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China Carbon Graphite Inc. Releases Third Quarter 2012 Results

China Carbon Graphite Group, Inc. logo

INNER MONGOLIA, China, Nov. 14, 2012 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. (OTCBB:CHGI) ("China Carbon" or the "Company"), the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top manufacturers of carbon and graphite products, today announced its financial results for the third quarter ended September 30, 2012.

Highlights through the Third Quarter (Q3) 2012:

  • Gross Profit Margin improved by 4.6% Y-O-Y, despite increased raw material costs.
  • Positive non-GAAP net income. Excluding quarterly interest payments, the Company produced positive EPS.
  • Company continues to hold positive Operating Income.
  • Sales are expected to rebound in future quarters based on improved construction outlook and value-added carbon and graphite products.
Summarized Q3 2012 Results:
Q3 2012 Q3 2011 CHANGE
Revenue $6.49 million $13.59 million -52.2%
Gross Profit $1.77 million $3.08 million -42.5%
Gross Profit Margin 27.25% 22.63% 4.62%
Net Income (Loss) $(798,649) $668,134 -219.5%
EPS(Diluted) (Loss)* $(0.03) $0.03 -200%
* Earnings per diluted share of $(0.03) on 24.56 million shares for Q3 2012. For Q3 2011, China Carbon reported fully diluted earnings per share of $0.03 on 22.75 million shares.

Third Quarter 2012 Financial Results

Despite a decrease in net revenue this quarter, the Company maintained a good production mix, successfully controlling prices and gross profit, and increased their gross profit margin by 4.6% Y-O-Y. China Carbon retained a positive operating cash flow, EBIT and EPS (non-GAAP).

This quarter's drop in sales is attributable to broader economic issues and waning short-term demand. "The global economy is slowing and a slump in China's construction industry is dragging down its economy," explained Mr. Donghai Yu, CEO of China Carbon. "Certain customers requested fewer orders due to price increases. However, we expect to see revenues rebound in future quarters, and our finished products can be sent back to our inventory for more sessions of baking, dipping and graphitization for further refinement into even higher-end products."

Mr. Yu expressed confidence in his company's ability to withstand the current economic climate, stating:

"We believe that the situation will be improved in future quarters. First, China's leaders have renewed pledges to boost the economy over the next 10 years and projected a year-on-year growth rate of around 7.5 percent during meetings this week in Beijing. Secondly, China's economic growth model has long focused on exports. Now, its leaders are trying to move away from that to focus on boosting domestic consumption - or moving toward an economy where domestic consumers lead the way. The third, China's recent economic figures such as rising factory output and consumer spending might be signs of a possible recovery. The fourth, local banks will continue to support us working capital by renewing loans forward. The fifth, a more refined product has better purity and density. The higher purity and density, the stronger demand is marketplace. Therefore more refined products now will indicate more sales and profits near future. In conclusion, the Company believes that the market will grow soon, and China Carbon will continue to keep its leading market positions in high purity and fine grain fields."

Sales

During the three months ended September 30, 2012, we had sales of $6,491,133, compared to sales of $13,591,978 for the three months ended September 30, 2011, a decrease of $7,100,845, or approximately 52.2%. Sales decrease was mainly attributable to decreased market demand during the three months ended September 30, 2012 from the slowing down of China's construction industry. The decrease in tonnage sold is due to fewer orders from certain customers due to price increases and a slight drop in the Chinese construction industry. The average unit selling price of our products decreased 13% during the three months ended September 30, 2012, compared to the same period for the three months ended September 30, 2011, with the 45% decrease in tonnage sold for the period. The average unit selling price of high purity graphite products decreased 3% during the three months ended September 30, 2012, compared to the same period for the three months ended September 30, 2011, with the 50% decrease in tonnage sold for the period.

The breakdown of revenues for each of graphite electrodes, fine grain graphite and high purity graphite, during the three months ended September 30, 2012 and 2011, respectively, was as follows:

September 30, 2012 % of Total September 30, 2011 % of Total
Sales Sales Sales Sales
Graphite Electrodes $ 788,769 12.1% $ 1,812,189 13.3%
Fine Grain Graphite 2,666,957 41.1% 5,780,071 42.5%
High Purity Graphite 2,763,836 42.6% 5,729,840 42.2%
Others (1) 271,571 4.2% 269,878 2.0%
Total $ 6,491,133 100.0% $ 13,591,978 100.0%
(1) "Other" sales represent revenue generated by sales of semi-processed products and other types of products.

About China Carbon Graphite Group, Inc.

China Carbon Graphite Group, through its affiliate, Xingyong Carbon Co., Ltd., manufactures graphite and carbon based products in China. The company is the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in smelting for colored metals and rare earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. In September 2007, the Company was approved and designated by the Ministry of Science & Technology as a "National Hi-tech Enterprise," a distinction that the Company still holds. Of the more than 400 carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor. For more information, please visit www.chinacarboninc.com.

The China Carbon Graphite Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=15754

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors set forth in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.

PART 1 - FINANCIAL INFORMATION

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.
China Carbon Graphite Group, Inc. and subsidiaries
Condensed Consolidated Balance Sheets
September 30, 2012 December 31, 2011
ASSETS (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 119,885 $ 521,450
Restricted cash 13,364,400 11,694,820
Accounts receivable, Net 11,812,372 12,541,321
Notes receivable 33,566 188,880
Advance to suppliers 2,556,244 5,921,970
Inventories 47,867,399 37,430,248
Prepaid expenses 74,017 452,730
Other receivables, net of allowance of $24,661 565,656 513,000
Total current assets 76,393,539 69,264,419
Property And Equipment, Net 35,643,025 36,719,595
Construction In Progress 7,973,865 6,414,847
Land Use Rights, Net 10,414,822 10,699,059
Total Assets $ 130,425,251 $ 123,097,920
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 4,699,301 $ 1,340,498
Advance from customers 1,330,935 1,360,989
Short term bank loans 32,774,600 45,488,600
Notes payable 24,342,300 16,763,100
Other payables 2,655,742 3,227,067
Loan from unrelated parties 2,215,217 --
Dividends payable 42,279 28,099
Total current liabilities 68,060,374 68,208,353
Amount Due To A Related Party 6,270,940 5,542,855
Long Term Bank Loan 4,741,180 --
Warrant Liabilities 396,651 174,805
Total Liabilities 79,469,145 73,926,013
Redeemable convertible series B preferred stock, $0.001 par value; 3,000,000 shares authorized; 300,000 and 426,110 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively. 360,000 511,332
Stockholders' Equity
Common stock, $0.001 par value; 100,000,000 shares authorized 24,212,518 and 22,981,408 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively 24,212 22,981
Additional paid-in capital 18,158,294 17,054,045
Accumulated other comprehensive income 8,461,994 7,943,542
Retained earnings 23,951,606 23,640,007
Total stockholders' equity 50,596,106 48,660,575
Total Liabilities and Stockholders' Equity 130,425,251 123,097,920
The accompanying notes are an integral part of these condensed consolidated financial statements.
China Carbon Graphite Group, Inc and subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
For the Three Months and Nine Months Ended September 30, 2012 and 2011
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2012 2011 2012 2011
Sales $ 6,491,133 $ 13,591,978 $ 28,429,886 $ 37,200,337
Cost of Goods Sold 4,722,151 10,515,933 20,850,882 28,855,956
Gross Profit 1,768,982 3,076,045 7,579,004 8,344,381
Operating Expenses
Selling expenses 64,487 51,223 140,437 158,398
General and administrative 1,056,283 1,316,048 3,078,144 3,919,776
Depreciation and amortization 56,198 97,832 160,028 191,586
Total operating expenses 1,176,968 1,465,103 3,378,609 4,269,760
Operating Income Before Other Income (Expense) 592,014 1,610,942 4,200,395 4,074,621
Other Income (Expense)
Interest expense (1,208,969) (957,434) (3,658,844) (2,364,238)
Other expense 272 -- (215,196) --
Other income, net 6,080 14,118 221,270 89,902
Change in fair value of warrants (188,046) 508 (221,846) 83,200
Total other expense (1,390,663) (942,808) (3,874,616) (2,191,136)
Net Income (Loss) $ (798,649) $ 668,134 $ 325,779 $ 1,883,485
Dividend Distribution (4,537) (13,525) (14,180) (21,654)
Net Income (Loss) Available To Common Shareholders $ (803,186) $ 654,609 $ 311,599 $ 1,861,831
Other Comprehensive Income (Loss)
Foreign currency translation gain 528,509 508,300 518,452 1,329,748
Total Comprehensive Income (Loss) $ (270,140) $ 1,176,434 $ 844,231 $ 3,213,233
Share Data
Basic earnings (loss) per share $ (0.03) $ 0.03 $ 0.01 $ 0.08
Diluted earnings (loss) per share $ (0.03) $ 0.03 $ 0.01 $ 0.08
Weighted average common shares outstanding, basic 24,260,834 22,307,980 23,843,306 22,231,842
Weighted average common shares outstanding, diluted 24,560,834 22,749,990 24,143,306 22,766,260
The accompanying notes are an integral part of these condensed consolidated financial statements.
Nine months ended September 30,
2012 2011
Cash flows from operating activities
Net Income $ 325,779 $ 1,883,485
Adjustments to reconcile net cash provided by operating activities
Depreciation and amortization 1,925,159 1,328,990
Related party interest expenses contribution 344,401 --
Stock compensation 512,158 980,800
Change in fair value of warrants 221,846 (83,200)
Change in operating assets and liabilities
Accounts receivable 858,426 (5,507,003)
Notes receivable 156,266 (10,951)
Other receivable (46,790) (2,075,385)
Advance to suppliers 3,405,974 (1,866,969)
Inventories (9,963,519) (6,664,546)
Prepaid expenses 1,906 231,613
Accounts payable and accrued liabilities 3,460,160 (2,682,072)
Advance from customers (44,443) 3,027,518
Taxes payable (760,615) --
Other payables 141,370 1,521,693
Net cash provided by (used in) operating activities 538,078 (9,916,027)
Cash flows from investing activities
Acquisition of property and equipment (65,156) (27,265)
Construction in progress (1,479,435) (7,110,556)
Net cash used in investing activities (1,544,591) (7,137,821)
Cash flows from financing activities
Proceeds from issuing common stock 472,000 160,000
Proceeds from warrants exercise -- 371,714
Dividends paid for series B preferred stock -- (32,996)
Proceeds from short-term bank loans 37,256,400 44,534,900
Payment to short-term bank loans (50,370,400) (33,824,950)
Proceeds from long-term bank loans 4,708,400 --
Proceeds from loans from unrelated parties 11,351,261 --
Payment of loans from unrelated parties (9,151,360) --
Payments to an related party (158,000) --
Proceeds from an related party 821,600 1,327,928
Proceeds from stock not yet issued (137,000) --
Restricted cash (1,532,600) (14,392,940)
Proceeds from notes payable 35,234,000 19,647,750
Payment to notes payable (27,887,000) --
Net cash provided by financing activities 607,301 17,791,406
Effect of exchange rate fluctuation (2,353) 17,369
Net increase (decrease) in cash (401,565) 754,927
Cash and cash equivalents at beginning of period 521,450 296,311
Cash and cash equivalents at end of period 119,885 1,051,238
Supplemental disclosure of cash flow information
Interest paid $ 3,358,169 $ 2,364,238
Non-cash activities:
Preferred stock conversion to common stock $ 151 $ 813
Reclassfication of warrant liability with equity -- $ 14,993
Issuance of common stock for compensation $ 135,350 $ 1,787,600
CONTACT: Investor Contact: Ms. Renee Volaric Director - Market Intelligence & PR RB Milestone Group, LLC Tel: (212) 661-0075 ext. 113 Email: RVolaric@RBMilestone.com Media Contact: Mr. Douglas Allen Associate - Market Intelligence & PR RB Milestone Group, LLC Tel: (212) 661-0075 ext. 118 Email: DAllen@RBMilestone.com Company Contact: Mr. Donghai Yu Chief Executive Officer China Carbon Graphite Group Inc. Email: ir@chinacarboninc.com

Source:China Carbon Graphite Group, Inc.