WEB NEWS Comments & Business Outlook
THREE MONTHS ENDED MARCH 31,
2014
2013
(UNAUDITED)
Net sales
$ 305,329 $ 538,855
Cost of goods sold
316,913 484,714
Gross profit (loss)
(11,584 ) 54,141
Operating expenses
Selling
226,973 424,337
General and administrative
1,519,402 1,649,847
Total operating expenses
1,746,375 2,074,184
Loss from operations
(1,757,959 ) (2,020,043 )
Non-operating income (expenses)
Interest income
29,109 38,195
Interest expense
(132,673 ) (62,263 )
Other expenses
(1,984 ) (7,264 )
Warrant derivative income (expense)
52,813 (169,151 )
Total non-operating expense, net
(52,735 ) (200,483 )
Loss before income tax
(1,810,694 ) (2,220,526 )
Income tax benefit
(4,334 ) (10,220 )
Net loss
(1,806,360 ) (2,210,306 )
Other comprehensive item
Foreign currency translation gain (loss)
(694,177 ) 219,155
Comprehensive loss
$ (2,500,537 ) $ (1,991,151 )
Basic and diluted weighted average shares outstanding *
18,852,560 18,852,582
Basic and diluted net loss per share
$ (0.10 ) $ (0.12 )
Management Discussion and Analysis
Sales
China’s coal industry saw another downturn in 2013, which has continued into 2014, due to the slow-down of the national economy and the government’s recent efforts to float coal prices and loosen controls on the import and export of coal. The result has been a growing surplus of supply over demand, continuously falling market prices in most regions of China for coal, especially power coal, and higher consumption of imported coal, all of which has a negative impact on local coal business. During the three months ended March 31, 2014, we had sales of $0.31 million compared to $0.54 million for the same period of 2013, a decrease of 43%. In the three months ended March 31, 2014, our sales volume derived from the Tong Gong mines decreased as compared to the same period in 2013. Our average selling price per ton for the three months ended March 31, 2014 increased to $65.38 as compared to $61.58 for the same period in 2013. All of our sales in the three months ended March 31, 2014 were from coal produced at our Tong Gong mine, which produces high yield coal and has a higher selling price than standard coal. Our sales volume was 4,670 tons for the three months ended March 31, 2014, compared to 8,750 tons for the same period of 2013, a decrease of 47%, resulting primarily from the decrease in our mines’ production, as described below, and the decrease of local demand. The decrease in local demand was attributable to the factors described above and the government’s policies of limiting coal consumption in favor of alternative fuel sources in residential and even for industrial usages, due to worsening air pollution in China, and the negative impacts from customers’ use of more coal imported from neighboring areas in Inner Mongolia, namely, because local market prices were decreased to a level at which it became unprofitable to mine locally, especially at the Xing An mines, as well as logistical difficulties for Xing An and its customers.
Our net loss for the three months ended March 31, 2014 was $1.81 million compared to $2.21 million for the corresponding period in 2013, a decrease in the amount of loss of $0.4 million, for the reasons explained above.
Comments & Business Outlook
YEARS ENDED DECEMBER 31
2013
2012
Net sales
$ 3,023,591 $ 30,906,513
Cost of goods sold
2,591,444 23,278,540
Gross profit
432,147 7,627,973
Operating expenses
Selling
1,741,795 5,740,645
General and administrative
6,857,768 7,427,467
Goodwill impairment
- 26,180,923
Total operating expenses
8,599,562 39,349,035
Loss from operations
(8,167,415 ) (31,721,062 )
Non-operating income (expenses)
Interest income
136,412 161,814
Interest expense
(403,697 ) (268,471 )
Other expenses
(16,621 ) (2,017 )
Warrant derivative income
646,910 1,095,211
Total non-operating income, net
363,003 986,537
Loss before income tax
(7,804,412 ) (30,734,525 )
Income tax expense (benefit)
(63,776 ) 503,056
Net loss
(7,740,636 ) (31,237,581 )
Other comprehensive item
Foreign currency translation gain
2,443,680 195,904
Comprehensive loss
$ (5,296,956 ) $ (31,041,677 )
Basic weighted average shares outstanding
18,852,582 18,852,582
Diluted weighted average shares outstanding
18,852,582 18,852,582
Basic net loss per share
$ (0.41 ) $ (1.66 )
Diluted net loss per share*
$ (0.41 ) $ (1.66 )
Management Discussion and Analysis
Sales. China’s coal industry saw another downturn in 2013 due to the slow-down of the national economy and the government’s recent efforts to float coal prices and loosen controls on the import and export of coal. The result has been a growing surplus of supply over demand, continuously falling market prices for coal, especially power coal, and higher consumption of imported coal, all of which has a negative impact on local coal business. Our revenues are from sales of coal. During the year ended December 31, 2013, we had sales of $3.02 million compared to $30.91 million for 2012, a decrease of 90%. In the year ended December 31, 2013, our sales volume decreased from both our Xing An and Tong Gong mines compared to the same period in 2012. Our average selling price per ton for the year ended December 31, 2013 increased to $62.76 as compared to $50.83 for 2012. All of our sales in 2013 were from coal produced at our Tong Gong mine which produces high yield coal and has a higher selling price than standard coal. Our sales volume was 48,180 tons for the year ended December 31, 2013, compared to 608,077 tons for 2012, a decrease of 92%, resulting primarily from the decrease in our mines’ production, as described below, and the decrease of local demand. The decrease in local demand was attributable to the factors described above and the government’s policies of limiting coal consumption in favor of alternative fuel sources in residential and even for industrial usages, due to worsening air pollution in China, and the negative impacts from customers’ use of more coal imported from neighboring areas in Inner Mongolia, namely, because local market prices were decreased to a level at which it became unprofitable to mine locally, especially at the Xing An mines, as well as logistical difficulties for Xing An and its customers.
Net Income (Loss). Our net loss for the year ended December 31, 2013 was $7.74 million compared to $31.24 million for the corresponding period in 2012, a decrease in the amount of loss of $23.50 million, for the reasons explained above.
Comments & Business Outlook
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
THREE MONTHS ENDED JUNE 30,
2013
2012
2013
2012
Net sales
$ 1,067,149 $ 19,639,700 $ 528,294 $ 5,146,286
Cost of goods sold
962,493 14,149,252 477,779 3,740,820
Gross profit
104,656 5,490,448 50,515 1,405,466
Operating expenses
Selling
732,799 4,609,879 308,462 2,624,221
General and administrative
3,313,822 4,456,390 1,663,975 2,607,126
Total operating expenses
4,046,621 9,066,269 1,972,437 5,231,347
Loss from operations
(3,941,965 ) (3,575,821 ) (1,921,922 ) (3,825,881 )
Non-operating income (expenses)
Interest income
72,749 79,674 34,554 31,647
Interest expense
(125,267 ) (149,731 ) (63,004 ) (73,096 )
Other expenses
(10,375 ) (3,111 ) 195
Warrant derivative income (expense)
225,648 (27,604 ) 394,799 123,390
Total non-operating income (expenses), net
162,755 (97,661 ) 363,238 82,136
Loss before income tax
(3,779,210 ) (3,673,482 ) (1,558,684 ) (3,743,745 )
Income tax expense (benefit)
(20,087 ) 717,868 (9,867 ) 290,677
Net loss
(3,759,123 ) (4,391,350 ) (1,548,817 ) (4,034,422 )
Other comprehensive item
Foreign currency translation gain (loss)
1,412,144 (326,677 ) 1,192,989 (420,161 )
Comprehensive loss
$ (2,346,979 ) $ (4,718,027 ) $ (355,828 ) $ (4,454,583 )
Basic and diluted weighted average shares outstanding
18,852,582 18,852,582
18,852,582 18,852,582
Basic and diluted net loss per share
$ (0.20 ) $ (0.23 ) $ (0.08 ) $ (0.21 )
Comments & Business Outlook
THREE MONTHS ENDED MARCH 31,
2013
2012
Net sales
$ 538,855 $ 14,493,414
Cost of goods sold
484,714 10,408,432
Gross profit
54,141 4,084,982
Operating expenses
Selling
424,337 1,985,658
General and administrative
1,649,847 1,849,264
Total operating expenses
2,074,184 3,834,922
Income (loss) from operations
(2,020,043 ) 250,060
Non-operating income (expenses)
Interest income
38,195 48,027
Interest expense
(62,263 ) (76,635 )
Other expenses
(7,264 ) (195 )
Warrant derivative expense
(169,151 ) (150,994 )
Total non-operating expenses, net
(200,483 ) (179,797 )
Income (loss) before income tax
(2,220,526 ) 70,263
Income tax expense (benefit)
(10,220 ) 427,191
Net loss
(2,210,306 ) (356,928 )
Other comprehensive item
Foreign currency translation gain
219,155 93,484
Comprehensive loss
$ (1,991,151 ) $ (263,444 )
Basic and diluted weighted average shares outstanding
18,852,582 18,852,582
Basic and diluted net loss per share
$ (0.12 ) $ (0.02 )
Comments & Business Outlook
Second Quarter of 2012 Financial Results
For the three months ended June 30, 2012, the Company generated net sales of $5.1 million compared to $11.4 million for the same period in 2011, a 55% decline.
Net loss for the three months ended June 30, 2012 was $4.0 million compared to net income of $0.5 million for the same period of 2011.
Diluted loss per share for the second quarter 2012 was $0.21 compared to diluted earning per share of $0.02 in the same period of 2011. The decrease in net income and diluted earning per share was mainly attributed to the increase in our operating expenses and decrease in sales and non-cash other income.
The decreased sales was to due to decreased sales of Tong Gong, as a result of decreased production and brokerage sales, and no sale of Xing An mines, caused by logistical difficulties of Xing An, and stockpiling the coal inventory for selling at a higher price in the future, as well as ceased production in Xing An mines due to seasonality and mine upgrading during the second quarter of 2012.
"With China's economy slowing down during 2012, many industries like energy and mining were feeling obviously slowing paces in terms of suppressed demand and reduced price. Our coal business was not spared as well, facing more than ever challenges in daily operation and financial results," said Mr. Hongwen Li, President of US China Mining Group. "However, we didn't want to speculate the downward market condition for fast cash. Instead we maintain ourselves in long position. During the second quarter, the Company kept focus on improving mining facilitates and continuing in capitalizing Xing An's retrofit project while held position in coal inventory, as we anticipated that coal industry would rally up in the coming quarters along with China's continuing efforts to stabilize economy. We believe that these efforts can help heap in gains some days."
Comments & Business Outlook
First Quarter 2012 Results
For the three months ended March 31, 2012, the Company generated net sales of $14.5 million compared to $22.2 million for the same period in 2011, a 35% decline.
Net loss for the three months ended March 31, 2012 was $0.4 million compared to net income of $9.6 million for the same period of 2011. Diluted loss per share for the first quarter 2012 was $0.02 compared to diluted earnings per share of $0.51 in the same period of 2011.
"While the first quarter left a certain amount of inventory, we believe that it will not take us long to sell and delivery the coal to our customers," said Mr. Hongwen Li, President of US China Mining Group. "We are well capitalized and intently focused on completing the Guizhou acquisition in the near term which will meaningfully increase both our coal reserves and production capacity, while capitalizing on higher market prices to drive incremental revenue and net income growth."
Comments & Business Outlook
Fourth Quarter 2011 Results
For the three months ended December 31, 2011 , the Company recorded revenues of $14.1 million compared to $28.7 million for the same period of 2010, a decrease of 51%.
Diluted earnings per share for the fourth quarter 2011 were $0.15 compared to $0.36 in the same period of 2010.
"The Company made some adjustments in our operation during 2011," commented by Mr. Hongwen Li , CEO of the Company. "Compared to the 2010, we produced more, brokered less and had fewer customers. The tightened capacity for coal transportation by rail was one of the main reasons for our increased efforts in selling more coal extracted from our mines to certain customers who were able to book railway cargoes for delivery during 2011."
"During 2011 the Company had to cope with increased pressures related to rising costs and operating expenses, resulting in squeezing effects on profit margin," Mr. Li said. "To relieve those effects, the Company continues our efforts to raise selling price and increase sales of coal we produce ourselves."
"In the meantime, the Company never stops executing our growth strategy," Mr. Li continued. "We are continuing the retrofit project in Xing An, which we anticipate will increase output capacity by 50% by 2013. We put into action a program to potentially capitalize an anthracite coal mine in Guizhou province and we have initiated an exploratory program to trade coal and other mineral products from the US for China 's end users."
"For 2012, we intend to stay on the same track as we did in 2011. We estimate that our output will stay in the range of production output permitted under our mining rights. Management will keep focus on having all 2011's outstanding issues completed in a reasonable time schedule, which we expect will provide the more positive outcomes we have planned."
Comments & Business Outlook
First Quarter Results :
"We continue to benefit from strong demand for coal in China ," explained Mr. Hongwen Li, President of US China Mining Group. "Production and sales were up significantly during the first quarter in Tong Gong and Xing An mines. After a slow seasonal period, we expect our coal brokerage and coal sorting business to accelerate through the second half of 2011 ."
Gross profit was $8.7 million for the first quarter of 2011 compared to $4.8 million for the same period of 2010, an increase of 80%
Net income for the three months ended March 31, 2011 was $4.1 million compared to net income of $2.1 million for the same period of 2010, an increase of 92% .
Diluted earnings per share for the first quarter 2011 were $0.22 compared to $0.14 in the same period of 2010
Management reaffirmed its prior guidance of $95.7 million of revenues and $20.3 million of net income for the full year 2011.
Liquidity Requirements
Based on our current expectations , we believe our cash and cash equivalents, and cash generated from operations will satisfy our working capital needs, and other liquidity requirements associated with our existing operations through the remainder of this year. We will continue to seek opportunities to expand our existing mining operations and acquire additional coal mining rights, and
we expect to finance such acquisitions through the issuance of debt or equity securities . Failure to obtain such financing could have a material adverse effect on our plans for expansion.
Comments & Business Outlook
For the three months ended December 31, 2010 , the Company recorded revenues of $28.7 million compared to $10.8 millionfor the same period of 2009, an increase of 165% .
"We are pleased to report a strong increase in our fourth quarter operating results, which provides confirmation of our embedded growth plan and solid momentum as we move into 2011 , said Mr. Hongwen Li, President of US China Mining Group. "The quarter benefitted from increased production at our Xing An mines while overall coal production increased 136.4% to 606,747 tons ."
GeoTeam Note : 2010 vs 2009 adjusted EPS for
Full year: $0.97 vs. $1.66
Fourth quarter: $0.41 vs. $0.07
Comments & Business Outlook
http://www.prnewswire.com/news-releases/us-china-mining-group-provides-2011-financial-guidance-revenues-of-957-million-net-income-of-203-million-representing-44-yoy-revenue-growth-117923899.html Preliminary financial guidance for the year ended 2011 , ending December 31 . The Company expects the following:
Fiscal Year Ended
December 31, 2011
Net Revenue ($ millions)
% change YOY
Coal production
$39.6 million
30%
Coal brokerage
$33.6 million
(16)%
Coal sorting
$22.5 million
N/A (new business)
Total
$95.7 million
44%*
Assumptions to forecast:
Business
Projected Volume (MT)
Projected Avg. Sales Price/ton
Coal production
834 thousand
$47.50
Coal brokerage
680 thousand
$47.50
Coal sorting
500 thousand
$47.50
Total
2,014 thousand
$47.50
"Our 2011 financial forecast reflects our confidence in executing our growth strategy," started Mr. Hongwen Li , President of US China Mining Group. "We expect strong organic growth from our coal brokerage and coal production business, which will benefit from completing the mining equipment upgrade at our Xing An mines by February 2011 . Once mining production and our coal sorting operations both reach full production by May 2011 , we anticipate revenues and profits to accelerate."
"With strong cash flows, minimal capital expenditure needs, $40 million of cash on our balance as of September 30, 2010 and an additional $15 million from our private placement in the fourth quarter of 2010, we are supremely positioned to make strategic acquisitions," continued Mr. Li. "We are currently evaluating several attractive acquisition candidates both domestically and in the U.S. Based on our preliminary due diligence and progress to date, we expect to complete at least two acquisitions during 2011. We have not included any contribution from acquisitions in our 2011 forecast, which would be additive to our overall growth rate."
Corporate Governance
On January 14, 2011 , U.S. China Mining Group, Inc. amended that certain Employment Agreement, dated August 15, 2008, by and between the Company and Hongwen Li, the Company’s President and Chief Executive Officer, to increase Mr. Li’s base salary from $100,000 per year to $200,000 per year effective as of January 1, 2011. No other changes were made to the Employment Agreement.
Deal Flow
CITY OF INDUSTRY, Calif., Jan. 7, 2011 /PRNewswire / -- US China Mining Group, Inc. is pleased to announce the closing of a private placement financing, resulting in gross proceeds of $15,000,000. In the private placement, US China Mining sold 3,750,000 units at a price of $4.00 per unit. Each unit is comprised of one share of common stock and one-half of one common stock purchase warrant. Each whole warrant entitles the holder to purchase an additional share of common stock at an exercise price of $6.80. The warrants have a five year term.
Comments & Business Outlook
Management expects the Company to generate
revenue of approximately $66.5 million
net income of approximately $14.1 million for the 2010 Fiscal year ending December 31, 2010 .
This represents a revenue increase of approximately 2.3% and decrease in net income of approximately 44%, from 2009 levels. The decrease in net income is primarily attributed to a decrease in production at the Xing An mine due to maintenance and retrofit projects that began in the fourth quarter of 2009.
As previously reported, the Company began programs to increase production efficiencies and safety at the Xing An mine in December of 2009. Upon completion of these programs and modifications, the Xing An mine will be able to maintain coal processing operations year-round and will increase coal production from 600,000 metric tons per year to 900,000 metric tons per year pending approval from local Government in 2012. The Company expects to be at the full production of 600,000 tons when all upgrades have been completed, in May of 2011.
Comments & Business Outlook
2010
2009
Net income
$
3,850,140
$
2,757,819
Weighted average shares outstanding - basic
14,932,582
14,932,582
Effect of dilutive securities:
Series “A” preferred stock
400,000
400,000
Options issued
15,887
Weighted average shares
outstanding - diluted
15,332,582
15,348,469
Earnings per share – basic
$
0.26
$
0.18
Earnings per share – diluted
$
0.25
$
0.18
Status of retrofit of project :
The Xing An project is expected to take about 12 to 14 months. We expect to partially resume production in November of 2010 and fully resume production in February of 2011. We expect that these mine improvements will improve efficiencies, lower costs and greatly enhance our growth and profitability once completed.
Liquidity Requirements
Deal Flow
On May 19, 2010, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") to acquire the Erdos City Dongsheng District Liujiaqu Coal Mine ("Liujiaqu Coal Mine") located in the Inner Mongolia region of the PRC. The transaction of the acquisition of Liujiaqu Coal Mine
had not been completed on September 30, 2010 . The parties are reviewing the potential impact on the transaction of new municipal policy and requirements of Erdos City and have not scheduled a date for completion of the transaction.
Comments & Business Outlook
Songzai International Holding Group Announces Entry Into Agreement to Acquire Liujiaqu Coal Mine in Inner Mongolia:
Estimated Mine Resources Exceed 140 Million Metric Tons
Terms:
Completion of the proposed acquisition is subject to a number of conditions including, but not limited to, completion of customary due diligence, obtaining all regulatory approvals and the consummation of financing conditions by the Company. Pursuant to the Asset Purchase Agreement, the Company shall acquire the Liujiaqu Coal Mine in consideration for a cash payment in the amount of USD $30 million and the issuance of an aggregate of 10,000,000 shares of the Company's common stock. Under the terms of the Asset Purchase Agreement, if the average closing price of the Company's common stock on the Over-The-Counter Bulletin Board (the "OTCBB") over the 10-day period ending on the day prior to the closing date is greater than $7.00 per share, then the number of shares of common stock to be issued by the Company in connection with the proposed acquisition shall be reduced to such number as determined by dividing USD $70 million by the average closing price for the Company's common stock on the OTCBB during such 10-day period. In addition, the sellers will receive a continuing interest equal to 30% of the net profits from the operation of the Liujiaqu Coal Mine.
Mr. Hongwen Li, CEO of the Company, commented, "We are pleased to have entered into this agreement to complete the large, strategic acquisition of the Liujiaqu Coal Mine. As the further execution of 'develop-the-west strategy' by the PRC government continues, energy, as a dominating developing industry in western China, will experience continued demand. The geographic location of the mine, combined with its resources of approximately 143 million metric tons, make this an important and compelling deal that will more than double the size of our company. Based on our research and information provided, we expect that beginning operation in the third quarter of 2010 will deliver meaningful revenues from the mine this year and upwards of $50 million in revenues during its first full year of operation in 2011 ."
Research
Mr. Hongwen Li, CEO of Songzai International Holding Group, commented, "In order to better position ourselves for future growth both organically and through strategic acquisitions, the management team has fully committed to increasing and improving the Company's overall public and investor relations efforts. We want to take the proactive steps of addressing shareholder questions, meeting new institutional investors and communicating our accomplishments efficiently." Mr. Li continued, "We are extremely pleased to be working alongside ACV in our investor relations, public relations and marketing initiatives. ACV has a strong track record of assisting high growth international companies like ours in increasing their visibility, expanding U.S investor platform and adding value to the company and its shareholders."
Source: Market Wire (April 22, 2010)
GeoBargain Notes
On SGZH April 15, 2010 released its 2009 10K
Full Year 2009
Full Year 2008
Period Change
GAAP Revenue
65.0 million
$57.1 million
93.1%
GAAP EPS
$1.63
$1.62
1.0%
Fully Diluted Shares
15.3 million
13.4 million
14.2%
Of course, no press release was originally issued. And we can see why. Working the numbers, the fourth quarter was horrible on all fronts.
4th Quarter 2009
4th Quarter 2008
Period Change
GAAP Revenue
$10.8 million
$14.2 million
-24.0%
GAAP EPS
$0.06
$0.33
-80.7%
Fully Diluted Shares
16.4 million
16.1 million
8.7%
Looking back at the SGZH third quarter short-term occurrences .
In the 2009 10K, SGZH left you to delve into the filing to assess the situation.
Our initial thoughts: How can you be in China coal sector and not grow right now? In the 10K the company inferred that it did not aggressively pursue its coal brokerage business, typically used to fill excess demand, due to the increase in coal prices.
In reaction to the plummeting stock price, it appears that the company eventually realized that maybe communicating with investors is not such a bad idea and spent the whopping $500 to issue a release Monday afternoon. We have been on SGZH for some time to improve shareholder communication efforts. Maybe now they will get the point, especially since their CFO recently resigned.
When all is said and done it appears that the fourth quarter results were affected by temporary issues.
Our results were temporarily impacted by the one month closing of a major power plant customer in July and, during the latter part of the year, by our beginning maintenance and retrofit project at our Xing An mines, thereby decreasing our sales volume. We expect, however, these mine improvements will improve efficiencies and lower costs and greatly enhance our growth and profitability once completed in 2010." Mr. Li continued, "
Unfortunately, the company did not give a timeline on this matter nor did it indicate how much of the company’s decline in revenues was from this project or its reduced coal brokerage business.
Management also states…
“As we look ahead we expect to continue our top line growth and profitability in 2010 and take advantage of our strong balance sheet to actively pursue strategic opportunities to improve and grow business."
While encouraging, this statement does not indicate that the company will grow its EPS, only that it will it will maintain profitability.
If the company pursues an acquisition we estimate this initial cash outlay could be at least $40.0 million . If SGZH tapped the equity markets at the current price we are talking around 6 million shares , which would be horrible unless EPS accretion is significant.
If not for the press release, we were inclined to remove SGZH from the GeoBargain list. Since it seems that the cessation of 30% EPS growth may be temporary we will maintain the GeoBargain code, but on a thin line. We are assuming that that the first quarter may still feel the impact of the ongoing maintenance program. We will attempt to gain more clarity on the timeline for the completion of its maintenance project and acquisition goals.
Additional input from a GeoInvesting Member:
The Tong mine rarely produces significant volume in Q4 (Didn't in 2007 or 2008 either)... The Xian An mine actually did twice as much production in 2009 than in 2008.
Disclosure: GeoTeam Long SGZH
GeoBargain Notes
Excerpt from GeoBargain & Special Update - Performance Laggards Article
Songzai Intl Holdings (OTCBB:SGZH)
As we indicated on Monday, November 16, 2009 GeoBargain Songzai Intl Holdings reported weak third quarter results. The stock responded by falling sharply. We are keeping SGZH on the GeoBargain list as it appears that the poor third quarter performance may be due to a one time event. Excerpt from our recent discussion note: "The decrease in sales was mainly due to the temporary closing of a major power plant customer for one month in July for overhauling and maintenance of its boilers.” Unfortunately, with no press release, investors have to dig into Songzai’s 10Q filing to locate this info. It is our belief that a responsible public company should take the time to alert investors with press releases to compliment its filings. We will make a suggestion to the Company to issue a press release, an action that may alleviate recent concerns. Songzai should also communicate how much of the decline in sales was the result of the closing of its power plant; would the revenue comparison have been flat or shown growth?
GeoBargain Notes
GeoBargain Songzai Intl Holdings reported pretty weak third quarter results today via a 10Q filing.
Qtr. Ended March 3rd Quarter 2009 3rd Quarter 2008 Period Change
GAAP Revenue
$9.3 million
$14.8 million
-37.2%
GAAP EPS
$0.18
$0.40
-55.6%
Source: 10Q Filing For the quarterly period ended September 30, 2009 .
At face value this report appears pretty dismal. Closer inspection, per commentary in the filing, indicates that the weak results should be temporary:
" The decrease in sales was mainly due to the temporary closing of a major power plant customer for one month in July for overhauling and maintenance of its boilers . Our total sales volume was 209,793 tons for the third quarter of 2009, as compared to 409,426 tons of sales for the third quarter of 2008, a decrease of 199,633 tons or approximately 49%.
The average selling price per ton for the third quarter of 2009 was approximately $44.17, compared to the average selling price of approximately $37.61 per ton for the third quarter of 2008, an increase of 17%. Our high average selling price for the third quarter of 2009 was a result of adjusting our selling price in 2009 according to the market price in Heilongjiang province, and our selling price can vary dramatically depending on the prevailing market price of coal in Heilongjiang Province. "
We suspect that the stock may take a short-term hit, until investors locate this commentary. A press release by the company would be advisable. The GeoTeam ® is curious how much sales were lost as result of this situation.
