China Shuangji Cement, Ltd a leading producer of cement in Shandong and Hainan Provinces, PRC today announced its financial results for the third quarter ended September 30, 2009, which included an increase in both revenues and net income for the period.
Third Quarter Highlights:
• Revenues for the three month period ended September 30, 2009 increased $935,481, or 7.07%, from $13,225,008 to $14,160,489 for the comparable period in 2008;
• Net income was $807,827 for the three month period ended September 30, 2009, compared to $761,400 for the three month period ended September 30, 2008, an increase of $46,427, or 6.10%;
• Cement sales increased approximately 0.64% from 407,244 metric tons to 409,832 metric tons from the prior period in 2008;
• Selling and Administrative expenses for the three month period ended September 30, 2009 decreased $88,836, or 19.24%, from $461,838 to $373,002 for the comparable period in 2008;
• Other Income Expense was reduced to $22,241 for the 3rd quarter from $287,468 for the same period in 2008, a reduction of 92%;
• Shareholder equity increased to $35,380,889 at September 30, 2009 from $30,907,077 at December 31, 2008;
• The Company’s newly acquired plant at Longkou increased its annualized production rate from 300,000 metric tons to 500,000 metric tons.
Mr. Wenji Song, Chairman and President of China Shuangji Cement, Ltd. commented, “We were pleased with our results for the third quarter. The challenging economic climate, combined with the closing of our Zhaoyuan plant had a slight impact on results. However, our new plant in Longkou and sales from inventory were able to offset the impact.”
He added, “Since the Chinese government has mandated the elimination of 250 million tons of outdated cement production capacity by 2010, we expect that industry consolidation will accelerate and market share and industry profits will be further consolidated among stronger companies, like China Shuangji Cement, Ltd. Organic growth of the cement industry in PRC should deliver solid operating results in the coming years. Approximately 300 cement plants will be closed in Shandong Province. Therefore, we expect that additional value will be created through acquisition opportunities. Management is positioning the Company accordingly,” concluded Mr. Song.
“Our financial results reflect our continued efforts to reduce our costs while maximizing profits for our shareholders,” stated Mr. Jun Song, CEO of China Shuangji Cement, Ltd. “We dramatically reduced administrative costs and slashed our interest expense. Our top priorities, which include the modernization of our physical plant operations and our financial control systems, are key to creating the long-term growth we expect for our Company.”
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 new capacity’, growth of new cement production capacity should slow down in the next few years. This may even result in supply shortages in some regional markets. Overall, cement prices are expected to climb steadily upwards, due to factors such as the supply-demand structure, and higher costs of coal and electricity. Also, the recently announced 4 trillion RMB stimulus program by the PRC government should result in increased demand for cement, and may increase commodity prices for cement as well.
Update on the Zhaoyuan City Plant
The Company is currently building a new 1 million metric ton cement plant outside Zhaoyuan City to replace the old Zhaoyuan plant. Previously, the Company stated that the cement plant in Zhaoyuan, which we were required to relocate by the government, would be completed by Q3 2009. This statement was based upon expectations of financing to complete this plant. However, because of the world-wide economic crisis, the Company’s fundraising activities have been curtailed. While there can be no guarantee of success, management now anticipates acquiring financing in early 2010. After receipt of capital, the company estimates that it will take approximately 3-4 months to have Zhaoyuan producing cement.