China Carbon Graphite Group Reports Second Quarter 2013 Financial Results

  China Carbon Graphite Group Reports Second Quarter 2013 Financial Results

PR Newswire

INNER MONGOLIA, China, Aug. 15, 2013

INNER MONGOLIA, China, Aug. 15, 2013 /PRNewswire/ -- China Carbon Graphite
Group, Inc. (CHGI) ("China Carbon" or the "Company"), the largest wholesale
supplier of fine-grain and high-purity graphite inChinaand one of the
nation's top manufacturers of carbon andgraphite products, today announced
its financial results for the second quarter ended June 30, 2013.

Mr. Donghai Yu, Chief Executive Officer of China Carbon, commented, "As
China's steel industry continued to battle with over-capacity, slowing demand
growth, and deteriorating steel prices, the graphite industry remained
challenged during the second quarter of 2013. The difficult industry
environment was reflected in our disappointing financial results for the
second quarter. However, graphite prices had stabilized during the second
quarter and likely bottomed in our view. Looking ahead, we expect the graphite
industry to recover in 2014 as demand increases and competition eases when
more small players are forced to exit the market during this downturn."

Second Quarter 2013 Financial Results

                     Three Months Ended June 30
                     2013                2012
                                 % of                 % of
                     Sales               Sales
                                 Total                Total
Graphite Electrodes  $1,579,942  58.2%   $1,497,743   12.6%
Fine Grain Graphite  916,953     33.8%   5,307,387    44.7%
High Purity Graphite 13,574      0.5%    4,902,424    41.3%
Others               203,784     7.5%    169,989      1.4%
Total                $2,714,254  100.0%  $11,877,543  100.0%

Sales: For the three months ended June 30, 2013, sales decreased by $9.16
million, or 77.1%, to $2.71 million from $11.88 million for the second quarter
of 2012. The decrease in sales was mainly due to industry-wide demand weakness
for our products as a result of continued struggles of steel manufacturers.
Demand for our fine grain graphite and high purity graphite products was
particularly weak during the second quarter with sales decreasing 82.7% and
99.7% to $0.92 million and $0.01 million, respectively. Sales of graphite
electrodes increased 5.5% to $1.58 million while sales of semi-processed and
other types of products grew 19.9% to $0.20 million.

Gross Income (Loss): Gross profit for the second quarter of 2013 was ($1.03)
million, compared to gross profit of $2.89 million for the same period of last
year. Gross margin decreased to (38.1%) for the second quarter of 2013 from
24.4% for the same period of last year. The decrease in gross margin was
mainly due to increased percentage of low margin product sales, increased
depreciation allocated to the cost of goods sold due to the transfer of
construction in progress to property and equipment since the end of 2012, and
increased fixed cost allocation as a result of decreased production volume.

Operating Income (Loss):

Selling Expenses:

Selling expenses decreased by 31.8% to $0.03 million for the second quarter of
2013 from $0.02 million for the same period of last year. The decrease was
mainly due to decreased sales commission and lower shipping and handling
expenses during the three months ended June 30, 2013 as compared to the three
months ended June 30, 2012, which was resulted from lower sales.

General and Administrative Expenses:

General and administrative expenses increased by $6.23 million, or 532.4%, to
$7.40 million for the second quarter of 2013 from $1.17 million for the same
period of last year. The increase in general and administrative expenses was
mainly due to increased consulting expenses and increased inventory impairment
expenses for the three months ended June 30, 2013 compared to the three months
ended June 30, 2012.

Depreciation and Amortization Expenses:

Depreciation and amortization expenses increased by $0.19 million, or 33.3%,
to $0.74 million for the second quarter of 2013 from $0.56 million for the
same period of last year. The increase in depreciation and amortization
expenses was due to additional fixed assets placed in service.

Operating expenses totaled $7.47 million for the second quarter of 2013,
compared to $1.25 million for the same period of 2012, an increase of $6.23
million, or 499.6%. Operating income decreased by $10.15 million, or 616.9%,
to ($8.51) million for the second quarter of 2013 from $1.65 million for the
same period of last year. As a result of the factors described above,
operating income (loss) margin was (313.4%) for the second quarter of 3013,
compared to 13.9% for the second quarter of last year.

Net Income (Loss): Net loss available to common stockholders was ($9.45)
million, or ($0.37) per diluted share, for the second quarter of 2013,
compared to net income available to common stockholders of $0.87 million, or
$0.04 per diluted share, for the second quarter of 2012.

Six Months Ended June 30, 2013 Financial Results

                     Six Months Ended June 30
                     2013                2012
                                 % of                 % of
                     Sales               Sales
                                 Total                Total
Graphite Electrodes  $1,660,902  28.8%   $2,645,516   12.1%
Fine Grain Graphite  2,331,909   40.4%   9,776,198    44.6%
High Purity Graphite 1,505,095   26.1%   9,260,948    42.2%
Others               297,266     5.1%    256,091      1.2%
Total                $5,775,172  100.0%  $21,938,753  100.0%

Sales: For the six months ended June 30, 2013, sales decreased by $16.16
million, or 73.7%, to $5.78 million from $21.94 million for same period of
last year. The decrease in sales was mainly due to industry-wide demand
weakness for our products as a result of continued struggles of steel
manufacturers. Demand for our fine grain graphite and high purity graphite
products was particularly weak for the six months ended June 30, 2013 with
sales decreasing 76.1% and 83.7% to $2.33 million and $1.51 million,
respectively. Sales of graphite electrodes also decreased by 37.2% to $1.66
million. Sales of semi-processed and other types of products grew 16.1% to
$0.30 million.

Gross Income (Loss): Gross profit (loss) for the six months ended June 30,
2013 was ($1.29) million, compared to gross profit of $5.81 million for the
same period of last year. Gross margin decreased to (22.4%) for the six months
ended June 30, 2013 from 26.5% for the same period of last year. The decrease
in gross margin was mainly due to increased percentage of low margin product
sales, increased depreciation allocated to the cost of goods sold due to the
transfer of construction in progress to property and equipment since the end
of 2012, and increased fixed cost allocation as a result of decreased
production volume.

Operating Income (Loss):

Selling Expenses:

Selling expenses decreased by $0.04 million, or 50.2%, to $0.04 million for
the six months ended June 30, 2013 from $0.08 million for the same period of
last year. The decrease was mainly due to decreased sales commission and lower
shipping and handling expenses during the six months ended June 30, 2013 as
compared to the same period of last year, which resulted from lower sales.

General and Administrative Expenses:

General and administrative expenses increased by $5.76 million, or 285.1%, to
$7.79 million for the six months ended June 30, 2013 from $2.02 million for
the same period of last year. The increase in general and administrative
expenses was mainly due to increased consulting expenses and increased
inventory impairment expenses for the six months ended June 30, 2013 compared
to the same period of last year.

Depreciation and Amortization Expenses:

Depreciation and amortization expenses increased by $0.04 million, or 2.58%,
to $1.40 million for the six months ended June 30, 2013 from $1.36 million for
the same period of last year. The increase in depreciation and amortization
expenses was due to additional fixed assets placed in service.

Operating expenses totaled $7.94 million for the six months ended June 30,
2013, compared to $2.20 million for the same period of last year, an increase
of $5.74 million, or 260.8%. Operating income decreased by $12.85 million, or
356.0%, to ($9.24) million for the six months ended June 30, 2013 from $3.61
million for the same period of last year. As a result of the factors
described above, operating income (loss) margin was (159.9%) for the six
months ended June 30, 2013, compared to 16.4% for the same period of last
year.

Net Income (Loss): Net loss available to common stockholders was ($10.96)
million, or ($0.43) per diluted share, for the six months ended June 30, 2013,
compared to net income available to common stockholders of $1.11 million, or
$0.05 per diluted share, for the same period of 2012.

Financial Position

As of June 30, 2013, the Company had cash and cash equivalents of $0.36
million, restricted cash of $27.37 million, and short-term bank loans of
$45.78 million. Net cash used in operating activities was ($5.23) million for
the six months ended June 30, 2013, compared to net cash provided by operating
activities of $1.83 million for the same period of last year.

AboutChina Carbon Graphite Group, Inc.

China Carbon Graphite Group, through its affiliate, Xingyong Carbon Co., Ltd.,
manufactures graphite and carbon based products inChina. The company is the
largest wholesale supplier of fine-grain and high-purity graphite in China and
one of the nation's top overall producers of carbon and graphite products.
Fine grain graphite is widely used in smelting for colored metals and rare
earth metal smelting as well as the manufacture of molds. High purity graphite
is used in metallurgy, mechanical industry, aviation, electronic, atomic
energy, chemical industry, food industry and a variety of other fields. In
September 2007,the Companywas approved and designated by the Ministry of
Science & Technology as a "National Hi-tech Enterprise," a distinction that
the Company still holds. Of the more than 400carbon graphiteproducers in
China,China Carbon Group Inc.is the only non-state-owned company to receive
this honor. For more information, please visithttp://www.chinacarboninc.com.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the
business of the Company and its subsidiary companies. These forward-looking
statements are often identified by the use of forward-looking terminology such
as "believes," "expects" or similar expressions. Such forward-looking
statements involve known and unknown risks and uncertainties that may cause
actual results to be materially different from those described herein as
anticipated, believed, estimated or expected. Investors should not place undue
reliance on these forward-looking statements, which speak only as of the date
of this press release. The Company's actual results could differ materially
from those anticipated in these forward-looking statements as a result of a
variety of factors, including the risk factors set forth in the Company's
annual report on Form 10-K and quarterly reports on Form 10-Q.

Company Contact:

Donghai Yu, CEO
China Carbon Graphite Group Inc.
Email: ir@chinacarboninc.com
Website: http://www.chinacarboninc.com

Investor Relations Contact:

Tina Xiao
Weitian Group LLC
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com,
Website: http://www.weitian-ir.com



China Carbon Graphite Group, Inc.and subsidiaries
Consolidated Balance Sheets
                                              June 30, 2013  December31,2012
                                              (Unaudited)    (Audited)
ASSETS
Current Assets
Cash and cash equivalents                     $ 356,102      $   129,746
Restricted cash                                 27,373,155       22,149,000
Accounts receivable, Net                        8,063,402        11,239,002
Notes receivable                                5,526,864        -
Advance to suppliers                            1,840,782        1,177,462
Inventories                                     42,787,195       48,417,875
Prepaid expenses                                981,809          280,779
Other receivables, net of allowance of
$223,683 and $220,339,                          122,465          35,655

respectively
Total current assets                            87,051,774       83,429,520
Property And Equipment, Net                     40,348,619       40,964,363
Construction In Progress                        24,434,608       7,324,379
Land Use Rights, Net                           9,753,620        9,657,419
Total Assets                                  $ 161,588,621  $   141,375,681
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses         $ 2,359,879    $   2,250,745
Advance from customers                          1,779,550        1,368,525
Short term bank loans                           45,784,860       38,680,500
Notes payable                                   50,998,794       40,606,500
Other payables                                  1,604,246        630,179
Loan from unrelated parties                     265,073          338,002
Dividends payable                               55,841           46,816
Total current liabilities                       102,848,243      83,921,267
Amount due to related parties                   4,748,375        4,795,593
Long Term Bank Loan                             16,260,957       4,782,900
Accounts Payable - Long Term                    -
Warrant Liabilities                             78,654           224,362
Total Liabilities                               123,936,229      93,724,122
Redeemable convertible series B preferred
stock, $0.001 par value;

3,000,000 shares authorized; 300,000 and        360,000          360,000
300,000 shares issued

and outstanding at June 30, 2013 and December
31, 2012, respectively
Stockholders' Equity
Common stock, $0.001 par value; 100,000,000
shares authorized

26,282,518 and 25,077,518 shares issued and     26,282           25,077
outstanding at

June 30, 2013 and December 31, 2012,
respectively
Additional paid-in capital                      18,540,025       18,223,781
Accumulated other comprehensive income          9,621,604        8,982,925
Retained earnings                               9,104,481        20,059,777
Total stockholders' equity                      37,292,392       47,291,558
Total Liabilities and Stockholders' Equity    $ 161,588,621  $   141,375,681





China Carbon Graphite Group, Inc and subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Three and Six Months Ended June 30, 2013 and 2012
(Unaudited)
                   Three months ended June 30,   Six months ended June 30,
                   2013           2012           2013            2012
Sales              $ 2,714,252    $ 11,877,543   $ 5,775,170     $ 21,938,753
Cost of Goods Sold   3,748,027      8,985,125      7,068,347       16,128,731
Gross Profit         (1,033,775)    2,892,418      (1,293,177)     5,810,022
(Loss)
Operating
Expenses
Selling expenses     19,895         29,152         37,836          75,950
General and          7,402,091      1,170,462      7,786,673       2,021,861
administrative
Depreciation and     51,814         46,826         119,702         103,830
amortization
Total operating      7,473,800      1,246,440      7,944,211       2,201,641
expenses
Operating (Loss)
Income Before        (8,507,575)    1,645,978      (9,237,388)     3,608,381
Other Income
(Expense)
Other Income
(Expense)
Interest expense     (1,054,202)    (1,220,173)    (1,916,650)     (2,449,918)
Interest income      16,502         21             61,806          43
Other expense       -              (215,468)      -               (215,468)
Other income         (68)           215,190        253             215,190
(expense), net
Change in fair       101,340        445,763        145,708         (33,800)
value of warrants
Total other
expense (income),    936,428        (774,667)      1,708,883       (2,483,953)
net
(Loss) Income
Before Income Tax    (9,444,003)    871,311        (10,946,271)    1,124,428
Expense
Income Tax Expense   -              -              -               -
Net Income (Loss)    (9,444,003)    871,311        (10,946,271)    1,124,428
Preferred Stock      (4,488)        (4,625)        (9,025)         (9,643)
Dividends
Net Income (Loss)
Available To         (9,448,491)    866,686        (10,955,296)    1,114,785
Common
Shareholders
Other
Comprehensive
Income
Foreign currency     492,402        (433,954)      638,679         (10,057)
translation gain
Total
Comprehensive      $ (8,951,601)  $ 437,357      $ (10,307,592)  $ 1,114,371
Income (Loss)
Share Data
Basic earnings     $ (0.37)       $ 0.04         $ (0.43)        $ 0.05
(loss) per share
Diluted earnings   $ (0.37)       $ 0.04         $ (0.43)        $ 0.05
(loss) per share
Weighted average
common shares
outstanding,         25,810,980     23,948,851     25,459,203      23,632,248

basic
Weighted average
common shares
outstanding,         25,810,980     24,254,661     25,459,203      23,938,058

diluted





China Carbon Graphite Group, Inc and subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
                                                Six months ended June 30,
                                                2013            2012
Cash Flows from Operating Activities
Net income (loss)                               $ (10,946,271)  $ 1,124,428
Adjustments to reconcile net cash provided by
(used in)

operating activities
Depreciation and Amortization                     1,395,836       1,360,692
Related party interest expenses contribution      -               222,860
Stock compensation                                317,450         374,333
Change in fair value of warrants                  (145,708)       33,800
Bad debt expenses                                 -               -
Inventory impairment                              5,328,291       -
Changes in operating assets and liabilities
Accounts receivable                               3,318,834       (557,196)
Notes receivable                                  (5,481,758)     (257,316)
Other receivables                                 (85,565)        (31,808)
Advance to suppliers                              (640,186)       3,529,409
Inventory                                         985,140         (6,755,136)
Prepaid expenses                                  (691,743)       (2,719)
Accounts payable and accrued liabilities          77,525          2,684,917
Advance from customers                            387,073         192,640
Taxes payable                                     110,025         (444,341)
Other payables                                    844,271         353,241
Net cash (used in) provided by operating          (5,226,786)     1,827,804
activities
Cash flows from investing activities
Acquisition of property, plant and equipment      (2,434)         (37,756)
Increase of land use rights                       (116,227)       -
Addition of construction in progress              (16,860,357)    (1,109,403)
Net cash used in investing activities             (16,979,018)    (1,147,159)
Cash flows from financing activities
Proceeds from issuing common stock                -               472,000
Proceeds from short term loans                    11,312,400      11,074,000
Repayments for short term loans                   (4,848,171)     (17,876,600)
Proceeds from long term loans                     21,008,743      4,714,360
Proceeds from loan from unrelated parties         (77,421)        9,162,944
Payment of loans from unrelated parties          -               (9,162,944)
Proceeds from loan from related parties           451,524         31,640
Repayments to related parties                    (570,533)       (142,380)
Proceeds from stock not yet issued                -               (145,000)
Restrict cash                                     (4,848,171)     996,660
Proceeds from notes payable                       17,776,629      17,876,600
Repayments to notes payable                       (17,776,629)    (16,848,300)
Net cash provided by financing activities        22,428,371      152,980
Effect of exchange rate fluctuation               3,787           (4,185)
Net increase in cash                              226,354         829,440
Cash and cash equivalents at beginning of         129,746         521,450
period
Cash and cash equivalents at ending of period   $ 356,100       $ 1,350,890
Supplemental disclosure of cash flow
information
Interest paid                                  $ 2,451,059     $ 1,643,371
Income taxes paid                              $ -             $ -
Non-cash activities:
Preferred stock conversion to common stock     $ -             $ 144
Issuance of common stock for compensation      $ 317,450       $ 153,800

SOURCE China Carbon Graphite Group, Inc.

Website: http://www.chinacarboninc.com