SOURCE: China Shuangji Cement Ltd.

November 19, 2008 18:16 ET

China Shuangji Cement Announces Third Quarter 2008 Results

ZHAOYUAN CITY, CHINA--(Marketwire - November 19, 2008) - China Shuangji Cement Ltd. (OTCBB: CNSJ) ("China Shuangji" or the "Company"), a leading producer of high grade cement in China, announced today reported results for the third quarter ended on September 30, 2008.

Third Quarter 2008 highlights: Revenue totaled $13.2 million, down 10.5% from the third quarter of 2007. Gross Profits totaled $1.90 million, down 18.5% from the third quarter of 2007. Operating Income totaled $1.44 million down 25% from the third quarter of 2007. Net Income before taxes during the third quarter of 2008 was $1,148,779. Net Income during the third quarter of 2008 was $761,400, or $0.03 per share. The Company received a partial compensation of $5.11 million by the Chinese government to relocate the Zhaoyuan cement plant. The Company also received an additional concession of $7.45 million in loan forgiveness with one of their banks. "We are disappointed with our results for the quarter as our revenue, which was 100% generated from cement, declined year over year for the third quarter primarily due to the softening in the Chinese economy combined with the general slowdown of general business activities and restrictions related to the Beijing Olympics. Companies in China were restricted in electrical power usage before and during the Beijing Olympics," said Mr. Wenji Song, Chairman and President of China Shuangji Cement. "Subsequent to the end of the quarter we were very pleased to announce that we concluded negotiations with one of the banks to which we are indebted for bank loans. The bank forgave $11,110,000 of debt. Of this total, $3,657,000 had previously been anticipated and recorded when the Danzhou plant was acquired. The additional concession of $7,453,000 will be recorded as income during the fourth quarter of 2008."

Financial Condition as of September 30, 2008: China Shuangji Cement had $5.31 million in total cash, approximately $2.0 million in working capital, and $20.3 million in debt. Shareholder's equity at the end of the third quarter stood at $11.4 million, compared to $9.17 million recorded at the end of 2007.

We have been asked by the government of the city of Zhaoyuan to relocate our Zhaoyuan cement plant to make room for the encroaching urban development of that city. As partial compensation for the relocation, the government paid us $4,668,057 during this third quarter and another $437,630 in October 2008. In October 2008, we began construction on a new plant in an industrial area of the city. These funds have been recorded as a deferred credit and will be amortized over the life of the new plant. In October 2008 these funds were used to pay down $5,105,687 of the outstanding bank loans. This action combined with the above mentioned bank forgiveness has substantially reduced our loans by $12,558,687.

Third Quarter 2008 Results: Net revenue for the three months ended September 30, 2008 decreased $1,554,418, or 10.5%, from $14,779,426 for the three months ended September 30, 2007 to $13,225,008 for the three months ended September 30, 2008. Total cement sales declined to 407,244 metric tons for the three months ended September 30, 2008 from 441,250 metric tons for the three months ended September 30,2007. Gross profit for the three months ended September 30, 2008 decreased $430,382 or 18.5%, from $2,328,467 for the three months ended September 30, 2007 to $1,898,085 for the three months ended September 30, 2008 due to the decrease in sale revenues of cement compared to the increase in raw materials. Operating income was $1,436,247 for the three months ended September 30, 2008 and $1,913,820 for the three months ended September 30, 2007. The decrease of $477,573, or 25.0%, was primarily the result of decreased revenues combined with the increase in general and administrative expenses. Income before income taxes was $1,756,956 for the three months ended September 30, 2007, compared to income before income taxes of $1,148,779 for the three months ended September 30, 2008. The decrease of $608,177, or 34.6%, was primarily the result of decreased sales revenues, increased general and administrative expenses, and decreased VAT refunds. Income taxes decreased $242,300, or 38.5%, from $629,679 for the three months ended September 30, 2007, to $387,379 for the three months ended September 30, 2008. The decrease is primarily due to decreased pretax income and a reduced tax rate. The corporate tax rate for 2008 decreased from 33% to 25%. Net income was $1,127,277 for the three months ended September 30, 2007, compared to $761,400 for the three months ended September 30, 2008, a decrease of $365,877 or 32.5%.

Net revenue for the nine months ended September 30, 2008 increased by $744,681, or 1.88%, from $39,670,754 for the nine months ended September 30, 2007 to $40,415,435 for the nine months ended September 30, 2008. The primary reason for our increase in net revenue was foreign exchange conversion. Total cement sales declined from 1,227,343 metric tons for the nine months ended September 30, 2007 to 1,109,675 metric tons for the nine months ended September 30, 2008.

Gross profit for the nine months ended September 30, 2008 decreased $174,793 or 3.01%, from $5,809,666 for the nine months ended September 30, 2007 to $5,634,873 for the nine months ended September 30, 2008 due to an increase in raw materials cost. Operating income was $4,717,155 for the nine months ended September 30, 2008 and $4,848,985 for the nine months ended September 30, 2007. The decrease of $131,830, or 2.72%, was primarily the result of increased raw materials cost combined with the decrease in general and administrative expenses. Income before income taxes was $3,660,602 for the nine months ended September 30, 2008, compared to income before income taxes of $4,177,217 for the nine months ended September 30, 2007. The decrease of $516,615, or 12.4%, was primarily the result of decreased sales revenues, increased cost of goods, decreasing general and administrative expenses, and decreased VAT refunds.

Net income was $2,529,986 for the nine months ended September 30, 2008 or $0.09 per share, compared to $2,695,211 or $0.10 per share for the nine months ended September 30, 2007, a decrease of $165,225 or 6.13%

Business Outlook

"We foresee positive business sales in the fiscal fourth quarter and beyond due the Chinese government decision to shut down a collection of small cement plants by the end of the year. This will result in expanding our cement market and increased commodity price for cement," stated Mr. Song. 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 capacity", growth of new cement production capacity may somehow slow down in the next few years, and it may even result in supply shortage in some regional markets at some stage. Overall cement prices are expected to climb steadily upwards, due to factors such as supply-demand structure, higher costs of coal and electricity input. Organic growth of the cement industry should be able to deliver satisfactory operating results in the coming years. The Chinese government has mandated the elimination of 250 million tons of outdated cement production capacity by 2010, so it is expected that industry consolidation will accelerate and market shares and industry profits will be further concentrated to strong companies. There are close to 300 cement plants to be closed in Shandong Province. Therefore, there will be additional value created by acquisition opportunities as a result of industry consolidation.

About China Shuangji Cement, Ltd.:

China Shuangji Cement, Ltd., through its affiliates and controlled entities, is a supplier of high-grade cement to the industrial sector in the People's Republic of China and to international markets. Its processed cement products are primarily purchased by the cement industry for the purpose of making the cement required for the construction of buildings, roads, and other infrastructure projects. The Company currently produces 1,500,000 metric tons of Portland cement annually and is one of the strongest 500 building materials enterprises in China.

Forward-looking Statements:

The information contained herein includes forward-looking statements. These statements relate to future events or to our future anticipated 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. We do not intend 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. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

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