Coal news and updates

SinoCoking Coal and Coke Chemical Industries, a vertically-integrated coal and coke processor, today announced its financial results for the fiscal 2014 second quarter ended December 31, 2013.  

 

Fiscal 2014 Second Quarter vs. Fiscal 2013 Second Quarter

 

Total revenue decreased to $13.2 million, as compared to $21.2 million. 

 

Gross margin improved to 15.6%, as compared to 13.8%. 

 

Income from operations decreased to $1.5 million, as compared to $2.3 million.

 

Net loss was $0.1 million or $(0.01) per diluted share, as compared to net income of $0.8 million or $0.04 per diluted share.

 

Fiscal 2014 First Half vs. Fiscal 2013 First Half

 

SinoCoking's Chairman and CEO, Mr. Jianhua Lv, commented, "Our fiscal 2014 second quarter performance was mainly due to a significant decrease in sales of coal products, which reflected ongoing weak market demand, despite winter generally being a high coal consumption season."

 

Mr. Lv added, "Approximately 95% of our revenue came from coke products and only 5% from coal products, as compared to approximately 51% and 49%, respectively, in the same period of fiscal 2013.  This reflects changes to our operating strategy in order to adapt to market conditions, as current coal demand remains very weak due to over capacity of crude steel.  Thus, we temporarily stopped raw coal and washed coal trading. On the other hand, we have begun selling coke and coke powder to Fangda Special Steel Technology Co., Ltd. ("Fangda Steel"), one of China's best-known special steel manufacturers, and we expect sales to Fangda Steel to steadily rise."

 

Mr. Lv continued. "Although gross profit as compared to the same period of fiscal 2013 decreased by 30% to $2.1 million, gross margin increased to 15.6% as we stopped coal trading, which tends to be a low margin business."

 

Recent Business Developments

 

On December 18, 2013, we signed a 5-year entrusting agreement with Jiyuan Tianlong Coking Co., Ltd ("Tianlong") to manage Tianlong's coking equipment. Founded in 2003, Tianlong is a joint-venture private enterprise engaged in the production of metallurgical coke.

 

As per the terms of the agreement, Hongli will utilize Tianlong's equipment, which has an annual coking capacity of 650,000 metric tons, to produce high quality metallurgical coke for sales to steel manufacturers such as Fangda Steel. 

 

Including Tianlong's equipment, the Company has more than doubled its coking capacity to over 1.1 million metric tons annually as follows: 

 

In November 2013, we signed an agreement to supply Fangda Steel with 6,000 metric tons of grade II coke and 3,000 metric tons of clean coke per month, and 36,000 metric tons of grade II coke and coke powder have been delivered as of December 31, 2013.  Our added coking capacity will enable us meet Fangda Steel's coke requirements even should they increase significantly.

 

Mr. Lv noted, "Since current market demand for coke products remains soft and timing of full recovery remains unknown, we have put the construction of our new coking plant on hold and have revised our business strategy as follows:

 

As a result of these initiatives, we have minimized the risks in and optimized our use of working capital by proactively using our assets."

 

Mr. Lv concluded, "We will continue our efforts to seek opportunities and innovative ways to support our business. We expect the foregoing initiatives to begin to yield positive results in fiscal 2014, and we look forward to report our progress in the coming months."

 

Source: http://www.marketwatch.com/