China Direct Industries, Inc. (CDII)
F3Q10 (Qtr End 06/30/10) Earnings Call Transcript
August 12, 2010 5:00 pm ET
Richard Galterio – VP, Public and Investor Relations
Andrew Wang – EVP and CFO
Mitch Paleo [ph]
Previous Statements by CDII
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Welcome to the fiscal 2010 third quarter earnings conference call for China Direct Industries. For those of you who may be new to the company, China Direct Industries trades on the NASDAQ global market, under the symbol CDII. China Direct Industries is a U.S.-based company, with operations in China in two core business segments, magnesium production and distribution of basic materials. The company also provides advisory services to China-based companies to assist them in competing in the global economy.
Headquartered in Deerfield Beach, Florida, China Direct Industries operates nine subsidiaries throughout China. China Direct Industries provides a direct link between Western investors and companies in the People's Republic of China. For more information on the company, please visit its website, at www.cdii.net.
Our call today is hosted by Mr. Andrew Wang, CFO; and Richard Galterio, Vice President. Additionally, Dr. James Wang, CEO and Chairman, will also be available during the Q&A session that will follow management's discussion of the third quarter ended June 30, 2010.
At this time, I would like to refer to the Safe Harbor Statement under the Private Securities Litigations Reform Act of 1995. During this conference call, management may discuss financial projections, information, or expectations about the company's products or markets, or otherwise make statements about the future, which statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made.
These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission, including its most recent Form 10-K filed on December 31, 2009.
At this time, I would like to introduce Mr. Richard Galterio, Vice President of Investor and Public Relations of China Direct Industries. Thank you. Mr. Galterio, you may begin.
Thank you, operator; and all of you who are joining us for our fiscal 2010 third quarter conference call.
China Direct Industries recorded revenue of $31.9 million for the third quarter of fiscal 2010, ended June 30, 2010. This was up 64% from the $19.5 million recorded in the comparable period in fiscal 2009. Our net loss in the quarter, now up to $1.1 million, or a loss of $0.04 per share, compared with a loss of $2.9 million or $0.12 per share in the third quarter of fiscal 2009.
Revenue was $77.3 million for the nine months of fiscal 2010, compared to $79.1 million for the comparable period in fiscal 2009. The net loss for the nine months ended June 30 now rose to $412,000, inclusive of $1.1 million in stock-based compensation, compared with net loss of $14.5 million in the same period of 2009. Our net performance in the first nine months have significantly improved, resulting in a loss per basic share and diluted share of $0.02, compared to a loss of $0.61 in the comparable 2009 period.
I am also pleased to report that we continue to see a market pickup in activity in all of our segments, particularly in magnesium and consulting.
In our magnesium segment, I would like to highlight several important trends. First, the volume output at our current magnesium operation was approximately 6,000 metric tons. This is up 49% from the same period in 2009. Second, volumes increased by 42% sequentially from last quarter.
In our consulting segment, we had particularly strong performance, with revenue up 123% from the same period in 2009. And I would also like to highlight some accomplishments in this area. First, we added two additional clients, bringing the total number of clients we service to seven. We are confident that these additions will lead to substantial increases in transaction revenue for assistance in areas like mergers, capital formation, and business development.
In our basic materials segment, we continue to see a market improvement in chemical operations, where revenue was up 59% from the same period in 2009. Additionally, as we have categorized our trading operations in this segment, the startup costs associated with trading are now reflected in this segment.
As we move forward into the remainder of the year, and soon into fiscal 2011, it is important to emphasize a number of key overall factors, which we believe will contribute to our success. First, our balance sheet remains strong, with $14.4 million in cash, a $1.5 million increase from our September 2009 year end, and still with negligible long-term debt. Second, we have over $37 million in working capital to support our operations as the business environment improves and we forge new trading opportunities in South America and Mexico. Third, the metrics in our magnesium segment continue to improve, with our working capital investments now starting to deliver top line growth, as more production is coming online. Additionally, our Ruiming acquisition will enable us to service our customers with a wider variety of products to further entrench our IMG brand. Fourth, we have parlayed our consensus with a number of consulting clients in the first half of the year into the addition of two new clients, as I have mentioned before, with additional prospects for the coming quarters. It is important to note that transactional business in consulting can yield very high margin revenue, as was the case in 2007 and in 2008, where consulting was the largest driver of earnings.