China Energy Corp. Reports Financial Results for First Quarter of Fiscal Year 2010
First quarter fiscal year 2010 revenue up 314.1% to usd20.8 million Net income of usd4.0 million with EPS of usd0.09 per share
First quarter fiscal year 2010 revenue up 314.1% to usd20.8 million
Net income of usd4.0 million with EPS of usd0.09 per share
HOHHOT CITY, China, April 20 /PRNewswire-Asia-FirstCall/ -- China Energy Corporation (OTC Bulletin Board: CHGY), ("China Energy" or "the Company"), a leading Inner Mongolia producer and processor of raw coal for domestic heating, electrical generation, and coking purposes for steel production in the People's Republic of China, recently announced financial results for the first quarter of its fiscal year ending November 30, 2010.
For the quarter ended February 28, 2010, the Company reported revenue of usd20.8 million, an increase of 314.1% over revenue of usd5.0 million generated in the first quarter of fiscal year 2009. The year-over-year increase in revenue was due to a significant increase in production resulting from a usd10 million expansion and improvement program at the LaiYeGou coal mine in Inner Mongolia, PRC. The program was completed in the third quarter of 2009 and included the installation of more efficient "longwall" mining equipment. On a sequential quarterly basis, the Company reported revenue of usd22.5 million in the fourth quarter of fiscal year 2009. The slight sequential decrease is due to seasonality in coal group sales in the first quarter of the fiscal year when operations are shut down for approximately two weeks during the Chinese New Year holiday and due to the above-average production volume of the fourth quarter of fiscal year 2009.
First quarter fiscal year 2010 sales from the Company's coal group increased 962% to usd16.2 million, or 78.2% of total sales, compared to usd1.5 million, or 30.5% of total sales in the same period in fiscal year 2009. As a component of this, 28.1% of total company sales came from coal production, and 50.1% came from coal trading during the first quarter of fiscal year 2010. China Energy produced approximately 156,000 metric tons of coal in the first quarter of 2010, compared to 17,000 metric tons in the same period of fiscal year 2009. Average sales price of coal during the first quarter fiscal year 2010 was usd37 per ton, compared to usd44 per ton in the same period in fiscal year 2009.
Sales of the heat power group totaled usd4.5 million, or 21.8% of total sales, in first quarter fiscal year 2010, compared to usd3.5 million or 69.5% of total sales in first-quarter fiscal year 2009. The higher level of sales from the heat power group was due to an increase of over 28.5% in the coverage area of the Company's heat power operations, and a slight increase in the volume of electricity sold by its electric power operations.
"Our strong operating performance in the first quarter of fiscal year 2010 reflects the efficiency of our longwall mining equipment which is now fully integrated at our LaiYeGou coal mine," stated WenXiang Ding, chief executive officer and president. "As a result of this installation we saw our recovery rate increase to 80% from 40%. Our expanded production capacity of 800,000 metric tons at our LaiYeGou coal mine coupled with the growing demand for coal used in power generation, manufacturing and heating in China should generate incremental growth in China Energy's revenue and net income through fiscal year 2010. We are also well positioned to expand our production and distribution capabilities through potential acquisition opportunities leveraging the rich coal resources in Inner Mongolia."
Cost of goods sold in the first quarter of fiscal year 2010 was approximately usd13.8 million, compared to approximately usd4.7 million in the first quarter of fiscal year 2009. Gross profit was usd6.9 million and gross margin was 33.4% in first-quarter of fiscal year 2010, compared to usd0.3 million in gross profit and gross margin of 6.5% during the same period in fiscal year 2009.
Operating expenses for the first quarter of fiscal year 2010 were approximately usd1.9 million, or 9.4% of revenue, compared to usd0.4 million or 8.7% of revenue in first-quarter fiscal year 2009. Selling and marketing expenses in first-quarter fiscal year 2010 were usd0.8 million compared to usd0.04 million in the same period in fiscal year 2009, and general and administration expenses totaled usd1.1 million and usd0.4 million in the respective periods. The increase in selling and marketing expenses in the first quarter of fiscal year 2010 was attributable in large part to the inclusion of usd0.5 million in transportation and storage expenses incurred in the Company's proprietary coal trading business. These expenses were first incurred in the third quarter of fiscal year 2009 in conjunction with the commencement of the Company's proprietary coal trading business.
Net income in the first quarter of fiscal year 2010 totaled approximately usd4.0 million, or usd0.09 per share, compared to a loss of approximately usd0.5 million, or usd0.01 per share in the first quarter of fiscal year 2009. Net income margins were 19.3% for the first quarter of fiscal year 2010. On a sequential quarterly basis, the Company generated net income of usd7.1 million, or usd0.16 per share in the fourth quarter of fiscal year 2009, which included usd1.5 million, or approximately usd0.03 per share in government subsidies received as incentive for the Company's heat power unit to supply heat at government-regulated prices. The amount and timing of future subsidies will depend upon market pricing of coal and government pricing for heat. Per share amounts for first quarter 2010 and 2009 are based on 45.0 million shares outstanding.
Balance Sheet and Cash Flow
Cash and cash equivalents totaled usd3.7 million on February 28, 2010 compared to usd5.1 million on November 30, 2009. The Company had total stockholders' equity of usd37.3 million, with total assets of usd85.9 million versus total liabilities of usd48.6 million on February 28, 2010. For the first quarter of fiscal year 2010, the Company generated about usd0.8 million in cash from operations versus cash used in operations of usd5.1 million in the first quarter of fiscal year 2009.
About China Energy Corporation
China Energy Corporation produces and processes raw coal for domestic heating, electrical generation and coking purposes for steel production primarily in the People's Republic of China, and acts as a brokerage in facilitating coal trade transactions. The Company produces coal through its subsidiary Inner Mongolia Tehong Coal Group Co, Ltd. ("Coal Group") and supplies heating and electricity requirements throughout the XueJiaWan district through its subsidiary Inner Mongolia Zhunger Heat Power Co., Ltd. ("Heat Power"). Through Heat Power, China Energy operates a thermoelectric plant and 21 heat transfer stations located in XueJiaWan, Ordos City in which the Company has a monopoly for heating supply granted to the Company by the local government. For additional information on China Energy Corporation see
Cautionary Statement Regarding Forward-Looking Information
This press release may contain certain "forward-looking statements" relating to the business of China Energy Corporation, and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the impact of the proceeds from the private placement on the Company's short term business and operations,; the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. 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 those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov)