SOURCE: Sancon Resources Recovery, Inc.

May 26, 2011 08:00 ET

Sancon Announces 2011 First Quarter Results

SHANGHAI, CHINA--(Marketwire - May 26, 2011) - Sancon Resources Recovery, Inc. (OTCBB: SRRY) (or "Sancon"), a growing environmental services and waste recycling company with operations in both China and Australia, announced today results for its 2011 first quarter ended March 31, 2011.

Financial highlights for 2011 first quarter:

--  Revenue increased 25% to $3.85 million
--  Gross profit of $1.37 million, a gross margin of 36%
--  Net Income of $0.45 million, a net margin of 12%
--  EBITDA of $0.5 million, or $0.02 per share.

Results of Operations - Comparison between the three months ended March 31, 2011 and the same periods in 2010

The Company generated revenue of $3.85 million in the 2011 first quarter, representing $778,638 or 25% increase compared to $3.07 million in the 2010 first quarter. Revenue from China operation increased $809,323 or 34% from $2.4 million in 2010 first quarter to $3.2 million in 2011 first quarter. Revenue from Australia operation has decreased $30,685 or 5% from $662,348 in 2010 first quarter to $631,663 in 2011 first quarter. The increase in revenue in China operation is partially because of the acquisition of the newly started waste paper and cardboards collection business from June 2010.

Gross profit decreased $156,200 or 10% to $1.37 million in the first quarter 2011 from $1.53 million in the first quarter 2010. Gross profit of China operation decreased $145,288 or 13% from $1.14 million in 2010 first quarter to $1 million in 2011 first quarter. The increase of raw material in our waste paper collection business is the main reason for the decrease of gross profit. However, our management believes the gross margin will be increased along with the expansion of the market in waste paper collection. In Australia, gross profit also decreased $10,912 or 3% from $386,587 in 2010 first quarter to $375,675 in 2011 first quarter. Gross margin decreased from 50% in the 2010 first quarter to 36% in the 2011 first quarter.

Net income for 2011 first quarter was $0.45 million, or $0.02 basic and diluted earnings per share, compared to $0.57 million or $0.03 basic and diluted earnings per share one year ago. Net income of our China operation decreased $0.67M or 11% from $0.61M in 2010 first quarter to $0.54M in 2011 first quarter. Net income of our Australia operation decreased $0.54M or 845% from $6,384 in 2010 first quarter to $47,556 for the same period in 2011. The high wage expenses and consulting fee result in the decrease of net income in Australia.

Financial Position as of March 31, 2011

At March 31, 2011, the Company had cash and cash equivalents totaling $6.5 million, total assets of $11 million, working capital of $6 million and stockholders' equity of $7.3 million. The Company generated $0.3 million in net cash from operating activities for the three months ended March 31, 2011.

"We are pleased with our continued increase in revenue in 2011 first quarter. However, our gross profit and net income has dropped. That is mainly due to the poor performance in our Australia operation and small scale of waste paper business in China," said Jack Chen, Sancon's Chief Executive Officer. "We have recently changed the management in our Australia operation and we are working hard to turn it around in the next quarter. In China, we've installed additional equipments which will triple our daily waste paper processing capacity. By expanding the waste paper business rapidly within a short period, we can negotiate a better pricing and increase our margin."

About Sancon Resources Recovery Inc

Sancon Resources Recovery, Inc. is an environmental service company specializes in the collection, processing, and selling of the reprocessed waste material such as plastic, metal, paper, cardboard, glass etc. The recycled materials are re-used by Sancon's manufacturing clients to make a wide variety of new products that include outdoor furniture, construction materials, building materials, packaging materials, and various other products. The use of recycled raw materials is both environmentally friendly and an important method to lower production costs for manufacturers to stay competitive. Sancon also invests in the renewable energy area by sponsoring the development of biofuel production technique that thrives on the supplies of carbon dioxide. Sancon currently has recycling plants based in Melbourne Australia and China. For more information please visit: www.sanconinc.com

Forward-looking statements:

The statements made in this press release, which are not historical facts, may contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.

                      SANCON RESOURCES RECOVERY, INC.
                        CONSOLIDATED BALANCE SHEETS
                                (Unaudited)

                                  Assets
                                                          As at
                                                --------------------------
                                                  March 31,   December 31,
                                                    2011          2010
                                                ------------  ------------
Current assets
  Cash and cash equivalents                     $  6,514,410  $  6,013,889
  Trade receivables, net                           2,060,937     1,503,849
  Inventory                                          133,871        61,286
  Deferred tax asset                                  83,876        37,617
  Other current assets                               316,654       301,234
  Advance and prepayment                              93,010        82,021
  Held to maturity securities                        129,384       129,489
                                                ------------  ------------
     Total current assets                          9,332,142     8,129,385

Property, plant & equipment, net                   1,173,874     1,190,106
Security deposit                                      11,340        11,179
Long Term Deferred Expenses                           12,103        13,448
                                                ------------  ------------
  Total assets                                  $ 10,529,459  $  9,344,118
                                                ============  ============

                      Liabilities and Stockholders' Equity

Liabilities
Current liabilities

  Trade payables                                $  1,138,792  $    922,626
  Capital lease - current                             22,561        24,807
  Tax payables                                       461,633       304,613
  Due to related parties                             977,896       697,030
  Loan Payable - current                              29,881        29,224
  Accrued expenses and other payables                616,131       540,036
                                                ------------  ------------
     Total current liability                       3,246,894     2,518,336

Long term liability
  Capital lease                                            -             -
  Loan Payable                                        21,216        28,805
                                                ------------  ------------
  Total liability                                  3,268,110     2,547,141
                                                ------------  ------------

Stockholders' equity
  Share Capital
     Authorized: 500,000,000 common shares, par
      value $0.001 per share Issued and Outstanding:
      22,964,996 shares as of December 31, 2010 and
      March 31, 2011                                  22,965        22,965
Additional paid-in capital                         1,079,200     1,079,200
Deferred Compensation                               (105,300)     (109,200)
Other comprehensive income                            78,377        86,098
Retained Earnings                                  5,808,911     5,361,208
                                                ------------  ------------
  Total                                            6,884,153     6,440,271
Non-controlling interest                             377,196       356,706
                                                ------------  ------------
  Total stockholders' equity                       7,261,349     6,796,977
                                                ------------  ------------
  Total liabilities & stockholders' equity      $ 10,529,459  $  9,344,118
                                                ============  ============

The accompanying notes are an integral part of these audited consolidated
financial statements




                      SANCON RESOURCES RECOVERY, INC.
                    CONSOLIDATED STATEMENTS OF INCOME
                                (Unaudited)

                                                   For the three months
                                                  periods ended March 31,
                                                    2011          2010
                                                ------------  ------------
Net sales                                       $  3,847,147  $  3,068,509
Cost of sales                                      2,472,944     1,538,106
                                                ------------  ------------
  Gross profit                                     1,374,203     1,530,403

Operating Expenses
  Depreciation                                        43,280        56,654
  Selling, general and administrative                853,189       875,659
                                                ------------  ------------
     Total operating expenses                        896,469       932,313
                                                ------------  ------------
Operating Income                                     477,734       598,090

Other income (expense)
  Other income, net                                   (9,730)      (13,194)
  Investment income(loss) prior to acquisition             -          (769)
  Interest (expense) income, net                        (376)          426
                                                ------------  ------------
     Total other income                              (10,106)      (13,537)
                                                ------------  ------------

Income from continued operations before
income taxes and discontinued operation              467,628       584,553

Income before income taxes and non-controlling
 interest                                            467,628       584,553

Income taxes                                            (565)        9,075

Net income (loss) attributed to non-controlling
 interest                                             20,490         8,168

                                                ------------  ------------
Net income                                           447,703       567,310

Other comprehensive item:
Foreign currency translation gain/(loss)               6,736          (796)

                                                ------------  ------------
Net comprehensive income                        $    454,439  $    566,514
                                                ============  ============

Earnings per share:
  Basic earnings per share                      $       0.02  $       0.02
                                                ============  ============
  Basic weighted average shares outstanding       22,964,996    22,964,996
                                                ============  ============
  Diluted earnings per share                    $       0.02  $       0.02
                                                ============  ============
  Diluted weighted average shares outstanding     22,697,410    23,098,466
                                                ============  ============

The accompanying notes are an integral part of these audited consolidated
financial statements

Contact Information

  • Contact:

    Sancon Resources Recovery, Inc.
    Ms Maggie Zhang
    +86 21 6775 6099
    info@sanconinc.com