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
"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
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CHINA SUN GROUP HIGH-TECH CO.
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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 | - | - | ||||
Common stock, $0.001 par value; 100,000,000 shares | 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.
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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 | 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 | $ | 0.04 | $ | 0.05 | $ | 0.13 | $ | 0.11 | |||||
Weighted average common stock | 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.
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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 | ||||||
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 | 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 | ||||||
