Financials
First Quarter Results Financial Statement And Related Announcement
Financials Archive
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Profit & Loss
Consolidated Statement of Comprehensive Income
Review of Performance
1Q2012 versus 1Q2011
Revenue for 1Q2012 increased by $1.4 million from $20.3 million in 1Q2011 to $21.7 million. This was mainly due to higher sales volume of Vanadium Oxide ("V2O5") flakes.
Gross profit for 1Q2012 decreased by $2.8 million from $6.8 million in 1Q2011 to $4.0 million. The lower overall gross profit margin of 18.2% in 1Q2012 as compared to 33.4% in 1Q2011 was mainly due to lower unit selling price of V2O5 flakes, lower production of rebar and higher maintenance costs.
Other income for 1Q2012 decreased by $2.7 million from $4.0 million in 1Q2011 to $1.3 million mainly due to decrease in interest income of $3.0 million.
Distribution costs for 1Q2012 decreased by $24,000 from $163,000 in 1Q2011 to $139,000 mainly due to lower entertainment costs.
Administrative expenses for 1Q2012 increased by $0.8 million from $2.1 million in 1Q2011 to $2.9 million mainly due to professional fees incurred for proposed acquisition project of $0.4 million.
Other expenses for 1Q2012 decreased by $15.2 million from $16.6 million in 1Q2011 to $1.4 million mainly due to impairment loss on available-for-sale financial assets of $16.0 million in 1Q2011 and offset by the higher foreign exchange loss of $0.5 million in 1Q2012.
Finance costs for 1Q2012 decreased by $3.4 million from $4.9 million in 1Q2011 to $1.5 million mainly due to the decrease in amortisation of fees and interest expenses in relation to bank loans of $2.3 million and absence of mark-to-market loss in 1Q2012.
Share of losses from associates for 1Q2012 increased by $4.6 million from $1.4 million in 1Q2011 to $6.0 million due to poor results of Chengyu.
Loss for 1Q2012 decreased by $7.9 million from $15.1 million in 1Q2011 to $7.2 million. The lower loss for 1Q2012 was mainly due to the absence of impairment loss on available-for-sale financial assets of $16.0 million in 1Q2011, offset by increased share of losses from associate of $4.6 million in 1Q2012.
Loss attributable to shareholders for 1Q2012 was $7.2 million as compared to $16.5 million in 1Q2011.
Review of Consolidated Balance Sheet Items
Interests in associates
Interests in associates decreased by $7.4 million from $46.6 million as at 31 December 2011 to $39.2 million mainly due to share of losses from associates of $6.0 million and loss in translation reserves of $1.4 million.
On 28 April 2012, CEO of the Company has resigned as a director of PEL with effect from 1 May 2012. With his resignation, the Company's interest in PEL will be changed from "interests in associate" to "investment in available-for-sale financial assets".
Other Investments
Other investments increased by $8.5 million from $55.7 million as at 31 December 2011 to $64.2 million mainly due to the increase in share price of China VTM shares and increase in fair value of PSL which were accounted for in the consolidated statement of comprehensive income.
Short term loan receivables
In 2009, the Company extended three loans amounting to $20.2 million to its affiliated party, Trisonic. The principal sum of $20.2 million is repayable annually over 3 years and interest is charged at the rate of 6.5% per annum. These loans were secured with Trisonic's shares owned by a shareholder of Trisonic. The security had been changed to 1,000 issued and paidup ordinary shares representing 10% of the issued share capital of PEL owned by a shareholder of Trisonic.
Short-term loan receivables decreased by $3.1 million from $60.4 million as at 31 December 2011 to $57.3 million mainly due to repayment of $1.3 million by Trisonic in accordance with the loan agreement and foreign exchange loss from weakening of US dollars against Singapore dollars.
Short-term loan receivables as at 31 March 2012 include the PEL Loan of US$42.6 million and Trisonic loan of S$4.0 million.
Trade and other receivables
As at 31 March 2012 and 31 December 2011, trade and other receivables accounted for about 18.4% and 14.4% of the total revenue respectively.
Trade and other receivables decreased by $3.3 million from $19.3 million as at 31 December 2011 to $16.0 million mainly due to the following:
- decrease in notes receivables of $5.2 million;
- decrease in trade receivables of Special Steel of $0.7 million and offset by;
- increase in prepayment and other receivables of Special Steel of $2.1 million and;
- increase prepayment and deposits paid for mineral trading business of $0.5 million.
The average trade receivables (including notes receivables) turnover days for year ended 31 March 2012 was 34.4 days as compared to 15.0 days for the year ended 31 December 2011, mainly due to lower revenue for 1Q2012.
Trade receivables turnover days based on the balance as at 31 March 2012 was 22.5 days as compared to 29.8 days as at 31 December 2011.
As of the date of this announcement, the Company does not foresee any issue with the collection of these trade and other receivables.
Deposit with an associate
The deposit with an associate decreased by $26.9 million from $60.6 million as at 31 December 2011 to $33.7 million. The decrease was mainly due to refund of deposit by the associate. The deposit was placed with its main supplier, Chengyu, to secure raw materials at favorable prices. The cost savings from the favorable pricing amounted to $1.6 million in 1Q2012 and $1.4 million in 1Q2011.
Financial derivatives
Financial derivatives asset as at 31 March 2012 relates to the mark-to-market value on the call and put options embedded in the CSIN Financing entered in 2011.
As at 31 March 2012, $3.1 million was classified as short-term and $33.1 million as long-term for which the maturity dates of the options matches with the repayment periods of the CSIN Financing.
Cash at bank and in hand
Cash at bank and in hand increased by $1.8 million from $34.4 million as at 31 December 2011 to $36.2 million. The increase was due to net cash inflow from operating and investing activities offset by net cash outflow from financing activities as disclosed in the cash flow statement.
Trade and other payables
Trade and other payables decreased by $3.8 million from $26.0 million as at 31 December 2011 to $22.2 million mainly due to decrease in trade and other payables of Special Steel of $3.6 million, decrease in other payables to an associate of $1.0 million, decrease in interest payables of SMRHK of $0.5 million and offset by the increase in notes payables of $1.2 million.
Financial liabilities
Financial liabilities (including current and non-current) decreased by $27.5 million from $139.8 million as at 31 December 2011 to $112.3 million mainly due to by partial payment of CITIC Loan 1 offset by the proceeds from drawdown of the revolving facilities of Citic Loan 1.
Included in the financial liabilities as at 31 March 2012 are mainly $86.7 million CSIN Financing and $25.6 million CITIC Loan 1.
Deferred tax liabilities
Deferred tax liabilities decreased by $3.7 million from $5.7 million as at 31 December 2011 to $2.0 million mainly due to the payment made in 1Q2012.
Share capital and reserves
There was no change in the Company's issued share capital since the previous financial year ended 31 December 2011.
Reserves are in respect of translation reserve, merger reserve, capital reserve, statutory reserve, other reserves, fair value reserve and accumulated profit/losses of the Group. Reserves decreased by $11.7 million from $7.7 million to a net deficit reserves of $4.0 million.
Commentary
Sapphire is currently evaluating the proposal to collaborate with Longwei, Chuanwei Group and Chengyu on premium steel products such as silicon steel. The Group will announce more details of the proposal in the near future.
During the past quarter, the Group's US$40 million loan to Prime Empire Limited has been fully repaid and there will be no conversion of the Convertible Loan. In addition, as of 1st May, 2012 Sapphire's Chief Executive Officer, Mr Teo Cheng Kwee has stepped down as a Director of Prime Empire Limited. With this resignation, Sapphire loses significant influence over Prime Empire Limited and hence has reclassified its investment in Prime Empire Limited from "interest in associate" to "investment in available-for-sale financial asset".
Steel prices continued the downward trend in the past few months. However, we are cautiously optimistic about the long term prospects of the PRC steel industry. The government's 12th 5 Year Plan for the industry has laid out a roadmap to encourage production of premium steel products.
Balance Sheet
