GUIYANG, China—China Forestry Industry Group, a company involved in the production and sale of floor materials and related products to residential and commercial customers in China through its subsidiaries Aosen Forestry and Silvan Flooring, reported its financial results for the quarter ended March 31, 2011.
First Quarter 2011 Highlights
- Revenue totaled $10.4 million, up 143.4% from $4.3 million for the first quarter in 2010
- Gross profit totaled $3.6 million, up 136.3% from $1.5 million in the first quarter of 2010
- Gross margin was 34.3%, compared to 35.3% in the same period in 2010
- Operating income was $2.9 million, up 138.8% from $1.2 million in the first quarter 2010
- Net income was $2.1 million or $.07 per fully-diluted share, compared to net income of $1.2 million or $.06 per fully-diluted share in the first quarter 2010
“Our fiscal year 2011 began on a strong note with significant top and bottom line growth for the first quarter,” said Yulu Bai, China Forestry Industry Group’s chairman and CEO. “The results were mainly driven by the performance of our laminate flooring subsidiary following the incorporation of Silvan Flooring and the accelerated marketing efforts to promote the “Silvan Touch” brand throughout 2010. Supported by our intention to expand our production capacity and sales network, we expect our growth momentum to continue as we strive to meet the strong demand for interior design and housing-related products in China.”
First Quarter 2011 Results
China Forestry’s achieved revenue of $10.4 million in first quarter of 2011, up 143.4% from the first quarter of 2010. The increase was primarily due to the expansion of the Company’s sales and distribution network following the acquisition of the laminate flooring business Silvan Flooring in late 2009.
Laminate flooring accounted for $9.0 million, or 86.5% of total sales for the first quarter 2011, an increase of 75.33%, from $1.4 million, or 13.5% of total sales for the first quarter 2010. While the Company began the marketing and promotion of Silvan Touch products in the first quarter 2010, the effect of these activities kicked off in late 2010 and trend continued into the first quarter of 2011.
Fiber board accounted for $2.7 million, or 24.7% of total sales for the first quarter 2011, compared to $5.9 million, or 77.0% of total sales, for the corresponding quarter last year. As a result of the Company’s strategic decision to concentrate on the production of laminate flooring, sale volume decreased by 18.84% to 18,488 sq. meters. However the effect on revenue was slightly offset by an 18.5% increase in the average selling price of fiber board to RMB 1,475 per cubic meters, as a response to increased raw material and logistics costs.
Cost of sales increased 147.2% to $6.9 million for the first quarter 2011 from $2.8 million for the first quarter 2010, mainly due to increased sales in the period.
Gross profit was $3.6 million, an increase of 136.3% from the corresponding period in the previous year. Gross margin was 34.3%, compared to 35.3% in the corresponding three-month period last year. Gross margins have remained flat year-over-year, but increased from the fourth quarter 2010 largely due to increased sales of laminate flooring since the fourth quarter 2010 in proportion to fiber board, as laminate flooring generally enjoy a higher price premium. However, selling prices for the Company’s laminate flooring were 18.7% lower year-over-year for the first quarter 2011 as the Company lowered prices to remain price competitive against peers, which offset the expansion in gross margin from the favorable product mix.
Selling and marketing expenses for the first quarter of 2011 were $349,595, an increase of 363.4%, from $75,435 for the corresponding period previous year. The increase was mainly due to increased advertisement expenses associated with the development of Company’s sales distribution channels as well as increased costs for the improvement of the Company’s online infrastructure.
General and administrative expenses for the first quarter of 2011 were $373,624, an increase of 53.5% from $243，364 for the corresponding period previous year. The increase was primarily attributable to higher costs associated with expansion of the Company’s sales network such as travel costs, and employee remuneration.
As a result, operating income was $2.9 million, an increase of 138.8% from $1.2 million previous year. Operating margin was 27.3%, compared to 27.9% for the corresponding period previous year.
For the three months ended March 31, 2011, the Company had $0.2 million in other expenses, compared with $0.3 million in other income for the same period last year, mainly due to increased interest expenses in the first quarter 2011 and a government tax rebate in the first quarter of 2010.
Net income was $2.1 million, or $0.07 per diluted share, for the first quarter of 2011, compared to $1.2 million, or $0.06 per diluted share, for the corresponding three-month period during the previous year. The Company had 30,000,000 weighted average diluted shares outstanding for the three months ended March 31, 2011, compared with 20,500,000 for the corresponding period in 2010.