WEB NEWS Comments & Business Outlook
Chisen Electric Corporation
Consolidated Statements of Operations and
Other Comprehensive Income
For the years ended March 31, 2012 and 2011
Years ended March 31
2012
2011
Note
US$’000
US$’000
Operating revenues:
Net sales to third parties
119,563
243,814
Cost of sales
(101,716
)
(214,456
)
Gross income
17,847
29,358
Operating expenses:
Sales, marketing and distribution
(11,629
)
(10,882
)
General and administrative
(9,295
)
(4,138
)
Operating (loss) income
(3,077
)
14,338
Other income, net
860
1,782
Impairment loss on property, plant and equipment
19
(2,857
)
-
Loss on disposal of scrap inventories
20
(13,896
)
(2,328
)
Interest income
1,766
483
Interest expense
(8,812
)
(3,359
)
(Loss) Income before income taxes
(26,016
)
10,916
Income taxes expense
4
(1,047
)
(2,447
)
(Loss) Income before extraordinary item
(27,063
)
8,469
Extraordinary gain (less applicable income taxes of US$0)
18
13,117
2,605
Extraordinary loss (less applicable income taxes of US$0)
18
(1,848
)
-
Net (loss) income including non-controlling interest
(15,794
)
11,074
Less: Net loss (income) attributable to non-controlling interest
52
(8
)
Net (loss) income attributable to CIEC common stockholders
(15,742
)
11,066
Amounts attributable to CIEC common stockholders
(Loss) Income before extraordinary item
(27,011
)
8,461
Extraordinary gain (less applicable income taxes of US$0)
18
13,117
2,605
Extraordinary loss (less applicable income taxes of US$0)
18
(1,848
)
-
Net (loss) income attributable to CIEC common stockholders
(15,742
)
11,066
Other comprehensive income
Foreign currency translation adjustment
1,465
1,437
Comprehensive (loss) income
(14,277
)
12,503
Comments & Business Outlook
Three months ended
Nine months ended
2011
2010
2011
2010
Note
US$’000
US$’000
US$’000
US$’000
Operating revenues:
Net sales to third parties
35,160
67,670
102,900
194,712
Cost of sales
(28,073
)
(59,200
)
(87,315
)
(170,460
)
Gross income
7,087
8,470
15,585
24,252
Operating expenses:
Sales, marketing and distribution
(2,390
)
(2,560
)
(7,031
)
(8,111
)
General and administrative
(2,812
)
(987
)
(6,597
)
(2,628
)
Operating income
1,885
4,923
1,957
13,513
Other income, net
418
276
619
889
Loss on disposal of scrap inventories
(6,092
)
(2,307
)
(6,092
)
(2,307
)
Provision for inventories
(5,431
)
-
(5,431
)
-
Interest income
479
117
1,184
315
Interest expense
(2,009
)
(940
)
(4,846
)
(2,231
)
(Loss) Income before income taxes
(10,750
)
2,069
(12,609
)
10,179
Income taxes benefit (expense)
4
434
(1,260
)
352
(2,421
)
(Loss) Income before extraordinary items
(10,316
)
809
(12,257
)
7,758
Extraordinary gain (less applicable income taxes of US$0)
19(a)
-
1,738
13,117
1,738
Extraordinary loss (less applicable income taxes of US$0)
19(b)
-
-
(1,848
)
-
Net (loss) income including non-controlling interests
(10,316
)
2,547
(988
)
9,496
Less: Net income attributable to non-controlling interests
(53
)
-
(64
)
-
Net (loss) income attributable to CIEC common stockholders
(10,369
)
2,547
(1,052
)
9,496
Amounts attributable to CIEC common stockholders
(Loss) Income before extraordinary item
(10,369
)
809
(12,321
)
7,758
Extraordinary gain
-
1,738
13,117
1,738
Extraordinary loss
-
-
(1,848
)
-
Net (loss) income attributable to CIEC common stockholders
(10,369
)
2,547
(1,052
)
9,496
Other comprehensive income
Foreign currency translation adjustment
256
561
1,297
1,115
Comprehensive (loss) income
(10,113
)
3,108
245
10,611
Weighted average number of common stock outstanding - basic and diluted
500,000,000
500,000,000
500,000,000
500,000,000
US$
US$
US$
US$
Net (loss) income per share of common stock outstanding before extraordinary items - basic and diluted
(0.021
)
0.002
(0.025
)
0.016
Net (loss) income per share of common stock outstanding after extraordinary items - basic and diluted
(0.021
)
0.005
(0.002
)
0.019
This decrease was mainly attributable to the decrease of production activities resulting from an unexpected tightening of an environmental protection policy enforced on all lead-acid battery manufacturers implemented by the PRC Central Government during the period ended December 31, 2011. Pursuant to the tightened policy, a 500 meter isolated area must be maintained between production facilities and residential areas. All production facilities must have complied with this policy on or before July 15, 2011. Our production facilities at Plant B at Jing’er Road are not capable of being in full compliance with the tightened environmental policy and the residential area near Plant B shows no signs of slowing its expansion towards Plant B, which is out of the Company’s control. Our management decided to gradually scale down the operations of Plant B and to relocate such production facilities to Plant D, apart from recharging and packing activities, before December 31, 2011. During the three months ended December 31, 2011, we were advised by the government that our recharging and packing activities in Plant B may continue through October 31, 2012. Although our production capacities gradually recovered, our major competitors had temporarily eroded our market share during the reporting period. As such, our revenue decreased significantly.
Comments & Business Outlook
Six months ended
September 30
2011
2010
2011
2010
Note
US$’000
US$’000
US$’000
US$’000
Operating revenues:
Net sales to third parties
36,422
76,613
71,821
127,042
Cost of sales
(29,859 )
(65,869 )
(63,323 )
(111,260 )
Gross income
6,563
10,744
8,498
15,782
Operating expenses:
Sales, marketing and distribution
(2,121 )
(3,040 )
(4,641 )
(5,551 )
General and administrative
(2,080 )
(956 )
(3,785 )
(1,641 )
Operating income
2,362
6,748
72
8,590
Other income, net
213
110
201
613
Interest income
402
102
705
198
Interest expense
(1,555 )
(606 )
(2,837 )
(1,291 )
Income (Loss) before income taxes
1,422
6,354
(1,859 )
8,110
Income taxes expense
4
(531 )
(912 )
(82 )
(1,161 )
Income (Loss) before extraordinary items
891
5,442
(1,941 )
6,949
Extraordinary gain (less applicable income taxes of US$0)
19(a)
-
-
13,053
-
Extraordinary loss (less applicable income taxes of US$0)
19(b)
-
-
(1,840 )
-
Net income including non-controlling interests
891
5,442
9,272
6,949
Less: Net income attributable to non-controlling interests
(11 )
-
(11 )
-
Net income attributable to CIEC common stockholders
880
5,442
9,261
6,949
AMOUNTS ATTRIBUTABLE TO CIEC COMMON STOCKHOLDERS
Income (Loss) before extraordinary items
880
5,442
(1,952 )
6,949
Extraordinary gain (less applicable income taxes of US$0)
-
-
13,053
-
Extraordinary loss (less applicable income taxes of US$0)
-
-
(1,840 )
-
Net income attributable to CIEC common stockholders
880
5,442
9,261
6,949
Other comprehensive income
Foreign currency translation adjustment
625
433
1,041
554
Comprehensive income
1,505
5,875
10,302
7,503
Earnings per share
3
Weight average number of common stock outstanding
- basic and diluted
50,000,000
50,000,000
50,000,000
50,000,000
US$
US$
US$
US$
Net income (loss) per share of common stock outstanding before extraordinary items
- basic and diluted
0.02
0.11
(0.04 )
0.14
Net income per share of common stock outstanding after extraordinary items
- basic and diluted
0.02
0.11
0.19
0.14
Revenues decreased by US$55,221,000, or 43.47%, to US$71,821,000 for the six months ended September 30, 2011 compared with US$127,042,000 for the six months ended September 30, 2010. This decrease was mainly attributable to the decrease of production activities resulting from an unexpected tightening of an environmental protection policy enforced on all lead-acid battery manufacturers implemented by the PRC Central Government during the period ended June 30, 2011. Pursuant to the tightened policy, a 500 meter isolated area must be maintained between production facilities and residential areas. All production facilities must comply with this policy on or before July 15, 2011. Our production facilities at Plant B at Jing’er Road are not in compliance with the tightened environmental policy and the residential area nearby Plant B shows no signs of slowing its expansion towards Plant B, which is out of the Company’s control. Our management decided to gradually scale down the operations of Plant B and to relocate such production facilities to Plant D before December 31, 2011. However, we are permitted by the government to continue to conduct our battery charging activities and packing activities until December 31, 2011.
Investor Alert
Company finally confirms our findings :
Third quarter 2011 revenues decreased by US$55,221,000, or 43.47%, to US$71,821,000 for the six months ended September 30, 2011 compared with US$127,042,000 for the six months ended September 30, 2010. This decrease was mainly attributable to the decrease of production activities resulting from an unexpected tightening of an environmental protection policy enforced on all lead-acid battery manufacturers implemented by the PRC Central Government during the period ended June 30, 2011. Pursuant to the tightened policy, a 500 meter isolated area must be maintained between production facilities and residential areas. All production facilities must comply with this policy on or before July 15, 2011. Our production facilities at Plant B at Jing’er Road are not in compliance with the tightened environmental policy and the residential area nearby Plant B shows no signs of slowing its expansion towards Plant B, which is out of the Company’s control. Our management decided to gradually scale down the operations of Plant B and to relocate such production facilities to Plant D before December 31, 2011. However, we are permitted by the government to continue to conduct our battery charging activities and packing activities until December 31, 2011.
Liquidity Requirements
Massive dilution in the cards
On September 6, 2010, Chisen Electric Jiangsu Company Limited (“CEJC”), a subsidiary of Changxing Chisen Electric Company., Ltd. (“CCEC”), the chief operating subsidiary of Chisen Electric Corporation, a Nevada corporation (the “Registrant”) entered into a Project Investment Agreement and a Supplemental Agreement to the Project Investment Agreement (together, the “Agreement”) with the Jiangsu Xuyi Economic Development Zone Administrative Committee (the “Committee”). Pursuant to the Agreement, CEJC shall invest, in the aggregate, approximately RMB1.2 billion (approximately $177 million ) in three stages to establish the Chisen Circular Economy Industry Park for the manufacturing of lead acid and lithium-ion batteries and other related products in the Jiangsu Xuyi Economic Development Zone. In the first stage, CEJC shall invest approximately RMB422 million (approximately $62 million), including approximately RMB150 million (approximately $22 million) in fixed assets. CEJC shall commence construction after obtaining the approval certificate of construction plan and within 20 days from the date of the Agreement. All construction shall be completed on or before December 31, 2011.
Investor Alert
Company has not disclosed the name of its customers:
Sales
Trade Receivables
Major Customers
Fiscal year ended
March 31, 2011
Fiscal year ended
March 31, 2010
Fiscal year ended
March 31, 2011
Fiscal year ended
March 31, 2010
$’000
$’000
COMPANY X
18.83
%
21.08
%
$
29,603
$
26,283
COMPANY Y
18.82
%
19.08
%
$
17,627
$
14,005
COMPANY Z
12.40
%
6.77
%
$
3,757
$
2,747
Company has not disclosed that its facilities have been temporarily shut down by the government. On the contrary, the company has claimed that it is in compliance with regulations:
We believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations. Although we believe that our current manufacturing operations comply in all material respects with applicable environmental laws and regulations, it is possible that future environmental legislation may be enacted or current environmental legislation may be interpreted to create environmental liability with respect to our other facilities, operations, or products.
Investor Alert
Investor Alert - Chisen Electric (CIEC) Among Chinese Lead-Acid Battery Companies whose Operations have been Temporarily Suspended by PRC Government
It is no secret that the Chinese government has been keeping a watchful eye on the lead-acid battery industry in China. Lead pollution has been on the rise and there have been several cases of serious health problems in assembly workers at lead-acid battery factories in different areas of China.
To see how this may affect Chisen Electric, please see the following:
http://geoinvesting.com/companies/CIEC_Alert05272011.aspx
Liquidity Requirements
As of the date of this report, we have not experienced any difficulty in raising funds by bank loans, including the renewal of existing short term loans, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our bank loans when they fall due.
However, we will need new sources of financing and additional capital in order to implement our current business strategy of expansion of our production facilities in Changxing County (Zhejiang Province) and in Jiangsu Province. Although we currently have the aforementioned short term loans and notes payable at our disposal, many of such short term loans and notes payable expire in the next three months, and there is no assurance that we will obtain any new loans or notes payable, or that such short term loans and notes payable set forth above will be renewed or that the terms of any renewals of such short term loans or notes payable will be on terms that are as favorable as our current instruments.
Liquidity Requirements
We generally finance our operations through operating profit and borrowings from banks. During the reporting period, we arranged a number of bank loans to satisfy our financing needs.
As of the date of this report , we have not experienced any difficulty in raising funds by bank loans, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our bank loans when they fall due.
