WEB NEWS CFO Trail
On June 19, 2012, the Board of Directors (the “Board”) of China Sun Group High-Tech Co. (the “Company”)
accepted the resignation of Ming Fen Liu as the Chief Financial Officer at the Company, effective immediately. Ms. Liu’s resignation was due to personal reasons and not because of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.
Comments & Business Outlook
Third Quarter 2012 Results
Third quarter fiscal 2012 revenue declined by 16% to $11.3 million compared to $13.4 million for the comparable period in fiscal 2011
Gross profit decreased by 15% to $3.9 million compared to $4.6 million for the comparable period in fiscal 2011
Sales of cobaltosic oxide totaled 235 tons, a decrease of 69 tons or 23% compared to 304 tons and sales of LIP totaled 230 tons, an increase of 25 tons, or 12%, compared to 205 tons for the comparable period in fiscal 2011
Gross profit margin increased slightly by 0.1% to 34.6% compared to 34.5% for the comparable period in fiscal 2011
Income from operations decreased over 10% to $3.3 million compared to $3.7 million for the comparable period in fiscal 2011
Net income decreased by 8% to $2.45 million , or $0.04 per diluted share, compared to $2.66 million , or $0.05 per diluted share, for the comparable period in fiscal 2011
"During the third quarter of fiscal 2012, we continued to follow our strategy to increase production of our higher-margin lithium iron phosphate (LIP) product." Commented Chief Executive Officer, Mr. Guosheng Fu , "We reduced our cobaltosic oxide production since the gross margin of cobaltosic oxide continued to decline. LIP is quickly becoming the preferred cathode material for lithium ion batteries worldwide. We have completed converting our seventh and eighth production lines to the production of LIP in this quarter. Our LIP production capacity reached 1,000 tons. We believe this will further enable us to expand our LIP market share and enhance our overall profitability."
Fiscal Year 2012 Outlook
Mr. Fu commented, "In fiscal 2012, we expect sales of LIP to continue to grow as our new LIP product further penetrates into the market. We believe that sales from LIP will continue to represent a larger percentage of our gross margins in the near future."
Comments & Business Outlook
Second Quarter 2012 Results
Second quarter fiscal 2012 revenue declined by 15% to $10.7 million compared to $12.6 million for the comparable period in fiscal 2011
Gross profit decreased by 12% to $3.6 million compared to $4.1 million for the comparable period in fiscal 2011
Gross profit margin increased by 1.4% to 33.6% compared to 32.2% for the comparable period in fiscal 2011
Income from operations increased by 72% to $3.1 million compared to $1.8 million for the comparable period in fiscal 2011
Net income increased by 148% to $2.3 million , or $0.04 per diluted share, compared to $0.94 million , or $0.02 per diluted share, for the comparable period in fiscal 2011
"During the second quarter of fiscal 2012, we continued to follow our strategy to increase production of our higher-margin lithium iron phosphate (LIP) product," commented Chief Executive Officer, Mr. Guosheng Fu . "LIP is quickly becoming the preferred cathode material for lithium ion batteries. We are still in the process of converting our seventh and eighth production lines to the production of LIP and we expect the conversion to be completed in the third quarter of fiscal 2012. We believe this will further enable us to expand our market share and enhance our overall profitability."
Fiscal Year 2012 Outlook
Mr. Fu commented, "We will continue to maintain our focus on increasing sales and expanding production of LIP in the rest of fiscal 2012. In fiscal 2012, we expect sales of LIP to continue to grow as our new LIP product further penetrates into the market. We believe that sales from LIP will continue to represent a larger percentage of our gross margins in the near future."
Comments & Business Outlook
Fourth Quarter Ended May 31, 2011 Financial Results Highlights
Fourth quarter revenue decreased by 1.3% to $10.8 million compared to $11.0 million for the comparable period in 2010
Gross profit increased by 5.1% to $3.8 million compared to $3.6 million for the comparable period in 2010
Net income increased by 2.9% to $2.4 million , or $0.044 per diluted share , compared to $2.3 million , or $0.043 per diluted share, for the comparable period in 2010 Fiscal Year Ended May 31, 2011 Financial Results Highlights
Fiscal year 2011 revenue increased by 17.9% to $48.6 million compared to $41.2 million in fiscal year 2010
Gross profit increased by 23.7% to $16.1 million compared to $13.1 million in fiscal year 2010
Net income decreased by 2.1% to $8.4 million , or $0.15 per diluted share , compared to $8.6 million , or $0.16 per diluted share, in fiscal year 2010
Non-GAAP net income, excluding $ 1.8 million of one-time share-based consultancy fees incurred during the second fiscal quarter, as previously disclosed, increased by 18.6% to $10.2 million or $0.18 per diluted share "During fiscal 2011, we experienced strong growth in revenue and gross profit as a result of increasing demand and sales of our lithium iron phosphate (LIP). Our LIP product recorded an attractive gross margin of 52% for fiscal year 2011 and we continue to benefit from the increasing demand for that product," commented Chief Executive Officer, Mr. Guosheng Fu . "We also expanded our sales and marketing efforts and focused on investing in the renovation of our equipment to make room for mass-production of lithium iron phosphate in the second quarter of fiscal 2011. At the end of fiscal 2011, six of our prior cobaltosic oxide product lines had been converted into lithium iron phosphate lines and we continue to use four other lines for cobaltosic oxide production."
Fiscal Year 2012 Outlook
Mr. Fu commented, "Looking ahead, in fiscal year 2012, we will convert two additional LIP production lines to expand our LIP production capacity to 1000 tons from the current capacity of 700 tons. We plan to begin converting work and complete this project in the second fiscal quarter of 2012. As a result, we expect to reach a total production capacity of 2500 tons, including our LIP and cobaltosic oxide products."
Additional Disclosure
"We have recently taken several measures, including the launch of our new corporate website and including extracts from our 2010 SAIC report in the form 10-K filed with the securities and exchange commission to ensure high levels transparency and corporate governance," added Mr. Fu. "We believe these measures distinguish China Sun within the investment community for the openness and clarity of our communication."
Comments & Business Outlook
FOR THE YEARS ENDED MAY 31, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
Years ended May 31,
2011
2010
Revenues, net
$ 48,568,339 $ 41,189,122
Cost of revenue (inclusive of depreciation and amortization)
(32,419,062 ) (28,134,650 )
Gross profit
16,149,277 13,054,472
Operating expenses:
Sales and marketing
148,383 77,870
Research and development
120,434 121,825
General and administrative
3,944,131 1,311,598
Total operating expenses
4,212,948 1,511,293
INCOME FROM OPERATIONS
11,936,329 11,543,179
Other income:
Interest income
54,317 35,067
Other income
45,009 -
INCOME BEFORE INCOME TAXES
12,035,655 11,578,246
Income tax expense
(3,623,736 ) (2,982,584 )
NET INCOME
$ 8,411,919 $ 8,595,662
Other comprehensive income (loss):
- Foreign currency translation gain (loss)
2,413,889 (24,205 )
COMPREHENSIVE INCOME
$ 10,825,808 $ 8,571,457
Net income per share – Basic and diluted
$ 0.15 $ 0.16
Weighted average common shares outstanding – Basic and diluted
54,989,110 53,422,971
Fourth Quarter Ended May 31, 2011 Financial Results Highlights
Fourth quarter revenue decreased by 1.3% to $10.8 million compared to $11.0 million for the comparable period in 2010
Gross profit increased by 5.1% to $3.8 million compared to $3.6 million for the comparable period in 2010
Net income increased by 2.9% to $2.4 million , or $0.044 per diluted share, compared to $2.3 million , or $0.043 per diluted share, for the comparable period in 2010
Fiscal Year Ended May 31, 2011 Financial Results Highlights
Fiscal year 2011 revenue increased by 17.9% to $48.6 million compared to $41.2 million in fiscal year 2010
Gross profit increased by 23.7% to $16.1 million compared to $13.1 million in fiscal year 2010
Net income decreased by 2.1% to $8.4 million , or $0.15 per diluted share, compared to $8.6 million , or $0.16 per diluted share, in fiscal year 2010
Non-GAAP net income, excluding $1.8 million of one-time share-based consultancy fees incurred during the second fiscal quarter, as previously disclosed, increased by 18.6% to $10.2 million or $0.18 per diluted share
"During fiscal 2011, we experienced strong growth in revenue and gross profit as a result of increasing demand and sales of our lithium iron phosphate (LIP). Our LIP product recorded an attractive gross margin of 52% for fiscal year 2011 and we continue to benefit from the increasing demand for that product," commented Chief Executive Officer, Mr. Guosheng Fu . "We also expanded our sales and marketing efforts and focused on investing in the renovation of our equipment to make room for mass-production of lithium iron phosphate in the second quarter of fiscal 2011. At the end of fiscal 2011, six of our prior cobaltosic oxide product lines had been converted into lithium iron phosphate lines and we continue to use four other lines for cobaltosic oxide production."
Fiscal Year 2012 Outlook
Mr. Fu commented, "Looking ahead, in fiscal year 2012, we will convert two additional LIP production lines to expand our LIP production capacity to 1000 tons from the current capacity of 700 tons. We plan to begin converting work and complete this project in the second fiscal quarter of 2012. As a result, we expect to reach a total production capacity of 2500 tons, including our LIP and cobaltosic oxide products."
Liquidity Requirements
Capital expenditures have historically been necessary to expand the production capacity of our manufacturing operations. Our prospective increase in both production lines and R&D are primarily due to the projected increased demand of our principal product lithium iron phosphate. On the basis of our current cash balances and outlook for the upcoming fiscal year,
we believe we have sufficient cash resources to fund the expansion of our lithium iron phosphate production lines from 700 tons to 1,000 tons per annum.
Comments & Business Outlook
DALIAN, China, June 13, 2011 /PRNewswire-Asia / -- China Sun Group High-Tech Co. (OTC Bulletin Board: CSGH) ("China Sun" or the "Company"), a vertically integrated supplier of raw materials for rechargeable Lithium–ion (Li-ion) batteries in China, today provided an update for investors regarding its production operations and the status of a new supply agreement.
New Agreement
The Company has signed a new agreement with Advanced Battery Technologies, Inc. (NASDAQ: ABAT) for the supply of Lithium Ion Phosphate (LIP). Pursuant to the agreement, China Sun will deliver a total of 170 tons of LIP to ABAT between April 2011 and December 2011. China Sun has delivered 8.5 tons to ABAT and will ship a further 23 ton average per month between June and December 2011.
Comments & Business Outlook
DALIAN, China, June 08, 2011 /PRNewswire-Asia / -- China Sun Group High-Tech Co. (OTC Bulletin Board: CSGH) ("China Sun Group" or the "Company"), a vertically integrated supplier of raw materials for rechargeable Lithium-ion (Li-ion) batteries in China, today announced that the Company has begun a program designed to further improve the transparency and effectiveness of its relationship with the investment community.
The Company plans to launch a new website by the end of July 2011. The website will contain new information valuable for investors that will include corporate video footage allowing investors to see the Company's new Lithium Iron Phosphate production lines that were completed in June. Video footage will also contain conversations with customers whose rapid growth is being supported by high quality product delivered by the Company and conversations with management with regard to the Company's business and strategy.
The Company also welcomes bona fide investors to visit its operations and see the business for themselves.
Assisting the Company in its future investor relations efforts will be CCG Investor Relations, the largest advisor to China-based, US-quoted small capitalization companies.
"We are looking forward to the opportunity to distinguish ourselves within the investment community for the openness and clarity of our communication," said Mr. Guosheng Fu, CEO of China Sun Group. "Many investors have come to expect very high standards of corporate disclosure and we plan to meet those expectations."
Comments & Business Outlook
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 2011 AND 2010
(Currency expressed in United States Dollars (“US$”), except for number of shares)
(Unaudited)
Three months ended
February 28,
Nine months ended
February 28,
2011
2010
2011
2010
Revenues, net
$
13,359,930
$
10,808,702
$
37,753,217
$
30,232,058
Cost of revenue (inclusive of depreciation and amortization)
8,753,182
7,427,144
25,367,854
20,760,441
Gross profit
4,606,748
3,381,558
12,385,363
9,471,617
Operating expenses:
Sales and marketing
47,493
30,057
116,266
83,195
Research and development
33,838
26,328
87,285
77,501
General and administrative
858,580
376,544
3,454,394
894,700
Total operating expenses
939,911
432,929
3,657,945
1,055,396
INCOME FROM OPERATIONS
3,666,837
2,948,629
8,727,418
8,416,221
Other income:
Subsidy income
291
-
44,722
-
Interest income
14,240
9,414
38,091
26,228
INCOME BEFORE INCOME TAXES
3,681,368
2,958,043
8,810,231
8,442,449
Income tax expense
(1,021,688
)
(756,920
)
(2,779,817
)
(2,160,300
)
NET INCOME
$
2,659,680
$
2,201,123
$
6,030,414
$
6,282,149
Other comprehensive income (loss):
- Foreign currency translation gain (loss)
650,847
(41,340
)
1,702,407
(52,300
)
COMPREHENSIVE INCOME
$
3,310,527
$
2,159,783
$
7,732,821
$
6,229,849
Net income per share – Basic and diluted
$
0.05
$
0.04
$
0.11
$
0.12
Weighted average common stock outstanding – Basic and diluted
55,639,638
53,422,971
54,693,341
53,422,971
"Our financial results continue to be positively driven by the increasing demand for our products. China Sun Group's sales and earnings continue to benefit from the increasing demand for our new higher margin product, lithium iron phosphate ("LIP product") and the continued surge in demand for lithium batteries. We are confident with our capability to develop high quality product to meet our customer's needs. We ended the third quarter with three production lines for our LIP product, and seven for producing our cobaltosic and lithium oxide products," commented Chief Executive Officer, Mr. Guosheng Fu.
Business Update Earnings were driven by the sharp growth in sales of lithium iron phosphate in the third quarter, primarily as a result of the new supply agreement entered into between the Company's PRC operating subsidiary, Dalian Xinyang High-Tech Development co., Ltd. (DLXY), and Henan Huanyu Sai Er New Energy Technology Co., Ltd ("Huanyu"). Pursuant to the terms of this Supply Agreement, the Company agreed to supply a minimum of 470 tons of lithium iron phosphate to Huanyu during the 2011 calendar year. As of February 28, 2011, the Company has supplied 146.96 tons of lithium iron phosphate to Huanyu. During the quarter, the Company also increased sales of lithium iron phosphate to clients based in Shandong and Beijing. The purchase price of lithium iron phosphate and other relevant commercial terms and conditions are determined by the parties on a monthly basis. Sales of lithium iron phosphate for the nine months ended February 28, 2011 was 517 tons, an increase of 366% from 111 tons for the same period in 2010.
Investor Presentations
The Registrant will deliver a
presentation at the 2011 Rodman & Renshaw Annual China Investment Conference in Shanghai, China on March 7, 2011 (local time).
Comments & Business Outlook
Dalian, China January 13, 2011 - China Sun Group High-Tech Co. today reported fiscal 2011 Q2 financial results.
·
Q2 revenue was $12.6 million, increasing 25.0% year-over-year.
·
Q2 gross profit was $4.1 million increasing 34.3% year-over-year.
·
Q2 net income was $0.9 million, or $0.02 per diluted share.
·
Q2 non-GAAP net income, excluding share-based consultancy fees, was $2.7 million, or $0.05 per diluted share, increasing 35.0% year-over-year.
“China Sun Group’s Q2 performance was strong driven by an increase in customer demand for our products, primarily our new higher margin product lithium iron phosphate,” commented China Sun Group’s Chief Executive Officer, Mr. Guosheng Fu. “During the quarter, we signed a contract to supply 470 tons of lithium iron phosphate (LIP) to Henan Huanyu Sai Er New Energy Technology Co., Ltd. during calendar 2011. We believe that we will continue to see significant opportunity for our new LIP product in the quarters ahead given the rapid development of China’s electric vehicle industry, and we are confident that we have the right strategy and operating systems in place to meet the growing demand for LIP.”
China Sun had strong growth in the second quarter, primarily as a result of the new LIP supply agreement. China Sun expects to add two additional LIP production lines by the end of May 30, 2011, which will increase the Company’s LIP production capacity. The Company reiterates its previous guidance of 2011 fiscal year
revenues in the range of $56.0 million to $58.0 million
non-GAAP adjusted net income to be in the range between $10.0 million and $11.0 million , excluding the cost of share-based consultancy fees.
Liquidity Requirements
We believe that we currently have sufficient income generated from our operations to meet our operating and/or capital needs. However, we will continue to evaluate various sources of capital to meet our growth needs
Comments & Business Outlook
First Quarter 2011 Highlights
Revenue increased 26.2% over the prior year quarter to $11.8 million
Operating margin of 27.7%
Net profit margin of 20.7%
Earnings per diluted share of $0.05 vs. $0.04
"Fiscal year 2011 got off to a solid start as we experienced increased customer demand throughout the first quarter," noted China Sun Group's Chief Executive Officer, Mr. Guosheng Fu . "The growth in demand for our expanded portfolio of products, which now includes Lithium Iron Phosphate (LIP), was in-line with management's expectations for the quarter, with revenue increasing 26% compared to the first quarter of the prior fiscal year. Furthermore, although higher raw materials costs resulted in lower gross margins in the most recent quarter compared to the prior year period, we anticipate that the revenue contribution from our new, higher margin LIP segment will steadily increase as the year progresses as we expect LIP production to ramp up throughout fiscal year 2011."
Continuing, Mr. Fu added, "We anticipate increased demand for LIP, which is used in the manufacture of batteries for eco-friendly cars, in part, as a result of the Chinese Government's recently announced 12th Five-Year Plan, which specifically identifies environmentally friendly as well as energy efficient industries and composite materials for preferential policy treatment in the form of government investment, tax incentives, and access to capital."
"Finally, given our strong performance in what is historically the weakest quarter of the year in terms of customer demand, we remain on schedule to meet our previously issued fiscal year 2011 financial guidance ."
Fiscal Year 2011 Outlook
Given the Company's first quarter production levels and the anticipated demand over the remaining nine months of fiscal year 2011, China Sun continues to anticipate producing 1,200 tons of cobaltosic oxide and 600 tons of Lithium Iron Phosphate for the full year with the Lithium Iron Phosphate production occurring mostly in the second half of the year. As a result of this forecast and management's expectations for raw materials prices over the next nine months, China Sun reaffirms the previously issued full year guidance of
Revenue in the range of $56.0 million to $58.0 million
N et income in the range of $10.0 million to $ 11.0 million
Net income per diluted share in the range of $0.18 to $0.20
Investor Presentations
Public presentation about the Company to be used in
future presentations to the financial community including investors, potential investors, analysts and other persons interested in the Company.
Comments & Business Outlook
Fourth Quarter 2010 Highlights :
Revenue increased 13.7% over the prior year quarter to $11.0 million .
Earnings per diluted share were flat at $0.04.
Fiscal Year 2010 Highlights:
Revenue increased 11.2% over the prior fiscal year to $41.2 million
Earnings per diluted share were flat $0.16.
"I am pleased both with the growth of our legacy products and with the launch of our Lithium Iron Phosphate segment during the past fiscal year. With China Sun's high quality production control and strong R&D team, we will be looking to expand our share of what we believe will a growing market as China develops new clean energy businesses and provides government and municipal support. In addition, the first phase of our development of a Power-li battery business, beginning in October 2010, will be an exciting start to our potential entry into a downstream industry where there is opportunity to add customer value and therefore increase margins to the benefit of shareholders," said Mr. Bin Wang, Chief Executive Officer of China Sun Group.
For fiscal year 2011 , China Sun Group expects to produce 1,200 tons of cobaltosic oxide and lithium cobalt oxide and 600 tons of lithium iron phosphate. The production of Lithium Iron Phosphate will be weighted towards the second half of the 2011 fiscal year. Based on these production levels and the Company's expectations for raw materials prices for the next twelve months, full year
Revenue is expected to be in the range of $56.0 million and $58.0 million . Net income is expected to be in the range of $10.0 million and $ 11.0 million . Net income per diluted share in the range of $0.18 to $0.20 .
Research
The GeoTeam ® is taking a closer look at China Sun Group High-Tech, a producer of anode materials used in lithium ion batteries. While raw quarterly earnings per share numbers have spanned a tight range for the last three years (between $0.01 to $0.05), recent comments in the China Sun's press releases and SEC filings indicate that its growth rate may accelerate:
'China Sun Group is pleased with DLX's performance in the third fiscal quarter. Despite downward pricing pressure in the global manufacturing industry, DLX successfully captured new sales, expanded gross profit margins and increased profitability during the first nine months of fiscal 2009,' said Bin Wang, Chief Executive Officer of China Sun Group. 'While DLX filled new orders for its existing product lines in the third fiscal quarter of 2009, it introduced its next generation, 'green' power source, lithium iron phosphate. Lithium iron phosphate is ideally used in batteries that power eco-friendly vehicles like hybrids and electric cars. We anticipate to commence deliveries on large-scale orders for lithium iron phosphate in the fourth quarter of fiscal 2009. '
We were able to locate a fiscal May 2009 analyst earnings per share estimate of $0.22 (~$0.18 fully taxed) . At its current price of $0.94 the stock is selling at a fully taxed adjusted P/E of 5.2.
Other potential positives: (source: 2008 10K)
China Sun Group High-Tech is involved in a "hot" industry; The lithium ion battery market is a green energy resource
Lithium ion batteries have desirable properties. (1) versatile, (2) compact and light weight, (3) high energy density and capacity, (4) high voltage, (5) excellent energy retention characteristics.
According to the Battery Industry Association of China, the lithium ion battery will become one of the most important sources of chemical power in 21st century. Research and development on the lithium ion battery has been added as a third objective to the PRC’s 11th five-year-development project.
The Battery Industry Association of China forecasts that the growing demand for portable products like mobile phones and laptops will stimulate the lithium ion battery industry in the PRC, which is expected to grow at rate of over 30% annually.
Still, further investor due diligence is necessary in order to formalize a final conclusion regarding the CSGH story. The GeoTeam ® is somewhat disappointed that the Company has not returned our phone calls. Still, due to its low P/E on analyst estimates we are coding the stock as a GeoSpecial (Re-Pricing of Risk Premium).
