China Energy Corp. Reports Record Fiscal Year 2010 Results; Revenues increase 103% to $88 million and net income increases 245% to $17.6 millionadmin
China Energy Corporation a producer and trader of coal for domestic heating, electrical generation, and coking purposes and a supplier of heating and electric energy services in Inner Mongolia, today announced financial results for the fourth quarter and fiscal year ended November 30, 2010.
Revenues for fiscal 2010 fourth quarter ended November 30 totaled $25.6 million, an increase of approximately 7.1% over $23.9 million reported in the same year ago period. China Energy produced and sold approximately 221,841 metric tons of coal at an average price of $49.4, compared to 295,168 metric tons at an average price of $39.1 in the fourth quarter of fiscal year 2009. Currently, China Energy has the capacity to produce up to 800,000 metric tons annually.
Gross profit decreased 12.4% to $9.9 million, with gross margin of 38.7% compared to 47.3% in the fourth quarter of 2009.
During the first three quarters of 2009, the Company did not have normal coal production while the long wall extraction machinery was being installed. When full production resumed in the fourth fiscal quarter, the Company ramped output above normal thresholds to make up for the shortfall which created an exceptionally strong quarter from an earnings perspective and higher margins.
Net income for the fourth quarter of fiscal year 2010 was $4.9 million, or $0.11 per diluted share, compared to $7.1 million, or $0.16 per diluted share, in the fourth quarter of fiscal year 2009. The effective tax rate was 26.0% compared to 19.7% for each respective period.
Fiscal Year 2010 Financial Results
For the year ended November 30, 2010, the Company reported revenue of $88.0 million, an increase of 103.2% over revenue of $43.3 million generated in 2009. For fiscal 2010, revenue from the coal group increased 121.2% to $71.0 million, and represented 80.7% of total sales, compared to $32.1 million, or 74.1% of total sales in fiscal year 2009. As a component of this, 39.4% of total company sales came from coal trading, and 41.3% came from coal production during fiscal year 2010. China Energy produced and sold 820.3 thousand tons of coal in 2010, a 80.9% increase from the 453.4 thousand tons in 2009, which mostly occurred during the fourth quarter. Average sales price of coal during fiscal year 2010 was $44.2 per ton, compared to $37.4 per ton in fiscal year 2009.
Revenue from the heat power group totaled $17.0 million, or 19.3% of total sales, in fiscal 2010, compared to $11.2 million, or 25.9% of total sales in fiscal year 2009. Higher revenues in this segment were due to an increase in the coverage area of Heat Power’s operations of over 19%.
“We were able to report significant growth across each of our businesses,” stated WenXiang Ding, chief executive officer and president. “We successfully ramped production at our Laiyegou mine, as well as capitalized on our expanded quota from the railway bureau to accelerate our coal trading volumes. Continued strong demand for energy and electricity provide both diversification and another conduit for incremental growth in 2011. As consolidation across our industry accelerates we continue to evaluate opportunities to expand our mining assets.”
Cost of goods sold for fiscal year 2010 was approximately $54.1 million, compared to approximately $29.3 million for fiscal year 2009. Gross profit was $33.9 million and gross margins were 38.5% in 2010, compared to $14.0 million in gross profit and gross margins of 32.3% during 2009. The increase in overall gross profit margin was primarily attributable to the improvement of the gross profit margin of the Company’s coal trading business which experienced a 1400 basis points margin improvement year-over-year. The Company benefited from the ability to sell coal at higher open market prices at the port. Heat Power benefited from a 275.2% increase in government subsidies to compensate for lower government regulated heat price and higher cost of coal.
Operating expenses for fiscal year 2010 were approximately $9.3 million, compared to $5.5 million in 2009. Selling and marketing expenses in fiscal year 2010 were $5.5 million compared to $2.2 million in 2009, which was driven by the increase of transportation and storage costs necessary to support the coal trading business. General and administration expenses totaled $3.8 million and $3.3 million in the respective periods.
Net income for fiscal year 2010 totaled approximately $17.6 million, or $0.39 per diluted, share, compared to approximately $5.1 million, or $0.11 per diluted share, in fiscal year 2009. A total of 45 million shares were utilized in the calculations for both years. Net income margins were 20.0% and 11.8% for fiscal years 2010 and 2009, respectively. The effective tax rate was 26.2% and 29.9% in fiscal 2010 and 2009, respectively.
Balance Sheet and Cash Flow
Cash and equivalents and restricted cash totaled $4.6 million on November 30, 2010 compared to $5.1 million on November 30, 2009. The Company had total stockholders’ equity of $52.0 million, with total assets of $103.3 million versus total liabilities of $51.3 million on November 30, 2010. For fiscal year 2010, the Company generated $17.9 million in cash from operations versus $13.2 million in fiscal year 2009.