Production, revenues and earnings per share all increased quarter-over-quarter and year-over-year. L&L Energy expects further improvement in revenues and earnings in the fall as seasonal coal prices increase and the Weishe mine ramps up production. The Weishe mine has been only in trial production until recently and produced only about 15,000 tons in Q1. It now has received final approval and should produce 150,000 tons per year.
L&L Energy believes there has been a bottom in coal prices. Coal prices declined 15 percent during the quarter, where the seasonal decline is typically 5 to 10 percent. The prices declined due to softening demand and a greater supply available for export.
L&L Energy continues to be a consolidator in Guizhou province and sees great opportunities for consolidation there. It recently signed a Memorandum of Understanding (MOU) on Union Energy Mines, which are a little larger than the traditional 150,000 ton mines. L&L Energy will be focusing on the larger mines. It expects to execute a deal with the Union Energy mines when they are operational. One of those mines is about to become operational.
Mongolia is an important diversification strategy for L&L Energy, but not its highest priority right now.
If L&L Energy decides to trade the DaPing mine as payment for the acquisition of the LuoZhou Mine, the $15 million obligation to pay for the DaPring mine would be part of the trade. L&L Energy was able to renegotiate a slower payment schedule for DaPing. The deal for LuoZhou probably would not take place until the mine is operational. LuoZhou is larger than DaPing.
L&L Energy is also expanding its wholesaling capabilities. Its wholesale segment experienced significant growth in the quarter. It expects rapid expansion in wholesale in the next few quarters.
Financials.
Production in Q1 was 149,000 tons, which was a 116 percent increase from a year ago and a 38 percent increase from Q4/2012.
Total sales were $45.3 million, consisting of: (1) $15.5 million in mining, (2) $17.9 million in washing, (3) $12.3 million in wholesale, and (4) $1.7 million in coking. Revenues increased 26 percent from Q1/2012 and 11 percent from Q4/2012. Wholesale revenues increased by 174 percent since Q1/2012 and 94 percent from Q4/2012.
Net income increased 159 percent from Q1/2012 and 48 percent from Q4/2012. Earnings per share for Q1 was $.17 versus $.21 in Q4/2012. The main reason for the decline in EPS was the decline in the price of coal.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/860621-l-amp-l-energy-s-management-discusses-f1q2013-results-earnings-call-transcript?part=single
Copyright 2012 Jaygo's Earnings Conference Call Summaries
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
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