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Synthesis Energy Systems Announced Fourth Quarter and Fiscal 2012 Financial Results

Texas Business reports:  HOUSTON—Synthesis Energy Systems Inc.  announced financial and operating results for the fourth quarter and fiscal 2012 ended June 30, 2012.

“Significant progress has been realized in reaching several important milestones including closing of an $8.7 million Hongye strategic equity investment into SES,” said chief executive  Robert Rigdon. “As announced yesterday, on September 21, 2012, SES received gross proceeds of $8,666,550 from Hongye and issued 5,777,700 shares to Hongye. Hongye is expected to pay the remaining $596,090 of their aggregate purchase price for their shares, and receive the balance of their shares, at the closing of the Zhongmo transaction. In addition to these important financing activities, we are well into the commissioning stage of the syngas producing facilities at our Yima Joint Venture project, which is scheduled to produce its first methanol product sales late in the fourth quarter of this calendar year.”

“We have spent the last year advancing our business interests and pipeline of opportunities in China and elsewhere,” Rigdon said. “We remain focused on delivering profitable operations from our joint ventures in China, completing ongoing strategic financing activities for our China business and converting global opportunities in our pipeline into projects. We believe these accomplishments, combined with our focus on revenue growth from operations and strategic financing, position us well to turn the corner across our current fiscal year and deliver improving financial results.”

Fourth Quarter 2012 Financial Results (Unaudited)

Total revenue for the three months ended June 30, 2012, was $284,000 versus $2.5 million for the three months ended June 30, 2011. The difference is primarily due to SES’ decision to hold the Zao Zhuang joint venture plant idle while it completes the previously reported ongoing contract restructuring discussions with its syngas customer and joint venture partner, Hai Hua.  SES is owed past capacity fees from Hai Hua, amounting to $4.7 million as of June 30, 2012, and the company is working to recover these past due fees in a newly restructured operating agreement under development. SES is actively engaged with the Weijiao Group, Hai Hua’s new owner, to get the Zao Zhuang Joint Venture producing syngas again and remains optimistic that a mutually beneficial agreement may be reached to improve the plant's financial performance.

Technology licensing and related services revenues for the three months ended June 30, 2012, were $284,000, versus $231,000 for the three months ended June 30, 2011. The technology licensing and related services revenues for the quarter ended June 30, 2012, resulted primarily from coal testing studies provided to customers which are confirming the suitability of SES’ technology in projects that are actively developing.

The company’s operating loss for the fourth quarter of fiscal 2012 was $4.2 million versus $4.7 million reported for the fourth quarter of fiscal 2011. The decrease in the operating loss was primarily attributable to a reduced loss of the ZZ Joint Venture plant and to the decrease in stock-based compensation expense.

 

 The net loss attributable to stockholders for the fourth quarter of fiscal 2012 was $5.0 million or $0.10 per share versus $4.6 million or $0.09 per share for the prior year's fourth quarter.

Fiscal 2012 Financial Results (Unaudited)

For the fiscal year ended June 30, 2012, total revenues were $3.1 million versus $10.2 million for fiscal 2011. These results included a $6.8 million decrease of product sales for the ZZ Joint Venture plant due to idling syngas production in September 2011, as mentioned previously.

Technology licensing and related services revenues were $0.9 million versus $1.2 million for the year ended June 30, 2011, and included revenues from coal testing, feasibility studies and other technical services provided in association with our technology licensing business.

The operating loss for fiscal 2012 was $18.3 million compared to an operating loss of $15.7 million for fiscal 2011.  The $2.5 million of additional loss was due primarily to the ZZ Joint Venture plant.

The net loss attributable to stockholders for fiscal 2012 was $19.9 million or $0.39 per share versus $15.5 million or $0.32 per share for fiscal 2011. The increase in the net loss includes the increased operating loss from the ZZ Joint Venture plant previously mentioned and planned expenses associated with the start-up of SES Resource Solutions Joint Venture and the Yima Joint Venture.  

Capital Resources and Liquidity

As of June 30, 2012, SES had cash and cash equivalents of $18.0 million and working capital of $9.9 million.  As previously announced, on September 21, 2012, SES received gross proceeds of $8,666,550 from Hongye and issued 5,777,700 shares to Hongye. Hongye is expected to pay the remaining $596,090 of their aggregate purchase price for their shares, and receive the balance of their shares, at the closing of the Zhongmo transaction.

 Corporate Highlights

·        Commissioning and start-up activities at the Yima Joint Venture project in China are underway. First methanol product sales are anticipated in the fourth quarter of calendar 2012. Once fully operational, SES believes that the Yima project should provide a positive impact to its financials and should be a major catalyst for further commercialization of its technology.

·         SES China has moved quickly to develop commercialization and funding opportunities. The $8.7 million of strategic investment into SES by Hongye is an important first step toward realizing the Company’s key near-term objectives in China.

·         The potential strategic investment of ZJX/China Energy into SES remains active as ZJX structures its funding partners for China Energy.  

·         SES and the Weijiao Group, Hai Hua’s new owner, are working to restructure the ZZ Joint Venture, which is expected to result in improved financial performance of the plant by sharing in profits from the integration of Hai Hua’s methanol unit with SES’ syngas unit.

·         Successfully completed testing of low volatile coal from Ncondezi Coal Company Limited under a previously announced joint study agreement. The study was intended to determine the feasibility of mining and exporting up to 15 million tons per year (Mtpa) of low volatile coal, in addition to Ncondezi’s planned >5Mtpa export thermal coal operation, from the Ncondezi Project in Mozambique.

·         Reported positive data from laboratory-scale testing of three Turkish lignite coals being considered for clean coal-based power generation projects in Turkey. The projects are under development by Tuten Ltd. for a large Turkish utility company that is looking to expand its clean energy portfolio.

·         SES has made significant progress in India developing a robust pipeline of potential projects and is moving closer to completing its first technology license in this country.

 SES provides technology, equipment and engineering services for the conversion of low rank, low cost coal and biomass feedstocks into energy and chemical products. Its strategy is to create value through providing technology and equipment in regions where low rank coals and biomass feedstocks can be profitably converted into high value products through its proprietary U-GAS  fluidized bed gasification technology, which SES licenses from the Gas Technology Institute.