ZHAOYUAN CITY, CHINA -- 11/20/08 --
China Shuangji Cement Ltd. (OTCBB: CNSJ) ("China Shuangji" or the "Company"), a leading producer of high grade
in China, announced today reported results for the third quarter ended on
September 30, 2008.
Third Quarter 2008 Highlights
-- Revenue totaled $13.2 million, down 10.5% from the third quarter of
2007
-- Gross Profits totaled $1.90 million, down 18.5% from the third quarter
of 2007
-- Operating Income totaled $1.44 million down 25% from the third quarter
of 2007
-- Net Income before taxes during the third quarter of 2008 was
$1,148,779
-- Net Income during the third quarter of 2008 was $761,400, or $0.03 per
share
-- Received a partial compensation of $5.11 million by the Chinese
government to relocate the Zhaoyuan cement plant
-- Received an additional concession of $7.45 million of loan forgiveness
with one of our banks
"We are disappointed with our results for the quarter as our revenue, which
was 100% generated from cement, declined year over year for the third
quarter primarily due to the softening in the Chinese economy combined with
the general slowdown of general business activities and restrictions
related to the Beijing Olympics. Companies in China were restricted in
electrical power usage before and during the Beijing Olympics," said Mr.
Wenji Song, Chairman and President of China Shuangji Cement. "Subsequent to
the end of the quarter we were very pleased to announce that we concluded
negotiations with one of the banks to which we are indebted for bank loans.
The bank forgave $11,110,000 of debt. Of this total, $3,657,000 had
previously been anticipated and recorded when the Danzhou plant was
acquired. The additional concession of $7,453,000 will be recorded as
income during the fourth quarter of 2008."
Financial Condition
As of September 30, 2008, China Shuangji Cement had $5.31 million in total
cash, approximately $2.0 million in working capital, and $20.3 million in
debt. Shareholder's equity at the end of the third quarter stood at $11.4
million, compared to $9.17 million recorded at the end of 2007.
We have been asked by the government of the city of Zhaoyuan to relocate
our Zhaoyuan cement plant to make room for the encroaching urban
development of that city. As partial compensation for the relocation, the
government paid us $4,668,057 during this third quarter and another
$437,630 in October 2008. In October 2008, we began construction on a new
plant in an industrial area of the city. These funds have been recorded as
a deferred credit and will be amortized over the life of the new plant. In
October 2008 these funds were used to pay down $5,105,687 of the
outstanding bank loans. This action combined with the above mentioned bank
forgiveness has substantially reduced our loans by $12,558,687.
Third Quarter 2008 Results
Net revenue for the three months ended September 30, 2008 decreased
$1,554,418, or 10.5%, from $14,779,426 for the three months ended September
30, 2007 to $13,225,008 for the three months ended September 30, 2008.
Total cement sales declined to 407,244 metric tons for the three months
ended September 30, 2008 from 441,250 metric tons for the three months
ended September 30, 2007.
Gross profit for the three months ended September 30, 2008 decreased
$430,382 or 18.5%, from $2,328,467 for the three months ended September 30,
2007 to $1,898,085 for the three months ended September 30, 2008 due to the
decrease in sale revenues of cement compared to the increase in raw
materials.
Operating income was $1,436,247 for the three months ended September 30,
2008 and $1,913,820 for the three months ended September 30, 2007. The
decrease of $477,573, or 25.0%, was primarily the result of decreased
revenues combined with the increase in general and administrative expenses.
Income before income taxes was $1,756,956 for the three months ended
September 30, 2007, compared to income before income taxes of $1,148,779
for the three months ended September 30, 2008. The decrease of $608,177, or
34.6%, was primarily the result of decreased sales revenues, increased
general and administrative expenses, and decreased VAT refunds.
Income taxes decreased $242,300, or 38.5%, from $629,679 for the three
months ended September 30, 2007, to $387,379 for the three months ended
September 30, 2008. The decrease is primarily due to decreased pretax
income and a reduced tax rate. The corporate tax rate for 2008 was
decreased from 33% to 25%.
Net income was $1,127,277 for the three months ended September 30, 2007,
compared to $761,400 for the three months ended September 30, 2008, a
decrease of $365,877 or 32.5%.
Nine Months 2008 Results
Net revenue for the nine months ended September 30, 2008 increased by
$744,681, or 1.88%, from $39,670,754 for the nine months ended September
30, 2007 to $40,415,435 for the nine months ended September 30, 2008. The
primary reason for our increase in net revenue was foreign exchange
conversion. Total cement sales declined from 1,227,343 metric tons for the
nine months ended September 30, 2007 to 1,109,675 metric tons for the nine
months ended September 30, 2008.
Gross profit for the nine months ended September 30, 2008 decreased
$174,793 or 3.01%, from $5,809,666 for the nine months ended September 30,
2007 to $5,634,873 for the nine months ended September 30, 2008 due to an
increase in raw materials cost.
Operating income was $4,717,155 for the nine months ended September 30,
2008 and $4,848,985 for the nine months ended September 30, 2007. The
decrease of $131,830, or 2.72%, was primarily the result of increased raw
materials cost combined with the decrease in general and administrative
expenses.
Income before income taxes was $3,660,602 for the nine months ended
September 30, 2008, compared to income before income taxes of $4,177,217
for the nine months ended September 30, 2007. The decrease of $516,615, or
12.4%, was primarily the result of decreased sales revenues, increased cost
of goods, decreasing general and administrative expenses, and decreased VAT
refunds.
Net income was $2,529,986 for the nine months ended September 30, 2008 or
$0.09 per share, compared to $2,695,211 or $0.10 per share for the nine
months ended September 30, 2007, a decrease of $165,225 or 6.13%.
Business Outlook
"We foresee positive business sales in the fiscal fourth quarter and beyond
due the Chinese government decision to shut down a collection of small
cement plants by the end of the year. This will result in expanding our
cement market and increased commodity price for cement," stated Mr. Song.
China's cement output is forecast to grow 10% per annum between 2008 and
2010. Due to the regulatory guidance of "eliminating old capacity before
establishing capacity," growth of new cement production capacity may
somehow slow down in the next few years, and it may even result in supply
shortage in some regional markets at some stage. Overall cement prices are
expected to climb steadily upwards, due to factors such as supply-demand
structure, higher costs of coal and electricity input. Organic growth of
the cement industry should be able to deliver satisfactory operating
results in the coming years.
The Chinese government has mandated the elimination of 250 million tons of
outdated cement production capacity by 2010, so it is expected that
industry consolidation will accelerate and market shares and industry
profits will be further concentrated to strong companies. There are close
to 300 cement plants to be closed in Shandong Province. Therefore, there
will be additional value created by acquisition opportunities as a result
of industry consolidation.
About China Shuangji Cement, Ltd.:
China Shuangji Cement, Ltd., through its affiliates and controlled
entities, is a supplier of high-grade cement to the industrial sector in
the People's Republic of China and to international markets. Its processed
cement products are primarily purchased by the cement industry for the
purpose of making the cement required for the construction of buildings,
roads, and other infrastructure projects. The Company currently produces
1,500,000 metric tons of Portland cement annually and is one of the
strongest 500 building materials enterprises in China.
Forward-looking Statements:
The information contained herein includes forward-looking statements. These
statements relate to future events or to our future anticipated 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. We do
not intend 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. The safe harbor for
forward-looking statements contained in the Securities Litigation Reform
Act of 1995 protects companies from liability for their forward-looking
statements if they comply with the requirements of the Act.
Contact:
Wenji Song
Chairman & President
Email Contact: Email Contact
Website: www.shuangjicement.com
