Ziyang Ceramics Reports Financial Results for the Second Quarter Ended June 30, 2012

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Ziyang Ceramics Corporation (ZYCI), a leading manufacturer of high quality interior porcelain tiles in China, announced today its financial results for the second quarter ended June 30, 2012. Second quarter 2012 revenue climbs to $14.4 million, up 45.6% from revenue of $9.9 million recorded in the second quarter of 2011 Second quarter 2012 net income reaches $4.0 million, up 76.1% from $2.3 million recorded in the second quarter of 2011 Gross margin climbs to 37.6% and net margin reaches 27.8% in the second quarter of 2012 Basic and diluted EPS reached $0.82 for the first six months of 2012 on 9 million weighted average shares outstanding

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Mr. Lingbo Chi, CEO of Ziyang Ceramics, stated, "We are extremely pleased with our performance this quarter as we continue to meet or exceed our sales targets while increasing margins and controlling expenses.

Ziyang Ceramics Corporation (ZYCI), a leading manufacturer of high quality interior porcelain tiles in China, announced today its financial results for the second quarter ended June 30, 2012.

Financial Highlights
For the second quarter of 2012, total revenues reached $14.4 million, up 45.6% from $9.9 million recorded in the second quarter of 2011. The increase in revenue was primarily driven by the increase in sales from our new line of interior porcelain wall tiles launched in August of 2011. Gross profit in the second quarter of 2012 increased to $5.4 million, up by 54.8% from $3.5 million achieved in the second quarter of 2011. Gross profit margin increased to 37.6% in the second quarter of 2012, compared to 35.4% in the same period of 2011 primarily due to the higher sales of our premium polycrystalline floor tiles where gross margin reached 42%. Overall net margin in the second quarter of 2012 increased to 27.8%, up from 23.0% recorded in the same period in 2011. Total operating expenses for the second quarter of 2012 decreased to $531,000, down 13.4% from $613,000 recorded in the same period in 2011. The decrease in operating expenses is primarily due to a reduction in retirement insurance expense.

For the second quarter of 2012, net income rose 76.1% to $4.0 million with earnings per basic and diluted share of $0.40 on 10 million weighted average shares outstanding. This compares to net income of $2.3 million recorded in the second quarter of 2011with earnings of $3.83 per basic and diluted share on 590,000 weighted average shares outstanding. The increase in the number of common shares outstanding in 2012 is a result of the issuance of 8.9 million shares in May of 2012 upon full conversion of two outstanding promissory notes we issued in connection with our acquisition of Ziyang Ceramic Company.

For the first six months, total revenues reached $25.8 million, up 48.6% from $17.3 million recorded in the same period in 2011. Net income for the first six months totaled $7.1 million, an increase of 78.7% from $4.0 million recorded for the six month period in 2011. We recorded earnings per basic and diluted share of $0.82 for the first six months of 2012 on 9 million weighted average shares outstanding.

At June 30, 2012, total cash was $5.8 million after the payment of $5.1 million in long term prepaid rent for 24 acres of land we plan to use for additional facility expansion and the repayment of approximately $2.6 million in loans outstanding. This compares to cash and cash equivalents of $5.9 million at December 31, 2011. Current assets were $14.2 million at June 30, 2012 compared to current assets of $14.1 million at December 31, 2011. Total shareholder equity increased by 33.5% to $29.0 million, compared to shareholder equity of $21.7 million at December 31, 2011.

Commenting on the financial results for the second quarter and six months of 2012, Mr. Lingbo Chi, CEO of Ziyang Ceramics, stated, "We are extremely pleased with our performance this quarter as we continue to meet or exceed our sales targets while increasing margins and controlling expenses. We have further strengthened our distribution base in the second quarter as our interior and higher-end tiles continue to be well received in our end markets. We are confident in our ability to build on our strong performance in the first half of 2012 and we believe our investments for the future for facility expansion will enable us to expand for the foreseeable future as we look to opportunistically grow our business. We continue to see our full year 2012 revenue exceeding $55 million with $14 million in net income. Our entire team is working diligently to further our growth in the coming quarters and years to help us maximize the value of our company for the benefit of our shareholders."

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Dore Perler
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