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China Carbon Graphite Group, Inc. (CHGI) Announces Q1 2011 Results

May 19, 2011 1:45 PM ETCHGI
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China Carbon Graphite Group, Inc., China’s biggest wholesaler of fine-grain and high-purity graphite, has just announced its Q1 2011 results.

For the quarter ended March 31, 2011, the company disclosed that revenues jumped 137%, from $4.85 million in Q1 2010 to $11.46 million in Q1 2011, while its net income rose 139%, from $0.86 million in Q1 2010 losses to its current $0.33 million positive net. The company’s EBITDA metric for Q1 2011 soared to $2.52 million, a 155% gain over its Q1 2010 level of $0.99 million.

China Carbon CEO Donghai Yu commented particularly on the EBITDA rise, saying, “As we expected, our first quarter results were excellent. In particular, we are very pleased with the significant improvement in our EBITDA, which increased 154 percent. We successfully adjusted our product mix in the first quarter of 2011 to capitalize on market demand, producing and selling more of our higher margin products, like high purity graphite, than our lower margin products, such as graphite electrodes. Notably, our sales benefited from the increasing applications for our higher margin products in China’s rapidly developing solar and mold industries.”

The company announcement also explained that the sales increases reflected in its Q1 report resulted largely from market recovery, noting that about 30% of total Q1 2011 sales was revenue from roughly 40 new customers attracted after March 31, 2010.

The company went on to say that “increased sales and improved margin of high purity graphite products offset the decreased sales of the Company’s lower margin products, like graphite electrodes, and decreased margins and unit prices of its fine grain graphite products.”

Seizing on the margin advantage of higher purity graphite products, China Carbon now has under construction a new baking plant that’s expected to become fully operational by August 2011. The company has said that the plant will increase its annual production capacity from 30,000 tons to 60,000 tons. Much of the construction has already been completed, with the exterior of this new facility finished. The facility will specialize in manufacturing higher margin products, including large size, ultra high power graphite electrode, high purity graphite and fine grain graphite.

CEO Yu further stated that the company used a forward-looking purchasing strategy to boost Q1 profits.

“Graphite prices are up across the board,” said Yu, adding, “for instance, the price range for large flake graphite in May 2010 was $1,300 to $1,700 per ton, now it is $2,275 to $3,000 per ton. We anticipated this jump in graphite prices and paid for additional levels of inventory in the third and fourth quarters of 2010, effectively locking in the price of raw materials before graphite prices started to climb. Due to our six month production cycle, we expect that we will fully realize the benefits from this move in the second half of fiscal 2011 and we anticipate that our margins and profitability will increase accordingly.”

More information on China Carbon Graphite Group, Inc. can be found on the Company’s website at chinacarboninc.com.

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