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First Quarter 2009 Highlights and Recent Events
-- First quarter revenue was $49.7 million, down 1.7% year-over-year
-- Operating income totaled $3.0 million, compared to $6.2 million in the
same quarter of 2008
-- Net income was $2.1 million or $0.02 per diluted share, compared to
$4.3 million, or $0.04 per diluted share, in the same quarter of 2008
-- Sales of cleaned coal totaled 456,000 metric tons (MT), down 20.8%
year-over-year
-- Average selling price of cleaned coal rose 18.5% year-over-year to
approximately $109 per MT (after adjusting for exchange rate
differences)
-- Received approval from the municipal government in April, 2009 to
restructure six coal mines in Shanxi Province
"During the first quarter of 2009, global economic turmoil slowed steel industry production, which hurt our tonnage sales and profitability level," said Mr. Liping Zhu, CEO and President of Puda Coal. "However, we are pleased that the Company remained profitable and completed significant facilities upgrades."
First Quarter 2009 Results
For the quarter ended March 31, 2009, total revenue was $49.7 million, down 1.7% from $50.6 million in the same quarter last year. Sales of cleaned coal were 456,000 MT, down 20.8% from 576,000 MT in the same period last year. The decrease in tonnage sales was primarily due to a longer Chinese New Year downtime as a result of decreased orders from customers in the first one and a half months of the period under the general economic downturn. The average selling price was approximately $109 (after adjusting for exchange rate differences), up 18.5% from $92 in the same quarter of 2008. The decline in tonnage sales was partially offset by the increase in selling price.
Gross profit for the quarter was $3.9 million, down 48.1% from $7.5 million for the same period of 2008. Gross margin was 7.8% in the quarter, down from 14.7% in the same period last year. The decline was attributable to an increase in the average purchase price of raw coal, which rose 22% from $58 per ton in the first quarter of 2008 to $71 per ton in the current quarter and was only partially offset by the increase in selling price, and increased cost in manufacturing overhead for the first quarter of 2009.
Operating expenses for the first quarter of 2009 were $0.9 million, down 25.4% from the same period last year. Selling expenses decreased 23.5% from $0.8 million to $0.6 million, due to the decrease in tonnage sales of cleaned coal. General and administrative expenses declined 28.5% from $0.5 million to $0.3 million, primarily due to a decrease in professional expenses. As a percentage of net revenue, operating expenses were 1.8% in the first quarter of 2009, compared to 2.4% in the same quarter last year.
Operating income was $3.0 million, or 5.9% of revenue in the first quarter of 2009, down 52.5% from $6.2 million, or 12.3% of net revenue in the first quarter of 2008.
Interest expense and debt financing costs totaled $0.1 million in the first quarter of 2009, down from $0.7 million a year ago. This decrease was due to lower non-cash expenses related to the amortization of the discount on the Company's convertible notes and warrants in the current quarter.
During the first quarters of 2009 and 2008, the Company recorded non-cash gains of $8,000 and $364,000, respectively, for the gain in fair value of the warrants issued in the November 2005 private placement.
Income tax expense declined 53.8% to $0.7 million in the first quarter of 2009 from $1.6 million in the year ago period, primarily due to a decrease in income.
Net income was $2.1 million, or $0.02 per diluted share, compared to $4.3 million, or $0.04 per diluted share, in the first quarter of 2008.
Financial Condition
As of March 31, 2009, Puda Coal had $24.4 million in cash and cash equivalents and $69.5 million in working capital and a current assets v. liability leverage of 6.7 to 1. Long-term debt was $7.5 million. At the end of the first quarter in 2009, shareholders' equity was $74.2 million, an increase from $72.3 million at the end of 2008.
The Company recorded cash used in operating activities of $14.3 million for the three months ended March 31, 2009, compared to cash generated from operating activities of $15.3 million for the same period prior year. This was primarily due to an increase in accounts receivable to $29.3 million at the end of the first quarter of 2009 from $14.6 million at the end of 2008, as many sales occurred in the second half of the quarter due to a longer Chinese New Year downtime under the general economic downturn. We expect that most of the receivables will be settled in the second quarter.
Recent Events
In April 2009, Puda Coal received an approval from the Yuncheng municipal government to consolidate six coal mines in Pinglu County, Shanxi Province. According to the letter of intent signed in January 2009, the consolidation of the coal mines requires approval from the Shanxi provincial government. Upon the approval of the project from the provincial government, the Company will acquire or consolidate those six coal mines.
Business Outlook
"The steel industry continues to experience slower production due to the general economic downturn," said Mr. Zhu. "However, we are confident that the long-term outlook for our clean coal operations remains attractive. More importantly, we are gradually developing our strategy to enter the coal mine industry, which should significantly enhance profitability and shareholder value in the future."
Upcoming Events
Puda Coal will present at the upcoming China Rising Investment Conference hosted by CCG Investor Relations in New York, NY on May 18, 2009. During the conference, Puda Coal's management will be available for one-on-one meetings. Additionally, the Company will conduct a non-deal road show following the conference in New York and Philadelphia.
Conference Call
The Company will host a conference call at 9:00 a.m. ET on Friday, May 15, 2009 to discuss the first quarter 2009 results. To participate in the live conference call, please dial 888-419-5570 (international callers dial 617-896-9871) approximately 10 minutes prior to the start of the call and enter passcode 51103156. A replay will be available for 14 days starting on Friday, May 15 at 11:00 a.m. Eastern Time and can be accessed by dialing 888-286-8010 (international callers dial 617-801-6888) and entering passcode 70616981.
About Puda Coal, Inc.
Puda Coal, through its subsidiaries, supplies premium grade coking coal to the steel making industry in China for use in making coke. The Company currently possesses approximately 3.5 million metric tons of annual coking coal cleaning capacity. Shanxi Province provides 20-25% of China's coal output and supplies nearly 50% of China's coke. For more information, please visit http://www.pudacoalinc.com/
FORWARD-LOOKING STATEMENTS
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. For example, our management's expectation about China's economic growth and the long term demand for high-grade coking coal, our business strategies such as our plan to acquire coal mines, and our belief that our management will successfully execute such business strategies, are subject to, among other things, the risks and uncertainties relating to the market condition beyond our control. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
- FINANCIAL TABLES FOLLOW -
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2009 and 2008
(In thousands of United States dollars, except per share data)
Three months ended March 31,
2009 2008
NET REVENUE $49,721 $50,598
COST OF REVENUE 45,850 43,145
GROSS PROFIT 3,871 7,453
OPERATING EXPENSES
Selling expenses 577 754
General and administrative expenses 341 477
TOTAL OPERATING EXPENSES 918 1,231
INCOME FROM OPERATIONS 2,953 6,222
INTEREST INCOME 33 27
INTEREST EXPENSE (137) (201)
DEBT FINANCING COSTS -- (513)
DERIVATIVE UNREALIZED FAIR VALUE GAIN 8 364
INCOME BEFORE INCOME TAXES 2,857 5,899
INCOME TAXES (741) (1,604)
NET INCOME 2,116 4,295
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment (166) 2,175
COMPREHENSIVE INCOME $1,950 $6,470
EARNINGS PER SHARE
- BASIC $0.02 $0.04
- DILUTED $0.02 $0.04
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
- BASIC 107,335,759 105,252,176
- DILUTED 107,649,807 113,298,354
PUDA COAL, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, 2009 and December 31, 2008
(In thousands of United States dollars)
March 31, December 31,
2009 2008
(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $24,381 $39,108
Accounts receivable, net 29,309 14,645
Other receivables 3 7
Advances to suppliers
- Related parties 820 879
- Third parties 2,793 5,635
Inventories 24,233 21,589
Total current assets 81,539 81,863
PROPERTY, PLANT AND EQUIPMENT, NET 12,951 13,370
INTANGIBLE ASSETS, NET 3,378 3,399
TOTAL ASSETS $97,868 $98,632
CURRENT LIABILITIES
Current portion of long-term debt
- Related party $1,300 $1,300
Accounts payable 4,530 4,272
Other payables
- Related parties 1,028 1,030
- Third parties 2,469 2,714
Accrued expenses 1,903 1,991
Income taxes payable 741 1,319
VAT payable -- 1,726
Distribution payable
- Related party 117 117
Total current liabilities 12,088 14,469
LONG-TERM LIABILITIES
Long-term debt
- Related party 7,475 7,800
Derivative warrants 4,078 4,086
Total long-term liabilities 11,553 11,886
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, authorized 5,000,000
shares, par value $0.01, issued and
outstanding None -- --
Common stock, authorized 150,000,000
shares, par value $0.001, issued and
outstanding 107,335,759
(2008: 107,335,759) 107 107
Paid-in capital 31,555 31,555
Statutory surplus reserve fund 1,366 1,366
Retained earnings 33,868 31,752
Accumulated other comprehensive income 7,331 7,497
Total stockholders' equity 74,227 72,277
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $97,868 $98,632
PUDA COAL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2009 and 2008
(In thousands of United States dollars)
Three months ended March 31,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,116 $4,295
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization of land-use rights 21 21
Depreciation 419 401
Allowance for doubtful debts 44 --
Amortization of discount on convertible
notes and warrants -- 134
Derivative unrealized fair value gain (8) (364)
Stock compensation 25 12
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (14,724) 13
Decrease in other receivables 4 6
Decrease/(increase) in advances to suppliers 2,889 (247)
(Increase)/decrease in inventories (2,676) 8,633
Increase in accounts payable 265 1,186
(Decrease)/increase in accrued expenses (111) 36
(Decrease)/increase in other payables (241) 427
Decrease in income tax payable (576) (664)
(Decrease)/increase in VAT payable (1,722) 1,026
Increase in penalty payable -- 379
Net cash (used in)/provided by operating
activities (14,275) 15,294
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (325) (325)
Net cash used in financing activities (325) (325)
Effect of exchange rate changes on cash (127) 936
Net (decease)/increase in cash and cash
equivalents (14,727) 15,905
Cash and cash equivalents at beginning of period 39,108 16,381
Cash and cash equivalents at end of period $24,381 $32,286
Supplementary cash flow information
Cash paid during the period for:
Interest $137 $201
Income taxes $1,317 $2,269
For more information, please contact:
Investor Relations Contact:
Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Elaine Ketchmere, VP Financial Writing
CCG Investor Relations
Tel: +1-310-954-1345
Email: elaine.ketchmere@ccgir.com
Web: http://www.ccgirasia.com
Company Contact:
Laby Wu, Chief Financial Officer, Director of Investor Relations
Puda Coal, Inc.
Tel: +86-10-6439-2405
Email: labywu@gmail.com
Web: http://www.pudacoalinc.com
SOURCE Puda Coal, Inc.
http://www.pudacoalinc.com
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