Industry News II

China Dredging Group Co., Ltd. Reports Unaudited First Quarter 2012 Results – Press Releases

September 23, 2012 No Comments »

FUZHOU, China, Sept. 23, 2012 /PRNewswire/ — China Dredging Group Co., Ltd. (together with its consolidated subsidiaries and variable interest entities, “China Dredging,” the “Company,” “we,” “us” and “our”), one of the leading independent (non-state-owned) providers of dredging services in the PRC, today announced its unaudited financial results for the first quarter of 2012.

Three Months Ended March 31, 2012 Highlights

  • Revenues of $59.5 million, a 18.7% period-over-period increase
  • Gross profit of $31.5 million, a 8.2% period-over-period increase
  • Net income of $21.7 million, a 18.7% period-over-period decrease
  • Operating cash flow of $33.8 million, a 175.8% period-over-period increase
  • Cash of $146.1 million and working capital of $159.4 million as of March 31, 2012

“I am very pleased that we were able to deliver strong quarterly results in revenue in the first quarter of 2012,” said Mr. Xinrong Zhuo, Chairman and Chief Executive Officer of China Dredging. “We believe this revenue growth reflects our strong strategic relationship with our main contractors, and we are committed to enhancing our market share in China's dredging industry.”

Recent Developments

In July 2012, we did not renew two dredgers lease agreements when the contracts expired, and terminated leasing one dredger in the consideration of its working efficiency. We try to integrate our management and technology for new projects. These three dredgers are not suitable for the new upcoming projects. As a result, we currently have 10 dredgers in our fleet, including 6 non-self-propelling cutter suction dredgers, 2 trailer suction hopper dredgers and 2 grab dredgers.

2012 First Quarter Operating Results

For the Three Months Ended

March 31,

2012

2011

Contract Revenue

$     59,499,531

$    50,131,369

Percentage Change

18.7%

Contract revenue increased by $9.4 million, or 18.7% (13.7% without foreign exchange effect), to $59.5 million for the three months ended March 31, 2012, compared to $50.1 million for the three months ended March 31,2012. The increased contract revenue primarily resulted from the increase of our dredging volume and unit construction price, which is a price negotiated with the contractor for each specific project. We completed 32.5 million cubic meters of dredging volume for the three months ended March 31, 2012, as compared to 28.5 million cubic meters for the three months ended March 31, 2011, representing an increase of 13.9% in dredging volume. In addition, the unit construction price per cubic meter increased by $0.07, or 4.0% (-0.2% without foreign exchange effect), to $1.83 for the three months ended March 31, 2012 from $1.76 for the same period of 2011. The increase was primarily due to an increase of demand for our dredging services and general market conditions. 

For the Three Months Ended

March 31,

2012

2011

Gross Profit

$     31,477,413

$    29,091,405

Gross Profit Margin

52.9%

58.0%

Gross profit increased by $2.4 million, or 8.2% (3.7% without foreign exchange effect), to $31.5 million for the three months ended March 31, 2012, compared to $29.1 million for the same period of 2011.  Our cost of contract revenue for three months ended March 31, 2012 increased by $7.0 million, or 33.2% (27.5% without foreign exchange effect), to $28.0 million for the three months ended March 31, 2012, compared to $21.0 million for the same period of 2011.  As a percentage of revenue, our cost of contract revenue increased from 42.0% for the three months ended March 31, 2011 to 47.1% for the same period of 2012 due to the increased headcount of employee and vessel leasing fee, the increasing price of consumable parts as well as the increased quantity demands for the projects. As a result, our gross profit margin decreased from 58.0% for the three months ended March 31, 2011 to 52.9% for the same period in 2012. 

For the Three Months Ended

March 31,

2012

2011

General and Administrative Expenses

$    2,435,274

$    1,950,684

Percentage Change

24.8%

General and administrative expenses increased by $0.5 million, or 24.8%, from $2.0 million, or 3.9% of revenues, for the three months ended March 31, 2011 to $2.4 million, or 4.1% of revenues, for the same period of 2012.  The increase in general and administrative expenses was primarily attributable to an increase in other taxes, such as business tax, which is levied in the PRC based on revenue.

 For the Three Months Ended 

 March 31,

2012

2011

Gain on Obligation under Make-Good Escrow

$          -

$6,298,527

Loss on Derivative

$  (192,957)

$  (22,852)

For the three months ended March 31, 2012, we had $0.2 million in net losses from the reductions of estimated obligations to investors that had been incurred as a result of our fourth quarter 2010 Private Placement, as compared to $6.3 million in net gains for the three months ended March 31, 2011. The gain on obligation under the make-good escrow related to our meeting earnings targets both in 2010 and 2011, resulting in release of the contingent liability and a resulting gain, which significantly impacted our other income (expense) for the three months ended March 31, 2011. There is no such gain or loss in 2012 as the make-good escrow expired on December 31, 2011. The loss on derivative related to the fair value adjustment to the embedded derivatives in our preferred shares issued in our 2010 Private Placement. These gains or losses have no income tax effect.

Taxable income increased by 7.3% for the three months ended March 31, 2012, compared to the same period of 2011. Income tax expense increased by $0.5 million, or 7.1%, to $7.3 million for the three months ended March 31, 2012, compared to $6.8 million for the same period of 2011. The applicable income tax was 25%, which was effective on January 1, 2008 in the PRC.

 For the Three Months Ended 

 March 31,

2012

2011

Net Income

$   21,668,818

$   26,647,614

Percentage Change

-18.7%

Earnings per Diluted Ordinary Share

$          0.35

$          0.40

As a result of the foregoing, our net income decreased by $5.0 million, or 18.7% (22.0% without foreign exchange effect), to $21.7 million for the three months ended March 31, 2012, compared to $26.6 million for the same period of 2011.   

As of March 31, 2012, we had cash of $146.1 million, total current assets $181.5 million, total assets of $302.6 million, total current liabilities of $22.1 million, no non-current liabilities, and a balance to Class A Preferred Shares of $50.0 million. We had a positive operating cash flow for the three months ended March 31, 2012 of $33.8 million, primarily attributable to the decrease in accounts receivable, cost and estimated earnings in excess of billings on contracts in progress, and prepaid expenses.

About China Dredging

China Dredging is one of the leading independent (non-state-owned) providers of specialized dredging services to the Chinese marine infrastructure market. With a modern fleet of ten dredging vessels, China Dredging has broad capabilities with which it is able to address diverse types of dredging projects. Its services, which require significant engineering and project management expertise, include on-site investigation and measurement, cost estimation, sediment and obstruction removal and transport and disposal of dredged material in an environmentally responsible manner. China Dredging conducts dredging operations through Fujian Xing Gang Port Service Co., Ltd., in which it holds a 50% equity interest, with the remaining 50% interest controlled by China Dredging pursuant to variable interest entity agreements. 

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking” statements regarding China Dredging's operating results and business prospects that involve substantial risks and uncertainties. You can identify some of these forward-looking statements by words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “likely to,” “may,” “plan,” “project,” “potential,” “predict,” “should,” “scheduled to,” “target,” “will,” “would,” or similar words, as well as statements in the future tense, in connection with any discussion of future operating or financial performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of China Dredging, or industry results, to differ materially from those expressed or implied by such forward-looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those forward-looking statements include, but are not limited to: continued public spending on PRC marine infrastructure; our ability to manage costs under our fixed-price contracts; our ability to maintain our concentrated customer base; the variable billing and payment cycles associated with our milestone contracts; our ability to maintain adequate working capital; our ability to expand our dredging fleet; unexpected adjustments or cancellations to our backlog; our ability to meet schedule requirements in our contracts; the significant competition in the markets in which we operate; our ability to attract and retain qualified personnel, including executive officers; extensive regulations of our business in the PRC; and political and economic policies of the Chinese government. Additional information and discussion of these risks, uncertainties, and other factors can be found in China Dredging's Annual Report on Form 20-F for the year ended December 31, 2011 and other filings by China Dredging with the U.S. Securities and Exchange Commission.  

The forward-looking statements contained in this press release are made only as of the date hereof and China Dredging does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise.

CHINA DREDGING GROUP CO., LTD AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(Unaudited)

March 31, 2012

December 31, 2011

Assets

Current assets

Cash

$146,146,866

$112,409,544

Accounts receivable

22,625,611

27,020,183

Cost and estimated earnings in excess of billings

   on contracts in progress

7,041,713

14,008,972

Prepaid expenses

1,059,825

4,767,072

Inventories

4,630,125

2,048,158

Other receivables 

3,520

3,364

Total current assets

181,507,660

160,257,293

Other assets

Prepaid dredger deposits

23,025,010

23,038,180

Security deposits

48,844,780

48,872,718

Property, plant and equipment, net

49,242,976

51,131,051

Total other assets

121,112,766

123,041,949

Total assets

$302,620,426

$283,299,242

Liabilities and equity

Liabilities

Current liabilities

Accounts payable

$3,650,920

$3,653,008

Advance from related companies

13,656

13,664

Income tax payable

7,332,457

8,295,538

Accrued liabilities and other payables

2,625,817

4,045,227

Derivative liability

8,472,784

8,279,827

Total current liabilities

22,095,634

24,287,264

Total liabilities

22,095,634

24,287,264

Class A Preferred Shares, no par value; 25,000,000 shares authorized;

10,012,987 shares issued and outstanding (liquidation preference

$50,064,935, less $0 discount)

as of March 31, 2012 and December 31, 2011

50,064,935

50,064,935

Shareholders' equity

Ordinary shares, no par value; 225,000,000 shares authorized;

      52,677,323 shares issued and outstanding as of

      March 31, 2012 and December 31, 2011

Statutory reserves

15,386,316

15,386,316

Additional paid-in capital

79,185,284

79,185,284

Retained earnings

120,227,914

98,559,096

Accumulated other comprehensive income

15,660,343

15,816,347

Total shareholders' equity

230,459,857

208,947,043

Total liabilities and equity

$302,620,426

$283,299,242

 

 

CHINA DREDGING GROUP CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(IN US DOLLARS)

 For the Three Months Ended 

 March 31,

2012

2011

Contract revenue

$59,499,531

$50,131,369

Cost of contract revenue, including depreciation of

    $1,864,560 and $1,727,801 for the three months

    ended March 31, 2012 and 2011, respectively

(28,022,118)

(21,039,964)

Gross profit

31,477,413

29,091,405

General and administrative expenses

(2,435,274)

(1,950,684)

Income from operations

29,042,139

27,140,721

Other income (expense):

   Interest income

149,486

72,128

   Gain on exchange difference, net

46

   Gain on obligation under Make-Good Escrow

6,298,527

   Loss on derivative

(192,957)

(22,852)

Total other (expense) income

(43,425)

6,347,803

Income before income taxes

28,998,714

33,488,524

Income tax expense

(7,329,896)

(6,840,910)

Net income

21,668,818

26,647,614

Accretion of discount on Class A Preferred Shares

(5,734,493)

Net income attributable to ordinary shareholders

$21,668,818

$20,913,121

Earnings per ordinary share

    – Basic

$0.41

$0.40

    – Diluted

$0.35

$0.40

Weighted average number of ordinary shares outstanding

    – Basic

52,677,323

52,677,323

    – Diluted

62,690,310

62,690,310

 

 

CHINA DREDGING GROUP CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN US DOLLARS)

 For the Three Months

 March 31, 

2012

2011

Net income attributable to ordinary shareholders

$21,668,818

$20,913,121

Other comprehensive income

    Foreign currency translation (loss) gain

(156,004)

1,414,722

$21,512,814

$22,327,843

Total comprehensive income 

 

 

CHINA DREDGING GROUP CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(IN US DOLLARS)

Ordinary Shares,

 Accumulated other

Total

with no Par Value

 Number of

Statutory

Additional

Retained

comprehensive

 shareholders' 

 Shares

 Amount

reserves

paid-in capital

earnings

 income

 equity

Balance as of December 31, 2011

52,677,323

$           –

$15,386,316

$79,185,284

$98,559,096

$15,816,347

$208,947,043

Net income

21,668,818

21,668,818

Foreign currency translation loss

(156,004)

(156,004)

Balances as of March 31, 2012

52,677,323

$           –

$15,386,316

$79,185,284

$120,227,914

$15,660,343

$230,459,857

 

 

CHINA DREDGING GROUP CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN US DOLLARS)

 For the Three Months Ended

 March 31,

2012

2011

Cash flows from operating activities:

Net income

$21,668,818

$26,647,614

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation of property, plant and equipment

1,846,933

1,728,158

Gain on obligation under Make-Good Escrow

(6,298,527)

Loss on derivative

192,957

22,852

Changes in operating assets and liabilities:

Accounts receivable

4,377,597

(807,625)

Cost and estimated earnings in excess of billings

   on contracts in progress

6,956,820

(5,344,982)

Other receivables

(159)

(774)

Prepaid expenses

3,703,227

(3,903,800)

Inventories

(2,582,235)

(3,351,786)

Accounts payable

731,152

Income tax payable

(958,004)

2,025,532

Accrued liabilities and other payables

(1,416,885)

804,146

Net cash provided by operating activities

33,789,069

12,251,960

Cash flows from investing activities:

Purchase of property, plant and equipment

(1,123,719)

Net cash used in investing activities

(1,123,719)

Cash flows from financing activities:

Cash paid for deferred offering expenses

(437,295)

Net cash used in financing activities

(437,295)

Net increase in cash

33,789,069

10,690,946

Effect of exchange rate changes on cash

(51,747)

639,810

Cash as of the beginning of the year

112,409,544

88,532,472

Cash as of the end of the period

$146,146,866

$99,863,228

Supplemental disclosures of cash flow information:

Cash paid:

Income tax paid

$8,287,901

$4,815,377

Supplemental disclosures of non-cash transactions:

Accretion of discount on Class A Preferred Shares

$                  -

$5,734,493

Transfer of deposits paid for dredgers to property

plant and equipment

$                  -

$12,541,131

SOURCE China Dredging Group Co., Ltd

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