089 |
50.2% |
Others (1) |
93,481 |
3.1% |
86,124 |
0.9% |
Total |
$ 3,060,918 |
100.0% |
$ 10,061,210 |
100.0% |
|
|
|
|
|
(1) "Other" sales represent
revenue generated by sales of semi-processed products and other
types of products. |
Cost of goods sold; gross margin
Our cost of goods sold consists of the price of raw materials,
utilities, labor, and depreciation expenses in our manufacturing
facilities. During the three months ended March 31, 2013, our cost
of goods sold was $3,320,320, compared to $7,143,606 for the three
months ended March 31, 2012, a decrease of $3,823,286 or
approximately 53.5%. The decrease in the cost of sales was due to
the decline in sales volume.
Our gross margin decreased from 29.0% for the three months ended
March 31, 2012 to (8.5)% for the three months ended March 31, 2013.
This decline is mainly attributed to a reduction in sales price due
to competition, less demand and an increase of cost of goods sold,
which is due to increased depreciation allocated to the cost of
goods sold resulting from the transfer of construction in progress
to property and equipment since the end of 2012.
Operating expenses
Operating expenses totaled $470,411 for the three months ended
March 31, 2013, compared to $955,201 for the three months ended
March 31, 2012, a decrease of $484,790, or approximately 50.8%.
Selling, general and administrative
expenses
Selling expenses decreased from $46,798 for the three months
ended March 31, 2012 to $17,941 for the three months ended March
31, 2013, a decrease of $28,857, or 61.7%. The decline was mainly
due to lower sales, decreased sales commission and lower shipping
and handling expenses during the three months ended March 31, 2013
as compared to the three months ended March 31, 2012.
Our general and administrative expenses consist of salaries,
office expenses, utilities, business travel, amortization expenses,
public company expenses (including legal, accounting and investor
relations) and stock compensation. General and administrative
expenses were $384,582 for the three months ended March 31, 2013,
compared to $851,399 for the three months ended March 31, 2012, a
decrease of $466,817, or 54.8%. The decline in general and
administrative expenses was mainly due to decreased consulting
expenses and bad debt expenses offset by increased salary expenses
for the three months ended March 31, 2013 compared to the three
months ended March 31, 2012.
Depreciation and amortization expenses
Depreciation and amortization expenses totaled $655,449 for the
three months ended March 31, 2013, compared to $567,584 for the
three months ended March 31, 2012, an increase of $87,865, or
approximately 15.48%. For the three months ended March 31, 2013,
depreciation and amortization was allocated between costs of goods
sold, selling and general administrative expenses in the amounts of
$587,561 and $67,888, respectively. For the three months
ended March 31, 2012, depreciation and amortization was allocated
between costs of goods sold, selling, and general administrative
expenses in the amounts $510,580 and $57,004, respectively. The
increase in depreciation and amortization expenses is due to
additional fixed assets placed in service.
Income (Loss) from operations
As a result of the factors described above, operating loss was
$729,813 for the three months ended March 31, 2013, compared to
operating income of $1,962,403 for the three months ended March 31,
2012, a decrease of approximately $2,692,216, or 137.2%.
Other income and expenses
Our interest expense was $862,448 for the three months ended
March 31, 2013, compared to $1,229,745 for the three months ended
March 31, 2012, reflecting decreased interest expenses on loans
from banks. Expenses from changes in the fair value of our warrants
as a result of adopting ASC 820-10 was $44,368 for the three months
ended March 31, 2013, compared to $(479,563) for the three months
ended March 31, 2012.
Income tax
During the three months ended March 31, 2013 and 2012, we
benefited from a 100% tax holiday from the PRC enterprise tax. As a
result, we had no income tax due for these periods. The enterprise
income tax at the statutory rates would have been approximately $0
and $165,203, respectively, for the three months ended March 31,
2013 and 2012 without consideration of adjustments on taxable
income. The tax holiday is from 2008 through 2017.
Net income (loss)
As a result of the factors described above, our net loss for the
three months ended March 31, 2013 was $1,502,268, compared to net
income of $253,117 for the three months ended March 31, 2012, a
decrease of $1,755,385, or 693.5%.
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 Group Inc. 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 |
|
|
|
China Carbon Graphite
Group, Inc. and Subsidiaries |
Consolidated Balance
Sheets |
|
|
|
|
March 31, 2013 |
December 31,
2012 |
|
(Unaudited ) |
(Audited) |
ASSETS |
|
|
|
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 1,680,254 |
$ 129,746 |
Restricted cash |
22,379,000 |
22,149,000 |
Accounts receivable, Net |
7,142,892 |
11,239,002 |
Notes receivable |
7,401,165 |
— |
Advance to suppliers |
12,503,217 |
1,177,462 |
Inventories |
48,181,039 |
48,417,875 |
Prepaid expenses |
785,438 |
280,779 |
Other receivables, net of allowance of
$221,026 and $220,339, respectively |
104,639 |
35,655 |
Total current assets |
100,177,644 |
83,429,519 |
|
|
|
Property And Equipment,
Net |
40,481,778 |
40,964,363 |
|
|
|
Construction In
Progress |
18,943,945 |
7,324,379 |
|
|
|
Land Use Rights, Net |
9,643,328 |
9,657,419 |
Total Assets |
$ 169,246,695 |
$ 141,375,680 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
Current Liabilities |
|
|
Accounts payable and accrued expenses |
$ 1,431,323 |
$ 2,250,745 |
Advance from customers |
1,740,402 |
1,368,525 |
Short term bank loans |
45,241,000 |
38,680,500 |
Notes payable |
40,733,000 |
40,606,500 |
Other payables |
1,489,655 |
630,179 |
Loan from unrelated parties |
11,351,604 |
338,002 |
Dividends payable |
51,353 |
46,816 |
Total current
liabilities |
102,038,337 |
83,921,267 |
|
|
|
Amounts Due To Related
Parties |
4,637,132 |
4,795,593 |
|
|
|
Long Term Bank Loans |
16,067,800 |
4,782,900 |
|
|
|
Warrant Liabilities |
179,994 |
224,362 |
Total Liabilities |
122,923,263 |
93,724,122 |
|
|
|
Redeemable convertible series B preferred
stock, $0.001 par value; 3,000,000 shares authorized; 300,000 and
300,000 shares issued and outstanding at March 31, 2013 and
December 31, 2012, respectively. |
360,000 |
360,000 |
Stockholders' Equity |
|
|
Common stock, $0.001 par value; 100,000,000
shares authorized 25,137,518 and 25,077,518 shares issued and
outstanding at March 31, 2013 and December 31, 2012,
respectively |
25,137 |
25,077 |
Additional paid-in capital |
18,256,121 |
18,223,781 |
Accumulated other comprehensive income |
9,129,202 |
8,982,925 |
Retained earnings |
18,552,972 |
20,059,775 |
Total stockholders'
equity |
45, 963,432 |
47,291,558 |
Total Liabilities and Stockholders'
Equity |
$ 169,246,695 |
$ 141,375,680 |
|
|
|
The accompanying notes are an
integral part of these consolidated financial statements. |
|
|
China Carbon Graphite
Group, Inc. and Subsidiaries |
Consolidated Statements
of Operations and Comprehensive Income |
For the Three Months
Ended March 31, 2013 and 2012 |
(Unaudited) |
|
|
|
|
Three months
ended March 31, |
|
2013 |
2012 |
|
|
|
Sales |
$3,060,918 |
$10,061,210 |
|
|
|
Cost of Goods Sold |
3,320,320 |
7,143,606 |
Gross Profit (loss) |
(259,402) |
2,917,604 |
|
|
|
Operating Expenses |
|
|
Selling expenses |
17,941 |
46,798 |
General and administrative |
384,582 |
851,399 |
Depreciation and amortization |
67,888 |
57,004 |
Total operating expenses |
470,411 |
955,201 |
|
|
|
Operating Income (Loss) Before Other
Income (Expense) |
(729,813) |
1,962,403 |
|
|
|
Other Income (Expense) |
|
|
Interest expense |
(862,448) |
(1,229,745) |
Interest income |
45,304 |
22 |
Other income, net |
321 |
-- |
Change in fair value of warrants |
44,368 |
(479,563) |
Total other expense |
(772,455) |
(1,709,286) |
|
|
|
Net Income (Loss) |
(1,502,268) |
253,117 |
|
|
|
Preferred Stock
Dividends |
(4,537) |
(5,018) |
|
|
|
Net Income (Loss) Available To Common
Shareholders |
(1,506,805) |
248,099 |
|
|
|
Other Comprehensive
Income |
|
|
Foreign currency translation gain |
146,277 |
423,897 |
Total Comprehensive
Income |
$ (1,355,991) |
$ 677,014 |
|
|
|
Share Data |
|
|
|
|
|
Basic earnings (loss) per share |
$ (0.06) |
$ 0.01 |
|
|
|
Diluted earnings (loss) per share |
$ (0.06) |
$ 0.01 |
|
|
|
Weighted average common shares
outstanding, |
|
|
Basic |
25,103,518 |
23,315,645 |
|
|
|
Weighted average common shares
outstanding, |
|
|
Diluted |
25,103,518 |
23,647,455 |
|
|
|
The accompanying notes are an
integral part of these consolidated financial statements. |
|
|
China Carbon Graphite
Group, Inc. and Subsidiaries |
Consolidated Statements
of Cash Flows |
(Unaudited) |
|
|
|
|
Three months
ended March 31, |
|
2013 |
2012 |
Cash Flows from Operating
Activities |
|
|
Net income (loss) |
$ (1,502,268) |
$ 253,117 |
Adjustments to reconcile net cash
provided by operating activities |
|
|
Depreciation and Amortization |
655,449 |
567,584 |
Stock compensation |
60,345 |
-- |
Change in fair value of warrants |
(44,368) |
479,563 |
Recovery of bad debt expenses |
(166,601) |
-- |
Changes in operating assets and
liabilities |
|
|
Accounts receivable |
4,290,026 |
(1,310,189) |
Notes receivable |
(7,387,374) |
(142,124) |
Other receivables |
(68,745) |
(44,531) |
Advance to suppliers |
(11,300,990) |
(5,197,009) |
Inventory |
386,948 |
(4,075,391) |
Prepaid expenses |
(530,927) |
169,188 |
Accounts payable and accrued liabilities |
(824,186) |
594,274 |
Advance from customers |
366,928 |
592,123 |
Taxes payable |
99,446 |
(110,310) |
Other payables |
755,723 |
133,762 |
Net cash used in operating
activities |
(15,210,594) |
(8,089,943) |
|
|
|
Cash flows from investing
activities |
|
|
Acquisition of property, plant and
equipment |
(2,292) |
(15,831) |
Proceeds from land bureau against cost of
land use rights |
|
237,749 |
Addition of construction in progress |
(11,575,140) |
(651,528) |
Net cash used in investing
activities |
(11,577,432) |
(429,610) |
|
|
|
Cash flows from financing
activities |
|
|
Proceeds from issuing common stock |
-- |
50,000 |
Proceeds from short term loans |
11,249,000 |
4,755,000 |
Repayments for short term loans |
(4,821,000) |
(4,755,000) |
Proceeds from long term loans |
11,249,000 |
-- |
Proceeds from loan from unrelated
parties |
10,992,029 |
9,313,808 |
Proceeds from loan from related parties |
448,994 |
79,727 |
Repayments to related parties |
(622,072) |
-- |
Proceeds from stock not yet issued |
-- |
77,500 |
Restricted cash |
(160,700) |
4,945,200 |
Proceeds from notes payable |
17,677,000 |
10,778,000 |
Repayments to notes payable |
(17,677,000) |
(16,880,250) |
Net cash provided by financing
activities |
28,335,251 |
8,363,985 |
|
|
|
Effect of exchange rate
fluctuation |
3,283 |
3,819 |
|
|
|
Net increase (decrease) in
cash |
1,550,508 |
(151,749) |
|
|
|
Cash and cash equivalents at
beginning of period |
129,746 |
521,450 |
|
|
|
Cash and cash equivalents at end of
period |
$1,680,254 |
$ 369,701 |
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
Interest paid |
$1,040,625 |
$ 984,830 |
Income taxes paid |
$ -- |
$ -- |
|
|
|
Non-cash activities: |
|
|
|
|
|
Preferred stock conversion to common
stock |
$ -- |
$ 94 |
CONTACT: Investor Contact:
Ms. Renee Volaric
Director
RB Milestone Group, LLC
Tel: (212) 661-0075 ext. 113
Email: RVolaric@RBMilestone.com
Company Contact:
Mr. Donghai Yu
Chief Executive Officer
China Carbon Graphite Group Inc.
Email: ir@chinacarboninc.com
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