Sancon Resources Recovery (PINK:SRRY)

"We are pleased with our continued increase in revenue in 2011 second quarter. However, our gross profit and net income has dropped. That is mainly due to the poor performance in our Australia operation and small scale of waste paper business in China," said Jack Chen, Sancon's Chief Executive Officer. "We have recently changed the management in our Australia operation and we are working hard to turn it around in the next quarter. In China, we've installed additional equipments which will triple our daily waste paper processing capacity. By expanding the waste paper business rapidly within a short period, we can negotiate a better pricing and increase our margin."

First Quarter Results:

• Revenue increased 25% to $3.85 million
• Gross profit of $1.37 million, a gross margin of 36%
• Net income for 2011 first quarter was $0.45 million, or $0.02 basic and diluted earnings per share, compared to $0.57 million or $0.03 basic and diluted earnings per share one year ago

"We are pleased with our continued increase in revenue in 2011 first quarter. However, our gross profit and net income has dropped. That is mainly due to the poor performance in our Australia operation and small scale of waste paper business in China," said Jack Chen, Sancon's Chief Executive Officer. "We have recently changed the management in our Australia operation and we are working hard to turn it around in the next quarter. In China, we've installed additional equipments which will triple our daily waste paper processing capacity. By expanding the waste paper business rapidly within a short period, we can negotiate a better pricing and increase our margin."

GeoTeam Note: Fourth Quarter 2010 vs. 2009 EPS was $0.01 vs. $0.02

Plan of Operation
 
During the next twelve months, we expect to take the following steps in connection with the development of our business and the implementation of our plan of operations:
 

• We intend to continue with our marketing strategies to deliver our products in China and provide our waste management service to clients;
• Along with the continued plastic and glass materials products we are now processing, we are also developing to process other materials, such as cardboard, copper and iron.
• During the next twelve months, the Company expects to set up larger network of collection and sales in China.
• During the next twelve months, the Company is planning to acquire other companies running similar business in China.

 
Our aggressive expansion plan will be replied on such capital support.  We cannot assure the successful result of fund raising.  As such, we may not execute our initial business strategy or plan as expected, and furthermore, our competitors may stand in a better position than us, which results in an adverse effect on our business, although we believe that currently, even without such funds, we can still run a healthy business within our already occupied markets.

Management believes there are no known trends, events, or uncertainties that could, or reasonably be expected to, adversely affect the Company’s liquidity in the short and long terms, or its net sales, revenues, or income from continuing operations. However the management observed increased competition in the material trading business has resulted in decrease margin in these businesses.

• Revenue for the three months period ended September 30, 2010 were $3,354,608 representing $542,691 or 19% increase compared to the sales of $2,811,917 in the same period of 2009.

• Net income for the three months period ended September 30, 2010 was $546,288, compared to $504,012 for the three months period ended September 30, 2009, an increase of $42,276 or 8%.

Results of Operations -- Comparison between the three months ended June 30, 2010 and the same periods in 2009

Revenue of $3.07 million in the 2010 second quarter, representing $324,127 or 12% increase compared to $2.74 million in the 2009 Second quarter.

Net income for 2010 was $0.537 million, or $0.02 basic and diluted earnings per share, compared to $0.535 million or $0.02 basic and diluted earnings per share .

"The revenue and gross profit from our existing business continues to increase in 2010 second quarter. We are still seeking and selecting consolidation opportunities that will complement our existing business in the waste and environmental services space," said Jack Chen, Sancon's Chief Executive Officer. "Our new waste paper and cardboards collection business has started in June 2010. We believe the new business will provide additional growth to our business forward. We will be updating our shareholders on our expansion progress throughout the year."

“In spite of the difficult and uncertain economic environment globally, our growth continues unabated. This is a testament to the fast growing Chinese waste management market, which underpins our economic performance. We are very pleased to achieve the sixth consecutive quarter of profitability and achieving year on year growth at the same time,” said Jack Chen, Sancon’s Chief Executive Officer. “We have recently been selected to participate numerous government sponsored Green initiatives and we are awarded additional license to process electronic waste in China.” Mr. Chen continued, “In Australia, we sponsored new Biofuel Technology which received substantial government grant in recognition of the green efforts. We believe these strategic initiatives position us favorably to capitalize on our growth momentum into 2010 and beyond."

Source: Business Wire (August 17, 2009)

“Due to the decline of the Australia dollar and slower economic activity in the country, the quantity of waste materials we processed and sold was significantly lower in Australia than in the year-earlier period, which offset growth in China. We are encouraged that demand in China remains strong, helped by the Chinese Government emphasizing environmental policies and projects for all sectors and entities. Chinese waste management market is one of the fastest growing markets in the world. It is estimated to be $35 billion by 2010,” said Jack Chen, Sancon’s Chief Executive Officer.

While we expect our margins and profitability to return to customary levels in the second quarter, we believe that our joint venture with Close The Loop as well as other initiatives to be announced shortly positions us for growth during the latter part of the year and into 2010.”

Source: Business Wire (May 19, 2009)