TAIYUAN, Shanxi, China, Aug. 15 /Xinhua-PRNewswire-FirstCall/ -- Puda Coal, Inc. (OTC Bulletin Board: PUDC) ("Puda Coal" or the "Company"), a supplier of China’s high grade metallurgical coking coal used to make coke for the purposes of steel manufacturing, today announced its financial results for the quarter ended June 30, 2008.
Second Quarter 2008 Highlights
-- Second quarter revenue reached a record $53.2 million, up 39.6% from
the second quarter of 2007
-- Operating income totaled $5.2 million, down 1.3% from the second
quarter of 2007
-- Net income was $2.9 million or $0.03 per fully diluted share
-- Sales of cleaned coal totaled 592,000 metric tons (MT), up 26.2% from
the second quarter of 2007
-- Average selling price of cleaned coal was approximately $90 and $89 per
MT (after adjusting for exchange rate differences) for the three months
ended June 30, 2008 and 2007, respectively
-- Entered into a new contract with Yanzhou Liming Coke and Coal
Distribution Ltd. to supply up to 120,000 metric tons (MT) of cleaned
coking coal before the end of 2008
-- Donated $0.7 million to Sichuan earthquake rescue efforts
-- Appointed Mr. Liping Zhu as President and CEO
-- Appointed Ms. Qiong (Laby) Wu as CFO
"Strong demand for high-grade coking coal in the second quarter resulted in record tonnage sales and year-over-year top line growth of 40%. We saw a slight increase in average selling price and achieved growth in net income," said Mr. Liping Zhu, President and CEO of Puda Coal.
Results for the Second Quarter 2008
For the second quarter ended June 30, 2008, total revenue was $53.2 million, up 39.6% from $38.1 million in the second quarter of 2007. 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 592,000 MT in the second quarter of 2008, up from 469,000 MT in the same period last year. The increase in the tonnage sales accounted for approximately 26% of the total 39.6% increase in net revenue and the remaining 14% was attributable to exchange rate differences and a slight increase in selling price. The average selling price was approximately $90 (after adjusting for exchange rate differences), compared to $89 for the same quarter of 2007.
Gross profit for the quarter was $6.7 million, up slightly from $6.6 million for the same period of 2007. Gross margin was 12.6% in the quarter, down from 17.4% in the same period last year. The decrease in gross margin was due to an increase in the average price of raw coal from approximately $55 per ton in the three months ended June 30, 2007 to approximately $57 per ton in the three months ended June 30, 2008.
Operating expenses for the second quarter of 2008 were $1.5 million, up 10.4% from $1.3 million in the same period last year. Selling expenses increased 21.9% in support of the increase in net revenue, while general and administrative expenses declined 2.2%, primarily due to lower legal and professional fees and expenses. As a percentage of net revenue, operating expenses were 2.8% in the second quarter of 2008, compared to 3.5% in the same quarter last year.
Operating income was $5.2 million, or 9.8% of revenue in the second quarter of 2008, down slightly from $5.3 million, or 13.9% of net revenue in the second quarter of 2007.
Interest expense and debt financing costs totaled $0.3 million in the second quarter of 2008, down from $1.2 million a year ago. This decrease was 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 second quarter of 2007 due to a delay in the effectiveness of the registration statement related to its November 2005 private placement.
During the second quarter of 2008, the Company recorded a non-cash expense of $0.1 million for a loss in fair value of the warrants issued in the November 2005 private placement. This compares to a fair value loss of $2.7 million recorded in the same period last year.
Other expense was $0.7 million in the second quarter of 2008, and represents the Company’s donation for earthquake rescue efforts in Sichuan Province.
Income tax expense declined to $1.2 million in the second quarter of 2008 from $2.1 million in the year ago period. Effective January 1, 2008, the income tax rate for the Company’s operating company, Shanxi Coal, was reduced to 25% from 33%.
Net income was $2.9 million, or $0.03 per fully diluted share, compared to a net loss of $670,000, or $(0.01) per fully diluted share, in the second quarter of 2007.
Six Month Results
Net revenue was $103.8 million in the first half of 2008, up 37.4% from $75.5 million in the first half of 2007. Gross profit was $14.2 million, or 13.6% of revenue, up slightly from $14.1 million, or 18.7% of revenue, in the first half of 2007. Operating income was $11.4 million, or 11.0% of revenue, down slightly from $11.6 million, or 15.4% of revenue, in the first half of 2007. Net income was $7.2 million, or $0.07 per fully diluted share, compared with net income of $3.2 million, or $0.04 per fully diluted share, in the first half of 2007.
Financial Condition
As of June 30, 2008, Puda Coal had $27.2 million in cash and cash equivalents and $54.3 million in working capital and a current ratio of 3.6:1. Long-term debt, excluding current portion, was $8.5 million and shareholders’ equity stood at $59.2 million compared to $48.6 million at the end of 2007.
The Company generated $10.2 million in cash from operating activities for the six months ended June 30, 2008, compared to cash used in operating activities of $11.1 million in the first half of 2007. The material increase in cash flow from operating activities was primarily due to the reduction of about $10.8 million in inventory, of which $9.3 million was raw materials inventory.
Business Outlook
Puda Coal expects China’s strong economic growth to continue to drive demand for steel as a result of large infrastructure projects, a prosperous national real estate market and China’s ongoing western development plan. As a result, the Company anticipates demand to remain strong for its high-grade coking coal. Puda Coal is also seeking to increase long term profitability by vertically integrating along the coal value chain through the acquisition of one or more coal mines.
"Over the past two months, we have enhanced our executive team to include additional management expertise, especially in the coal industry, and a highly qualified Chief Financial Officer," said Mr. Zhu. "We believe our new management team will be successful in executing our business strategy, including the acquisition of coal mines in Shanxi Province."
Recent Events
In July 2008, the Company appointed Ms. Qiong (Laby) Wu as its Chief Financial Officer. Prior to joining Puda Coal, Ms. Wu was CFO and Vice President of Financing and Investor Relations at Sinoenergy Corporation. Prior to that, she was employed by Ernst & Young Hua Ming Accounting Firm as a Senior Auditor, responsible for financial audits and designing internal control processes.
Conference Call
The Company will host a conference call at 10:00 a.m. ET on Friday, August 15, 2008 to discuss results for the second 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: 866-800-8648. International callers should dial 617-614-2702. When prompted by the operator, mention Conference Passcode 248 836 61. If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday August 15 at 12:00 p.m. ET. To access the replay, please dial 888-286-8010 and enter the passcode 53952062. International callers should dial 617-801-6888 and enter the same passcode 53952062.
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. For example, our management’s expectation about China’s continued economic growth and the 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, are subject to, among other things, the risks and uncertainties relating to the market condition beyond our control. 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 six months ended June 30, 2008 and 2007
(In thousands of United States dollars, except for per share data)
Three Three Six months Six months
months months ended ended
ended ended June 30, June 30,
June 30, June 30, 2008 2007
2008 2007
NET REVENUE $53,188 $38,097 $103,786 $75,512
COST OF REVENUE (46,491) (31,469) (89,636) (61,379)
GROSS PROFIT 6,697 6,628 14,150 14,133
OPERATING EXPENSES
Selling expenses 858 704 1,612 1,546
General and administrative
expenses 626 640 1,103 992
TOTAL OPERATING EXPENSES 1,484 1,344 2,715 2,538
INCOME FROM OPERATIONS 5,213 5,284 11,435 11,595
INTEREST INCOME 26 15 53 40
INTEREST EXPENSE (196) (512) (397) (1,001)
DEBT FINANCING COSTS (109) (639) (622) (1,406)
DERIVATIVE UNREALIZED FAIR
VALUE (144) (2,716) 220 (1,848)
(LOSS)/GAIN
OTHER EXPENSE (719) -- (719) --
INCOME BEFORE INCOME TAXES 4,071 1,432 9,970 7,380
INCOME TAXES (1,208) (2,102) (2,812) (4,203)
NET INCOME/(LOSS) 2,863 (670) 7,158 3,177
OTHER COMPREHENSIVE INCOME
Foreign currency translation
adjustment 1,285 750 3,460 1,150
COMPREHENSIVE INCOME $4,148 $80 $10,618 $4,327
NET INCOME/(LOSS) 2,863 (670) 7,158 3,177
LESS: DIVIDENDS
Option holder preference
dividend -- (2,717) -- (2,717)
Common dividend -- -- -- --
UNDISTRIBUTED EARNINGS $2,863 $(3,387) $7,158 $460
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
For the three and six months ended June 30, 2008 and 2007
(In thousands of United States dollars, except for per share data)
Three Three Six months Six months
months months ended ended
ended ended June 30, June 30,
June 30, June 30, 2008 2007
2008 2007
BASIC EARNINGS/(LOSS) PER SHARE
- Option holder preference $-- $0.04 $-- $0.04
- Other common holders 0.03 (0.05) 0.07 0.00
$0.03 $(0.01) $0.07 $0.04
DILUTED EARNINGS/(LOSS) PER SHARE
- Option holder preference $-- $0.04 $-- $0.04
- Other common holders 0.03 (0.05) 0.07 0.00
$0.03 $(0.01) $0.07 $0.04
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
-BASIC 105,252,176 96,711,763 105,252,176 95,405,732
-DILUTED 109,546,054 97,139,660 109,546,054 95,838,544
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2008 and December 31, 2007
(In thousands of United States dollars)
June 30, December 31,
2008 2007
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $27,198 $16,381
Restricted cash 233 233
Accounts receivable, net 8,952 8,137
Other receivables
- Related parties 2 4
- Third parties -- 6
Advances to suppliers
- Related parties 729 685
- Third parties 12,801 1,363
Inventories 25,188 35,953
Total current assets 75,103 62,762
PROPERTY, PLANT AND EQUIPMENT, NET 14,205 15,018
INTANGIBLE ASSETS, NET 3,442 3,484
TOTAL ASSETS $92,750 $81,264
CURRENT LIABILITIES
Current portion of long-term debt
- Related party $1,300 $1,300
Accounts payable
- Related parties 190 182
- Third parties 3,357 2,140
Other payables
- Related parties 1,914 1,851
- Third parties 2,994 2,916
Accrued expenses 1,601 1,350
Income taxes payable 1,226 2,223
VAT payable 1,804 1,379
Distribution payable 1,167 1,096
Convertible notes 2,084 1,841
Derivative conversion feature 1,100 1,100
Penalty payable 2,104 1,725
Total current liabilities 20,841 19,103
LONG-TERM LIABILITIES
Long-term debt
- Related party 8,450 9,100
Derivative warrants 4,260 4,480
Total long-term liabilities 12,710 13,580
PUDA COAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
June 30, 2008 and December 31, 2007
(In thousands of United States dollars)
June 30, December 31,
2008 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
105,252,176 (2007: 105,252,176) 105 105
Paid-in capital 28,304 28,304
Statutory surplus reserve fund 1,366 1,366
Retained earnings 21,965 14,807
Accumulated other comprehensive income 7,459 3,999
Total stockholders’ equity 59,199 48,581
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $92,750 $81,264
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2008 and 2007
(In thousands of United States dollars)
Six months ended June 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,158 $3,177
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization of land-use rights 42 41
Depreciation 813 493
Allowance for doubtful debts 1 5
Amortization of debt issue costs -- 6
Amortization of discount on convertible notes and
warrants 243 646
Derivative unrealized fair value (gain)/loss (220) 1,848
Discount on converted shares and exercised warrants -- 508
Stock compensation 26 --
Changes in operating assets and liabilities:
Increase in accounts receivable (280) (1,528)
Decrease in other receivables 8 38
Increase in advances to suppliers (11,030) (744)
Increase in VAT recoverable -- (627)
Decrease/increase in inventories 12,733 (14,916)
Increase in accounts payable 1,044 237
Increase/(decrease) in accrued expenses 144 (67)
(Decrease)/increase in other payables (75) 707
Decrease in income tax payable (1,110) (428)
Increase/(decrease) in VAT payable 326 (1,220)
Increase in penalty payable 379 754
Net cash provided by/(used in) operating activities 10,202 (11,070)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment -- (5,977)
Net cash used in investing activities -- (5,977)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of warrants -- 630
Repayment of long-term debt (650) (650)
Net cash used in financing activities (650) (20)
Effect of exchange rate changes on cash 1,265 469
Net increase/(decrease) in cash and cash
equivalents 10,817 (16,598)
Cash and cash equivalents at beginning of period 16,381 24,943
Cash and cash equivalents at end of period $27,198 $8,345
For more information, please contact:
Investor Relations Contact:
Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Company Contact:
Director of Investors Relation
Wenwei Tian, Chief Operating Officer,
Puda Coal, Inc.
Tel: +86-351-228-1302
Email: awtian@yahoo.com
Web: http://www.ccgir.com
