Puda Coal, Inc. Q1 2006 Earnings Conference Call Transcript (PUDC)

May.19.06 | About: Puda Coal, (PUDA)

Puda Coal, Inc. (PUDC)

Q1 2006 Earnings Conference Call

May 16, 2006, 4:30 p.m. EST

Executives

Mr. Zhao Ming, Chairman and Chief Executive Officer

Mr. Lee, Vice President and Controller

Mr. Wenwei Tian, Vice President of Investor Relations

Mr. Saunty, Vice President

Operator

Good afternoon. My name is Aileen, and I will be your conference facilitator today. At this time I would like to welcome everyone to Puda Coal’s first quarter 2006 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question and answer period.

Except for historical information contained herein, statements made during this conference call are forward-looking statements. These forward-looking statements include expectations related to factors impacting anticipating revenue, gross margins, expenses, earnings, inventory, and new product introductions. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and several factors could cause actual results to differ materially from those in the forward-looking statements. A more complete listing of these risk factors can be found in the company’s most recent report on Form 10-KSB. In addition, in during this call, we use any non-related GAAP financial measure as defined by the SEC in Regulation G, we will file the required reconciliation to the most directly comparable GAAP measure on a current report on Form 8-K. I would now like to turn the call over to Mr. Wenwei Tian, Vice President of Investor Relations. Thank you, Mr. Tian; you may begin your conference.

W. Tian

Thank you. Good afternoon and welcome to Puda Coal’s first quarter 2006 earnings conference call. My name is Wenwei Tian, and I am Vice President of Investor Relations for Puda Coal, Incorporated. The purpose of this conference call is to augment the information provided in the company’s earnings [inaudible] 2006. After completing the financial report, we will open the call to a few persons from the audience.

Puda Coal soon is to control the affiliates in [inaudible] City, China, is a leading supplier of China’s highest-grade metallurgical coking coal, which is used to make coke for purposes such as steel manufacturing. Puda Coal is currently the largest coking coal cleaning company in Shanxi Province. Shanxi Province accounts for 20% to 25% of China’s coal output, and 50% of China’s coke production. As the profit for value-added coking coal supplier, Puda offers a known management investment trade in China’s coking coal sector.

Puda Coal’s stock is currently traded on the OTC Bulletin Board under the PUDC-OB symbol.

At this time I would like to introduce the management team: Mr. Zhao Ming, Chairman and Chief Executive Officer, Mr. Lee, Vice President and Controller, Mr. Saunty, Vice President for taking the investments, and in this call, he will also serve as the interpreter for Mr. Zhao Ming.

Puda reported record revenue of approximately $20.8 million for the quarter ended March 31, 2006, a 386% increase over revenue of approximately $4.3 million in Q1 2005. The tonnage sales of cleaned coking coal increased approximately 208,000 tons from approximately 59,000 tons in Q1 2005 to approximately 267,000 tons in Q1 2006, a 353% increase. The increase in sales was a result of China’s continued strong economic growth and the continued demand for high-grade metallurgical coking coal.

Gross profit for the three months ended March 31, 2006 was approximately $4.5 million, an increase of approximately $3.6 million, or 424% from gross profit of approximately $0.9 million in Q1 2005. Gross profit margins were 22% in Q1 2006, up from 20% in Q1 2005 as a result of a slight increase in the selling price of cleaned coking coal from approximately $75 to $78 per ton year-on-year.

Puda also reported operating income of approximately $3.8 million for the three months ended March 21, 2006, an increase of approximately $3.1 million, or 408% from approximately $0.7 million in Q1 2005. Puda reported a net loss of approximately $2.7 million for the three months ended March 31, 2006, compared to net income of approximately $0.5 million in Q1 2005, a decrease of approximately $3.2 million, or 638%. Included in the loss were non-cash charges totaling approximately $4.4 million, consisting of approximately $1 million in the amortization of debt financing costs and approximately $3.4 million in a financial related derivative fair value loss. Excluding the non-cash charges incurred with the November 2005 debt financing, net income for Q1 2006 would have been approximately $1.7 million on an adjusted basis.

Based on approximately 75.5 million shares outstanding, Puda reported a loss of $0.03 a share for the three months ending March 31, 2006, compared to a profit of $0.01 per share in Q1 2005.

Now we would like to move to the question and answer segment of the conference call. On behalf of the company, I thank you for your patience while certain persons are translated. Operator, please review the instructions for our audience.

Question-and-Answer Session

Operator

At this time, Mr. Tian, there are no questions.

W. Tian

I would like to thank everyone for participating in our conference call today. We look forward to our next conference call in August. A replay of this call will be available two hours after completion of this call through May 31, 2006. To access the replay, please dial in U.S. and Canada 1-800-642-1687, international, 1-706-645-9291. The conference ID is 9353470. Thank you.

Operator

Ladies and gentlemen, this concludes today’s Puda Coal’s first quarter 2006 earnings conference call. You may now disconnect.

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