Sino-Forest Corporation News
Sino-Forest Reports First Quarter 2008 Results
Financial Highlights - Revenue increases 21% to $136 million - EBITDA increases 57% to $74 million - Income from operations increases 43% to $35 million - Non-operating charges of $7.4 million (approximately $0.04 EPS) result in Net Income increasing only 26% to $15 million - Non-operating charges combined with the effect of a 30% increase in outstanding common shares resulted in diluted EPS unchanged compared to same quarter last year (US$ millions, except margin and First Quarter per share amounts) ended March 31 2008 2007(3) Change (Restated) $ $ % ————————————————————————————————————- Revenue 136.1 112.8 20.7 Gross Profit(1) 46.9 32.1 46.1 Gross Profit Margin 34.4% 28.5% 5.9% pts EBITDA(2) 73.6 47.0 56.8 Income from operations 34.6 24.2 42.9 Net Income 14.5 11.5 26.2 Diluted Earnings Per Share from Continuing Operations 0.09 0.08 2.3 Diluted Earnings Per Share 0.08 0.08 (3.2) Cash Flow From Operating Activities of Continuing Operations 32.0 46.3 (30.8) Note: See footnotes (1), (2) and (3) at end of this release
Mr Chan continued, "These results demonstrate our ability to execute our integrated plantation model and confirm that the economics of our strategic plan are attractive — exceeding our expectations and guidance. We continue to ramp up our capabilities and acquire additional fibre under existing agreements at the contracted terms. These agreements will provide a solid foundation of sustainable and prosperous growth for Sino-Forest Corporation."
Business Segment Highlights
Total revenue increased 21% to
————————————————————————————————————- First Quarter 2008 First Quarter 2007 ———————————————————- $'000 % $'000 % ————————————————————————————————————- Wood Fibre Operations ——————————- ————————————————————————————————————- Plantation Fibre 102,670 75.4 51,316 45.5 ————————————————————————————————————- Other Fibre 24,187 17.8 55,776 49.5 ————————————————————————————————————- Manufacturing and Other Operations 9,280 6.8 5,685 5.0 ————————————————————————————————————- Total Revenue 136,137 100.0 112,777 100.0 ————————————————————————————————————- ————————————————————————————————————- Wood Fibre Operations Revenue Plantation Fibre ————————————————————————————————————- First Quarter ended First Quarter ended March 31, 2008 March 31, 2007 ——————————————————————————— Sales Sales per Total per Total Hectares hectare revenue Hectares hectare Revenue ————————————————————————————————————- $ $'000 $ $'000 ————————————————————————————————————- Purchased plantations 9,175 5,476 50,244 11,150 4,430 49,395 ————————————————————————————————————- Integrated plantations 4,254 12,306 52,349 - - - ————————————————————————————————————- Heyuan Pine Undertaking - - - 880 1,667 1,467 ————————————————————————————————————- Planted plantations 64 1,203 77 261 1,739 454 ————————————————————————————————————- Total 13,493 7,609 102,670 12,291 4,175 51,316 ————————————————————————————————————- ————————————————————————————————————-
Plantation fibre revenue doubled to
The total volume of fibre sold during the first quarter was approximately 1.4 million cubic metres, with approximately 863,000 m(3) from our purchased and planted plantations, and approximately 509,000 m(3) from integrated plantations. In the same quarter last year, we sold a total of 1.0 million m(3) from purchased and planted plantations (which include Heyuan Pine Undertaking), and no trees from our integrated plantations.
The average yield of harvested logs sold under the integrated plantation was 120 m(3) per hectare and it commanded an average selling price of
The average yield of standing timber sold under the purchased and planted plantations was 93 m(3) per hectare during the quarter 2008 (84 m(3) per hectare for Q107), which obtained an average selling price of
Other Fibre
Revenue from imported wood products decreased 56% from
Revenue from the sales of wood logs decreased 83% to
Manufacturing and Other Operations Revenue
Revenue from this business segment increased 63% to
Gross Profit
Gross profit increased 46% from
Wood Fibre Operations Gross Profit
Gross profit margin from sales of purchased and planted plantations increased from 58% in Q1 2007 to 63% in 2008 due to higher selling prices. The gross profit margin from sales of logs under the integrated plantation operations was 28%.
Gross profit margin from sales of imported wood products remained similar to last year's 3%.
Gross profit margin from sales of wood logs decreased from 10% in Q1 2007 to 5% in 2008 as a result of no sales of logs from Inner Mongolia.
Manufacturing and Other Operations Gross Profit
Gross margin from our manufacturing and other operations decreased from 12% in Q1 2007 to breakeven in 2008, primarily due to increased cost of production of our manufacturing plants and downtime due to the snowstorms in the first quarter of 2008.
Selling, General and Administration Expenses
SG&A expenses increased 67% to
Income from Operations
Income from operations increased 43%, from
Non-Operating Charges
During the quarter, the Company incurred non-operating charges in the amount of approximately
Net Income from Continuing Operations
As a result of the foregoing, net income from continuing operations in the first quarter increased 33%, from
Cash Flows from Operating Activities of Continuing Operations
Net cash provided by operations increased from
Capital Expenditures ————————————————————————————————————- First Quarter ended First Quarter ended March 31, 2008 March 31, 2007 ————————————————————- (in millions) Hectares $ Hectares $ ————————————————————————————————————- Tree acquisition - Purchased plantations 27,706 77.9 14,416 73.6 ————————————————————————————————————- Re-planting and maintenance of plantations 4.4 3.4 ————————————————————————————————————- Panel manufacturing and other operations 10.0 1.0 ————————————————————————————————————- Total 92.3 78.0 ————————————————————————————————————- ————————————————————————————————————-
Capital expenditures in the first quarter of 2008 for plantation acquisitions increased 6% to
Outlook
The outcome from
Our goal in 2008 is to continue to expand our portfolio of plantation trees and fibre inventory under management, and to build up a large-scale sustainable re-plant program in 2009 after more land in our southern-province plantation base has been harvested and cleared.
Notice of Conference Call
Sino-Forest will hold an investor conference call to further discuss its first quarter 2008 results on
NOTE: The unaudited Interim Consolidated Financial Statements and Notes and Management Discussion and Analysis for the period ended
About Sino-Forest Corporation
Sino-Forest Corporation is a leading commercial forestry plantation operator in
Note (1) to the Financial Highlights table: Gross profit for any period is defined as total revenue less cost of sales. Gross profit is presented as additional information because we believe that it is a useful measure for certain investors to determine our operating performance. Gross profit is not a recognized term under Canadian GAAP and should not be considered as an alternative to net income as an indicator of our operating performance or any other measure of performance derived in accordance with Canadian GAAP. Because it is not a Canadian GAAP measure, gross profit may not be comparable to similar measures presented by other companies.
Note (2) to the Financial Highlights table: EBITDA for any period is defined as income from operations for the period after adding back depreciation and amortization and depletion of timber holdings from cost of sales, for the period. EBITDA is presented as additional information because we believe that it is a useful measure for certain investors to determine our operating cash flow and historical ability to meet debt service and capital expenditure requirements. EBITDA is not a measure of financial performance under Canadian GAAP and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with Canadian GAAP.
Note (3) to the Financial Highlights table: Results have been restated to reflect the classification of wood chips and commission operations as discontinued operations as disclosed in Note 18 Discontinued Operations and the adoption of a new accounting policy for uncertainty in income taxes in the consolidated financial statements for the year ended
No stock exchange or regulatory authority has approved or disapproved of information contained herein. Certain information included in this news release is forward-looking and is subject to important risks and uncertainties. When used in this news release, the words "believe", "intend", "estimate", "expect", "plan" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations. The results or events predicted in these statements may differ materially from actual results or events and are no guarantees of future performance of Sino-Forest. Factors which could cause results or events to differ from current expectations include, among other things: our ability to acquire rights to additional standing timber, our ability to meet our expected plantation yields, the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs, our reliance on joint venture partners, authorized intermediaries, key customers, suppliers and third party service providers, our ability to operate our production facilities on a profitable basis, changes in currency exchange rates and interest rates, and PRC economic, political and social conditions and government policy, and stock market volatility, other factors not currently viewed as material could cause actual results to differ materially from those described in the forwarding-looking statements. For additional information with respect to certain of these and other factors, see the reports filed by Sino-Forest Corporation with applicable Canadian securities administrators. Sino-Forest Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Expressed in thousands of United States dollars, except for earnings per share information) (Unaudited) (Restated) Three months ended March 31, 2008 2007 $ $ ————————————————————————————————————- Revenue 136,137 112,777 Costs and expenses Cost of sales 89,258 80,686 Selling, general and administration 11,322 6,765 Depreciation and amortization 1,001 1,143 ————————————————————————————————————- 101,581 88,594 ————————————————————————————————————- Income from operations before the undernoted 34,556 24,183 Interest expense (10,571) (11,114) Interest income 2,595 1,467 Exchange losses (2,839) (467) Loss on changes in fair value of financial instruments (4,535) (314) Other income 682 297 ————————————————————————————————————- Income before income taxes 19,888 14,052 Provision for income taxes (4,274) (2,346) ————————————————————————————————————- Net income from continuing operations 15,614 11,706 Net loss from discontinued operations (1,087) (196) ————————————————————————————————————- Net income for the period 14,527 11,510 ————————————————————————————————————- Earnings per share Basic 0.08 0.08 Diluted 0.08 0.08 ————————————————————————————————————- Earnings per share from continuing operations Basic 0.09 0.08 Diluted 0.09 0.08 ————————————————————————————————————- Loss per share from discontinued operations Basic (0.01) - Diluted (0.01) - ————————————————————————————————————- Retained earnings Retained earnings, beginning of year, as previously presented 540,964 397,380 Cumulative impact of accounting changes relating to financial instruments - (8,689) ————————————————————————————————————- Retained earnings, beginning of period 540,964 388,691 Net income for the period 14,527 11,510 ————————————————————————————————————- Retained earnings, end of period 555,491 400,201 ————————————————————————————————————- ————————————————————————————————————- CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of United States dollars) (Unaudited) (Restated) Three months ended March 31, 2008 2007 $ $ ————————————————————————————————————- Net income for the period 14,527 11,510 Other comprehensive income: Unrealized loss on financial assets designated as available-for-sale, net of tax of nil (949) - Unrealized gains on foreign currency translation of self-sustaining operations 62,746 9,090 ————————————————————————————————————- Other comprehensive income 61,797 9,090 ————————————————————————————————————- Comprehensive income 76,324 20,600 ————————————————————————————————————- ————————————————————————————————————- CONSOLIDATED BALANCE SHEETS (Expressed in thousands of United States dollars) (Unaudited) As at As At March 31, December 31, 2008 2007 $ $ ————————————————————————————————————- ASSETS Current Cash and cash equivalents 230,222 328,690 Short-term deposits 29,060 22,163 Accounts receivable 134,560 105,329 Inventories 51,657 46,661 Prepaid expenses and other 27,907 24,185 ————————————————————————————————————- Total current assets 473,406 527,028 ————————————————————————————————————- Timber holdings 1,271,686 1,174,153 Capital assets, net 91,155 78,608 Other assets 78,791 57,708 ————————————————————————————————————- 1,915,038 1,837,497 ————————————————————————————————————- ————————————————————————————————————- LIABILITIES AND SHAREHOLDERS' EQUITY Current Bank indebtedness 49,863 55,383 Accounts payable and accrued liabilities 108,852 107,989 Income taxes payable 2,103 1,615 Liabilities of discontinued operations 34,530 32,016 ————————————————————————————————————- Total current liabilities 195,348 197,003 ————————————————————————————————————- Long-term debt 443,310 441,985 Derivative financial instrument 11,625 11,211 ————————————————————————————————————- Total liabilities 650,283 650,199 ————————————————————————————————————- Commitments and Contingencies Shareholders' equity Share capital 537,141 537,141 Contributed surplus 5,039 3,906 Accumulated other comprehensive income 167,084 105,287 Retained earnings 555,491 540,964 ————————————————————————————————————- Total shareholders' equity 1,264,755 1,187,298 ————————————————————————————————————- 1,915,038 1,837,497 ————————————————————————————————————- ————————————————————————————————————- CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of United States dollars) (Unaudited) (Restated) Three months ended March 31, 2008 2007 $ $ ————————————————————————————————————- CASH FLOWS FROM OPERATING ACTIVITIES Net income for the period 14,527 11,510 Net loss from discontinued operations 1,087 196 Add (deduct) items not affecting cash Depletion of timber holdings included in cost of sales 38,054 21,625 Loss on changes in fair value of financial instruments 4,535 314 Unrealized exchange losses 2,497 153 Stock-based compensation 1,133 455 Depreciation and amortization 1,001 1,143 Interest income from Mandra (300) - Other 529 447 ————————————————————————————————————- 63,063 35,843 Net change in non-cash working capital balances (31,042) 10,457 ————————————————————————————————————- Cash flows from operating activities of continuing operations 32,021 46,300 ————————————————————————————————————- Cash flows from operating activities of discontinued operations 1 4,038 ————————————————————————————————————- CASH FLOWS USED IN INVESTING ACTIVITIES Additions to timber holdings (83,637) (77,273) Increase in other assets (22,411) - Additions to capital assets (10,036) (1,031) Increase in non-pledged short-term deposits (3,947) (1,761) Business acquisition (1,928) - Proceeds from disposal of capital assets 1 - ————————————————————————————————————- Cash flows used in investing activities (121,958) (80,065) ————————————————————————————————————- CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES (Decrease) increase in bank indebtedness (6,757) 916 Increase in long-term debts 855 - (Increase) decrease in pledged short-term deposits (1,938) 1,054 Payment on derivative financial instrument (2,100) (930) ————————————————————————————————————- Cash flows (used in) from financing activities (9,940) 1,040 ————————————————————————————————————- Effect of exchange rate changes on cash and cash equivalents 1,408 131 ————————————————————————————————————- Net decrease in cash and cash equivalents (98,468) (28,556) Cash and cash equivalents, beginning of year 328,690 152,887 ————————————————————————————————————- Cash and cash equivalents, end of year 230,222 124,331 ————————————————————————————————————- ————————————————————————————————————- Supplemental cash flow information Cash payment for interest charged to income 16,458 16,658 Interest received 2,595 1,575 ————————————————————————————————————- ————————————————————————————————————-
SOURCE Sino-Forest Corporation
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