China Carbon Graphite (CHGI) research, news, and more from GeoInvesting

Company description

Wed, 01 Jul 2009 04:00:00 GMT

China Carbon is one of the nation's top three producers of specialty carbon and graphite products. The Company, through its affiliate, Xingyong Carbon Co., Ltd., manufactures carbon- and graphite-based products in China. The company is one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in smelting for colored metals and rare earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. In September 2007, the Company was approved and designated by Ministry of Science & Technology as a "National Hi-tech Enterprise." Of the 400 plus carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor.

Comments & Business Outlook

Tue, 15 Nov 2011 05:00:00 GMT

Third Quarter 2011 Results

For the three months ended September 30, 2011, revenue increased 36%, from $10.0 million in Q3 2010 to $13.6 million in Q3 2011

Adjusted EPS in third quarter 2011 was $0.05 vs $0.09

"We were very glad to see sustained growth in our core businesses, fine grain and high purity graphite products, this past quarter," commented Donghai Yu, China Carbon's CEO. "During this time, we continued concentrating on the development of our fine grain and high purity graphite products business segments since these products are currently providing higher margins than our other business segment, graphite electrodes, and we were pleased to see the benefits of maintaining such a strategy. When comparing the third quarter of 2010 to the third quarter of 2011, our net sales of high purity graphite products rose from $2.2 million to $5.7 million, and our net sales of fine grain graphite products increased from $4.9 million to $5.8 million.

Mr. Yu continued, "Even though the increased interest expenses decreased our net profits in the three months ended September 30, 2011, we saw an increase in our net profit margins on a nine month basis and also when comparing our EBITDA from the third quarter of this year to the same period last year, we managed to keep this figure nearly in line with rising input costs and increased capital expenditures related to the construction of our new facility. With the launch of our new 30,000 ton facility, which includes a baking and dipping plant that will both specialize in the manufacturing of our higher margin products made from fine grain and high purity graphite, we expect that we will see significant improvement in our financial results in 2012. As the demand for graphite continues to rise, raw material prices are increasing as well, but we are confident that we are in a better position to thrive in this climate due to our production capacity expansion and ability to produce higher margin fine grain and high purity graphite products."

Business Outlook

"Through our ongoing expansion efforts, we are seeking to further leverage our leading position in China's graphite market and improve our profitability significantly," remarked Mr. Yu. "Recently demand of our higher margin graphite products have been exceeding our production capacity, so we intend to have our new facility specialize in the manufacturing of such products. Accordingly, we project that our revenues and profits will rise with increased sales of our higher margin products since many of these products, like large-size graphite electrodes, are applicable to and experiencing rising demand from some of China's fastest developing industries, including aerospace, defense, automotive and clean tech. Our ability to manufacture higher margin products is one of our key competitive advantages and with the doubling of our production capacity and by continuing our product development, we are confident that we will improve our financial results in future quarters."

"Currently we are seeking out potential natural graphite mines and solar graphite manufacturer acquisitions and or joint venture projects, and I want to emphasize to our investors that this will take time as these negotiations are very complicated and costly, and we must approach every potential acquisition and or joint venture carefully," added Mr. Yu. "We anticipate further improvement in our cash flow once our new facility is up and running that along with our solid relationships with Chinese banks, like China Construction Bank, leads us to expect that we will be able to finance our acquisitions and or joint venture with our cash flow and bank financing. In addition, we may also seek out off-take agreements with other suppliers in an effort to secure favorable graphite pricing amidst the rising prices of graphite."

Comments & Business Outlook

Tue, 04 Oct 2011 04:00:00 GMT

NEW YORK, Oct. 4, 2011 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. (OTCBB:CHGI) ("China Carbon" or the "Company"), the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top manufacturers of carbon and graphite products, today announced that videos showcasing the Company's latest manufacturing facilities are now available at:

http://s1219.photobucket.com/albums/dd423/ChinaCarbon/

The videos give viewers an in-depth look at China Carbon's new baking and dipping plants that will specialize in producing the Company's higher margin products made from fine grain and high purity graphite. Last quarter, the majority of China Carbon's revenues came from sales of its higher margin products and the Company's management team is confident that its new facilities will help China Carbon better meet the rising demand it is seeing for such products.

"Keeping investors, customers and potential clients apprised of what is happening within our Company is very important to us and we believe that these videos will allow those interested in China Carbon to get a better feel for the forthcoming operations at our new facilities. We expect that with the addition of these two plants, we will double our current production capacity that will, in effect, put us in a better position to supply more of our higher margin products, like large-size graphite electrodes, to many of China's fastest growing industries. This is a very exciting time for our Company and we want people interested in China Carbon to be able to see what steps we are taking to maintain our progress."

Liquidity Requirements

Mon, 15 Aug 2011 04:00:00 GMT

Some of our future expansion plans, including the expansion of our product offerings to include nuclear, solar and semiconductor products and pursuing an acquisition, would likely require us to obtain additional funds from equity or debt markets, or to borrow additional funds from local banks.

Comments & Business Outlook

Fri, 12 Aug 2011 04:00:00 GMT

China Carbon Graphite Group, Inc and subsidiaries
Consolidated Statements of Income and Comprehensive Income
(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010

Sales	$	12,145,024		$	3,248,351		$	23,608,359		$	8,095,207

Cost of Goods Sold		9,456,762			3,019,732			18,340,023			6,842,398
Gross Profit		2,688,262			228,619			5,268,336			1,252,809
		22	%		7	%		22	%		15	%
Operating Expenses		1,106,978			1,009,491			2,710,903			1,438,420
Selling expenses		57,312			21,704			107,175			46,697
General and administrative		1,049,666			987,787			2,603,728			1,391,723
Amortization		47,152			10,887			93,754			38,227
		1,154,130			1,020,378			2,804,657			1,476,647
Operating Income (Loss) Before Other Income (Expense)
and Income Tax Expense		1,534,132			(791,759	)		2,463,679			(223,838	)

Other Income (Expense)
Interest expense		(693,274	)		(268,123	)		(1,406,804	)		(474,271	)
Interest income		-			-			-			-
Other expense		(765	)		(2,926	)		(766	)		(2,926	)
Other income		15,670			-			76,550			-
Change in fair value of warrants		26,540			1,783,448			82,692			563,018
		(651,829	)		1,512,399			(1,248,328	)		85,821

Income (Loss) Before Income Tax Expense		882,303			720,640			1,215,351			(138,017	)

Income Tax Expense		-			-			-			-

Net Income (Loss)	$	882,303		$	720,640		$	1,215,351		$	(138,017	)

Other Comprehensive Income
Foreign currency translation gain		553,200			146,086			821,448			46,564
Total Comprehensive Income (loss)	$	1,435,503		$	866,726		$	2,036,799		$	(91,453	)

Share Data

Basic earnings (loss) per share	$	0.04		$	0.04		$	0.05		$	(0.01	)

Diluted earnings (loss) per share	$	0.04		$	0.04		$	0.05		$	(0.01	)


Weighted average common shares outstanding, basic		22,350,263			20,068,117			21,993,435			19,281,103


Weighted average common shares outstanding diluted		23,194,542			20,068,117			22,671,285			19,281,103

During the three months ended June 30, 2011, we had sales of $12,145,024 as compared to sales of $3,248,351 for the three months ended June 30, 2010, an increase of $8,896,673, or approximately 273.9%. Our revenue was generated mainly from sales of graphite electrodes, fine grain graphite, high purity graphite, and semi-processed graphite products. Sales increase was mainly attributable to a significant increase in the demand of our products during the three months ended June 30, 2011 resulting from the market recovery, new customer developments, and change of product mix to include more high purity graphite products which average unit price increased 98% in the three months ended June 30, 2011 compared to the same period last year. The fast development of manufacturing of solar and mold products increased the demand of our products as raw material. Increased production capacity and increased unit prices also contributed to the increase of total sales. The increased unit price of high purity graphite is due to a large demand for such products in the market. We also had a decrease in the demand of high purity graphite in 2010. Since then, the company has been successful to improve its product mix to achieve higher profit by increasing sales of fine grain graphite and high purity graphite products which generate a better margin.

Until the third quarter of 2008, we experienced rapid growth in our operations. From the fourth quarter of 2008 until the end of 2009, however, as a result of the global economic crisis, the steel industry in general slowed, which caused our revenues and gross margin to decline significantly. Specifically, we had a significant decline in sales of graphite electrodes. The industry started to recover in 2010, and in particular since the third quarter of 2010. Our revenues and gross margins improved significantly in the second half of 2010, which trend has continued into 2011. As a result, our cash and receivables have also increased while the collectability remains very reliable. We believe that our allowance for doubtful accounts as of June 30, 2011 is adequate. We expect the recovery and increasing demand in the fine grain, high purity and ultra high power graphite electrode, markets to continue in subsequent quarters in 2011, primarily due to anticipated growth in the iron and steel automobile, aerospace ad defense industries in the PRC. Currently, steel plants in China have been upgrading their furnace facilities and created a high demand for large size ultra high power graphite electrode, which are different products from general graphite electrode. The margin of large size ultra high power graphite electrode is high due to the shortage of supply to the demand. We estimate the trend will continue for the near future. Our new forming plant will specialize in manufacturing high margin products including large size ultra high power graphite electrode, high purity graphite and fine gain graphite.

In order to try and address this demand, we have installed a 4200-ton compressor and 36 annular kilns as of June 30, 2011 and are currently testing this equipment. In addition, the new baking plant will have 36 furnaces, totaling 160 meters in length. The baking plant is expected go online later this month and testing at the extrusion press plant is expected to be finished by September 2011, with operations expected to begin shortly thereafter, subject to potential further delays in the installation of equipment, the hiring of additional employees, orders from customers, or other delays involved in construction, installation or production in a new facility. The new plant is expected to be used to manufacture a new product, ultra high power graphite electrodes with a diameter ranging from 600 to 800mm, along with existing fine grain and high-purity graphite products. The industrial applications of the products to be manufactured in the new facility include aerospace, defense, automotive and clean tech end products currently carries the greatest demand of all forms of graphite. We believe that this expansion will make us China's first domestic producer of 800 mm diameter ultra high power electrodes and will further strengthen the Company's leading position in China's fine grain graphite market. After the expansion, the Company is expected to have a 60,000 ton production annual capacity. The Company is currently operating at 100% production capacity of 30,000 tons annually.

Business Outlook

"Right now, we plan to have our new facility specialize in the manufacturing of higher margin products, like large size, ultra high power graphite electrodes, and high purity and fine gain graphite products," remarked Mr. Yu. "China's emerging aerospace, defense, automotive and clean tech end industries present the greatest demand for all types of graphite, specifically the forms of graphite we are planning to produce at our new facility. Moreover, we anticipate considerable growth in China's electric arc furnace steel production, which we believe will contribute to increased demand for large size, ultra high graphite electrodes. Accordingly, we are working hard to become the first company in China to produce 800 mm diameter ultra high power graphite electrodes. Through our product development and capacity expansion efforts, we are striving to enhance our production of higher margin products so we can gain further leverage in China's graphite sector."

Comments & Business Outlook

Thu, 04 Aug 2011 04:00:00 GMT

NEW YORK, Aug. 4, 2011 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. (OTCBB:CHGI) ("China Carbon" or the "Company"), the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top manufacturers of carbon and graphite products, today announced that operations at its new facility, which includes baking and dipping plants, will commence later this month and become fully operational by September 2011.

China Carbon has already completed installations at the facility as well as testing at the baking plant. The baking plant will go online later this month and testing at the extrusion press plant will be finished by September 2011 with operations beginning shortly thereafter, according to the Company's management team. Once the facility is completely up and running, China Carbon anticipates that it will have an annual production capacity of 30,000 tons, which would double the Company's current annual production capacity. With its expansion efforts, China Carbon looks to better position itself to meet the growing demand the Company is seeing for its higher margin products.

When compared to the first quarter of 2010, the Company's sales more than doubled in the first quarter of 2011, with 80 percent of its revenues coming from sales of its higher margin products. Accordingly, China Carbon plans to primarily manufacture its higher margin products, such as Ultra high power graphite electrodes and fine grain and high purity graphite products, at its facility.

Donghai Yu, China Carbon's Chief Executive officer, commented, "We want to diversify our products' applications and enter in as many markets as possible. Right now, we feel that we have an excellent opportunity to really enrich our business by providing more of our higher margin products to some of China's fastest growing industries, including the aerospace, defense, automotive, steel and clean-tech industries."

In particular, China Carbon anticipates maintaining and enhancing its supply of large size, ultra high power graphite electrodes to Chinese steel plants. Currently, the margin for large size, ultra high power graphite electrode is high due to the shortage of supply to demand. In an effort to take advantage of this trend, the Company is striving to become China first domestic producer of 800 mm diameter ultra high power graphite electrodes.

"Our ability to produce higher margin products is one of our key competitive advantages," added Mr. Yu. "Large size carbon and graphite manufacturing requires the most sophisticated technologies but can deliver us more than a 30 percent gross profit margin. We believe that we are already China's leading manufacturer of large size carbon and graphite products, and through our capacity expansion and product development, our goal is to enhance our production of these products and gain further leverage in the market."

Comments & Business Outlook

Tue, 17 May 2011 04:00:00 GMT

First Quarter Results:

Revenue increased 137%, from $4.85 million in Q1 2010 to $11.46 million in Q1 2011
EBITDA improved 155% from $0.99 million in Q1 2010 to $2.52 million in Q1 2011
Net income grew 139%, from ($0.86 million) in Q1 2010 to $0.33 million in Q1 2011
Adjusted net income rose 91%, from $0.33 million in Q1 2010 to $0.63 million in Q1 2011
Adjsuted EPS was $0.03 vs. $0.02

Donghai Yu, China Carbon's CEO, said, "As we expected, our first quarter results were excellent. In particular, we are very pleased with the significant improvement in our EBITDA, which increased 154 percent. We successfully adjusted our product mix in the first quarter of 2011 to capitalize on market demand, producing and selling more of our higher margin products, like high purity graphite, than our lower margin products, such as graphite electrodes. Notably, our sales benefited from the increasing applications for our higher margin products in China's rapidly developing solar and mold industries."

Comments & Business Outlook

Thu, 05 May 2011 04:00:00 GMT

NEW YORK, May 5, 2011 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. today announced that the Company anticipates reporting a considerable increase in revenue for the first quarter of 2011 as compared with the same quarter of 2010.

China Carbon's preliminary, unaudited revenue during the first quarter of 2011 was approximately $11.6 million USD, reflecting an increase of approximately $6.7 million USD or 138%, when compared to revenue of $4.8 million during the first quarter of 2010. This substantial improvement in revenue is due to its doubled capacity and the significant increase in the sales of its high margin products.

Industrial Minerals recently reported that the price range for industry standard large flake high carbon graphite has risen from $2,050-$2,500 per ton to $2,275-$3,000 per ton. In the third and fourth quarters of 2010, China Carbon accurately projected that the per ton graphite price would increase within this range.

Anticipating these price increases, after securing a $27 million USD loans from the Construction Bank of China, China Carbon purchased additional levels of inventory and paid advances to suppliers to lock in the price of its raw materials. This well-timed strategic move has China Carbon expecting improved gross margins for the first quarter of 2011 as well as considerable full year increases.

The notable rise in the commodity prices associated with carbon graphite is being driven in large part by the mounting demand for carbon graphite, which is in turn being driven by increased manufacturing associated with global economic growth. At this time, China Carbon plans to accommodate by expanding its current operations and the Company estimates that the construction of its new baking plant—which is expected to boost its annual production capacity from 30,000 tons to 60,000 tons—will be completed by June 2011 and fully operational by August 2011, subject to potential delays involved in construction, installation or production involved in the development of a new manufacturing facility. The Company is currently running at 100 percent capacity.

Comments & Business Outlook

Mon, 18 Apr 2011 04:00:00 GMT

Full Year 2010 Results:

Revenue increased 102%, from $15.4 million in 2009 to $31.0 million in 2010
Gross profit increased 218%, from $2.2 million in 2009 to $6.9 million in 2010
Gross profit rate increased 57.86%, from 14.17% in 2009 to 22.36% in 2010
Operating income increased 383%, from operating loss of ($0.9 million) in 2009 to operating income of $2.4 million in 2010
Net income increased 194%, from net loss of ($1.5 million) in 2009 to net income of $1.4 million in 2010
EPS of $0.06 vs. ($0.16), up 138%

GeoTeam® Note: 2010 vs. 2009 Adjusted EPS

Full Year: $0.14 vs. $(0.08)
Fourth Quarter: $0.06 vs. $(0.21)

"We are thoroughly pleased that the Company's operations generated such robust growth and excellent results in 2010," said Donghai Yu, Chief Executive Officer of China Carbon. "We are especially proud to have increased our net income by over 190 percent and operating income by over 380 percent compared to 2009. We are glad to see increased revenue from expanded customer base due to market recovery and doubled production capacity, improved margin due to a higher margin product mix, as well as strong financing support from banks."

Mr. Yu explained that China Carbon is positioned for excellent results in 2011 and for future growth in the coming years as the Company plans to expand production capacity by as much as 100% in 2011. Mr. Yu stated, "Our new facility which is expected to start operating around August 2011 will increase the production capacity of our higher margin products. The Company also has plan to actively seek opportunities to integrate vertically with raw material providers to help to save the raw material cost and thus to improve the gross profits."

The Company expects that the increased demand for its higher margin products of fine grain graphite and high purity graphite will extend through 2011, primarily due to anticipated growth in China's automobile, aerospace, defense, iron and steel industries. China Carbon also expects that relatively lower margin products of graphite electrodes will continue to experience increased demand in 2011. The Company anticipates that cash flow from operations will continue to increase with enhanced sales, improved accounts receivable collection and less bad debt expenses for accounts receivable allowances.

Liquidity Requirements

Mon, 18 Apr 2011 04:00:00 GMT

We expect that anticipated cash flows from operations, short-term and long-term bank loans and loans from a related party will be sufficient to fund our operations through at least the next twelve months, provided that:

We generate sufficient business so that we are able to generate substantial profits, which cannot be assured;
Our banks continue to provide us with the necessary working capital financing; and
We are able to generate savings by improving the efficiency of our operations.

In December 2009 and January 2010, we raised an aggregate of approximately $3 million in a private placement transaction. We may require additional equity, debt or bank funding to finance acquisitions or to allow us to produce graphite for the nuclear industry, which are our primary growth strategies

Research

Wed, 06 Apr 2011 04:00:00 GMT

We are speculating that CHGI will report strong 2010 year end financial results

Notice verbiage in the original 2010 year end extension filing

Is it anticipated that any significant change in results of operations from the corresponding period for the last fiscal year will be reflected by the earnings statements to be included in the subject report or portion thereof?

Notice verbiage in the amended 2010 year end extension filing

Yes

Please be aware that a strong report is not guaranteed, but since the company ended 2009 on a sour note, we are speculating that the "significant change" will be positive. Given the state of the Chinese RTO market, we do not how investors will react to such news.

Comments & Business Outlook

Mon, 24 Jan 2011 05:00:00 GMT

NEW YORK, Jan. 24, 2011 (GLOBE NEWSWIRE) -- China Carbon Graphite Group, Inc. today announced that it has completed the exterior construction of its new 30,000-ton plant, and will start installation and shakedown testing of a 4200-ton compressor and 36 annular kilns soon. The new facilities are expected to begin production by June 2011.

Comments & Business Outlook

Tue, 16 Nov 2010 05:00:00 GMT

Third Quarter 2010 Highlights

Revenue was $9,979,707, up 78.8% from the same quarter of 2009.
Gross profit was $2,474,084, up 62.2% from the third quarter of 2009.

Gross margin of 24.8%, slightly decreased 2.5% from 27.3% for the third quarter of 2009.
Net income was $1,900,563, an increase of $965,298 or 100% from the third quarter 2009.

Earnings per diluted share were $0.09 vs. $0.06.

"We are pleased to announce solid financial results and robust growth in the quarter," Donghai Yu, CEO of the Company commented. "Our Third Quarter results came in strong as anticipated, we experienced 78.8% growth in our revenues year over year. Due to our long production cycle, in the quarter, we began to deliver most of the orders we received at the beginning of this year. We expect to see increased demand in higher margin ultra purity graphite electrode, fine grain and high purity graphite product lines. We see this demand extending through 2010 and into 2011, primarily due to anticipated growth in the automobile, aerospace, defense, iron and steel industries in China. Thus far, in 2010, we have doubled our capacity from 15,000 tons to 30,000 tons. We have also begun construction on a new 30,000 ton facility to meet the increasing demands of our customers. Additionally, we have sufficient capital to fund all of our raw material needs for our new capacity expansion through our RMB 180 million loan from China Construction Bank."

"We have recently increased our customer base and expect to establish long term relationships with each new customer. In turn we believe this will further strengthen our robust revenue growth in the future," Mr. Yu continued.

GeoTeam® Note: CHGI included an other income line item in its filings. Investors should eliminate this figure for a more accurate picture of CHGI's performance. Doing so yields EPS of $0.06 for the 2010 third quarter.

					Three Months ended September 30	Nine months ended September 30,
	2010			2009			2010			2009

Sales	$	9,979,707		$	5,580,776		$	18,074,914		$	12,131,938

Cost of Goods Sold		7,505,623			4,055,953			14,348,021			9,012,935
Gross Profit		2,474,084			1,524,823			3,726,893			3,119,003

Operating Expenses
Selling expenses		48,978			14,102			95,675			332,016
General and administrative		706,235			218,522			2,097,959			675,932
Depreciation and amortization		74,365			19,096			112,592			57,275
		829,578			251,720			2,306,226			1,065,223
Operating Income Before Other Income (Expense)
and Income Tax Expense		1,644,506			1,273,103			1,420,667			2,053,780

Other Income (Expense)
Interest expense		(308,489	)		(356,891	)		(782,760	)		(761,586	)
Interest income		-			-			-			-
Other expense		(16	)		-			(2,941	)		(1,462	)
Other income		556,038			19,053			556,038			545,122
Change in fair value of warrants		25,129			-			588,147			-
		272,662			(337,838	)		358,484			(217,926	)

Income Before Income Tax Expense		1,917,168			935,265			1,779,151			1,835,854

Deal Flow

Mon, 08 Nov 2010 05:00:00 GMT

China Carbon Graphite Group, Inc. today announced that during the second and third quarters of 2010, it has received RMB 180 million in total from China Construction Bank through four loans, which is equal to roughly USD 27 million based on a RMB to US dollar conversion rate of 6.66 to 1.

Each of these loans has a one year term with an interest rate of 5.41% per year and will be renewable at the lender's option after the expiration of the loans.
The loan agreement provides for operating and financial covenants typical for loan transactions of this type.
Proceeds of the loans will be used by the Company to purchase raw materials, specifically focusing on higher purity graphite and fine grain graphite materials.

This loan facility enables China Carbon to significantly reduce the risk of price inflation of raw materials and leverage increased facility capacity, and expand its profit margin, by allowing the Company to buy larger amounts of raw materials in advance in order to receive better pricing.

"We believe the price of raw materials will continue to rise in the coming years, the loans we received from China Construction Bank will allow us to lock in the price of our raw materials by facilitating larger advanced purchase arrangements at better pricing, in order to hedge against the risk of inflation. Furthermore, with the increasing sales and price of our products, we believe we will deliver improved results in next few quarters, showing incremental increases in our top and bottom line," said Donghai Yu, the Chief Executive Officer of China Carbon.

"The ability for us to receive these loans on such favorable terms from one of the largest Chinese banks further shows the confidence of our business operation and future industry potential," Donghai Yu continued.

CFO Trail

Wed, 01 Sep 2010 04:00:00 GMT

On September 1, 2010, Ms. Ting Chen, Chief Financial Officer, informed the Board of Directors of China Carbon Graphite Group, Inc. (the “Company”) that she would resign as the Chief Financial Officer and as a member of the Board of the Company, effective on that date, and the Board of Directors has accepted her resignation. There was no disagreement between Ms. Chen and the Company which led to her resignation.

Research

Thu, 20 Aug 2009 04:00:00 GMT

China Carbon Graphite reported 2009 second quarter results today:

Revenues decreased 53% to $ 3.7 million
GAAP Earnings per share fell to 50% to $0.04
Geo calculated Tax adjusted non-GAAP Earnings per share fell 40% to $0.03

While we didn't expect results to drastically recover from plant closure issues we discussed in our initial report, we were hoping for a slightly better financial showing. Furthermore, China Carbon did not revisit its financial guidance of top and bottom line growth of 15% to 20%.

Still, there was some encouraging information presented in China Carbon's press release that bodes well for long-term investors.

A resolution of a capitalization issue arising from the reverse merger transaction in December 2007 that called for the company to pay $4 million in fees.
China Carbon is now starting to see an increase in order flow. "The Company received purchase orders late in the second quarter that it expects will be filled in the third and fourth quarters of 2009."(Source: Press Release)
The company commented that it is pursuing acquisition opportunities.

Value investors can find solace in that the stock is still trading at a discount to its current book value per share of $2.61. China Carbon will likely have to relay a message that it can resume earnings per share growth in the near future in order to fully garner Wall Street's attention. The stock has already come a long way in a short period of time, mainly due to capital restructuring initiatives. Now it is time for China Carbon to show the street that it can grow its business. Completing an acquisition could accomplish this task.

Research

Tue, 04 Aug 2009 04:00:00 GMT

New article available for China Carbon Graphite

Research

Thu, 16 Jul 2009 04:00:00 GMT

On Wednesday, July 1, 2009, 10:14AM The GeoTeam® coded China Carbon Graphite (chinacarboninc.com) as a GeoSpecial. At its current price the stock may offer an attractive risk reward opportunity.

In 2007 the China Carbon saw its earnings per share grow 30.7% with a 47.2% increase in sales. 2008 saw a continuation of growth as sales and adjusted net income grew 7.7% and 11.1% respectively. 2008 growth would have been greater if it had not been for the Olympics which necessitated the closure of Xingyong's plant facilities as mandated by the Chinese government for the August 2008 Olympics. The closure caused the Company to shut down its production. The Company requires a 6 months production cycle and therefore was unable to resume production until March of 2009." With operations back to normal the company is positioning itself to propel its growth rate to new heights.

China Carbon is one of the China's top three producers of specialty graphite products. The Company's main products are graphite electrodes, fine grain graphite and high purity graphite. In general, the mineral is a valuable commodity in the Chemical, Mechanical, Nuclear and Electrical industries because of its ability to conduct heat and electricity and for its refractory nature (chemical and physical stability over a wide range of temperatures). These industries often need durable materials that can withstand conditions and processes over a long period of time, characteristics that lack in other industrial materials.

Graphite is considered to be one of the purest forms of carbon and highest grade of coal. Purity refers to the percent of carbon versus other non-carbon impurities found in the mineral. Graphite is one of two allotropes of carbon (the other being diamonds), the term allotrope meaning that it is a naturally occurring form of pure carbon. The chart below illustrates different grades of coal as they compare to carbon's allotropes.

		Mineral Constituents by % Weight
Name	*Volatiles %	C Carbon %	H Hydrogen %	O Oxygen %	S Sulfur %
Braunkohle (Lignite Coal)	45-65	60-75	6.0-5.8	34-17	0.5-3
Flammkohle (Flame coal)	40-45	75-82	6.0-5.8	>9.8	1
Gasflammkohle (Gas flame coal)	35-40	82-85	5.8-5.6	9.8-7.3	1
Gaskohle (Gas coal)	28-35	85-87.5	5.6-5.0	7.3-4.5	1
Fettkohle (Fat coal)	19-28	87.5-89.5	5.0-4.5	4.5-3.2	1
Esskohle (Forge coal)	14-19	89.5-90.5	4.5-4.0	3.2-2.8	1
Magerkohle (Non baking coal)	10-14	90.5-91.5	4.0-3.75	2.8-3.5	1
Anthrazit (Anthracite Coal)	7-12	>91.5	<3.75	<2.5	1
Graphite	7	>99	<1	<1	<1
Diamond	0	100	0	0	0

Source: Wikipedia

There are three types of naturally occurring graphite; high crystalline graphite, amorphous graphite and flake graphite, all of which are named for observations that can be made about how they appear in their natural environments. However, graphite can also be artificially processed to obtain a synthetic form of the mineral.

Amorphous graphite has applications in metallurgy, pencil production, refractories, coating, lubricants and paint production.

Crystalline graphite can be used in batteries, lubricants, grinding wheels and powder metallurgy.

Flake graphite is used predominantly in refractory applications, mainly in secondary steel making; in addition to this it may also be used in lubricants, powder metallurgy, pencils and coatings. Most sources of natural graphite are also used in the fabrication of graphite foil.

Synthetic, or artificially prepared, graphites are used in aerospace applications, batteries, carbon brushes, graphite electrodes for furnaces and metallurgical processing, and moderator rods in nuclear power plants. China Carbon specializes in "using carbon rich raw materials to manufacturing graphite with a high degree of purity. The raw materials, purchased from domestic Chinese suppliers, include materials such as coal asphalt, asphalt coke, metallurgy coke, needle coke, metallurgy coke powder, quartzose sand, coal, petroleum coke and calcined coke. The extraction process typically requires a large amount of heat and several iterations of critical extraction steps before the desired purity is obtained.

Understanding China Carbon Graphite:

China Carbon Graphite manufactures three types of synthetic graphite products. Each type of product can generally be broken down into different quality grades that determine its use.

Its products are generally used:

As a component in other products,
As an element of the machinery in a facility
To produce nuclear energy
In the manufacturing process of other products.

The company typically focuses on high end applications within its varying product lines.

1. Graphite electrodes line: Conducting material used for electric arc furnaces in the manufacture of steel and smelting alloy steel, brown alumina, yellow phosphorus, or other metals.

The electric arc furnace operates as a batch melting process producing batches of molten steel. The energy supplied during the smelting process can be either chemical or electrical. Electrical energy is supplied via the graphite electrodes and is usually the largest contributor in smelting operations.

2. Fine Grain graphite: Widely used in smelting for colored metals and rare-earth metal smelting as well as the manufacture of molds. (When liquid metal needs to poured into a container, that container must have a high tolerance for heat. Because graphite has a low sensitivity to heat, it is ideal for making molds in this scenario).

3. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. Common uses of this product line are the manufacture of molds, parts for machinery, automotive parts, lining in pipes to prevent chemical erosion, cubicles for silicon wafers and nuclear power plant applications. High purity graphite is generally lighter and less sensitive to heat than the aforementioned product lines.

Growth strategy. Going forward the company will follow a three pronged strategy:

1. Continue to serve the higher end markets in its Graphite electrodes line and Fine Grain graphite product lines.

2. Financing: The Company has applied for a $26 million loan financing from the PRC at below market rates. Use of proceeds: immediate acquisition, expansion of current plant and to purchase additional equipment for the manufacture of fine grain and high purity products.

The company has identified a potential acquisition target, that when purchased, would result in a 100% increase of both revenues and profits. If the transaction occurs it would double the size of the company in terms of revenue and net income.

3. Intensify its penetration into the high purity markets: A major impetus for growth will come from China Carbon's increased focus on its high purity graphite line.

There are numerous reasons to concentrate on the high purity graphite line:

1. Less competition

The majority of Chinese graphite manufacturing companies are not involved in the production of high purity graphite.
The expertise and high cost of machinery needed to manufacture high purity graphite is very demanding, creating a barrier to entry.
The company has a qualified and seasoned staff. This is important because "the reputation of the manufacturer and the quality of the product may be as important as price."

2. High purity graphite opens the door to a much broader array of markets. This should reduce the company's sensitivity to economic cycles when compared to its other product lines.

3. Margins in the high purity graphite line are significantly better as compared to its other product lines.

4. High purity graphite is becoming the preferred material of choice utilized in the production of nuclear plants. This trend presents an exciting opportunity on which China Carbon is poised to capitalize.

The projected significant investments in Chinese nuclear power industry provide opportunities for companies that are directly or indirectly involved in the nuclear power industry.
Energy demands and savings, as well as emission reduction requirements pose growing pressures for the fast development of the Chinese economy. Industry experts contend that nuclear power is the most competitive solution to change Chinese energy structures and meet the energy demands.
By the end of 2008 a total of 11 nuclear power generating sets were in operation. The Chinese government is seeking to build 40 nuclear reactors by 2015.
In 2008 the annual nuclear power production was about 68 billion KWh, accounting for 2% of the total power production in China. The Chinese government plans that the installed capacity of nuclear power in China will eventually reach 5%, the electrical power production will reach 8% and the installed capacity of the nuclear power will exceed 70 million KW by 2020. If these estimates materialize, then the investments in Chinese nuclear power construction will total 720 billion Yuan (105 billion USD) in approximately 10 years.

The GeoTeam is speculating that the current stock price of China Carbon has been suffering as a result of the following reasons.

1. A capitalization issue arising from the reverse merger transaction in December 2007 called for the company to have to pay $4 million in fees. The initial payment of $800,000 was due by December 13, 2007 and the remaining $3,200,000 is due by September 13, 2009. Neither payment had been made.

Problem solved- China Carbon has submitted capitalization reorganization plan to the PRC for approval. "We expect approval for the recapitalization in the next 60 days. These actions will effectively reduce the intercompany investment obligations owed to Yongle from $4,000,000 to $100,000 and eliminate possible fines or penalties by the PRC business bureau.

2. The 2008 Olympics resulted in short term facility shut downs.

Problem solved- "The sales decrease reflects the closure of Xingyong's plant facilities as mandated by the Chinese government for the Olympics in August 2008. The closure caused the Company to shut down its production. The Company requires a 6 months production cycle and therefore was unable to resume production until March of 2009." With the conclusion of the Olympics operations are back to normal.

3. Dilution due to financing needs for acquisitions and plant expansion.

Problem solved - "As one of the largest privately owned employers in Inner Mongolia, we have been recommended by the local government of Inner Mongolia to apply for a RMB 180,000,000 loan (approximately $26,000,000 US) through the Central government's economic stimulus plan. Once approved, it will expedite the process of doubling our production capacity to 30,000 metric tons annually and allow us to develop nuclear graphite for the more than 40 nuclear reactors the government is seeking to build by 2015."
Final approval for the loan and funding is expected in the fourth quarter of this year.

4. The six million outstanding warrants makes it difficult to compile an EPS estimate and accurately value the stock. The issue of potential dilution is still open and could put a short term cap on the stock unless:

The company considers steps to restructure the contract terms of the outstanding warrants, a step the GeoTeam® would highly recommend. To that end, the GeoTeam® has been able to confirm that China Carbon is preparing a repurchase agreement to retire 5 million warrants.
Completes an acquisition that can deliver EPS growth despite dilution.
Adds manufacturing capacity that can deliver EPS growth despite dilution.

5. No investor awareness initiatives.

Problem solved-

-China Carbon Graphite has retained the services of Ventana Capital Partners. (www.venturecapitalpartners.com)
-China Carbon Graphite has retained the services of Capital Group Communications. (www.capitalgc.com)
-Research report has been furnished by Crystal Equity Research which should help the company gain additional exposure. (www.crystalequityresearch.com)

The GeoTeam® will follow the CHGI story very closely. The stock may start to react positively when the loan and capital restructuring terms are actually approved. The company has provided guidance implying that it will experience sales and earnings growth in 2009.

"As we look at the remainder of 2009, we expect that China Carbon will achieve a 15% to 25% increase in top line and bottom line in 2009. We are encouraged as the overall economic condition has been steadily improving in China. We are especially encouraged by the strong demand for our high quality fine grain graphite and high purity graphite."

It appears that this guidance does not take into account potential for acquisitions or manufacturing capacity increases, either of which could significantly add to the 2009 out look, a situation possibly needed in the short term for investors to get over dilutive issues.

Book Value Per Share using current outstanding shares: $2.61
Book Value Per Share including outstanding warrants: $1.82

Enterprise Value Per Share using current outstanding shares: $1.15
Enterprise Value Per Share including outstanding warrants: $1.03

The GeoTeam® will publish complete valuation scenarios as events unfold.

Sources:

chinacarboninc.com
thefreelibarary.com
reportbuyer.com
crystalequityresearch.com

Research

Wed, 01 Jul 2009 04:00:00 GMT

China Carbon Receives Initial $5 Million PO From Tianrui Group.

"The PRC stimulus package will boost spending on infrastructure as well as assist in the recovery of steel manufacturing in China," stated Donghai Yu, CEO of the Company. "We expect that the effects of this stimulus package could result in a substantial increase in order flow for the remainder of 2009."

Source: GlobeNewswire (June 29, 2009)

"As one of the largest privately owned employers in Inner Mongolia, we have been recommended by the local government of Inner Mongolia to apply for a RMB 180,000,000 loan (approximately $26,000,000 US) through the Central government's economic stimulus plan. Once approved, it will expedite the process of doubling our production capacity to 30,000 metric tons annually and allow us to develop nuclear graphite for the more than 40 nuclear reactors the government is seeking to build by 2015."

Source: GlobeNewswire (May 27, 2009)

Special Situations

Wed, 01 Jul 2009 04:00:00 GMT

The GeoTeam is taking a closer look at China Carbon Graphite and coding the stock as a special situation play- repricing of risk premium/corporate restructuring.

See comprehensive review of CHGI.

The company is the largest wholesale supplier of fine grain and high purity graphite in China and one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in smelting for colored metals and rare-earth metal smelting as well as the manufacture of molds. Management commented,

"During the year ended December 31, 2008, we had sales of $27.3 million , as compared to sales of $ 25.4 million for the year ended December 31, 2007, an increase of $1.9 million or approximately 7.48%. This increase resulted from our marketing efforts both to develop new customers and make follow-on sales to existing customers, although our sales decreased in the fourth quarter reflecting the effects of the global economic downturn as well as the closure of Xingyong’s plant facilities for almost two months for the Olympics in August 2008 as part of the Chinese government’s program to reduce air pollution during that period. This shutdown reduced our production in third quarter and therefore affected sales in fourth quarter 2008 because it takes about three months to six months to produce graphite products. These factors caused our sales in fourth quarter 2008 to decrease compared to both the third quarter 2008 and the fourth quarter of 2007.

We believe that our working capital, together with the cash flow from our ongoing business will be sufficient to enable us to meet our normal cash requirements for the next twelve months provided that we generate sufficient business so that we are able to generate a profit, which cannot be assured. We will require additional working capital if we are going to make any acquisitions or to purchase equipment to expand our production capacity. We will also need additional funding to make the capital payment to Yongle if we don’t receive any further extensions. Further, we expect that both revenue and the results of our operations will decline as a result of the effects of the global economic downturn. As a result, if we are not able to generate savings by making our operations more efficient, we may require additional funding for our normal operations. We cannot assure you that funding will be available if and when we require funding. Further, in the event that any of our lenders demand payment at the time the loans are due in May 2009 through July 2009, we would require additional financing in order to repay those loans, and we cannot assure you that we will be able to obtain the necessary funding either from another bank or from other sources."

Financials

Wed, 01 Jul 2009 04:00:00 GMT

1st QUARTER 2009 vs. 2008 FINANCIAL SNAPSHOT ENDED MARCH

	1st Quarter 2009	1st Quarter 2008	Period Change
GAAP Revenue	$2.9 million	$5.7 million	49.1%
GAAP EPS	$0.04	$0.02	100.0%
Tax Rate	00.0%	00.0%	00.0%
Fully Tax-Adjusted EPS ^b	$0.0256	$0.0128	100.0%
Fully Diluted Shares ^c	13,847,244	18,757,257	-26.2%

Source: See Release, May 27, 2009.

FULL YEAR 2008 vs. 2007 FINANCIAL SNAPSHOT ENDED DECEMBER

	Full Year 2008	Full Year 2007	Period Change
GAAP Revenue	$27.3 million	$25.4 million	7.5%
GAAP EPS	$0.21	$0.34	-38.2%
Company Supplied Non-GAAP EPS ^a	$0.32	$0.34	-20.6%
Tax Rate	00.0%	00.0%	00.0%
Fully Tax-Adjusted GAAP EPS ^b	$0.15	$0.22	-31.8%
Fully Tax-Adjusted Non-GAAP EPS ^a,b	$0.21	$0.22	-4.5%
Fully Diluted Shares ^c	14,623,187	10,506,099	39.2%

Source: See Release, April 20, 2009

^aNon-GAAP EPS figures generally exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to its financial press releases. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.

^b For valuation purposes, The GeoTeam® prefers to adjust EPS to reflect a United States tax rate of 36%
^cIt's important to note that the company has a total of six million warrants outstanding (with exercise prices of $1.20 and $2.00) that will result in significant dilution if the stock price rises.

Investor Presentations

Sun, 22 Feb 2009 05:00:00 GMT

Presentation from November 20, 2008.