Q3 Revenue Rises 83% and Net Income Climbs 94% Year over Year
TAIYUAN, Shanxi, China, Nov. 10 /Xinhua-PRNewswire-FirstCall/ -- Puda Coal, Inc. (OTC Bulletin Board: PUDC), a supplier of China's high grade metallurgical coking coal used to make coke for the purposes of steel manufacturing, today announced its strong financial results for the quarter ended September 30, 2008.
Third Quarter 2008 Highlights
-- Third quarter revenue reached a record $74.1 million, up 82.7% from the
third quarter last year
-- Operating income totaled $9.0 million, up 63.1% from the third quarter
last year
-- Net income was $6.5 million or $0.06 per fully diluted share, up 94.3%
from $3.4 million, or $0.03 per fully diluted share, for third quarter
last year
-- Sales of cleaned coal totaled 603,000 metric tons (MT), up 22.6% from
third quarter last year
-- Average selling price of cleaned coal rose 35.2% to approximately $123
per MT (after adjusting for exchange rate differences) from the third
quarter last year
-- Launched new corporate website: www.pudacoalinc.com
-- To present at the Rodman & Renshaw Annual Global Investment Conference
in New York and conduct non-deal roadshow in the U.S. in November
"We are extremely pleased with the significant increase in both our top and bottom line performance during the third quarter, which was the result of strong demand for our high grade coking coal and a substantial increase in selling prices," said Mr. Zhu, CEO and President of Puda Coal. "We plan to maintain a strong level of cash flow and liquidity to fuel our operations in the fourth quarter of 2008 and in 2009," added Mr. Zhu.
Results for the Third Quarter 2008
For the quarter ended September 30, 2008, total revenue was $74.1 million, up 82.7% from $40.5 million in the same quarter last year. This revenue growth was driven by larger customer order volume from existing and new clients for high-grade coking coal. Sales of cleaned coal were 603,000 MT, up 22.6% from 492,000 MT in the same period last year. The average selling price was approximately $123 (after adjusting for exchange rate differences), up 35.2% from $91 for the same quarter of 2007. The increases in tonnage sales and selling price of cleaned coal were the primary reasons for the increase in the net revenue.
Gross profit for the quarter was $10.2 million, up 53.1% from $6.7 million for the same period of 2007. Gross margin was 13.8% in the quarter, down from 16.4% in the same period last year. The 2.6 percentage point decline was attributable to an increase in the average purchase price of raw coal, which rose from $56 per ton in the third quarter of 2007 to $90 per ton in the current quarter. The increase in the average price of raw coal was partially offset by the increase in the average selling price of cleaned coal.
Operating expenses for the third quarter of 2008 were $1.2 million, up 5.1% from $1.1 million in the same period last year. Selling expenses increased 12.8% in support of the increase in net revenue, while general and administrative expenses declined 6.6%. As a percentage of net revenue, operating expenses were 1.6% in the third quarter of 2008, compared to 2.8% in the same quarter last year.
Operating income was $9.0 million, or 12.1% of revenue in the third quarter of 2008, up 63.1% from $5.5 million, or 13.6% of net revenue in the third quarter of 2007.
Interest expense and debt financing costs totaled $0.3 million in the third quarter of 2008, down from $0.9 million a year ago. This decrease was primarily due to lower non-cash expenses related to the amortization of the discount on the Company's convertible notes and warrants in the current quarter. In addition, the Company incurred a penalty of $0.4 million in the third quarter of 2007 due to a delay in the effectiveness of the registration statement related to its November 2005 private placement. The penalty was paid in shares of the Company's common stock.
During the third quarters of 2008 and 2007, the Company recorded non-cash gains of $0.1 million and $0.6 million, respectively, for the gain in fair value of the warrants issued in the November 2005 private placement.
Income tax expense increase 21.1% to $2.3 million in the third quarter of 2008 from $1.9 million in the year ago period due to the increase in operating profit at the Company's operating company, Shanxi Coal. This was partially offset by a reduction in the income tax rate to 25% from 33%, effective January 2008.
Net income was $6.5 million, or $0.06 per fully diluted share, compared to $3.4 million, or $0.03 per fully diluted share, in the third quarter of 2007.
Nine Month Results
Net revenue was $177.8 million for the nine months ended September 30, 2008, up 53.2% from $116.0 million in the same period of 2007. Gross profit was $24.3 million, or 13.7% of revenue, up 17.1% from $20.8 million, or 17.9% of revenue, for the nine months ended September 30, 2007. Operating income was $20.4 million, or 11.5% of revenue, up 19.4% from $17.1 million, or 14.7% of revenue, in the first nine months of 2007. Net income was $13.7 million, or $0.13 per fully diluted share, compared with net income of $6.5 million, or $0.07 per fully diluted share, in the nine months ended September 30, 2007.
Financial Condition
As of September 30, 2008, Puda Coal had $39.4 million in cash and cash equivalents and $63.3 million in working capital and a current ratio of 4.0:1. Long-term debt, excluding current portion, was $8.1 million and shareholders' equity stood at $68.3 million up from $48.6 million at the end of 2007.
The Company generated $22.6 million in cash from operating activities for the nine months ended September 30, 2008, compared to cash used in operating activities of $17.4 million in the same period last year. This was primarily due to a decrease in working capital needs resulting from decreased inventory. As of September 30, 2008, the Company had approximately $25.4 million in inventories, of which $12.3 million was raw materials.
Business Outlook
Due to high prices for raw materials used in steel making and other economic factors, China's steel industry is currently experiencing slower production, which the Company believes will have a slight impact on its tonnage sales in the next two quarters or a relatively longer time.
In the longer term, Puda Coal believes the outlook for its coal washing operations remains attractive, as the Company has maintained a stable increased customer base and supply tunnels, and the demand for high-grade coking coal will continue to increase due to the development programs of China's western regions, which is expected to drive demand for steel in the long term. The Company is currently operating at approximately 69% utilization and has the capacity to meet the increases in future demand. In addition, the Company intends to execute its strategy of entering the coal mining business to increase profitability.
"While steel production in China is currently experiencing some softness, we believe the ongoing need for steel in China's long-term economic development will continue to drive the demand for steel. This provides significant opportunities for suppliers of cleaned coking coal like us," said Mr. Zhu. "We believe Puda Coal is particularly well positioned to capture this opportunity because of our excellent customer relationships and ability to provide our customers with large quantities of high grade cleaned coal."
Upcoming Events
Puda Coal will present at the upcoming Rodman & Renshaw Annual Global Investment Conference held November 10-12 at the New York Palace Hotel in New York City. During the conference, Puda Coal's management will be available for one-on-one meetings.
To complement its participation at the conference, Puda Coal is participating in a non-deal roadshow from November 10-14. Ms. Laby Wu, Puda Coal's Chief Financial Officer and Mr. Wenwei Tian, Puda Coal's COO and Director of Investor Relations will visit securities analysts and other investors in New York, Chicago and Dallas.
Conference Call
The Company will host a conference call at 9:00 a.m. ET on Monday, November 10, 2008 to discuss results for the third quarter of 2008. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-481-7939. International callers should dial 617-847-8707. When prompted by the operator, mention Conference Passcode 390-702-85. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, November 10 at 11:00 a.m. ET. To access the replay, please dial 888-286-8010 and enter the passcode 950-343-30. International callers should dial 617-801-6888 and enter the same passcode 950-343-30.
About Puda Coal, Inc.
Puda Coal, through its subsidiaries, supplies premium grade coking coal to the steel making industry in China for use in making coke. The Company currently possesses 3.5 million metric tons of annual coking coal cleaning capacity. Shanxi Province provides 20 - 25% of China's coal output and supplies nearly 50% of China's coke.
FORWARD-LOOKING STATEMENTS
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these
forward-looking statements. You should not place undue reliance on
forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity as well as local and global economic and financial conditions. For example, our management's expectation about China's continued growth of the demand for high-grade coking coal, our business strategies such as our plan to acquire coal mines, and our belief that our management will successfully execute such business strategies to enhance our profitability, are subject to, among other things, the risks and uncertainties relating to the market condition beyond our control. We will not, and we assume no obligation to, publicly update or revise these
forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these
forward-looking statements, even if new information becomes available in the future.
--FINANCIAL TABLES FOLLOW--
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 2008 and 2007
(In thousands of United States dollars, except for per share data)
Three Three Nine Nine
months months months months
ended ended ended ended
September September September September
30, 2008 30, 2007 30,2008 30, 2007
NET REVENUE $74,051 $40,536 $177,837 $116,048
COST OF REVENUE 63,861 33,881 153,497 95,260
GROSS PROFIT 10,190 6,655 24,340 20,788
OPERATING EXPENSES
Selling expenses 783 694 2,395 2,240
General and administrative
expenses 422 452 1,525 1,444
TOTAL OPERATING EXPENSES 1,205 1,146 3,920 3,684
INCOME FROM OPERATIONS 8,985 5,509 20,420 17,104
INTEREST INCOME 31 18 84 58
INTEREST EXPENSE (191) (345) (588) (1,346)
DEBT FINANCING COSTS (118) (515) (740) (1,921)
DERIVATIVE UNREALIZED
FAIR VALUE GAIN/(LOSS) 121 588 341 (1,260)
OTHER EXPENSE -- -- (719) --
INCOME BEFORE INCOME TAXES 8,828 5,255 18,798 12,635
INCOME TAXES (2,289) (1,890) (5,101) (6,093)
NET INCOME 6,539 3,365 13,697 6,542
OTHER COMPREHENSIVE INCOME
Foreign currency translation
adjustment 483 654 3,943 1,804
COMPREHENSIVE INCOME $7,022 $4,019 $17,640 $8,346
EARNINGS PER SHARE
- BASIC $0.06 $0.03 $0.13 $0.07
- DILUTED $0.06 $0.03 $0.13 $0.07
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
- BASIC 107,291,751 100,188,544 105,936,997 97,017,522
- DILUTED 107,291,751 116,548,514 105,936,997 97,023,280
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2008 and December 31, 2007
(In thousands of United States dollars)
September December
30, 2008 31, 2007
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $39,429 $16,381
Restricted cash 233 233
Accounts receivable, net 10,677 8,137
Other receivables
- Related parties 2 4
Third parties -- 6
Advances to suppliers
- Related parties 795 685
- Third parties 7,597 1,363
Inventories 25,357 35,953
Total current assets 84,090 62,762
PROPERTY, PLANT AND EQUIPMENT, NET 13,776 15,018
INTANGIBLE ASSETS, NET 3,419 3,484
TOTAL ASSETS $101,285 $81,264
CURRENT LIABILITIES
Current portion of long-term debt
- Related party $1,300 $1,300
Accounts payable
- Related parties -- 182
- Third parties 4,642 2,140
Other payables
- Related parties 1,032 1,851
- Third parties 3,432 2,916
Accrued expenses 1,645 1,350
Income taxes payable 2,305 2,223
VAT payable 1,808 1,379
Distribution payable 1,297 1,096
Convertible notes 2,202 1,841
Derivative conversion feature 1,100 1,100
Penalty payable -- 1,725
Total current liabilities 20,763 19,103
LONG-TERM LIABILITIES
Long-term debt
- Related party 8,125 9,100
Derivative warrants 4,139 4,480
Total long-term liabilities 12,264 13,580
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
September 30, 2008 and December 31, 2007
(In thousands of United States dollars)
September December
30, 2008 31, 2007
(Unaudited)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, authorized 5,000,000
shares, par value $0.01, issued and
outstanding None -- --
Common stock, authorized 150,000,000
shares, par value $0.001, issued and
outstanding 107,335,759 (2007:
105,252,176) 107 105
Paid-in capital 30,455 28,304
Statutory surplus reserve fund 1,366 1,366
Retained earnings 28,388 14,807
Accumulated other comprehensive income 7,942 3,999
Total stockholders' equity 68,258 48,581
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $101,285 $81,264
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2008 and 2007
(In thousands of United States dollars)
Nine months ended
September 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $13,697 $6,542
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization of land-use rights 65 59
Depreciation 1,244 872
Allowance for doubtful debts 6 1
Amortization of debt issue costs -- 6
Amortization of discount on convertible
notes and warrants 361 777
Derivative unrealized fair value (gain)/loss (341) 1,260
Discount on converted shares and exercised
warrants - 638
Stock compensation expense 29 --
Changes in operating assets and liabilities:
Increase in accounts receivable (1,895) (265)
Decrease in other receivables 8 38
Increase in advances to suppliers (6,081) (602)
Increase in VAT recoverable -- (938)
Decrease/(increase) in inventories 13,088 (26,007)
Increase in accounts payable 2,107 51
Increase in accrued expenses 221 34
(Decrease)/increase in other payables (562) 877
Decrease in income tax payable (85) (673)
Increase/(decrease) in VAT payable 318 (1,228)
Increase in penalty payable 379 1,138
Net cash provided by/(used in) operating
activities 22,559 (17,420)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2) (5,977)
Net cash used in investing activities (2) (5,977)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of warrants -- 1,110
Repayment of long-term debt (975) (975)
Net cash (used in)/provided by financing
activities (975) 135
Effect of exchange rate changes on cash 1,466 136
Net increase/(decrease) in cash and cash
equivalents 23,048 (23,126)
Cash and cash equivalents at beginning of
period 16,381 24,943
Cash and cash equivalents at end of period $39,429 $1,817
For more information, please contact:
Investor Relations Contact:
Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com
Company Contact:
Wenwei Tian, Chief Operating Officer,
Director of Investors Relations
Puda Coal, Inc.
Tel: +86-351-228-1302
Email: awtian@yahoo.com
Web: http://www.pudacoalinc.com
