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02.12.2013 20:16
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China Carbon Graphite Group Reports Third Quarter 2013 Financial Results
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PR Newswire
INNER MONGOLIA, China, Dec. 2, 2013
INNER MONGOLIA, China, Dec. 2, 2013 /PRNewswire/ -- China Carbon Graphite Group, Inc. (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 third quarter ended September 30, 2013.
Mr. Donghai Yu, Chief Executive Officer of China Carbon, commented, "Plagued by the stubborn crisis of China's steel industry from which our major profits are generated, we experienced continuous challenges in the third quarter resulting in a 58% decrease in our revenues over the same period of last year. To tackle these challenges, our management has been making necessary initiatives including adjusting our product portfolio and positioning strategies. We hope these efforts can help us better mitigate the risks and the negative impacts from the downturn of overall economy."
Third Quarter 2013 Financial Results
| | Three Months Ended September 30 | ||||||
| | 2013 | | 2012 | ||||
| | Sales | | % of Total | | Sales | | % of Total |
| Graphite Electrodes | $361,069 | | 13.3% | | $788,769 | | 12.1% |
| Fine Grain Graphite | 935,145 | | 34.4% | | 2,666,957 | | 41.1% |
| High Purity Graphite | 1,188,145 | | 43.6% | | 2,763,836 | | 42.6% |
| Others | 237,364 | | 8.7% | | 271,571 | | 4.2% |
| Total | $2,721,723 | | 100.0% | | $6,491,133 | | 100.0% |
Sales: For the three months ended 30, 2013, sales decreased by $3.77 million, or 58.1%, to $2.72 million from $6.49 million for the third quarter of 2012. The decrease in sales was mainly due to industry-wide demand weakness for our products as a result of continued struggles of steel manufacturers. In particular, demand for our fine grain graphite and high purity graphite products remained extremely low during the third quarter with sales decreasing 64.9% and 57.0% to $0.94 million and $1.19 million, respectively. Sales of graphite electrodes decreased 54.2% to $0.36 million while sales of semi-processed and other types of products declined 12.6% to $0.24 million.
Gross Income (Loss): Gross profit for the third quarter of 2013 was $0.45 million, compared to $1.77 million for the same period of last year. Gross margin decreased to 16.6% for the third quarter of 2013 from 27.3% for the same period of last year. The decrease in gross margin was mainly due to increased percentage of low margin product sales, increased depreciation allocated to the cost of goods sold due to the transfer of construction in progress to property and equipment since the end of 2012, and increased fixed cost allocation as a result of decreased production volume.
Operating Income (Loss):
Selling, General and Administrative Expenses:
Selling expenses decreased by 87.2% to $0.01 million for the third quarter of 2013 from $0.06 million for the same period of last year. The decrease was mainly due to decreased sales commission and lower shipping and handling expenses during the three months ended September 30, 2013 as compared to the three months ended September 30, 2012.
General and administrative expenses increased by $1.66 million, or 157.1%, to $2.72 million for the third quarter of 2013 from $1.06 million for the same period of last year. The increase in general and administrative expenses was mainly attributable o increase in bad debt expenses and partially offset by decrease in stock-based compensation expenses for consulting services.
Depreciation and Amortization Expenses:
Depreciation and amortization expenses increased $0.13 million, or 234.2%, to $0.19 million for the third quarter of 2013 from $0.06 million for the same period of last year. The increase in depreciation and amortization expenses was due to additional fixed assets placed in service.
Impairment of Property and Equipment:
The Company also recorded impairment of property and equipment of $3.54 million for the third quarter of 2013.
Overall, operating expenses totaled $6.45 million for the third quarter of 2013, compared to $1.18 million for the same period of 2012, an increase of $5.28 million, or 448.4%. As a result of the factors described above, operating loss was ($6.00) million for the third quarter of 2013, compared to operating income of $0.59 million for the same period of last year. Operating loss margin was (220.5%) for the third quarter of 3013, compared to operating profit margin of 9.1% for the same period of last year.
Net Income (Loss): Net loss available to common stockholders was ($6.89) million, or ($0.26) per diluted share, for the third quarter of 2013, compared to ($0.80) million, or ($0.03) per diluted share, for same period of last year.
Nine Months Ended September 30, 2013 Financial Results
| | Nine Months Ended September 30 | ||||||
| | 2013 | | 2012 | ||||
| | Sales | | % of Total | | Sales | | % of Total |
| Graphite Electrodes | $2,021,971 | | 23.8% | | $3,434,285 | | 12.1% |
| Fine Grain Graphite | 3,247,054 | | 38.2% | | 12,443,155 | | 43.8% |
| High Purity Graphite | 2,693,240 | | 31.7% | | 12,024,784 | | 42.3% |
| Others | 534,628 | | 6.3% | | 527,662 | | 1.8% |
| Total | $8,496,893 | | 100.0% | | $28,429,886 | | 100.0% |
Sales: For the nine months ended September 30, 2013, sales decreased by $19.93 million, or 70.1%, to $8.50 million from $28.43 million for same period of last year. The decrease in sales was mainly due to industry-wide demand weakness for our products as a result of continued struggles of steel manufacturers. Demand for our fine grain graphite and high purity graphite products was particularly weak for the nine months ended September 30, 2013 with sales decreasing 73.9% and 77.6% to $3.25 million and $2.69 million, respectively. Sales of graphite electrodes also decreased by 41.1% to $2.02 million. Sales of semi-processed and other types of products grew 1.3% to $0.53 million.
Gross Income (Loss): Gross loss for the nine months ended September 30, 2013 was ($4.71) million, compared to gross profit of $7.58 million for the same period of last year. Gross loss margin was (55.4%) for the nine months ended September 30, 2013, compared to 26.7% for the same period of last year. The decrease in gross margin was mainly due to inventory impairment cost of $3.27 million for the third quarter of 2013, increased percentage of low margin product sales, increased depreciation allocated to the cost of goods sold due to the transfer of construction in progress to property and equipment since the end of 2012, and increased fixed cost allocation as a result of decreased production volume.
Operating Income (Loss):
Selling, General and Administrative Expenses:
Selling expenses decreased by $0.09 million, or 67.2%, to $0.05 million for the nine months ended September 30, 2013 from $0.14 million for the same period of last year. The decrease was mainly due to decreased sales commission and lower shipping and handling expenses during the nine months ended September 30, 2013 as compared to the same period of last year.
General and administrative expenses increased by $3.56 million, or 115.6%, to $6.64 million for the nine months ended September 30, 2013 from $3.08 million for the same period of last year. The increase in general and administrative expenses was mainly due to increased bad debt expenses of $2.19 million, increased stock based compensation expense for directors and officers of $0.27 million, and increased accrued expenses for potential lawsuit loss of $0.32 million for the nine months ended September 30, 2013 compared to the same period of last year.
Depreciation and Amortization Expenses:
Depreciation and amortization expenses increased by $0.15 million, or 92.2%, to $0.31 million for the nine months ended September 30, 2013 from $0.16 million for the same period of last year. The increase in depreciation and amortization expenses was due to additional fixed assets placed in service.
Impairment of Property and Equipment:
The Company also recorded impairment of property and equipment of $3.54 million for the nine months ended September 30, 2013.
Operating expenses totaled $10.53 million for the nine months ended September 30, 2013, compared to $3.38 million for the same period of last year, an increase of $7.16 million, or 221.8%. As a result of the factors described above, operating loss totaled ($15.24) million for the nine months ended September 30, 2013, compared to operating income of $4.20 million for the same period of last year. Operating loss margin was (179.4%) for the nine months ended September 30, 2013 versus operating profit margin of 14.8% for the same period of last year.
Net Income (Loss): Net loss available to common stockholders was ($17.84) million, or ($0.69) per diluted share, for the nine months ended September 30, 2013, compared to net income available to common stockholders of $0.31 million, or $0.01 per diluted share, for the nine months ended September 30, 2012.
Financial Position
As of September 30, 2013, the Company had cash and cash equivalents of $0.20 million, restricted cash of $30.72 million, and short-term bank loans of $45.92 million. The Company had working capital deficit of ($15.57) million as of September 30, 2013, compared to a deficit of ($0.49) million at the end of 2012.
Net cash used in operating activities was ($11.57) million for the nine months ended September 30, 2013, compared to net cash provided by operating activities of $0.54 million for the same period of last year.
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 http://www.chinacarboninc.com.
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