NEW YORK, April 18, 2011 (GLOBE NEWSWIRE) -- 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 issued the Company's financial results for Fiscal Year 2010 ended December 31, 2010.
2010 Fiscal Year Financial Highlights:
- Revenue increased 102%, from $15.4 million in 2009 to $31.0 million in 2010
- Gross profit increased 218%, from $2.2 million in 2009 to $6.9 million in 2010
- Gross profit rate increased 57.86%, from 14.17% in 2009 to 22.36% in 2010
- Operating income increased 383%, from operating loss of ($0.9 million) in 2009 to operating income of $2.4 million in 2010
- Net income increased 194%, from net loss of ($1.5 million) in 2009 to net income of $1.4 million in 2010
Summarized Full Fiscal Year 2010 Results compared with Full Fiscal Year 2009 Results Ended December 31:
"We are thoroughly pleased that the Company's operations generated such robust growth and excellent results in 2010," said Donghai Yu, Chief Executive Officer of China Carbon. "We are especially proud to have increased our net income by over 190 percent and operating income by over 380 percent compared to 2009. We are glad to see increased revenue from expanded customer base due to market recovery and doubled production capacity, improved margin due to a higher margin product mix, as well as strong financing support from banks."
"We saw 2010 sales to both established and new customers, with about 45 percent of our total sales in 2010 resulting from our new customers. We have increased our production capacity from 15,000 metric tons to 30,000 metric tons in 2010. We are also currently operating at 100% production capacity. The increased capacity allowed us to fulfill more demand from customers. Before we were constraint from our production capacity," Mr. Yu continued. "It proved that our strategic decision to double our production capacity and to purchase additional levels of inventories was effective, as we were better prepared to supply the heightened demand for our products."
Mr. Yu further added, "Our core products all sold extremely well in 2010. Notably, we sold a greater proportion of our higher margin products. Graphite electrodes sales increased over 37 percent, fine grain graphite sales grew over 100 percent and high purity graphite sales rose over 500 percent. We look forward to further gains in revenue as we expect the demand for and our supply of our higher margin graphite products to both continue to rise in 2011."
2010 Full Year Financial Results
China Carbon's revenues more than doubled, from $15,369,978 in 2009 to $30,994,150 in 2010, an increase of $15,624,172 or approximately 102%. The Company's revenue was generated mainly from sales of fine grain graphite, graphite electrodes, high purity graphite and semi-processed graphite products. Sales rose in 2010 due to a significant increase in the demand of the Company's products, which is attributable to the market recovery and new client development. The increased production capacity and increased unit prices also contributed to the boost of total sales.
Cost of Goods Sold
The Company's cost of goods sold increased from $13,192,496 in 2009 to $24,062,354 in 2010, an increase of $10,869,858 or approximately 82%. This increase reflects the growth in sales in 2010. China Carbon's cost of goods sold consists of cost of raw materials, utility, labor cost and depreciation expenses on manufacturing facilities.
Gross Profit and Gross Profit Margin
China Carbon's gross profit increased $4,754,314, or 218%, from $2,177,482 in 2009 to $6,931,796 in 2010. The Company's gross margin increased from 14% in 2009 to 22% in 2010 due to the variance in its production mix—in 2010, China Carbon sold a greater proportion of higher margin products.
Selling, General and Administrative Expenses
China Carbon's selling, general and administrative expenses totaled $4,342,274 in 2010 compared to $2,960,578 in 2009, an increase of $1,381,696 or approximately 47%.
The Company's selling expenses consist of shipping and handling expenses and exhibition expenses. Selling expenses decreased from $365,865 in 2009 to $186,693 in 2010, or (49 %). The decrease was due to a reduction in shipping and handling fees in 2010 compared to 2009. In 2010, customers picked up more products, which is customary in the industry for some of China Carbon's higher margin products, resulting in less shipping and handling fees.
China Carbon's general and administrative expenses consist of salaries, office expenses, utilities, business travel, amortization expenses and public company expenses such as legal, accounting, investor relations as well as stock compensation. General and administrative expenses were $4,155,581 in 2010 compared to $2,594,713 in 2009. The increase of the general and administrative expenses is due primarily to increased professional expenses as a public company and to a $1.3 million bad debt expense, which is reserved as an accounts receivable allowance. The increased receivable allowance is in line with increased accounts receivable. The accounts receivable allowance amounted to $2.5 million as of December 31, 2010. By April 18, 2011, the Company has collected the majority of December 31, 2010 accounts receivable balance. Thus as of April 18, 2011, the uncollected December 31, 2010 accounts receivable is less than the accounts receivable allowance reserved.
China Carbon's net income for 2010 was $1,383,391 compared to a net loss of ($1,474,276) in 2009, an improvement of $2,857,667 or 194%.
Liquidity and Capital Resources
China Carbon's primary capital needs have been to fund its working capital requirements. The Company's primary sources of financing have been cash generated from operations, short-term and long-term loans from banks in China, and loans from a related party. As of December 31, 2010, the Company had short-term loans in the aggregate amount of $33 million outstanding, which the Company believes to be renewable. China Carbon entered into four short-term bank loans with China Construction Bank for a total of $27 million between August 6 and September 16, 2010. On January 11, 2011, we entered into a short-term bank loan with China Construction Bank for a total of $4.6 million. The loan has an interest rate of 6.06%, due in January 11, 2012, and secured by property and equipment and land use rights. In February 2011, the Company returned $682,650 of a bank loan from a Credit Union. The Company expects that anticipated cash flows from operations, short-term and bank loans will be sufficient to fund its operations through at least the next twelve months.
Mr. Yu explained that China Carbon is positioned for excellent results in 2011 and for future growth in the coming years as the Company plans to expand production capacity by as much as 100% in 2011. Mr. Yu stated, "Our new facility which is expected to start operating around August 2011 will increase the production capacity of our higher margin products. The Company also has plan to actively seek opportunities to integrate vertically with raw material providers to help to save the raw material cost and thus to improve the gross profits."
The Company expects that the increased demand for its higher margin products of fine grain graphite and high purity graphite will extend through 2011, primarily due to anticipated growth in China's automobile, aerospace, defense, iron and steel industries. China Carbon also expects that relatively lower margin products of graphite electrodes will continue to experience increased demand in 2011. The Company anticipates that cash flow from operations will continue to increase with enhanced sales, improved accounts receivable collection and less bad debt expenses for accounts receivable allowances.
"The future looks bright for China Carbon," said Mr. Yu. "Our technology is applicable to some of China's most rapidly developing industries and we are well positioned in our marketplace. We plan to continue surveying the market before we make any decisions regarding changing our current product mix and regarding the product mix of the new facility under construction. To better position ourselves to fulfill potential increased demand for our products, we are currently doubling our annual production capacity from 30,000 metric tons to 60,000 metric tons. China Carbon anticipates that its new plant will emphasize production of the Company's higher margin products."
China Carbon is also poised to take advantage China's nuclear graphite needs. Through the Company's development of isostatic graphite—including nuclear, solar and semiconductor graphite—China Carbon looks to provide China's existing nuclear power reactors as well as the nation's reactors under construction with nuclear graphite in the near future. China Carbon is also currently developing ultra-high purity graphite with a diameter of 840 mm, which is required for nuclear plants. Additionally, steel plants in China have been upgrading their furnace facilities, creating a high demand for large size ultra-high grade graphite electrodes. China Carbon expects that operations will commence at its new facility in June 2011. The Company believes that it will become China's first domestic producer of 800 mm diameter ultra-high grade electrodes.
Mr. Yu stated, "We expect that by August 2011, our production capacity will be doubled from 30,000 metric tons to 60,000 metric tons. Since now we are operating at 100% and cannot fulfill current demand of our products, we estimate that our new production facility which will start operating in August 2011 will reach its 100% utilization rate in one to two years after its initial operation. This is further strengthening our high end graphite product mix and leader position. We aspire to strengthen our position in China's graphite and carbon industries and to grow the Company even further. Each day we strive to improve the Company and our products. Our goal is to become a world-leader in the graphite and carbon industries."
Please find more information at our brand new website: www.chinacarboninc.com.
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 which 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.
CONTACT: Investor Contact: Mr. Kevin Fickle 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: firstname.lastname@example.org