NEW YORK, May 27, 2009 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. (OTCBB:CHGI) (the "Company"), China's largest wholesale supplier of fine grain and high purity graphite, announced its financial results for the first quarter 2009.
Net sales were $2,894,000 in the first quarter 2009 compared to $5,728,000 in the first quarter 2008. The sales decrease reflects the closure of Xingyong's plant facilities as mandated by the Chinese government for the Olympics in August 2008. The closure caused the Company to shut down its production. The Company requires a 6 months production cycle and therefore was unable to resume production until March of 2009.
Gross margins increased from 23.8% for the first quarter 2008 to 29.1% for the first quarter 2009. The improvement in gross margin was due to our production focus shift from graphite electrodes to higher margin products such as fine grain graphite and high purity graphite.
Even though the Company had only one month of production in the first quarter, net income increased to $471,000, or $0.04 per diluted share, for the first quarter of 2009, compared to $389,000, or $0.02 per diluted share, for the first quarter of 2008.
Donghai Yu, CEO of China Carbon, commented, "We have not only maintained but improved our gross margin. We will continue to focus on production of high quality fine grain graphite and high purity graphite to maintain high margins in the future."
Donghai Yu also made the following comments in regards to several new Company events:
Financing
"As one of the largest privately owned employers in Inner Mongolia, we have been recommended by the local government of Inner Mongolia to apply for a RMB 180,000,000 loan (approximately $26,000,000 US) through the Central government's economic stimulus plan. Once approved, it will expedite the process of doubling our production capacity to 30,000 metric tons annually and allow us to develop nuclear graphite for the more than 40 nuclear reactors the government is seeking to build by 2015."
Recapitalization
"Under the laws of the Peoples Republic of China (the "government" or "PRC"), China Carbon cannot acquire Xinghe Xingyong Carbon Co., Ltd. ("Xingyong") directly, through which we are engaged in the manufacture of carbon and graphite products. As a result, we set up a wholly foreign owned company Xinghe Yongle Carbon Co., Ltd. ("Yongle") in PRC. Yongle entered into a series of agreements with Xingyong which give us effective control over the business of Xingyong. On May 21, 2009 the Company's Board of Directors approved the reduction of Yongle's registered capital from $4,000,000 to $100,000 and has submitted the reduction to the PRC for approval. We expect approval for the recapitalization in the next 60 days. These actions will effectively reduce the intercompany investment obligations owed to Yongle from $4,000,000 to $100,000 and eliminate possible fines or penalties by the PRC business bureau as previously described in the Company's 10Q filing."
Future Acquisitions
"While the economic slowdown has made for challenging times for many carbon graphite companies, it is also creating numerous opportunities to acquire quality assets with excellent growth potential at attractive valuations. We are aggressively pursuing acquisition opportunities in the carbon graphite industry and the specialty metals industry."
Financial Projections for 2009
"As we look at the remainder of 2009, we expect that China Carbon will achieve a 15% to 25% increase in top line and bottom line in 2009. We are encouraged as the overall economic condition has been steadily improving in China. We are especially encouraged by the strong demand for our high quality fine grain graphite and high purity graphite."
About China Carbon Graphite Group, Inc.
China Carbon is one of the nation's top three producers of specialty carbon and graphite products. The Company, through its affiliate, Xingyong Carbon Co., Ltd., manufactures carbon and graphite 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 Ministry of Science & Technology as a "National Hi-tech Enterprise." Of the 400 plus carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor. For more information, visit http://www.chinacarboninc.com.
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.