SOURCE: Sancon Resources Recovery, Inc.

August 22, 2011 14:42 ET

Sancon Announces 2011 Second Quarter Results

SHANGHAI, CHINA--(Marketwire - Aug 22, 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 second quarter ended June 30, 2011.

On April 1, 2011, Sancon approved an infusion of equity in to Sancon Resources Recovery (Shanghai) Co., Ltd. ("Sancon SH") for a total of USD 2,000,000, of which Sancon invested USD1,400,000 to Sancon SH and the minority shareholder invested USD 600,000. After completion of this transaction, ownership % remains unchanged.

Financial highlights for 2011 second quarter:

  • Revenue increased 14% to $6.97 million
  • Gross profit of $2.73 million, a gross margin of 39%
  • Net Income of $0.69 million, a net margin of 10%
  • EBITDA of $0.7 million, or $0.02 per share.

Results of Operations - Comparison between the six months ended June 30, 2011 and the same periods in 2010

The Company generated revenue of $6.97 million in the 2011 second quarter, representing $836,962 or 14% increase compared to $6.14 million in the 2010 second quarter. Revenue from China operation increased $892,500 or 19% from $4.8 million in 2010 second quarter to $5.7 million in 2011 second quarter. Revenue from Australia operation has decreased $55,538 or 4% from $1,346,260 in 2010 second quarter to $1,290,722 in 2011 second 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 $296,347 or 10% to $2.73 million in the second quarter 2011 from $3.02 million in the second quarter 2010. Gross profit of China operation decreased $359,448 or 16% from $2.28 million in 2010 second quarter to $1.92 million in 2011 second 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 increased $63,101 or 8% from $743,604 in 2010 second quarter to $806,705 in 2011 second quarter. Gross margin decreased from 50% in the 2010 second quarter to 39% in the 2011 second quarter.

Net income for 2011 second quarter was $0.69 million, or $0.03 basic and diluted earnings per share, compared to $1.10 million or $0.05 basic and diluted earnings per share one year ago. Net income of our China operation decreased $0.34M or 29% from $1.15M in 2010 first quarter to $0.81M in 2011 first quarter. Net income of our Australia operation decreased $63,800 or 124% from $51,088 in 2010 second quarter to $114,888 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 June 30, 2011

At June 30, 2011, the Company had cash and cash equivalents totaling $6.98 million, total assets of $11 million, working capital of $6 million and stockholders' equity of $8.13 million. The Company generated $1.31 million in net cash from operating activities for the six months ended June 30, 2011.

"We are pleased with our continued increase in revenue in 2011 second 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
June 30, 2011 December 31, 2010
Current assets

Cash and cash equivalents
$
6,975,390
$ 6,013,889
Trade receivables, net 1,280,673 1,503,849
Inventory 74,669 61,286
Deferred tax asset 39,216 37,617
Other current assets 278,459 301,234
Advance and prepayment 110,197 82,021
Held to maturity securities 129,489 129,489
Due from related parties 296,603 -
Total current assets 9,184,696 8,129,385
Property, plant & equipment, net 1,124,502 1,190,106
Security deposit 11,655 11,179
Long Term Deferred Expenses 10,759 13,448
Total assets $ 10,331,612 $ 9,344,118
Liabilities and Stockholders' Equity
Liabilities
Current liabilities

Trade payables
$
834,746
$
922,626
Capital lease - current 20,455 24,807
Tax payables 355,170 304,613
Due to related parties 81,370 697,030
Loan Payable - current 30,953 29,224
Accrued expenses and other payables 866,024 540,036
Total current liability 2,188,718 2,518,336
Long term liability
Capital lease - -
Loan Payable 13,605 28,805
Total liability 2,202,323 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 June 30, 2011 22,965 22,965
Additional paid-in capital 1,079,200 1,079,200
Deferred Compensation (101,400 ) (109,200 )
Other comprehensive income 100,806 86,098
Retained Earnings 6,057,617 5,361,208
Total 7,159,188 6,440,271
Non-controlling interest 970,101 356,706
Total stockholders' equity 8,129,289 6,796,977
Total liabilities & stockholders' equity $ 10,331,612 $ 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 six months periods ended June 30,
2011 2010
Net sales $ 6,972,770 $ 6,135,808
Cost of sales 4,247,405 3,153,814
Gross profit 2,725,365 2,981,994
Operating Expenses
Depreciation 85,540 81,926
Selling, general and administrative 1,918,848 1,799,625
Total operating expenses 2,004,388 1,881,551
Operating Income 720,977 1,100,443
Other income (expense)
Other income, net 431 (9,014 )
Investment income(loss) prior to acquisition - 31,666
Interest (expense) income, net 249 2,489
Total other income 680 25,141
Income from continued operations before income taxes and discontinued operation 721,657 1,125,584
Income before income taxes and non-controlling interest 721,657 1,125,584
Income taxes 11,851 11,385
Net income (loss) attributed to non-controlling interest 13,396 9,627
Net income 696,410 1,104,572
Other comprehensive item:
Foreign currency translation gain/(loss) 14,708 (20,018 )
Net comprehensive income $ 711,118 $ 1,084,554
Earnings per share:
Basic earnings per share $ 0.03 $ 0.05
Basic weighted average shares outstanding 22,964,996 22,964,996
Diluted earnings per share $ 0.03 $ 0.05
Diluted weighted average shares outstanding 23,515,786 23,083,417
The accompanying notes are an integral part of these audited consolidated financial statements

Contact Information

  • Contact:

    Sancon Resources Recovery, Inc.
    Ms Amy Ping Li
    +86 21 6775 6099
    info@sanconinc.com