Cathay Forest Products Corp.
TSX VENTURE : CFZ

Cathay Forest Products Corp.

August 30, 2010 17:30 ET

Cathay Forest Announces Second Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 30, 2010) - Cathay Forest Products Corp. (TSX VENTURE:CFZ) today reported a net loss of $393,925, or $0.003 per share on sales of $17 million for the three months ended June 30, 2010 and a net loss of $1.7 million or $0.012 per share, on sales of $24 million for the first six months of 2010.

(All financial figures in this release are expressed in Canadian dollars unless otherwise stated)

Financial Highlights

  • Revenue increased 14% to $17.0 million versus $14.9 million
  • Gross Profit margin increased to 8.4% versus a negative 0.6%
  • Gross Profit increased to $1.4 million versus a negative $100,000

These results compare with previous periods in the following table:

($cdn millions, except per share amounts) Three months ended   Six months ended  
  June-30   June-30  
  2010   2009   Change   2010   2009   Change  
  ($ ) ($ ) ( %) ($ ) ($ ) ( %)
Revenue 17.0   14.9   14 % 23.7   21.2   12 %
Gross Profit 1.4   (0.1 ) 1469 % 2.3   0.4   427 %
Gross Profit Margin 8.4 % -0.6 % 1276 % 9.9 % 2.1 % 371 %
Net Income (0.4 ) (2.1 ) 79 % (1.7 ) (3.2 ) 46 %
Basic and Diluted EPS (0.003 ) (0.018 ) -83 % (0.013 ) (0.028 ) 54 %
Cash Flow from Operating (2.5 ) 1.7   -250 % (7.7 ) 1.9   -502 %
Activities                        

"The improved results are a combination of higher selling prices and lower production costs in our Russian logging operations as the company has ramped up its harvesting levels over the past few months. With impending major pulpwood contracts, we expect to lower harvesting costs by a further 15 to 20% by the end of the year. And in the final quarter of 2010, we anticipate commencing harvesting in our six and five year old poplar plantations in China", stated John Duncanson, the Company's interim Chief Executive Officer and Chief Operating Officer.

Operational Results

Total revenue for Q2-2010 increased 14% to $17.0 million from $14.9 million in Q2-2009 and $6.7 million in Q1-2010. This increase was attributable to higher selling prices and volumes of logs sold from our Russian logging operations.

Selling prices in Q2-2010 improved by an average of 7% for spruce logs and 9% for larch logs over average prices in Q1-2010. Log sale volumes from our Russian operations to China in the quarter were 58.3 million cubic metres, an increase of 106% over Q1-2010. Most of the selling price increase and volume increase happened in the final two weeks of the quarter.

Outlook

The demand for softwood logs and lumber in China continues to grow. China is the world's largest importer of softwood logs. According to Wood Resources International LLC, during the first six months of 2010, imports were up 17% from the same period in 2009, reaching the highest level on record. Russia and New Zealand are the two largest suppliers, together accounting for almost 86% of the total imports.

Softwood lumber imports into China, according to Chinese Customs, are up 48% year-over-year. Russia and Canada are the two largest suppliers, together accounting for 85% of imports. Chinese softwood lumber imports from Russia, year to date, are up 34%.

The demand for hardwood (poplar) wood supply also continues to grow in China. With another 5 million tonnes of hardwood pulp production capacity in China to start-up over the next two years, the market for hardwood pulpwood will be strong.

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 has built a world-class forest products company through a customer base that includes the domestic Chinese forest product, pulp and paper industry and other wood products customers in Japan.

Notice of Conference Call

Cathay Forest will hold an investor conference call to further discuss its second quarter 2010 operating and financial results on September 1, 2010 at 9:00 AM EST. To participate, please dial 1-416-695-6616 for local callers, or 1-800-355-4959 for North American toll-free access. Alternatively, to listen to a replay of the conference call, dial 1-416-695-5800 (Toll-Free: 1-800- 408-3053), and enter pass code 1630304. The replay of the conference call will be available for 14 days.

Forward Looking Statements

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 complete financial statements and Management's Discussion and Analysis are posted on the company's website www.cathayforest.com as well as on SEDAR www.sedar.com.

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

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