CD International Enterprises Management Discusses Q1 2012 Results - Earnings Call Transcript

CD International Enterprises, Inc. (CDII)

Q1 2012 Earnings Call

May 10, 2012 4:30 PM ET

Executives

Richard Galterio – VP

Hernan Welch – CFO

Analysts

Marco Barattini – Barattini Investment Advisors

Aaron Lanning

Presentation

Operator

Greetings and welcome to the fiscal 2012 second quarter earnings conference call for CD International Enterprises Incorporated. For those of you who may be new to the company, CD International Enterprises trades on the NASDAQ global market under the symbol CDII.

CD International Enterprises is a U.S. based company that produces, sources, and distributes industrial commodities in China and the Americas and provides business and financial corporate consulting services. For more information on this company, please visit its website at www.cdii.net.

Our call today is hosted by Mr. Hernan Welch, CFO; and Richard Galterio, Vice President. Additionally a Q&A session will follow management’s discussion of the second quarter ended March 31, 2011.

At this time I would like to refer to the Safe Harbor statements under the Private Securities Litigation 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. These 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.

At this time, I would like to introduce Mr. Richard Galterio, Vice President of CD International Enterprises. Mr. Galterio, you may begin your call.

Richard Galterio

Thank you operator and all of you who are joining us for our second quarter of fiscal 2012 conference call. CD International recorded revenues of $41.9 million for the second quarter of fiscal 2012 with gross profit of $6.6 million and net income attributable to common stockholders of $2 million. This compares to revenue of $42.3 million, with gross profit of $3.2 million and a net loss attributable to common stockholders of $14,000 recorded in the same period in fiscal 2011.

Gross margins in the second quarter of fiscal 2012 improved to 15.6%, up from 7.6% in the same period in the prior fiscal year. Net margins in the second quarter also improved to 4.8% from approximately breakeven in the same period of the prior year. Earnings per basic and diluted shares outstanding reached $0.05 per share in the second quarter of fiscal 2012 on 41.5 million basic weighted average shares and 42.2 million diluted weighted average shares. Earnings per basic and diluted share outstanding were $0.00 on 34.7 million weighted average shares in the second quarter of fiscal 2011.

For the first six months of fiscal 2012, we recorded revenues of $78.9 million with gross profit of $12.2 million and net income attributable to common stockholders of $5.1 million. This resulted in $0.12 per basic and diluted share in earnings on 41 million basic weighted average shares and 41.7 million diluted weighted average shares. This compares to revenues of $88 million with gross profit of $9.8 million and net income attributable to common stockholders of $3.4 million resulting in $0.10 per basic and diluted share on $33.3 million basic and diluted weighted average shares outstanding in the second quarter of fiscal 2011.

Gross margins and net margins for this first six months of fiscal 2012 were $15.4 million and $6.5 million respectively. This compares to a 11.1% and 3.9% respectively in the same period in fiscal 2011. In highlighting our magnesium segment, overall pricing continued to improve compared to the second quarter of fiscal 2011, averaging 2,773 per ton as compared to 2,639 per ton.

Total magnesium revenue increased to approximately $25.9 million in this quarter compared to $24.3 million recorded in the comparable period in fiscal 2011. Our magnesium segment remains profitable on an EBITDA basis and gross margin improved to 2.6% in the second quarter of fiscal 2012 up from 0.8% in the first fiscal quarter of 2012. So we had a sequential increase in our gross margins.

During the course – for the current period, we also continued to build inventory in anticipation of rising prices and increased demand as overall economic conditions slowly improve. Recent stock prices have gone up to approximately 3100 FOB China and we anticipate a firming of demand as we move through the remainder of the calendar year.

In our basic material segments, revenues totaled $10.5 million, declining by $6 million compared to same period in 2011. The decline in revenues was mainly a result of a decline in sales at our CDI Beijing subsidiary compared to the prior quarter in fiscal 2011. And this is due to reduced demand from slow urban infrastructure expansion and pricing credit in China.

In our consulting segments, we achieved strong performance with revenue reaching $5.6 million in the second quarter of fiscal 2012 compared to $1.6 million recorded in the same period in fiscal 2011. We added one new U.S. based client during the quarter bringing the total number of clients we service on a continuous basis to seven and we are confident that we will continue to add additional clients leading to future growth in this segment.

Read the rest of this transcript for free on seekingalpha.com