Cathay Forest Products Corp.
TSX VENTURE : CFZ

Cathay Forest Products Corp.

April 30, 2010 16:34 ET

Cathay Forest Announces Fourth Quarter and Year End Financial Results for 2009

TORONTO, ONTARIO--(Marketwire - April 30, 2010) - Cathay Forest Products Corp. ("Cathay Forest" or "the Company") (TSX VENTURE:CFZ) reported financial results for the quarter and year ended December 31, 2009. All financial figures in this release are expressed in Canadian dollars unless otherwise stated.

Financial Highlights

  • Revenue increased 124% or $30.7 million for the year to $55.6 million.
  • Gross Profit margin increased to 9.7% versus 5.4% last year.
  • Gross Profit increased 303% to $5.4 million for the year.
  • Net Loss improved by $1.4 million versus 2008, which resulted in a loss per share of ($0.027).
($cdn millions, except per share amounts) Three months ended
December-31
  Twelve months ended
December-31
 
  2009   2008   Change   2009   2008   Change  
  ($)   ($)   (%)   ($)   ($)   (%)  
Revenue 11.1   8.6   29 % 55.6   24.8   124 %
Gross Profit 0.2   -0.7   124 % 5.4   1.3   303 %
Gross Profit Margin 1.4 % -7.6 %     9.7 % 5.4 %    
Net Loss (2.5 ) (2.8 ) 9 % (3.1 ) (4.5 ) 32 %
Basic and Diluted EPS -0.02   -0.03   28 % -0.03   -0.04   33 %
Cash Flow from Operating Activites 0.5   1.9   -76 % 1.4   (10.0 ) 114 %

Total revenue for 2009 was $55.6 million representing a 124% increase over the previous year. This increase in revenue was mainly attributable to increased volumes of trading revenue, additional volumes resulting from the Russian operations, in addition to the first sale of fast- growth poplar in the third quarter of 2009.

Additionally, gross profit increased 303% to $5.4 million from $1.3 million in 2008. Consolidated gross profit margin increased to 9.7% in 2009 from 5.4% in 2008, mainly due to the higher margins associated with the sale of the fast growth poplars and the sale of bamboo.

Cathay Forest's fourth quarter results were reflective of primarily from the revenue generated from the trading operations and revenue generated from the sale of standing timber originating from the Russian operations. Revenue increased 28.3% to $11.1 million from $8.6 million in the fourth quarter of 2008, while gross profit margin increased to 1.4% versus negative 7.6% last year. Net loss decreased 9.3% to $2,514,478 from $2,773,017, loss per share decreased to $0.022 from $0.025 in 2008.

At the year end, the Company's cash position had increased 82% to $18.0 million versus a year ago.

Revenue

In 2009, revenue from the sale of poplar increased to $11.8 million from $nil as the company began harvesting its poplar plantations. Revenue from the sale of Standing Timber in China and Russia increased to $3.1 million and $11.0 million, respectively, compared to $2.2 and $nil in 2008. The increased revenue in China was mainly due to the sale of bamboo in the third quarter of 2009 in the Jiangxi location which amounted to approximately $2.1 million while the sale of Chinese fir in Jiangxi amounted to approximately $1.0 million. In 2008, Russian operations were primarily focused on the building of infrastructure and harvesting operations only took place in the final quarter of the year.

In 2009, the Company's importing operations experienced an increase in volume, which was mainly attributable to an increase in supplies provided by the Company's standing timber operations in Russia. The total volume of logs traded increased 28.5% during 2009 to 222,339 m3, this compares to 173,022 m3 sold during the same period last year. As a result, revenue from our log trading operations increased to $33.9 million compared to $22.0 million in 2008.

Revenue generated from sales to our Japanese customer amounted to $2.8 million in 2009. There were no comparable sales in 2008.

Gross Profit

Gross profit increased 303% to $5.4 million in 2009 from $1.3 million in 2008. Gross profit margin increased to 9.7% from 5.4% last year, mainly due to the higher margins associated with the sale of the fast growth poplars and the sale of bamboo.

In the fourth quarter, total gross profit increased 124% to $0.2 million and gross profit margin increased to 1.4% from (9.2%) in the fourth quarter of 2008.

Selling, General and Administration Expenses

The Company's Selling, General and Administration Expenses increased 18%, to $5.5 million in 2009 from $4.6 million in 2008. The increase in general and administrative expenses is attributable to the coming on line of the Russian operations.

Net Loss

As a result of the above, the net loss for the year was $3.1 million versus a loss of $4.5 million in 2008.

Cash Flow from Operating Activities of Continuing Operations

Total annual cash provided by operations increased to $1.4 million in 2009 from ($10.0) million in 2008. In 2009, the increase in cash from operations was primarily related to the effect of the loss for the period in addition to an increase in accounts receivable of $7,510,247 and a significant reduction in inventory levels which generated cash flow of $7,633,977.

About Cathay Forest Products Corp.

Cathay Forest is a forest products company that manages approximately 1,000,000 hectares of standing timber properties and fast-growth, high-yield poplar plantations in China and Russia. Cathay Forest is building a world-class forest products company through a customer base that includes the domestic Chinese pulp and paper industry and other wood products customers in the Japanese market.

All statements, other than statements of historical fact, in this news release are forward-looking statements that involve various risk and uncertainties, including, without limitation, statements regarding the future plans and objectives of Cathay Forest. We caution readers not to place undue reliance on these statements as a number of important factors could cause actual results and future events to differ materially from the plans, objectives, expectations and intentions expressed in such forward-looking statements. Except as required under applicable securities laws, Cathay Forest assumes no obligations to update forward-looking statements should circumstances or management's estimates or opinions change.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy of this release.

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