SOURCE: Sancon Resources Recovery Inc

April 08, 2011 11:49 ET

Sancon Resources Recovery Announces Fourth Quarter and Fiscal Year 2010 Results

SHANGHAI, CHINA--(Marketwire - Apr 8, 2011) - Sancon Resources Recovery, Inc. (OTCBB: SRRY) (or "Sancon"), a growing environmental services and waste recycling company with its main operations located in China, today announced results for the fourth quarter and fiscal year ended December 31, 2010.

Financial highlights of 2010 fourth quarter are:

--  Revenue in 2010 fourth quarter was $3.55 million, an increase of 25%
    compared to $2.85 million for the fourth quarter of 2009.

--  Gross profit was $1.6 million for the fourth quarter 2010, compare to
    $1.24 million for the same period in 2009.

--  Gross margin increased from 44% in 2009 fourth quarter to 45% in 2010
    fourth quarter.

--  EBITDA in 2010 fourth quarter was $0.37 million, a decreased of 30%
    compared to $0.53 million in 2009 fourth quarter.

--  Net income was $0.25 million for the fourth quarter 2010, or $0.01 per
    share, compared to $0.48 million, or $0.02 per share for the fourth
    quarter 2009. The decrease mainly due to the losses incurred by our
    Australia subsidiary.

Financial highlights of 2010 fiscal year are:

--  Revenue in 2010 grew 19% to $13 million from $11 million in 2009 due to
    the growth in our China operation. Revenue in 2008 was $10.57 million.

--  Gross profit increased 19% to $6.12 million in 2010 from $5.17 million
    in 2009. Gross profit in 2008 was $5.91 million.

--  Gross margin was 47% in 2010 and 2009.

--  EBITDA decreased from $2.32 Million in 2009 to $2.22 million in 2010.

--  Net income in 2010 was $1.9 million, or $0.08 per share, compared to
    $2.09 million, or $0.09 per share in the year ago period. Our Australia
    subsidiary had net loss of $0.17 million in 2010 compare to net income
    of $15,000 in 2009, which contributed the decrease in overall net
    income for the year 2010.

Fourth Quarter and Fiscal Year 2009 Financial Highlights:

Revenue

Revenue for the fourth quarter 2010 was $3.55 million, representing an increase of 6% from $3.35 million in the third quarter 2010, and an increase of 25% from $2.85 million in the fourth quarter 2009.

Revenues for the year 2010 were $13 million as compared to $11 million of 2009, an increase of $2 million or 19%. The increases were mainly due to the sales amount contributed from the China operation.

Gross Profit

The gross profit was $1.6 million for the fourth quarter 2010. It increased $0.12 million or 8% compared to $1.49 million for the third quarter 2010. For the fourth quarter 2009, gross profit was $1.24 million. The gross margin increased from 44% in 2009 fourth quarter to 45% in 2010 fourth quarter. In 2010 third quarter, gross margin was 44%.

The gross profit for the year 2009 was $5.17 million, representing $0.96 million or 19% increase compared to $6.12 million for the year 2010. The gross margin was 47% for the year 2010 and 2009.

Selling, general and administrative expenses

Selling, general and administrative expenses were $1.22 million for the fourth quarter 2010 and $0.9 million for the third quarter 2010, an increase of 37%. It was $0.75 million in 2009 fourth quarter and increased by $0.47 million or 63% compared to 2010 fourth quarter.

Selling, general and administrative expenses increased to $3.92 million for the year 2010, from $2.86 million for the year 2009, an increase of $1 million or 37%. The growth of wages expenses and freight outwards in our Australia operation leads to the increase of SG&A expenses.

Net Income

For the fourth quarter 2010, net income was $0.25 million, or $0.01 per share, compared to $0.5 million, or $0.02 per share for the third quarter 2010. In 2009 fourth quarter, net income was $0.48 million, or $0.02 per share.

Net income for the year 2010 was $1.9 million, or $0.08 per share, compared to $2.09 million or $0.09 per share in 2009, a decrease of $0.19 million or 9%. Net profit margin for the year 2010 was 15% while it was 19% for the year 2009. The decrease is mainly due to the significant decrease of net income in our Australia operation.

Balance Sheet

Cash and cash equivalents totaled to $6 million as of December 31, 2010, primarily due to the increased revenue and cash flow.

As of December 31, 2010, total trade receivables were $1.5 million, an increase of 52% from $0.99 million as of December 31, 2009. The payment terms of our accounts receivable is about one month and under two months.

The working capital was $5.6 million for the year 2010 and it was $3.39 million for the year 2009. It increased $2.2 million or 66%.

Operating highlights of 2010 fiscal year are:

--  Sancon Shanghai ("Sancon SH"), our majority owned subsidiary, acquired
    52% equity of Sheng Rong Environment Protection Technology Co., Ltd
    ("Shanghai Sheng Rong") in 2010.

--  Shanghai Sheng Rong started waste paper and cardboards recycling
    operation from June 2010.  This operation generated around $0.7 million
    revenue in 2010.

Business Outlook:

--  The company enters into a prelimnary acquisition agreement with an
    environmental services company in Beijing. This company is one of the
    only two recycling companies selected by the Beijing Municipal
    government to aggregate the fragmented recycling operation in the area.
    The acquisition is expected to complete thrid quarter of 2011.

--  The company will further expand its waste paper and cardboards
    recylcing operations through Sheng Rong, and electronic waste processing
    in China in 2011. We believe these businesses will provide us
    additional revenue and profit in 2011.

"We are very pleased to see the continued increase in revenue and gross profit in 2010. Our net income has been affected by the poor performance in our Australia operation. Our management is considering various options for the Australian operation including closure of the Australia subsidiary or a complete divestment. In 2011 we would like to concentrate our resources in growing the Chinese Market," said Jack Chen, Sancon's Chief Executive Officer. "In 2011, through acquisitions, we will corporate with Chinese Government and expand waste recycling business around China. We also will pay more attention on electronic waste recycling area which we believe will be one of the most promising industries in China going forward."

About Sancon Resources Recovery Inc

Sancon Resources Recovery, Inc. is an environmental service company specializing in the collection, processing, and reuse of recycled waste materials such as plastic, metal, paper, cardboard and glass. The recycled materials reenters the manufacturing market to make a wide variety of new products, including outdoor furniture, construction material, building material, packaging material and other products. The use of recycled raw material is both environmentally friendly and an important method to lower production costs for manufacturers to stay competitive. Sancon currently has recycling plants and logistics operation in Melbourne Australia and across major cities in China. For more information please go to 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
                                (AUDITED)

                        Assets

                                                          As at
                                                --------------------------
                                                 December        December
                                                 31, 2010        31, 2009
                                                 ----------     ----------
Current assets
Cash and cash equivalents                       $ 6,013,889    $ 3,703,716
Trade receivables, net                            1,503,849        988,673
Inventory                                            61,286         16,013
Deferred tax asset                                   37,617         33,057
Other current assets                                301,234        285,933
Advance and prepayment                               82,021         49,502
Held to maturity securities                         129,489        129,000
                                                 ----------     ----------
    Total current assets                          8,129,385      5,205,894

Property, plant & equipment, net                  1,190,106        958,041
Security deposit                                     11,179          9,824
Held to maturity securities-non current                   -        129,993
Investment                                                -         42,678
Long Term Deferred Expenses                          13,448              -
                                                 ----------     ----------
Total assets                                    $ 9,344,118    $ 6,346,430
                                                 ==========    ===========

          Liabilities and Stockholders' Equity

Liabilities
Current liabilities
Trade payables                                  $   922,626    $   886,034
Capital lease - current                              24,807         15,925
Tax payables                                        304,613         97,779
Due to related parties                              697,030        420,504
Loan Payable - current                               29,224         26,199
Accrued expenses and other payables                 540,036        371,593
                                                 ----------     ----------
   Total current liability                        2,518,336      1,818,034

Long term liability
Capital lease                                             -         21,799
Loan Payable                                          28,805        56,117
                                                 -----------    -----------
Total liability                                    2,547,141     1,895,950
                                                 -----------    -----------

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 2009                                    22,965        22,965
Additional paid-in capital                         1,079,200       860,449
Deferred Compensation                               (109,200)     (124,800)
Other comprehensive income                            86,098        71,641
Retained Earnings                                  5,361,208     3,461,642
                                                 -----------    ----------
Total                                              6,440,271     4,291,897
Non-controlling interest                             356,706       158,583
                                                 -----------    ----------
Total stockholders' equity                         6,796,977     4,450,480
                                                 -----------    ----------
Total liabilities & stockholders' equity        $  9,344,118   $ 6,346,430
                                                 ===========    ==========






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

                                         For the years ended December 31,
                                              2010              2009
                                       ----------------- -----------------
Net sales                                   $  13,039,832     $ 10,997,101
Cost of sales                                   6,915,560        5,830,774
                                               ----------      -----------
Gross profit                                    6,124,272        5,166,327

Operating Expenses
Depreciation                                      190,621          190,724
Selling, general and administrative             3,918,884        2,860,905
                                               ----------      -----------
    Total operating expenses                    4,109,505        3,051,629
                                               ----------      -----------
Operating Income                                2,014,767        2,114,698

Other income (expense)
Other income, net                                  31,317           45,753
Investment income(loss) prior to
 acquisition                                      163,306           (1,331)
Loss on disposal                                   (7,296)               -
Loss on acquisition                              (157,847)               -
Interest (expense) income, net                        (87)           7,985
                                               ----------      -----------
Total other income                                 29,393           52,407
                                               ----------      -----------

Income from continued operations before
income taxes and discontinued operation         2,044,160        2,167,105

Discontinued operations
Loss from discontinued operations                       -              (50)
Loss on disposal of subsidiary                          -           (1,834)
                                               ----------      -----------
Loss on discontinued operations                         -           (1,884)
                                               ----------      -----------

Income before income taxes and
 non-controlling interest                       2,044,160        2,165,221

Income taxes                                      124,838           40,779

Net income (loss) attributed to
 non-controlling interest                          19,756           30,754
                                               ----------      -----------

Net income                                      1,899,566        2,093,688

Other comprehensive item:
Foreign currency translation
 gain/(loss)                                       14,457            8,787
                                               ----------      -----------

Net comprehensive income                    $   1,914,023     $  2,102,475
                                               ==========      ===========

Earnings per share:
Basic earnings per share-continued
 operations                                 $        0.09     $       0.09
                                               ==========      ===========
Basic earnings per share-discontinued
 operations                                 $           -     $      (0.00)
                                               ==========      ===========
Basic earnings per share                    $        0.08     $       0.09
                                               ==========      ===========
Basic weighted average shares
 outstanding                                   22,964,996       22,866,229
                                               ==========      ===========
Diluted earnings per share-continued
 operations                                 $        0.09     $       0.09
                                               ==========      ===========
Diluted earnings per share-discontinued
 operations                                 $           -     $      (0.00)
                                               ==========      ===========
Diluted earnings per share                  $        0.08     $       0.09
                                                ==========     ===========
Diluted weighted average shares
 outstanding                                   23,019,968       22,866,229
                                               ==========      ===========

Contact Information

  • Contact:

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