SinoCoking Reports 18% Increase In Profits

Coal Sales and Revenues Up In Q4

SinoCoking Coal and Coke Chemical Industries, Inc. reported net income of $4.7 million in the quarter ended 31 December 2009 – an 18% increase over the same quarter in 2008. The company achieved higher coal product revenue and improved margins on coal products and coal tar.

In the quarter ending December 31, 2009, SinoCoking's net income increased to $4.7 million, representing an 18% increase from $4.0 million in the same quarter of 2008. The increase was primarily related to higher coal product revenue and improved profit margins on coal products and coal tar.

Revenues increased to $14,763,958, up 30% from the same quarter of 2008 primarily due to a strong increase in coal product sales revenue, offset by a moderate decrease in revenue from coke sales. Coal product sales revenue increased by $4.2 million while coke sales revenue decreased by $0.7 million, as management continued its strategy of increasing coal sales relative to its coke production to bolster profitability.

Cost of sales increased 25.5% to $8,736,811, driven primarily by a significant increase in the sale of raw coal, offset by a moderate reduction in coke production. Cost of revenue for coal products alone increased to approximately $5.0 million, compared to $1.6 million the previous year. In the quarter ending December 31, 2008, cost of revenue from coal products was 23% of the overall cost of revenue. In the same quarter ending December 31, 2009, cost of revenue for coal products rose to 57% of the overall cost of revenue.

Gross profit increased 37%, to $6,027,147. Gross profit as a percentage of sales increased to 40.82% in the three month period ending December 31, 2009, up from 38.69% in the same period ending December 31, 2008. The increase in gross margin was due to higher margins on coal product sales and coal tar, offset by the effect of a reduction in high-margin coke product sales. While coke products generate the highest gross margin among the company's products, increases in gross margins on coal products and coal tar sales coupled with a large increase in coal product sales more than offset the effect of reduced coke product sales on gross margin in this period.

Commenting on the results Mr. Jianhua Lv, Chairman and Chief Executive Officer said "In 2009 our industry faced some tough challenges, with a cloudy macroeconomic outlook," and added "however, we believe our company addressed these challenges successfully by strategically shifting our emphasis toward coal product sales during these periods. In the last half of 2009, the global economic picture began improving, and we are optimistic about the coming year in terms of industrial demand for coke and coking coal. Market prices for coke products rebounded firmly in late 2009, and we expect that trend to continue in 2010, particularly due to strong demand in China."