SOURCE: Songzai International Holding Group, Inc.

May 17, 2010 08:00 ET

Songzai International Holding Group Announces First Quarter 2010 Results

CITY OF INDUSTRY, CA--(Marketwire - May 17, 2010) -  Songzai International Holding Group, Inc. (OTCBB: SGZH), a Chinese leader in coal production and exploration in the People's Republic of China, today announced its financial results for the first quarter ended March 31, 2010.

For the three months ended March 31, 2010, the Company recorded revenues of $12.56 million compared to $20.76 million for the same period of 2009, a decrease of approximately 40%. The decrease in sales is primarily due to reduced production of Xing An Mines as a result of mine maintenance and retrofit projects which commenced at the end of 2009. The projects are expected to finish in July, 2010. The Company expects these mine improvements will enhance efficiencies and lower costs thereby improving its growth and profitability once mining resumes.

Cost of sales for the three months ended March 31, 2010 was $7.73 million, an increase of $0.77 million or approximately 11%, from $6.96 million for the same period of 2009. The Company's total production during the three months ended March 31, 2010 was 237,724 tons, compared to 494,497 tons produced for the same period of 2009, a decrease of 256,773 tons. Cost of sales as a percentage of sales increased to approximately 61% for the three months ended March 31, 2010 from approximately 33% for the same period of 2009. This increase was mainly due to significant decrease in the sales and increase of average cost per ton. The average cost per ton was $29.25 in the first quarter of 2010, compared to $18.83 for the same period in 2009. This increase was primarily attributable to the amortization of mining rights based upon the reserve study as of December 31, 2009 resulting in an increase of non-cash cost per ton of approximately $10.

Gross profit was $4.83 million for the first quarter of 2010 compared to $13.80 million for the same period of 2009, a decrease of $8.97million. Our gross profit as a percentage of sales was approximately 39% and 67% in the three months ended March 31, 2010 and 2009, respectively. The decrease in gross profit margin was mainly attributable to the decreased production and sales volume, decreased average selling price per ton and increased average cost per ton.

Net income for the three months ended March 31, 2010 was $2.13 million compared to net income of $10 million for the same period of 2009, a decrease of $7.87 million. Net income as a percentage of sales decreased from 48% for the first quarter of 2009 to 17% for the same period of 2010. This was mainly attributed to the significant decrease in the production and sales volume as well as increased average cost per ton of coal. As of March 31, 2010, the Company had cash and cash equivalents of $28.53 million.

The average selling price per ton for the first quarter of 2010 was $47.55, compared to $56.14 for the same period of 2009, a decrease of 15%. The Company's total sales volume was 264,122 tons for the three months ended March 31, 2010, compared to 369,784 tons for the same period of 2009, a decrease of approximately 29%. The decrease in sales volume was mainly due to temporary decreased production volume in the Xing An Mines.

Mr. Hongwen Li, President of Songzai International Holding Group, commented, "We recognize the short-term impact the Xing An Mine retrofit had on our financial results this quarter. We expect one more quarter of continued pressure as we make the necessary adjustments. We fully anticipate returning to more normalized sales volume in the third quarter and do not expect further cost increases or decreases in selling price." Mr. Li continued, "As we have recently mentioned, we continue to actively pursue strategic opportunities to improve our distribution and production capabilities. We continue to carefully assess various opportunities and their ability to complement our growth strategy."

About Songzai International Holding Group, Inc.

Songzai International Holding Group, Inc. (OTCBB: SGZH) is engaged in coal production and sales by exploring, assembling, assessing, permitting, developing and mining coal properties in the People's Republic of China ("PRC"). After obtaining permits from the Heilongjiang Province National Land and Resources Administration Bureau and the Heilongjiang Economic and Trade Commission, we extract coal from properties to which we have the right to mine capped amounts of coal, and then sell most of the coal on a per metric ton ("ton") basis in cash on delivery, primarily to power plants, cement factories, wholesalers and individuals for home heating. We do not own the coal mines, but have mining rights to extract a capped amount of coal from a mine as determined by government authorized mining engineers and approved by the Heilongjiang Department of Land and Resources. Our business consists of the operations of the Tong Gong and Xing An coal mines in northern PRC.

Safe Harbor Statement

This press release contains certain statements that may include 'forward-looking statements' as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by the use of forward-looking terminology such as "believe, expect, anticipate, optimistic, intend, will" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and factors, including those discussed in the Company's periodic reports that are filed with and available from the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risks and other factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

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