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China Sun Group High-Tech Co. Announces Third Quarter Fiscal Year 2012 Results

2012-04-13 20:38 991

DALIAN, China, April 13, 2012 /PRNewswire-Asia/ -- China Sun Group High-Tech Co. (OTC Bulletin Board: CSGH) ("China Sun Group" or the "Company"), a supplier of cathode materials for rechargeable Lithium-ion (Li-ion) batteries in China, today announced its financial results for the quarter ended February 29, 2012.

Third Quarter Fiscal Year 2012 Financial Results Highlights

  • Third quarter fiscal 2012 revenue declined by 16% to $11.3 million compared to $13.4 million for the comparable period in fiscal 2011
  • Gross profit decreased by 15% to $3.9 million compared to $4.6 million for the comparable period in fiscal 2011
  • Sales of cobaltosic oxide totaled 235 tons, a decrease of 69 tons or 23% compared to 304 tons and sales of LIP totaled 230 tons, an increase of 25 tons, or 12%, compared to 205 tons for the comparable period in fiscal 2011
  • Gross profit margin increased slightly by 0.1% to 34.6% compared to 34.5% for the comparable period in fiscal 2011
  • Income from operations decreased over 10% to $3.3 million compared to $3.7 million for the comparable period in fiscal 2011
  • Net income decreased by 8% to $2.45 million, or $0.04 per diluted share, compared to $2.66 million, or $0.05 per diluted share, for the comparable period in fiscal 2011

"During the third quarter of fiscal 2012, we continued to follow our strategy to increase production of our higher-margin lithium iron phosphate (LIP) product." Commented Chief Executive Officer, Mr. Guosheng Fu, "We reduced our cobaltosic oxide production since the gross margin of cobaltosic oxide continued to decline. LIP is quickly becoming the preferred cathode material for lithium ion batteries worldwide. We have completed converting our seventh and eighth production lines to the production of LIP in this quarter. Our LIP production capacity reached 1,000 tons. We believe this will further enable us to expand our LIP market share and enhance our overall profitability."

Fiscal Third Quarter 2012 Results

Net Revenue

Net revenue for the three months ended February 29, 2012 was $11.3 million, down 16% from $13.4 million for the comparable period in 2011. One hundred percent (100%) of the net revenue decrease was attributed to a decrease in sales of our older product cobaltosic oxide. Sales of cobaltosic oxide for the three months ended February 29, 2012 totaled 235 tons and $6.8 million, a decrease of 69 tons and $2.7 million, or 23% in quantity and 28% in dollar value, from 304 tons and $9.5 million for the comparable period in 2011. Sales of LIP for the three months ended February 29, 2012 totaled 230 tons and $4.4 million, an increase of 25 tons and $0.6 million, or 12% in quantity or 16% in dollar value, from 205 tons and $3.8 million for the comparable period in 2011.

Quarter ended February, tons sold

2012

2011

Cobaltosic oxide

235

304

Lithium iron phosphate

230

205

Gross Profit

Gross profit for the three months ended February 29, 2012 was $3.9 million, a decrease of 15% from $4.6 million for the comparable period in fiscal 2011. Overall gross margin for the three months ended February 29, 2012 was 34.6% compared to 34.5% for the same period in fiscal 2011, a 0.1% increase. During the quarter, the gross profit margins for cobaltosic oxide and LIP were 22% and 54%, respectively compared to 26% and 55%, respectively for the comparable period in fiscal 2011. Although the gross margin for cobaltosic oxide decreased by 4%, the production volume of cobaltosic oxide also decreased and the volume of higher margin product LIP increased. Thus, we were still able to maintain the overall gross margin. The 4% decrease in gross margin for cobaltosic oxide was primarily attributable to a reduction in the average selling price from $31,354 per ton for the three months ended February 28, 2011, to $29,071 per ton for the three months ended February 29, 2012. There were no significant fluctuations in gross profit margins for LIP for the three months ended February 29, 2012 compared with the three months ended February 28, 2011.

Sales and Marketing Expenses

Sales and marketing expenses for the three months ended February 29, 2012 were $41,624 compared to $47,493 for the comparable period, a decrease of $5,869 or 12%.

Research and Development Expenses

Research and development expenses for the three months ended February 29, 2012 were $33,798 compared to $33,838 for the comparable period, a decrease of $40 or 0.12%.

General and Administrative Expenses

General and administrative expenses for the three months ended February 29, 2012 were $0.5 million compared to $0.8 million for the comparable period, a decrease of $0.3 million or 38%.

Income from Operations

Income from operations for the three months ended February 29, 2012 was $3.3 million, a decrease of $0.4 million or 10%, compared to $3.7 million for the three months ended February 28, 2011. The decrease was due to the decrease in gross profit in the Company's PRC subsidiaries.

Net Income

Net income for the three months ended February 29, 2012 was $2.4 million, a decrease of $0.2 million or 8%, compared to net income of $2.7 million for the comparable period. The decrease in net income resulted primarily from the decrease in gross profit.

Financial Condition

As of February 29, 2012, China Sun Group High-Tech Co. held cash and cash equivalents of $27.8 million, up from $21.8 million at May 31, 2011. The Company's working capital was $30.5 million as of February 29, 2012. Accounts receivable were $4.6 million and total current assets were $33.2 million. The Company had $2.7 million in current liabilities, no long-term debt, and stockholders' equity stood at $62.5 million. In the nine months ended February 29, 2012, the Company generated $8.0 million in cash flow from operating activities.

The Company's decision to maintain high cash reserves was mainly due to (1) the projected need for new manufacturing equipment for LIP production in fiscal year 2012 estimated to cost approximately $7.44 million and (2) the projected purchase of new R&D equipment for approximately $3.0 million in the rest of calendar year of 2012.

Fiscal Year 2012 Outlook

Mr. Fu commented, "In fiscal 2012, we expect sales of LIP to continue to grow as our new LIP product further penetrates into the market. We believe that sales from LIP will continue to represent a larger percentage of our gross margins in the near future."

About China Sun Group High-Tech Co.

China Sun Group High-Tech Co. ("China Sun Group") produces cathode materials used in lithium ion batteries. Through its wholly-owned operating subsidiary, Dalian Xinyang High-Tech Development Co. Ltd ("DLX"), the Company primarily produces cobaltosic oxide and lithium ion phosphate. According to the China Battery Industry Association, DLX has the second largest cobalt series production capacity in the People's Republic of China. Through its research and development division, DLX owns a proprietary series of nanometer technologies that supply state-of-the-art components for advanced lithium ion batteries. Leveraging its state-of-the-art technology, high-quality product line and scalable production capacity, the Company diversified into the manufacture of LIP. For more information, visit http://www.chinasungrouphightech.com.

Safe Harbor Statement

The statements contained herein that are not historical facts are considered "forward-looking statements." Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. The forward-looking statements involve risks and uncertainties, including, but not limited to, the effect of political, economic, and market conditions and geopolitical events; legislative and regulatory changes that affect our business; the availability of funds and working capital; the actions and initiatives of current and potential competitors; investor sentiment; and our reputation. We do not undertake any responsibility to publicly release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by any forward-looking statements. The factors discussed herein are expressed from time to time in our filings with the Securities and Exchange Commission available at http://www.sec.gov.

Company Contact:

Mr. Guosheng Fu, Chief Executive Officer

China Sun Group High-Tech Co.

Tel: 86 411 8288 9800/8289 2736 (China)

Email: ir@china-sun.cn

Website: www.chinasungrouphightech.com


CHINA SUN GROUP HIGH-TECH CO.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF FEBRUARY 29, 2012 AND MAY 31, 2011
(Currency expressed in United States Dollars ("US$"), except for number of shares)



February 29, 2012


May 31, 2011



(Unaudited)


(Audited)

ASSETS







Current assets:







Cash and cash equivalents


$

27,796,238


$

21,810,394

Accounts receivable, trade



4,550,321



2,465,862

Inventories



841,589



610,025

Deposits and prepayments



4,228



1,026








Total current assets



33,192,376



24,887,307








Non-current assets:







Technical know-how, net



2,351,772



2,420,278

Property, plant and equipment, net



29,659,122



27,805,208








TOTAL ASSETS


$

65,203,270


$

55,112,793








LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities:







Accounts payable, trade


$

1,081,287


$

-

Income tax payable



539,315



536,647

Other payables and accrued liabilities



1,117,602



1,163,324








Total liabilities



2,738,204



1,699,971








Commitments and contingencies














Stockholders' equity:







Preferred stock, $0.001 par value; 2,000,000 shares
authorized; none of shares issued and outstanding



-



-

Common stock, $0.001 par value; 100,000,000 shares
authorized; 56,212,971 and 55,962,971 shares issued and
outstanding, respectively



56,213



55,963

Additional paid-in capital



11,858,039



11,790,789

Accumulated other comprehensive income



7,176,336



5,457,233

Statutory reserve



4,396,344



3,342,358

Deferred compensation



(96,000)



(96,000)

Retained earnings



39,074,134



32,862,479








Total stockholders' equity



62,465,066



53,412,822








TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

65,203,270


$

55,112,793

See accompanying notes to condensed consolidated financial statements


CHINA SUN GROUP HIGH-TECH CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2012
AND FEBRUARY 28, 2011
(Currency expressed in United States Dollars ("US$"), except for number of shares)
(Unaudited)



Three months ended February


Nine months ended February



29, 2012


28, 2011


29, 2012


28, 2011














Revenues, net


$

11,268,804


$

13,359,930


$

33,471,067


$

37,753,217














Cost of revenue (inclusive of
depreciation and amortization)



7,366,419



8,753,182



22,120,626



25,367,854














Gross profit



3,902,385



4,606,748



11,350,441



12,385,363














Operating expenses:













Sales and marketing



41,624



47,493



122,663



116,266

Research and development



33,798



33,838



101,470



87,285

General and administrative



529,005



858,580



1,379,469



3,454,394














Total operating expenses



604,427



939,911



1,603,602



3,657,945














INCOME FROM OPERATIONS



3,297,958



3,666,837



9,746,839



8,727,418














Other income:













Subsidy income



-



291



-



44,722

Interest income



20,550



14,240



54,111



38,091














INCOME BEFORE INCOME TAXES



3,318,508



3,681,368



9,800,950



8,810,231














Income tax expense



(869,765)



(1,021,688)



(2,535,309)



(2,779,817)














NET INCOME


$

2,448,743


$

2,659,680


$

7,265,641


$

6,030,414














Other comprehensive income:













- Foreign currency translation gain



678,626



650,847



1,719,103



1,702,407














COMPREHENSIVE INCOME


$

3,127,369


$

3,310,527


$

8,984,744


$

7,732,821














Net income per share - Basic and
diluted


$

0.04


$

0.05


$

0.13


$

0.11














Weighted average common stock
outstanding - Basic and diluted



55,998,685



55,639,638



55,974,964



54,693,341

See accompanying notes to condensed consolidated financial statements.

CHINA SUN GROUP HIGH-TECH CO.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2012
AND FEBRUARY 28, 2011
(Currency expressed in United States Dollars ("US$"))
(Unaudited)



Nine months ended February



29, 2012


28, 2011

Cash flows from operating activities:







Net income


$

7,265,641


$

6,030,414

Adjustments to reconcile net income to net cash provided by
operating activities:







Depreciation of property, plant and equipment



1,679,459



1,223,915

Amortization of technical know-how



139,258



132,679

Shares issued for services, non-cash



67,500



2,064,125

Changes in operating assets and liabilities:







Accounts receivable, trade



(1,984,158)



(125,965)

Inventories



(210,471)



586,798

Deposits and prepayments



(3,129)



(536,805)

Accounts payable, trade



1,067,124



(1,999,474)

Customer deposits



-



187,520

Income tax payable



(13,254)



(892,542)

Other payables and accrued liabilities



(10,154)



(54,348)

Net cash provided by operating activities



7,997,816



6,616,317








Cash flows from investing activities:







Purchase of plant and equipment



(2,750,564)



(52,513)

Net cash used in investing activities



(2,750,564)



(52,513)








Effect of exchange rate changes on cash and cash equivalents



738,592



819,493








NET CHANGE IN CASH AND CASH EQUIVALENTS



5,985,844



7,383,297








CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD



21,810,394



18,017,266








CASH AND CASH EQUIVALENTS, END OF PERIOD


$

27,796,238


$

25,400,563








SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:




Cash paid for income taxes


$

2,548,564


$

3,742,036

Cash paid for interest


$

-


$

-

See accompanying notes to condensed consolidated financial statements








Source: China Sun Group High-Tech Co.
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