HUIZHOU, China, June 30 /PRNewswire-Asia-FirstCall/ -- Qiao Xing
Universal Resources, Inc. (Nasdaq: XING) ("the Company" or "XING"),
an emerging Chinese resources company headquartered in Huizhou, Guangdong
Province, today announced its unaudited results for the
fiscal year ended December 31,
2009.
"We are pleased with the progress we have made in the past
several months executing our resources driven growth strategies.
During this time, we were able to divest our fixed line terminal
business and complete the acquisition of our molybdenum mine. In
addition, we entered into preliminary agreements to acquire
participation in copper, lead and zinc," commented Mr. Ruilin Wu, the Company's Chairman and Chief
Executive Officer. "We expect the Chinese and the Global economy
will continue to grow in the months and years ahead, and we expect
that our strategy to exit our legacy telecom businesses and focus
our efforts on building a portfolio of strategic mining assets will
provide us with more stable and attractive returns on our
shareholder's capital going forward."
Fiscal 2009 Highlights
Fiscal year 2009 represented a critical year for the Company as
it transitioned its business focus from telecommunication terminals
to the resources industry. In April
2009, XING successfully acquired China Luxuriance Jade Co.,
Ltd. to enter the molybdenum mining and processing industry. In
July 2009, XING started commercial
production of molybdenum concentrate at its molybdenum mine,
generating sales revenue of Rmb193.9
million (US$28.4 million) and
net income of Rmb64.2 million
(US$9.4 million) in the second half
of the year.
Based on the initial success of its molybdenum business as well
as an extensive study of China's
macro economic trends, the Company is further consolidating its
strategy to become a pure resources company with meaningful scale
and a focus on strategically important metals. As a result of its
new strategic direction, XING divested its fixed line and low-end
mobile phone business on November 30,
2009 and officially changed its name to Qiao Xing Universal
Resources, Inc. effective in early 2010.
Throughout 2009, the Company's subsidiary, Qiao Xing Mobile
Communications Co., Ltd. (NYSE: QXM) ("QXMC") pursued a prudent
business strategy to manage the increasingly intense competition
within the mobile phone business, as well as the difficult economic
environment resulting from the global financial crisis. During the
year, QXMC reinforced its payment collections efforts to protect
its financial condition. In 2009 QXMC sales revenue decreased
24.2%, net cash flow from operations was Rmb602.4 million (US$88.2
million) for the year and cash balance as of December 31, 2009 increased from Rmb2,907.1 million to Rmb3,129.0 million
(US$458.4 million). On a consolidated
basis, the Company had a cash balance totaling Rmb3,709.5 million (US$543.4 million) as of December 31, 2009 compared to Rmb3,117.5 million as of December 31, 2008.
Financial Review of Operations for the Molybdenum Mine
Business
Commercial production at the Company's molybdenum mine started
in July 2009. Consolidated revenue
from the mining business for 2009 totaled Rmb193.9 million (US$28.4
million). Gross profit was Rmb100.6
million (US$14.7 million),
resulting in gross margin of 51.8%. Net income totaled Rmb64.2 million (US$9.4
million). Net income in the fourth quarter of 2009 increased
by 9.1% compared to the third quarter of 2009.
Molybdenum concentrate production in 2009 was 1,929.6 tons,
equivalent to 929.9 tons (2.05 million pounds) of molybdenum
metal.
Average cash cost for molybdenum metal production in 2009 was
Rmb70,024 (US$10,259) per ton, or Rmb31.83 (US$4.66)
per pound (The Company produces molybdenum concentrate, its cash
cost does not include the cost of smelting).
Capital expenditures for the mining business in 2009 totaled
Rmb113.0 million (US$16.6 million), of which Rmb94.0 million (US$13.8
million) was for the mine and Rmb19.0
million (US$2.8 million) was
for the mill.
Financial Review of Operations for 2009 on a Consolidated
Basis
Net sales
Net sales revenue decreased by Rmb327.1
million from Rmb2,153.9
million for fiscal year 2008 to Rmb1,826.8 million (US$267.6 million) for fiscal year 2009,
representing a decrease of 15.2%. The decrease was primarily due to
a reduction in sales at the Company's QXMC subsidiary.
QXMC revenue from the sale of handsets and accessories decreased
by 24.1% from Rmb2,140.3 million in
2008 to Rmb1,624.3 million
(US$238.0 million) in 2009, primarily
due to lower handset shipments and lower average selling price of
handsets sold. The decrease in handset shipments was primarily the
result of fewer new model launches and a slowdown in shipments amid
intense competition in the handset market. The decline in average
selling price of handsets from Rmb788
per unit in 2008 to Rmb735
(US$108) per unit in 2009, was
primarily driven by the launch of lower-priced VEVA-series products
to target the lower-end market as well as more aggressive pricing
to drive sales in an increasingly competitive environment. Average
selling prices were also affected by a decline in the use of the TV
infomercial arrangement under which handsets were sold to
infomercial companies at a higher price, but in return, QXMC had to
bear airtime and logistic costs.
Gross Profit
Gross profit for fiscal year 2009 was Rmb351.9 million (US$51.6
million), representing a decrease of Rmb514.9 million from Rmb866.8 million in fiscal year 2008, driven by a
decline in gross profit at the Company's QXMC subsidiary.
In 2009, QXMC gross profit declined 71% to Rmb251.3 million (US$36.8
million) from Rmb866.8 million
in 2008. The decline in gross profit at QXMC was primarily due to
decreased revenue from mobile handset products. Gross margin at
QXMC decreased from 40.2% in 2008 to 15.4% in 2009, primarily due
to fewer new model launches and more aggressive pricing amid
increasing competition in the PRC handset market. Gross margin was
also affected by a decline in the use of the TV infomercial
arrangement under which handsets were sold to infomercial companies
at a higher price, but in return, QXMC had to bear airtime and
logistic costs.
Operating expenses
Selling expenses decreased by Rmb36.1
million from Rmb146.6 million
for fiscal year 2008 to Rmb110.4
million (US$ 16.2 million) for
fiscal year 2009. The decrease was mainly due to decreased selling
and distribution expenses at QXMC.
General and administrative expenses increased by Rmb55.0 million from Rmb59.8 million in fiscal year 2008 to
Rmb114.8 million (US$ 16.8 million) in fiscal year 2009,
representing an increase of 92.0%. The increase was primarily
related to higher general and administrative expenses in QXMC for
2009.
Research and development expenses at QXMC were up 24.7% to
Rmb36.4 million (US$5.3 million) in 2009 compared to Rmb29.2 million in 2008.
Other income and expenses
Amortization of other intangible assets decreased by 59.8% from
Rmb11.7 million in 2008 to
Rmb4.7 million (US$0.7 million) in 2009 mainly because certain
intangible assets at QXMC had been fully amortized during 2008 and
2009.
In 2009, the Company recorded an impairment charge of
Rmb13.6 million (US$2.0 million) for the "CECT" brand.
In November 2009, QXMC entered
into an agreement for the sale of a property and the associated
land use rights to a third party for a total consideration of
Rmb163 million (US$23.9 million). The sale was subsequently
completed in the second quarter of 2010. As of December 31, 2009, the land and property have
been reclassified from non-current assets to current assets held
for sale. An impairment charge of Rmb6.0
million (US$0.9 million) was
recorded during the fiscal year ended December 31, 2009 to write down the value of the
assets to their fair value which was estimated based on the
expected sales proceeds less sales costs.
Interest income decreased by Rmb26.2
million from Rmb54.8 million
in 2008 to Rmb28.6 million
(US$ 4.2 million) in 2009. The
decrease was mainly attributable to the decrease in interest rates
in 2009 and the repayment of loans by a third party.
Interest expense decreased by Rmb88.9
million from Rmb311.7 million
in 2008 to Rmb222.8 million
(US$32.6 million) in 2009. In 2008
Qiao Xing Universal Telephone, Inc ("QXUT") recorded interest
expense of Rmb145.8 million relating
to two convertible bonds issued in 2006 and 2007. With repayment of
the 2007 convertible bond, the Company recorded an interest expense
of Rmb4.1 million (US$0.6 million) for QXUT in 2009. QXMC issued
US$70,000,000 senior convertible
notes on May 15, 2008 and recorded
interest expense of Rmb92.9 million
relating to those notes in 2008. On March
31, 2009, the Company purchased US$30,000,000 principal amount of QXMC senior
convertible notes from three note holders for an aggregate purchase
price of US$24,000,000. The Company
recorded interest expense of Rmb168.3
million (US$24.7 million)
related to the QXMC convertible notes in 2009. In 2009, interest
expense related to bank loans and other bank borrowings amounted to
Rmb50.4 million (US$7.4 million), compared to Rmb102.5 million in 2008, mainly attributed to
the repayment of bank borrowings in 2009.
The Company recognized a gain on re-measurement of embedded
derivatives relating to the convertible bonds of Rmb160.0 million in 2008 and a loss of
Rmb8.3 million (US$1.2 million) in 2009. The fair value of the
embedded derivatives is most sensitive to the market price on the
re-measurement date of the shares of the Company into which the
bonds are convertible.
The Company recorded a loss on extinguishment of convertible
debts amounting to Rmb15.3 million
(US$2.2 million) in 2009.
As a consequence of the QXMC share issue in connection with the
conversion of convertible notes and the exchange of stock options
for ordinary shares in 2009, the Company recorded a loss of
Rmb98.1 million (US$14.4 million) in 2009
The Company recorded non-cash unrealized loss on common stock
purchase warrants of Rmb4.7 million
(US$0.7 million) for 2009 due to a
requirement under US GAAP to account for the Company's outstanding
warrants as a derivative, with changes in the fair value recorded
as net income or loss.
Income tax expense decreased by Rmb108.9
million from Rmb155.7 million
in 2008 to Rmb46.9 million
(US$6.9 million) in 2009.
Discontinued operations
On November 30, 2009, the Company
sold Qiao Xing Communication Holdings Limited ("QXCH") to Dragon Fu
Investment Limited (DFIL) for a total consideration of Rmb75,000,000 (US$10,989,000), resulting in a gain on disposal
of discontinued operations of Rmb144.2
million (US$21.1 million). Net
loss from the discontinued operations of QXCH for the eleven months
ended November 30, 2009 was
Rmb372.2 million (US$54.5 million). The disposal also resulted in a
realized foreign currency translation gain of Rmb88.2 million (US$12.9
million). The total net loss from the discontinued
operations of QXCH of Rmb139.8
million (US$20.5 million) was
stated as a separate item in the consolidated financial statements
of the Company in 2009. In 2008, net of tax loss from the
operations of QXCH amounted to Rmb291.0
million. In 2007, QXCH recorded a net of tax income of
Rmb63.0 million.
Net results
Net earnings decreased by Rmb227.5
million from net losses of Rmb136.8
million in 2008 to net losses of Rmb364.3 million (US$53.4
million) in 2009. Loss per basic share was Rmb5.80 (US$0.85)
in 2009, compared to loss per basic share of Rmb4.42 in 2008.
Business Outlook
The Company is optimistic about a solid recovery in the global
economy and the continuous growth of the Chinese economy and
therefore believes that strategically important resources,
including molybdenum, lead, zinc and copper, will be in growing
demand for many years to come. As the supply side for many metals
has been constrained because of reduced access to financing during
the global financial crisis, the Company expects to enjoy strong
pricing power from its mining business going forward. As a result,
the Company is actively conducting due diligence on potential
acquisition targets and intends to enter into other strategically
important mining segments in the quarters ahead.
As one of its top business priorities, the Company will make
efforts to complete the acquisition of a lead-zinc mining company
as soon as possible in 2010. Should the acquisition be completed
within this year, the lead-zinc mine is expected to be accretive to
the Company in the first year, as it already has production
capacity for processing 500 tons of lead-zinc ores per day.
On the molybdenum front, the molybdenum price has remained
strong thus far in 2010 and even throughout the recent market
correction. The average price for molybdenum oxide peaked around
US$18.00 per pound on March 8, 2010 before retreating to US$15.40 per pound for the week of June 4, 2010. While the molybdenum price will
largely depend on supply from Chinese mines, in addition to the
pace of improving demand from Western and Japanese steel mills, the
Company anticipates that demand and price for molybdenum is
expected to improve within the next 18 months. According to a
recent study by Desjardin Securities, the molybdenum market is
expected to see demand outstripping supply in 2010 and 2011,
driving prices back to pre-crisis levels of US$25 per pound in 2010 and US$30 per pound in 2011. As such, the Company has
decided to look for more acquisition opportunities in China.
Strategic Focus on Resources
XING's goal is to become a relatively large company in the
resources industry with focus on several strategically important
nonferrous metals including molybdenum, lead, zinc and copper. The
Company will firmly adhere to this strategy while making great
efforts to sort out its relationship with QXM as it continues to
pursue alternatives to exit its legacy businesses. The Board of
Directors is expected to discuss this issue when it convenes in
July 2010.
Recent Developments
On June 9, 2010, XING announced
that Mr. Ruilin Wu, the Company's
Chairman and Chief Executive Officer, has resumed the share
purchase plan pursuant to which he planned to purchase up to an
aggregate of US$10 million of the
outstanding shares of the Company.
On May 26, 2010, the Company's
subsidiary signed a letter of intent with Chifeng Xingu Mining Co.,
Ltd. ("Chifeng Xingu"), a non-affiliated third party, to acquire
the 100% equity interest in Balinzuo Banner Xinyuan Mining Co.,
Ltd. ("Xinyuan Mining" or the "Mining Company"). Xinyuan Mining
owns a relatively large-scale lead-zinc mine in Balinzuo Banner, in
the Inner Mongolia Autonomous Region of the People's Republic of China (the "Xinyuan
Lead-zinc Mine" or the "Mine"). Based on the preliminary due
diligence and domestic geological exploration materials, Xinyuan
Mining owns the mining license of the Xinyuan Lead-zinc Mine,
covering 3.3233 square kilometers. The reserves of lead-zinc metal
and copper metal, which are subject to verification, are estimated
to be 825,000 tons and 109,000 tons, respectively, with average
grade at 7.60% for lead-zinc and 1.01% for copper. The Mine has
current production capacity for processing 500 tons of ores per
day, and is now at the stage of trial operation.
On May 5, 2010 the Company
announced the redemption of all outstanding Convertible Notes,
which releases the Company from several restrictions and allows it
to have more flexibility to pursue its corporate strategy focused
on becoming a large player in the resources industry.
Note: The above are estimates of the Company's preliminary
unaudited financial results for the fiscal year ended December 31, 2009. Please note that these
estimates remain subject to adjustment based upon, among other
things, completion of the full-year reporting process, and audited
results could differ materially from the estimates provided below.
Due to the acquisition of the 100% equity interest in CLJC and the
commencement of its mining operations, the Company needs additional
time to complete the 20-F filing and intends to file its 2009
Annual Report on Form 20-F as soon as possible and, in any event,
not later than July 15, 2010. The
Company is filing a Form 12b-25 with the SEC to extend the
June 30, 2010 filing deadline to
July 15, 2010 without imposing any
adverse conditions on the Company concerning the trading of its
shares.
About Qiao Xing Universal Resources, Inc.
Qiao Xing Universal Resources, Inc. is an emerging Chinese
resources company headquartered in Huizhou, Guangdong
Province, China. The
Company was previously one of the leading players of
telecommunication terminal products in China, but made the strategic decision to
diversify into the resources industry in 2007. In April 2009, the Company acquired the 100% equity
interest in China Luxuriance Jade
Company, Ltd ("CLJC"). CLJC, through its wholly owned Chinese
subsidiaries, owns the rights to receive the expected residual
returns from Chifeng Haozhou Mining Co., Ltd. ("Haozhou Mining"), a
large copper- molybdenum poly-metallic mining company in Inner
Mongolia, China. Since then, the
Company has further refined its strategy to become a pure resources
company and is actively seeking additional acquisition targets in
the resources industry.
Safe Harbor Statement
This announcement contains forward-looking statements, as
defined in the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. In some cases, these
forward-looking statements can be identified by words or phrases
such as "aim," "anticipate," "believe," "continue," "estimate,"
"expect," "intend," "is /are likely to," "may," "plan,"
"potential," "will" or other similar expressions. Statements that
are not historical facts, including statements about Qiao Xing
Universal Resources, Inc.'s beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from those contained in any
forward-looking statement. Information regarding these factors is
included in our filings with the Securities and Exchange
Commission. Qiao Xing Universal Resources, Inc. does not undertake
any obligation to update any forward-looking statement, except as
required under applicable law. All information provided in this
press release is as of June 30,
2010.
For more information, please contact:
Company Contact:
Mr. Rick Xiao, Vice President
Email: rick@qiaoxing.com
Tel: +86-752-282-0268
CCG Investor Relations Contact:
Mr. Ed Job, Account Manager
Email: ed.job@ccgir.com
Tel: +1-646-213-1914 (NY office)
SOURCE Qiao Xing Universal Resources, Inc.