CHINA CARBON GRAPHITE GROUP, INC. 
By 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.
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.
Company Contact:
Donghai Yu, CEO
China Carbon Graphite Group Inc.
Email: ir@chinacarboninc.com
Website: http://www.chinacarboninc.com
Investor Relations Contact:
Tina Xiao
Weitian Group LLC
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com
Website: http://www.weitian-ir.com
China Carbon Graphite Group, Inc. and subsidiaries
Consolidated Balance Sheets
September 30, 2013 December 31, 2012
------------------ -----------------
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $197,636 $129,746
Restricted cash 30,718,954 22,149,000
Accounts receivable, Net 6,232,675 11,239,002
Advance to suppliers 11,912,484 1,177,462
Inventories 45,645,068 48,417,875
Prepaid expenses 721,491 280,779
Other receivables, net of allowance of $224,319 and $220,339,
respectively 452,695 35,655
---------------------
Total current assets 95,881,003 83,429,519
Property And Equipment, Net 36,334,180 40,964,363
Construction In Progress 27,543,023 7,324,379
Land Use Rights, Net 9,654,207 9,657,419
--------- ---------
Total Assets $169,412,413 $141,375,680
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $3,492,996 $2,250,745
Advance from customers 1,697,436 1,368,525
Short term bank loans 45,915,033 38,680,500
Notes payable 57,679,739 40,606,500
Other payables 2,345,935 630,179
Loan from unrelated parties 265,826 338,002
Dividends payable 55,015 46,816
-----------------
Total current liabilities 111,451,980 83,921,267
Amount due to related parties 4,761,875 4,795,593
Long Term Bank Loan 22,352,941 4,782,900
Accounts Payable - Long Term -
Warrant Liabilities 25,657 224,362
-------------------
Total Liabilities 138,592,453 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 September 30, 2013 and December 31, 2012,
respectively. 310,000 360,000
---------------------
Stockholders' Equity
Common stock, $0.001 par value;100,000,000 shares authorized
26,342,518 and 25,077,518 shares issued and outstanding at
September 30, 2013 and December 31, 2012, respectively 26,342 25,077
Additional paid-in capital 18,551,966 18,223,781
Accumulated other comprehensive income 9,714,447 8,982,925
Retained earnings 2,217,206 20,059,775
-----------------
Total stockholders' equity 30,509,960 47,291,558
---------- ----------
Total Liabilities and Stockholders' Equity $169,412,413 $141,375,680
============ ============
China Carbon Graphite Group, Inc and subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Three and Nine Months Ended September 30, 2013 and 2012
(Unaudited)
Three months ended September 30, Nine months ended September 30, Six months ended June 30,
-------------------------------- ------------------------------- -------------------------
2013 2012 2013 2012 2013 2012
---- ---- ---- ---- ---- ----
Sales $2,721,723 $6,491,133 $8,496,893 $28,429,886 $5,775,170 $21,938,753
Cost of Goods Sold 2,269,493 4,722,151 13,202,146 20,850,882 10,932,653 16,128,731
--------- --------- ---------- ---------- ---------- ----------
Gross Profit (Loss) 452,230 1,768,982 (4,705,253) 7,579,004 (5,157,483) 5,810,022
------- --------- ---------- --------- ---------- ---------
Operating Expenses
Selling expenses 8,252 64,487 46,088 140,437 37,836 75,950
General and administrative 2,688,323 1,056,283 6,610,689 3,078,144 3,922,367 2,021,861
Impairment of property and equipment 3,569,646 - 3,569,646 -
Depreciation and amortization 187,803 56,198 307,505 160,028 119,702 103,830
------ ------- -------
Total operating expenses 6,454,023 1,176,968 10,533,928 3,378,609 4,079,905 2,201,641
--------- --------- ---------- --------- --------- ---------
Operating (Loss) Income Before Other Income (Expense) (6,001,793) 592,014 (15,239,181) 4,200,395 (9,237,388) 3,608,381
---------- ------- ----------- --------- ---------- ---------
Other Income (Expense)
Interest expense (1,501,867) (1,208,970) (3,418,517) (3,658,888) (1,916,650) (2,449,918)
Interest income 562,916 - 624,722 44 61,806 43
Other expense - 272 - (215,196) - (215,468)
Other income (expense), net (352) 6,080 (99) 221,270 253 215,190
Change in fair value of warrants 52,997 (188,046) 198,705 (221,846) 145,708 (33,800)
------ -------- ------- -------- ------- -------
Total other expense (income), net 886,306 (1,390,664) 2,595,189 (3,874,616) 1,708,883 (2,483,953)
------- ---------- --------- ---------- --------- ----------
(Loss) Income Before Income Tax Expense (6,888,099) (798,650) (17,834,370) 325,779 (10,946,271) 1,124,428
Income Tax Expense - - - - - -
Net Income (Loss) (6,888,099) (798,650) (17,834,370) 325,779 (10,946,271) 1,124,428
Preferred Stock Dividends 826 (4,537) (8,199) (14,180) (9,025) (9,643)
--- ------ ------ ------- ------ ------
Net Income (Loss) Available To Common Shareholders (6,887,273) (803,187) (17,842,569) 311,599 (10,955,296) 1,114,785
Other Comprehensive Income
Foreign currency translation gain 92,843 528,509 731,522 518,452 638,679 (10,057)
------ ------- ------- ------- ------- -------
Total Comprehensive Income (Loss) $(6,795,256) $(270,141) $(17,102,848) $844,231 $(10,307,592) $1,114,371
=========== ========= ============ ======== ============ ==========
Share Data
Basic earnings (loss) per share $(0.26) $(0.03) $(0.69) $0.01 $(0.43) $0.05
====== ====== ====== ===== ====== =====
Diluted earnings (loss) per share $(0.26) $(0.03) $(0.69) $0.01 $(0.43) $0.05
====== ====== ====== ===== ====== =====
Weighted average common shares outstanding,
basic 26,336,648 24,260,834 25,754,899 23,843,306 25,459,203 23,632,248
========== ========== ========== ========== ========== ==========
Weighted average common shares outstanding,
diluted 26,336,648 24,560,834 25,754,899 24,143,306 25,459,203 23,938,058
========== ========== ========== ========== ========== ==========
China Carbon Graphite Group, Inc and subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended September 30,
-------------------------------
2013 2012
---- ----
Cash Flows from Operating Activities
Net income (loss) $(17,834,370) $325,779
Adjustments to reconcile net cash provided by (used in) -
operating activities -
Depreciation and Amortization 2,144,180 1,925,159
Related party interest expenses contribution - 344,401
Stock compensation 262,650 512,158
Change in fair value of warrants (198,705) 221,846
Bad debt expenses 2,187,134 -
Impairment of property and equipment 3,542,153 -
Inventory impairment 3,266,648 -
Changes in operating assets and liabilities
Accounts receivable 2,982,054 858,426
Notes receivable - 156,266
Other receivables (413,189) (46,790)
Advance to suppliers (10,631,243) 3,405,974
Inventory 352,515 (9,963,519)
Prepaid expenses (416,248) 1,906
Accounts payable and accrued liabilities 1,193,573 3,460,160
Advance from customers 301,852 (44,443)
Taxes payable 289,304 (760,615)
Other payables 1,400,248 141,370
Net cash (used in) provided by operating activities (11,571,444) 538,078
----------- -------
Cash flows from investing activities
Acquisition of property, plant and equipment (64,803) (65,156)
Increase of land use rights (116,611) -
Addition of construction in progress (19,931,665) (1,479,435)
Net cash used in investing activities (20,113,079) (1,544,591)
----------- ----------
Cash flows from financing activities
Proceeds from issuing common stock - 472,000
Proceeds from short term loans 39,886,502 37,256,400
Repayments for short term loans (33,400,892) (50,370,400)
Proceeds from long term loans 17,835,428 4,708,400
Repayments of long term loans (486,421) -
Proceeds from loan from unrelated parties 11,090,543 11,351,261
Repayment of loans to unrelated parties (11,168,221) (9,151,360)
Proceeds from loan from related parties 122,254 821,600
Repayments to related parties (236,625) (158,000)
Proceeds from stock not yet issued - (137,000)
Restrict cash (8,107,013) (1,532,600)
Proceeds from notes payable 57,235,509 35,234,000
Repayments to notes payable (41,021,484) (27,887,000)
Net cash provided by financing activities 31,749,580 607,301
---------- -------
Effect of exchange rate fluctuation 2,833 (2,353)
Net increase (decrease) in cash 67,890 (401,565)
Cash and cash equivalents at beginning of period 129,746 521,450
Cash and cash equivalents at ending of period $197,636 $119,885
======== ========
Supplemental disclosure of cash flow information
Interest paid $3,866,767 $3,358,169
========== ==========
Income taxes paid $ - $ -
====================================== =================================
Non-cash activities:
Preferred stock conversion to common stock $ - $151
====================================== ====
Issuance of common stock for compensation $262,650 $135,350
======== ========
SOURCE China Carbon Graphite Group Inc.
