Cathay Forest Products Corp.
TSX VENTURE : CFZ

Cathay Forest Products Corp.

August 28, 2009 16:33 ET

Cathay Forest Announces Second Quarter Results

TORONTO, ONTARIO--(Marketwire - Aug. 28, 2009) - Cathay Forest Products Corp. ("Cathay Forest")(TSX VENTURE:CFZ) today reported financial results for the three months and six months ended June 30, 2009.

Cathay Forest reported revenues of $14,933,687 for the three-month period ended June 30, 2009. This compares with revenues of $4,506,072 for the same period last year, a 231% increase. This significant increase in revenue is attributed to a number of factors including the continued growth of log importing activities through the additional volumes produced by our Russian affiliate in addition to a reduction of inventory levels. The importing operation continues to generate high volumes over prior periods and it is anticipated that monthly volumes will continue at approximately 30,000 cubic meters per month.

On the year to date basis, the six month revenue reached $21,211,206, an increase of $10,574,933 over the comparable six month period in 2008 reflecting the increase revenue contribution of the log importing business.

Net loss for the latest three month period was $2,062,863 or $0.018 per share.

As at June 30, 2009, Cathay Forest reports a cash position of $5,586,530, a reduction of $3,389,378 during the second quarter of 2009. Of this amount, cash flow from operations was a positive $1,657,769 compared to negative cash flow from operations of $7,705,646 in the same period in 2008.

Positive cash flow from operations was offset by investments in property and equipment, plantation assets and the deposit for the investment in Eco-Energy which in total resulted in negative cash flow from investing activities of $2,748,638. Of this amount, $2,059,434 was due to the deposit required for the investment in the Eco-Energy China Group ("Eco-Energy") project noted below.

Cash flow from financing activities was negative $2,025,786 primarily due to the repayment of an advance to a related party.

Management is of the opinion that Cathay Forest remains in a strong cash position for the foreseeable future as the market prices for its products are expected to return to 2008 levels in the months to come. Cathay Forest's plan for capital expenditures until the end of fiscal 2009 calls for minimal spending on capital assets.

Cathay Forest experienced better prices for its product in the second quarter of 2009 as prices have increased over the lows experienced in the first quarter of this fiscal year. It is anticipated that the market for our forest products will remain strong for the balance of the year has the effect of the 2008 global economic crisis have now generally been absorbed and the China stimulus package for infrastructure development continues to be applied.

Cathay Forest is also currently considering the optimal time period to start harvesting some of its Fast Growth Poplar plantations.

ECO-ENERGY CHINA GROUP

Subsequent to the end of the quarter, Cathay Forest finalized the acquisition of a 40% interest in Eco-Energy for US$2,400,000. This transaction had been previously publicly announced in May 2009. The transaction is a cash based transaction in exchange for 2,400,000 shares at a price of US$1.00 share.

Eco-Energy is a vertically integrated biodiesel producer based in the southwestern province of Guizhou. This investment represents a valuable addition to Cathay Forest's portfolio of forestry assets. Eco-Energy's assets include a 40,000 hectare plantation of Jatropha Curcas and a recently completed biodiesel refinery.

Three current directors of Cathay Forest have also been appointed to the Board of Eco-Energy.

Cathay Forest is a forest products company managing standing timber properties and developing 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 harvesting customers serving a variety of wood products industries.

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 obligation 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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