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Sancon Announces 2011 First Quarter Results

SHANGHAI, CHINA--(Marketwire - 05/26/11) - Sancon Resources Recovery, Inc. (OTC.BB:SRRY - News) (or "Sancon"), a growing environmental services and waste recycling company with operations in both China and Australia, announced today results for its 2011 first quarter ended March 31, 2011.Financial highlights for 2011 first quarter:

 
-- Revenue increased 25% to $3.85 million
-- Gross profit of $1.37 million, a gross margin of 36%
-- Net Income of $0.45 million, a net margin of 12%
-- EBITDA of $0.5 million, or $0.02 per share.

Results of Operations - Comparison between the three months ended March 31, 2011 and the same periods in 2010The Company generated revenue of $3.85 million in the 2011 first quarter, representing $778,638 or 25% increase compared to $3.07 million in the 2010 first quarter. Revenue from China operation increased $809,323 or 34% from $2.4 million in 2010 first quarter to $3.2 million in 2011 first quarter. Revenue from Australia operation has decreased $30,685 or 5% from $662,348 in 2010 first quarter to $631,663 in 2011 first quarter. The increase in revenue in China operation is partially because of the acquisition of the newly started waste paper and cardboards collection business from June 2010.Gross profit decreased $156,200 or 10% to $1.37 million in the first quarter 2011 from $1.53 million in the first quarter 2010. Gross profit of China operation decreased $145,288 or 13% from $1.14 million in 2010 first quarter to $1 million in 2011 first quarter. The increase of raw material in our waste paper collection business is the main reason for the decrease of gross profit. However, our management believes the gross margin will be increased along with the expansion of the market in waste paper collection. In Australia, gross profit also decreased $10,912 or 3% from $386,587 in 2010 first quarter to $375,675 in 2011 first quarter. Gross margin decreased from 50% in the 2010 first quarter to 36% in the 2011 first quarter.Net income for 2011 first quarter was $0.45 million, or $0.02 basic and diluted earnings per share, compared to $0.57 million or $0.03 basic and diluted earnings per share one year ago. Net income of our China operation decreased $0.67M or 11% from $0.61M in 2010 first quarter to $0.54M in 2011 first quarter. Net income of our Australia operation decreased $0.54M or 845% from $6,384 in 2010 first quarter to $47,556 for the same period in 2011. The high wage expenses and consulting fee result in the decrease of net income in Australia.Financial Position as of March 31, 2011At March 31, 2011, the Company had cash and cash equivalents totaling $6.5 million, total assets of $11 million, working capital of $6 million and stockholders' equity of $7.3 million. The Company generated $0.3 million in net cash from operating activities for the three months ended March 31, 2011."We are pleased with our continued increase in revenue in 2011 first quarter. However, our gross profit and net income has dropped. That is mainly due to the poor performance in our Australia operation and small scale of waste paper business in China," said Jack Chen, Sancon's Chief Executive Officer. "We have recently changed the management in our Australia operation and we are working hard to turn it around in the next quarter. In China, we've installed additional equipments which will triple our daily waste paper processing capacity. By expanding the waste paper business rapidly within a short period, we can negotiate a better pricing and increase our margin."About Sancon Resources Recovery IncSancon Resources Recovery, Inc. is an environmental service company specializes in the collection, processing, and selling of the reprocessed waste material such as plastic, metal, paper, cardboard, glass etc. The recycled materials are re-used by Sancon's manufacturing clients to make a wide variety of new products that include outdoor furniture, construction materials, building materials, packaging materials, and various other products. The use of recycled raw materials is both environmentally friendly and an important method to lower production costs for manufacturers to stay competitive. Sancon also invests in the renewable energy area by sponsoring the development of biofuel production technique that thrives on the supplies of carbon dioxide. Sancon currently has recycling plants based in Melbourne Australia and China. For more information please visit: www.sanconinc.comForward-looking statements:The statements made in this press release, which are not historical facts, may contain certain forward-looking statements concerning potential developments affecting the business, prospects, financial condition and other aspects of the company to which this release pertains. The actual results of the specific items described in this release, and the company's operations generally, may differ materially from what is projected in such forward-looking statements. Although such statements are based upon the best judgments of management of the company as of the date of this release, significant deviations in magnitude, timing and other factors may result from business risks and uncertainties including, without limitation, the company's dependence on third parties, general market and economic conditions, technical factors, the availability of outside capital, receipt of revenues and other factors, many of which are beyond the control of the company. The company disclaims any obligation to update information contained in any forward-looking statement.

 
SANCON RESOURCES RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

Assets
As at
--------------------------
March 31, December 31,
2011 2010
------------ ------------
Current assets
Cash and cash equivalents $ 6,514,410 $ 6,013,889
Trade receivables, net 2,060,937 1,503,849
Inventory 133,871 61,286
Deferred tax asset 83,876 37,617
Other current assets 316,654 301,234
Advance and prepayment 93,010 82,021
Held to maturity securities 129,384 129,489
------------ ------------
Total current assets 9,332,142 8,129,385

Property, plant & equipment, net 1,173,874 1,190,106
Security deposit 11,340 11,179
Long Term Deferred Expenses 12,103 13,448
------------ ------------
Total assets $ 10,529,459 $ 9,344,118
============ ============

Liabilities and Stockholders' Equity

Liabilities
Current liabilities

Trade payables $ 1,138,792 $ 922,626
Capital lease - current 22,561 24,807
Tax payables 461,633 304,613
Due to related parties 977,896 697,030
Loan Payable - current 29,881 29,224
Accrued expenses and other payables 616,131 540,036
------------ ------------
Total current liability 3,246,894 2,518,336

Long term liability
Capital lease - -
Loan Payable 21,216 28,805
------------ ------------
Total liability 3,268,110 2,547,141
------------ ------------

Stockholders' equity
Share Capital
Authorized: 500,000,000 common shares, par
value $0.001 per share Issued and Outstanding:
22,964,996 shares as of December 31, 2010 and
March 31, 2011 22,965 22,965
Additional paid-in capital 1,079,200 1,079,200
Deferred Compensation (105,300) (109,200)
Other comprehensive income 78,377 86,098
Retained Earnings 5,808,911 5,361,208
------------ ------------
Total 6,884,153 6,440,271
Non-controlling interest 377,196 356,706
------------ ------------
Total stockholders' equity 7,261,349 6,796,977
------------ ------------
Total liabilities & stockholders' equity $ 10,529,459 $ 9,344,118
============ ============

The accompanying notes are an integral part of these audited consolidated
financial statements




SANCON RESOURCES RECOVERY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

For the three months
periods ended March 31,
2011 2010
------------ ------------
Net sales $ 3,847,147 $ 3,068,509
Cost of sales 2,472,944 1,538,106
------------ ------------
Gross profit 1,374,203 1,530,403

Operating Expenses
Depreciation 43,280 56,654
Selling, general and administrative 853,189 875,659
------------ ------------
Total operating expenses 896,469 932,313
------------ ------------
Operating Income 477,734 598,090

Other income (expense)
Other income, net (9,730) (13,194)
Investment income(loss) prior to acquisition - (769)
Interest (expense) income, net (376) 426
------------ ------------
Total other income (10,106) (13,537)
------------ ------------

Income from continued operations before
income taxes and discontinued operation 467,628 584,553

Income before income taxes and non-controlling
interest 467,628 584,553

Income taxes (565) 9,075

Net income (loss) attributed to non-controlling
interest 20,490 8,168

------------ ------------
Net income 447,703 567,310

Other comprehensive item:
Foreign currency translation gain/(loss) 6,736 (796)

------------ ------------
Net comprehensive income $ 454,439 $ 566,514
============ ============

Earnings per share:
Basic earnings per share $ 0.02 $ 0.02
============ ============
Basic weighted average shares outstanding 22,964,996 22,964,996
============ ============
Diluted earnings per share $ 0.02 $ 0.02
============ ============
Diluted weighted average shares outstanding 22,697,410 23,098,466
============ ============

The accompanying notes are an integral part of these audited consolidated
financial statements