Sino-Forest second-quarter results
Sino-Forest Corp TRE.A
Shares issued 65,942,900 1999-08-16 close $1.9
Tuesday Aug 17 1999
Mr. Allen Chan reports
Sino-Forest has had continuing strong results for the second quarter of 1999. Net income for the second quarter was $6.3-million, an increase of 24 per cent, compared with net income of $5.1-million for the second quarter of 1998. Revenue of $28.3-million recorded in the second quarter of 1999 was 62-per-cent higher than the $17.5-million in the second quarter of 1998. The increase in both revenue and earnings is primarily due to the higher lumber and wood product trading and increases in wood chip shipments.
Wood chip shipments
For the quarter ended June 30, 1999, wood chip shipments continued to be strong, increasing 24 per cent to 422,000 BDMT, compared with 339,000 BDMT in the second quarter of 1998. Of the total wood chips shipped in the second quarter of 1999, 32,000 BDMT, representing approximately 8 per cent, were for the export market and 390,000 BDMT, representing approximately 92 per cent, were sold in the domestic PRC market. Export and domestic PRC shipments in the second quarter of 1998 were 65,000 BDMT and 274,000 BDMT, respectively. For the second quarter of 1999, the company acted as principal on 167,000 BDMT and as an agent on 255,000 BDMT, compared with 159,000 BDMT and 180,000 BDMT respectively for the second quarter of 1998. As in the past, the second quarter shipments of the company typically represent approximately 20 per cent of the total shipment for the year. The company believes that it is on track to produce at least two million BDMT of wood chips in 1999.
During the second quarter of 1999, commission income earned from wood chip shipments of 255,000 BDMT made by the company's Guangxi joint venture partner, amounted to approximately $3.7-million, compared with $2.7-million earned in the second quarter of 1998. Principal sales to June 30, 1999, represented 40 per cent of total shipments. The company expects principal sales to increase to approximately 60 per cent of total shipments in 1999, compared with the 41 per cent attained in fiscal 1998.
The average wood chip price, net of VAT, in the second quarter of 1999, was $95 per BDMT, compared with $98 per BDMT in the first quarter of 1999. With respect to sales in which the company acted as an agent, the company earned an average of $14.50 per BDMT in the second quarter of 1999, compared with $14.62 per BDMT in the first quarter of 1999. The slight decrease in both wood chip price and commission income earned per BDMT in the first and second quarters of 1999 is attributable to the weak Japanese market, which also has affected prices in the domestic market. Despite the weaker prices recorded in the first and second quarters of 1999, the company believes that current positive developments in the pulp market will strengthen prices in the second half of 1999.
Lumber and wood products trading
Revenue from lumber and wood product trading increased 1,350 per cent to $8.7-million in the second quarter of 1999, compared with $0.6-million in the second quarter of 1998. The increase in revenue from lumber and wood product trading is attributable to the funds available to the company as a result of its financing completed in January, 1999, which provided the company with additional working capital to accelerate growth in this sector. Revenue from the lumber and wood product trading business is expected to be approximately $80-million in 1999, compared with $11.7-million in 1998. The majority of the increase in revenue from the lumber and wood product trading is expected to be realized in the third and fourth quarters of 1999.
Outlook
The pulp and paper market is showing improvement which, if sustained, should help to strengthen wood chip prices in the second half of 1999. The Japanese market is still weak although it is showing signs of improvement.
WARNING: The company relies upon litigation protection for "forward-looking" statements.
CONSOLIDATED STATEMENT OF INCOME
Three months ended June 30
(thousands of dollars)
1999 1998
Revenue $ 28,277 $ 17,478
-------- --------
Costs and expenses
Cost of sales 19,881 10,922
Selling, general
and administration 935 1,045
Depreciation
and amortization 15 30
Amortization
of deferred
financing costs 7 -
-------- --------
20,838 11,997
-------- --------
Income from
operations 7,439 5,481
Equity in losses of
Jiangxi investments (96) (105)
Interest income
(expense), net (473) (16)
Other income 1 -
-------- --------
Income before
income taxes 6,871 5,360
Provision for
income taxes (569) (295)
-------- --------
Net income
for the period 6,302 5,065
======== ========
Earnings per share 8 cents 7 cents
CONSOLIDATED STATEMENT OF INCOME
Six months ended June 30
(thousands of dollars)
1999 1998
Revenue $ 45,415 $ 26,236
-------- --------
Costs and expenses
Cost of sales 32,633 16,140
Selling, general
and administration 1,912 2,172
Depreciation
and amortization 30 45
Amortization
of deferred
financing costs 11 -
-------- --------
34,586 18,357
-------- --------
Income from
operations 10,829 7,879
Equity in losses of
Jiangxi investments (193) (207)
Interest income
(expense), net (624) (17)
Other income 2 -
-------- --------
Income before
income taxes 10,014 7,655
Provision for
income taxes (812) (434)
-------- --------
Net income
for the period 9,202 7,221
======== ========
Earnings per share 12 cents 10 cents
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