Sino-Forest Corp - News Release
Sino-Forest nine-month results
Sino-Forest Corp TRE.A
Shares issued 66,042,900 Nov 17 close $1.67
Thu 18 Nov 99 News Release
Mr. Kee Wong reports
All amounts are in U.S. dollars.
Sino-Forest had continuing strong results for the third quarter of 1999.
Net income for the third quarter was $9.0-million, an increase of 34 per
cent compared with net income of $6.7-million for the third quarter of
1998. Revenue of $37.7-million recorded in the third quarter of 1999 was 40
per cent higher than the $27.0-million reported in the third quarter of
1998. The increase in both revenue and earnings is primarily because of the
higher lumber and wood product trading and the continuing increases in wood
chip shipments.
Wood chip shipments
For the quarter ended Sept. 30, 1999, wood chip shipments continued to be
strong, increasing 23 per cent to 617,700 BDMT compared with 501,600 BDMT
shipped in the third quarter of 1998. Of the total wood chips shipped in
the third quarter of 1999, 30,000 BDMT, representing approximately 5 per
cent, were for the export market and 587,700 BDMT, representing
approximately 95 per cent, were sold in the domestic PRC market. Export and
domestic PRC shipments in the third quarter of 1998 were 83,800 BDMT and
417,800 BDMT, respectively. For the third quarter of 1999, the company
acted as principal on 227,000 BDMT and as an agent on 390,700 BDMT,
compared with 219,500 BDMT and 282,100 BDMT respectively for the third
quarter of 1998. As in the past, the third quarter shipments of the company
typically represent approximately 30 per cent of the total shipment for the
year. The company believes that it is on track to produce at least 2.0
million BDMT of wood chips in 1999.
During the third quarter of 1999, commission income earned from wood chip
shipments of 390,700 BDMT made by the company's Guangxi joint venture
partner amounted to approximately $5.7-million, compared with $4.3-million
earned in the third quarter of 1998. Principal sales to Sept. 30, 1999,
represented 38 per cent of total shipments. Principal sales for 1999 are
not expected to reach 60 per cent as previously budgeted due to the
continuing weak prices for wood chips. Principal sales for 1999 are
expected to remain at the same level as last year of approximately 40 per
cent. "Although the expected decrease in principal sales from budget will
have a significant impact on the revenue line, it is not expected to have a
significant impact on profitability due to the small difference on margin
between principal sales and agency sales at the current prices for wood
chips," says Allen Chan, chairman and chief executive officer.
The average wood chip price, net of VAT, in the third quarter of 1999
remained the same as the last quarter at $95 per BDMT. With respect to
sales in which the company acted as an agent, the company earned an average
of $14.50 per BDMT in both the second and third quarters of 1999.
Lumber and wood products trading
Revenue from lumber and wood product trading increased 158 per cent to
$10.3-million in the third quarter of 1999, compared with $4.0-million in
the third 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 increase trading in this sector.
The company had previously projected revenue from the lumber and wood
product trading business for 1999 to be approximately $80-million of which
approximately $30-million was to be derived from the trading of aspen logs
in the People's Republic of China. The company is experiencing some
difficulties in sourcing lumber in certain developing countries due to the
increasingly higher environmental and sustainable forest management
standards imposed on these countries. The company's policy is to purchase
lumber only from plantations or secondary forests. Accordingly, lumber
trading revenue for 1999 is expected to be below budget of $50-million by
approximately 25 per cent to 30 per cent. The company is still in the
process of developing the trading of aspen logs in the PRC and is expected
to generate revenue in this segment of the business in the year 2000.
"Although lumber and wood products trading revenue is not expected to meet
budget in 1999, it is still expected to increase by more than 200 per cent
compared with the $11.7-million recorded in 1998," says Mr. Chan.
Selling, general and administration
The decrease in selling, general and administration expenses in the third
quarter of 1999 is primarily attributable to financing costs written off in
the third quarter of 1998. These expenses relate to the 1998 aborted
financing for the Sino-Panel's downstream projects.
Outlook
Despite the difficulties experienced in the lumber and wood products import
business, the company is confident that its core business (wood chips
shipment) is on target. Revenue for 1999 is still expected to grow by
approximately 40 per cent on a year-to-year basis.
The pulp and paper market is expected to be stronger in the coming months
and should strengthen wood chip prices in the new year. The Japanese market
is recovering at a very slow pace and may take a few more months before
selling to that market could be improved.
WARNING: The company relies on litigation protection for "forward-looking"
statements.
CONSOLIDATED STATEMENT OF INCOME
Three months ended Sept. 30
(thousands of U.S. dollars)
1999 1998
Revenue $37,722 $27,002
------- -------
Costs and expenses
Cost of sales 26,179 17,555
Selling, general
and administration 1,120 2,150
Depreciation and
amortization 16 2
Amortization of
deferred financing
costs 8 -
------- -------
27,323 19,728
------- -------
Income from
operations 10,399 7,274
Equity in losses
of Jiangxi Investments (97) (103)
Interest income
(expense), net (436) 6
Other income 133 -
------- -------
Income before
income taxes 9,999 7,177
Provision for
income taxes (954) (437)
------- -------
Net income $9,045 $6,740
======= =======
Earnings per share 12 cents 9 cents
CONSOLIDATED STATEMENT OF INCOME
Nine months ended Sept. 30
(thousands of U.S. dollars)
1999 1998
Revenue $83,137 $53,238
------- -------
Costs and expenses
Cost of sales 58,812 33,695
Selling, general
and administration 3,032 4,322
Depreciation and
amortization 46 68
Amortization of
deferred financing
costs 19 -
------- -------
61,909 38,085
------- -------
Income from
operations 21,228 15,153
Equity in losses
of Jiangxi Investments (290) (310)
Interest income
(expense), net (1,060) (11)
Other income 135 -
------- -------
Income before
income taxes 20,013 14,832
Provision for
income taxes (1,766) (871)
------- -------
Net income $18,247 $13,961
======= =======
Earnings per share 24 cents 19 cents
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