Cost of Sales & Gross Margin
China Carbon's cost of goods sold consists of the cost of raw materials, utilities, labor, and depreciation expenses in its manufacturing facilities. The Company's cost of goods sold was $8.99 million in Q2 2012 compared to cost of goods sold of $9.46 million in Q2 2011, a decrease of $0.47 million or 4.99%. This decrease was directly associated with the decrease in China Carbon's sales.
China Carbon's gross margin however increased from 22.1% for Q2 2011 to 24.4% for Q2 2012. This increase reflects the variance in China Carbon's product mix, which is attributable to an increase of percentage in the Company's sales of fine grain graphite and high purity graphite products, which are higher margin products compared to graphite electrodes and other products.
As a result of the factors described above, China Carbon's net income was $0.87 million in Q2 2012 as compared to $0.88 million in Q2 2011, a decrease of $0.01 million.
"As we continue to refine our strategy of focusing on our higher margin products made from fine grain and high purity graphite, we will see improved financial results in upcoming quarters," remarked Mr. Yu. "This strategy enables us to maintain profitability while also exploring the significant potential market for these products. High purity and fine grain graphite products have numerous applications in fast developing fields like the nuclear, solar and defense industries, and we are working hard to be in a better position to meet any potential rises in demand for these products, including getting our new facility that will specialize in the manufacture of fine grain and high purity graphite products, plus double our annual production capacity to 60,000 tons, completely up and running."
About China Carbon Graphite Group, Inc.
China Carbon Graphite Group, through its affiliate, Xingyong Carbon Co., Ltd., manufactures graphite and carbon based products in China. The company is the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in smelting for colored metals and rare earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. In September 2007, the Company was approved and designated by the Ministry of Science & Technology as a "National Hi-tech Enterprise," a distinction that the Company still holds. Of the more than 400 carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor. For more information, please visit www.chinacarboninc.com.
Safe Harbor Statement
This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors set forth in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.
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