Cathay Forest Announces Third Quarter Financial Results
07 Febbraio 2011 - 10:16PM
Marketwired
Cathay Forest Products Corp. (TSX VENTURE: CFZ) today reported a
net loss of $0.5 million, or $0.004 per share on sales of $15
million for the three months ended September 30, 2010 and a net
loss of $2.2 million or $0.016 per share, on sales of $39 million
for the first nine months of 2010. Included in revenue for the
third quarter is a recognition of unearned revenue into revenue of
$2.2 million. This amount of unearned revenue had been accumulated
in the accounts since the third quarter in 2009. As the transaction
was never completed the amounts considered as deferred revenue and
non-refundable were consequently recognized as revenue in this
quarter. There also a significant increase in general expenses of
$0.6 million reflecting additional costs for consulting, legal, and
additional salaries incurred during the quarter.
Delays in filing these financial statements were a direct result
of management requiring time to work with its professional advisors
to complete an investigation and the preparation of restated
financial statements as noted below. The financial statements for
the current period could not be issued until such time as the
necessary restatements were completed.
Restatement
The Company also announces the restatement of the consolidated
financial statements for the year ended December 31, 2009 and the
interim consolidated financial statements for the three month
periods ended September 30, 2009, March 31, 2010 and June 30, 2010.
The restatements were required in order to properly reflect the
nature of the transactions which had been previously recorded on
the sale of poplar and bamboo in the third quarter of 2009. At the
time of recording the transaction, a portion of the plantation
assets were deemed to have been sold. As a result of
non-performance of the sales agreements by the buyers and upon
subsequent investigation, it was determined that under PRC law, the
ownership of trees cannot be transferred until such time as the
trees have been harvested. Management's investigation also
determined that the buyers dissolved the companies used to enter
into the sales agreements in August and September, 2010,
respectively. These findings resulted in the need to restate
several prior period financial statement s in order to meet the
requirements of the CICA Handbook Section 3400. The effect for the
reversal of the sales agreement also resulted in adjustments to
asset and liabilities accounts, the details of which are noted in
the notes to the financial statements.
(All financial figures in this release are expressed in Canadian
dollars unless otherwise stated)
Financial Highlights
-- Revenue increased 58% to $15.2 million versus $9.6 million
-- Gross Profit margin increased to 21.1% versus 4.8%
-- Gross Profit increased to $3.2 million versus $0.5 million
These results compare with previous periods in the following
table:
($Cdn millions, Three months ended Nine months ended
except per share
amounts)
September-30 September-30
2010 2009 Change 2010 2009 Change
(Restated) (Restated)
($) ($) (%) ($) ($) (%)
----------------------------------------------------------------------------
Revenue 15.2 9.6 58% 39.0 30.8 27%
Gross Profit 3.2 0.5 -791% 5.5 0.9 508%
Gross Profit Margin 21.1% 4.8% -537% 14.2% 3.0% 380%
Net Income (Loss) (0.5) (1.7) 71% (2.2) (4.9) -56%
Basic and Diluted
EPS (0.004) (0.015) -73% (0.016) (0.005) n/m
Cash Flow from (0.6) 1.1 -153% (8.5) 3.0 -384%
Operating
Activities
Operational Results
Revenue for Q3-2010 increased 59.5% to $15.2 million from $9.554
million in Q3-2010 and $17.0 million in Q2-2010. The increase in
revenue is primarily due an increase in the volume of logs imported
from Russia into China.
The Company's Russian log sales volumes and prices continued to
improve during the third quarter of 2010, particularly through
Taicang Port (Shanghai). Average selling prices increased by 8%, on
a quarter over quarter basis.
The gross profit margin for Q3-2010 was 21.1% versus 8.4% in
Q2-2010 and 14.2% year-to-date.
Outlook
The higher demand for wood products in China continues unabated.
According to China Customs, Chinese log imports for the first eight
months of 2010 totaled 22.7 million cubic metres (m3), representing
a year-over-year increase of 23.4%. The demand for lumber products
in China also continues to grow, with softwood lumber imports for
the first nine months of 2010 up 128% to 10.4 million m3.
Russian log prices continue to firm, with larch prices up 2.5%
in October versus the end of September, while spruce prices are up
2.0% over the same period.
"We consider the recent announcement by the Russian government
to phase out export tariffs on raw materials, including timber, in
order to join the WTO as a significant event. The final accession
date is expected in 2011. Although the initial agreement was struck
with the European Union, we expect China, already a WTO member,
will push for a bilateral agreement with Russia", stated John
Duncanson, the company's interim CEO and Chief Operating
Officer.
About Cathay Forest Products Corp.
Cathay Forest is a forest products company that manages
approximately 1,000,000 hectares of standing timber properties and
fast-growth, high-yield poplar plantations in China and Russia.
Cathay Forest has built a world-class forest products company
through a customer base that includes the domestic Chinese forest
product, pulp and paper industry and other wood products customers
in Japan.
Forward Looking Statements
All statements, other than statements of historical fact, in
this news release are forward-looking statements that involve
various risk and uncertainties, including, without limitation,
statements regarding the future plans and objectives of Cathay
Forest. We caution readers not to place undue reliance on these
statements as a number of important factors could cause actual
results and future events to differ materially from the plans,
objectives, expectations and intentions expressed in such
forward-looking statements. Except as required under applicable
securities laws, Cathay Forest assumes no obligations to update
forward- looking statements should circumstances or management's
estimates or opinions change.
The complete financial statements and Management's Discussion
and Analysis are posted on the company's website
www.cathayforest.com as well as on SEDAR www.sedar.com.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy of this release.
Contacts: Cathay Forest Products Corp. Luc Perron Chief
Financial Officer (416) 226-7269 luc.perron@cathayforest.com Cathay
Forest Products Corp. John Duncanson Interim Chief Executive
Officer & Chief Operating Officer (416) 531-3680
john.duncanson@cathayforest.com www.cathayforest.com
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