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China Green Material Technologies (CAGM.OB) Posts Solid Q3 Earnings Leveraged by Increased Demand and Market Expansion

|Includes: China Green Material Technologies, Inc. (CAGM)

China Green Material Technologies Inc., a China-based manufacturer of starch-based biodegradable containers, today posted its financial results for the third quarter ended September 30, 2010.

The company reported a third-quarter revenue increase of 43.6 percent to $6.0 million, compared to $4.2 million reported in the third quarter of 2009. The company attributes the increase to strong reorders from existing customers; the company also retained six new customers, with orders from those relationships, reflecting the company’s expansion into the supermarket sector.

Su Zhonghao, CEO of China Green Materials, said rising demand for its current products paired with the introduction of new products strengthened the quarterly figures.

“We experienced further acceleration in our revenue growth which increased from 28.4 percent during the first half of this year to 43.6 percent in the third quarter. This strong momentum reflects growing demand from new and existing customers in China, particularly for the product categories of disposable cups, disposable containers and disposable plates,” Zhonghao stated in the press release. “As we continue to introduce new branded products, which are stronger and less expensive than those from our competitors, while expanding our distribution capabilities to make our products available to more Chinese consumers, we are poised to capture additional market share in the rapidly growing RMB2.5 billion biodegradable products market in China.”

Gross profit in the third quarter of 2010 grew 35 percent to $2.7 million compared to $2.0 million in the third quarter of last year, while gross margin was 45.6 percent versus 48.6 percent for the third quarter of 2009.

China Green Materials reported 2010 third-quarter income from operations at $2.0 million, up 13.9 percent from the $1.8 million reported in the year-ago period.

Net income in the third quarter was $1.7 million, or $0.07 per diluted share, compared to $1.1 million, or $0.06 per diluted share, in the third quarter of 2009; adjusted net income (non-GAAP) increased 22.4 percent to $1.9 million, compared to a year ago adjusted net income.

Zhonghao said the company will continue to grow as needed to supply market demand. He also noted the company’s recent construction of a new facility expected to boost production capacity by more than 100 percent.

“We are focused on expanding our capacity to meet the robust demand for our products. During the third quarter, we completed construction of our new state-of-the-art facility which is located in Harbin Economic and Technological Development Zone. We completed the buildout on schedule and once fully utilized, will enable us to produce 11,000 tons of finished products each year, which expands our currently capacity by 122 percent. We will scale into this during the coming year as we grow our revenues and gain additional market share. More specifically, we expect to be operating at 13,000 tons of capacity by the end of this year and scaling to full capacity at 20,000 tons by the end of 2011. The new facility allows us to operate more efficiently and will provide the ability to fill larger orders from our growing base of domestic and international customers. All in all, I am extremely excited about the future growth outlook for China Green Materials,” he stated.

As of September 30, 2010, China Green reported $10.8 million in cash and cash equivalents, an increase of approximately $3.5 million from the end of 2009. The increase is primarily due to net proceeds from private placements completed during 2010, and was offset by $7.6 million of equipment and property investments for the new manufacturing facility.

For more information visit sinogreenmaterial.com

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