Sino-Forest Reports Second Quarter 2010 Results

TORONTO, Aug. 10, 2010 /CNW/ - Sino-Forest Corporation ("Sino-Forest") (TSX:TRE) announced its financial results today for the three months and first half ended June 30, 2010. All amounts in this release are expressed in U.S. dollars unless otherwise indicated.

Second Quarter 2010 Financial Highlights

    
    -   Revenue increased 36% in Q2, and 39% in H1 2010 to $557 million
    -   Gross margin from sales of standing timber in Yunnan generated $69
        per m3
    -   Net Income for Q2 rose 41%, and 56% in the H1 of the year
    -   Diluted EPS for Q2 and H1 2010 rose 13% to 26 cents, and 22% to 44
        cents, respectively
    -   Cash Flow From Operating Activities decreased 36% in Q2, and 53% for
        H1 2010, primarily due to temporary increases in receivables


    -------------------------------------------------------------------------
    (US$ millions,   Second Quarter ended June 30   First Half ended June 30
     except margins
     and per share         2010     2009   Change     2010     2009   Change
     amounts)                 $        $        %        $        $        %
    -------------------------------------------------------------------------
    Revenue               305.8    224.4       36    556.8    401.7       39
    Gross Profit(1)       123.3     82.2       50    218.5    147.8       48
    Gross Profit Margin   40.3%    36.6%    4%pts     39.2     36.8    2%pts
    EBITDA(2)             174.1    145.4       20    320.2    260.3       23
    Net Income             63.7     45.0       41    106.5     68.1       56
    Diluted Earnings
     Per Share             0.26     0.23       13     0.44     0.36       22
    Cash Flow From
     Operating
     Activities           100.3    156.8      (36)   151.8    324.3      (53)
    -------------------------------------------------------------------------
    Notes (1) and (2) are at the end of this release
    

Allen Chan, Chairman and CEO of Sino-Forest, said, "We are very pleased to report continuing double-digit growth in revenue and net income in the second quarter of 2010, despite a number of measures launched by China's Central Government to cool down an over-heated economy and property speculation. Sino-Forest was not overly affected by the tightening measures, as our operations are focused on emerging markets within China and as the country's large wood fibre deficit continues to grow. Further, the areas in and around Yunnan continue to show strong growth and demand for fibre as demonstrated by our sales in this region in the first half of 2010."

Mr. Chan added, "Despite the heavy rainfall in the second quarter of 2010 which caused severe flooding in many provinces across China, our operations were not significantly affected and we anticipate that there will be a short-term fibre shortage in the country's wood markets. Currently, log prices are about 5% below their highs in 2008, and we anticipate that these prices will continue to rebound given solid demand and the short-term impact from flooding. The flooding did impact the ability of certain customers to harvest plantation trees that we sold to them, which has therefore resulted in a build-up of our receivables. While this affected our cash flows in the second quarter, we expect this impact to be short-term. On our replanting program, the heavy rainfall had caused us to slowdown our progress; nonetheless we re-planted in the second quarter approximately 2,000 hectares of our targeted 25,000 hectares. We recommenced our replanting programme in July and anticipate achieving our target hectares by end of this year."

"We are also very pleased to have increased our ownership interest in Hong Kong-listed Omnicorp Limited from approximately 19.8% to approximately 53.5%. Omnicorp's core business is bringing quality hardwood into China in a sustainable manner, while Sino-Forest focuses on improving the growing yield output of China's low-yielding forest plantations", continued Mr. Chan.

Business Segment Highlights

The following table presents the total revenue breakdown for the three months ended June 30, 2010 and 2009:

    
    -------------------------------------------------------------------------
                                                    Second            Second
                                             Quarter ended     Quarter ended
                                             June 30, 2010     June 30, 2009
                                            $'000        %    $'000        %
    -------------------------------------------------------------------------
    Wood Fibre Operations
    Plantation Fibre                      188,080     61.5  158,898     70.8
    Trading of Wood Logs                  100,413     32.9   56,771     25.3
    Manufacturing and Other Operations     17,265      5.6    8,750      3.9
    -------------------------------------------------------------------------
    Total                                 305,758    100.0  224,419    100.0
    -------------------------------------------------------------------------
    

Our revenue increased 36.2% in the second quarter of 2010 to $305.8 million, with the largest contribution coming from a 76.8% increase in the trading of wood logs.

Wood Fibre Operations

Plantation Fibre

    
    -------------------------------------------------------------------------
                                          Second Quarter ended June 30, 2010
    -------------------------------------------------------------------------
                                                   Vol. of      Av.
                                                     fibre    price    Total
                                         Hectares     sold  per m(3) revenue
                                                  '000 m(3)       $    $'000
    -------------------------------------------------------------------------
    Standing timber                         6,702    1,681       96  161,562
    Harvested logs                          2,634      363       73   26,518
    -------------------------------------------------------------------------
    Total                                   9,336    2,044       92  188,080
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                          Second Quarter ended June 30, 2009
    -------------------------------------------------------------------------
                                                   Vol. of      Av.
                                                     fibre    price    Total
                                         Hectares     sold  per m(3) revenue
                                                  '000 m(3)       $    $'000
    -------------------------------------------------------------------------
    Standing timber                        18,538    2,616       61  158,898
    Harvested logs                              -        -        -        -
    -------------------------------------------------------------------------
    Total                                  18,538    2,616       61  158,898
    -------------------------------------------------------------------------
    

Revenue from sales of plantation fibre increased 18.4% to $188.1 million in Q2 2010, mainly due to an increase in the average selling price of standing timber sales and revenue from harvested logs, of which we had no sales in Q2 last year.

The 58.3% increase in the average selling price of standing timber was mainly due to a difference in sales mix. We sold broadleaf in Yunnan as standing timber at an average selling price of $102 per m(3) in the three months ended June 30, 2010, whereas we sold pine and Chinese fir as standing timber at an average price of $61 per m(3) in the same period in 2009.

The average sales per hectare increased 135.0% to $20,146 per hectare in the three months ended June 30, 2010, compared to $8,571 per hectare in the same period in 2009, due to sales of higher-yield trees from Yunnan.

The average yield per hectare sold as standing timber in Q2 2010 was 251 m(3) compared to 141 m(3) in the same period in 2009. The average yield per hectare sold as harvested logs in Q2 2010 was 138 m(3) compared to nil m(3) in the same period in 2009.

During the second quarter, we sold approximately 6,082 hectares of trees acquired under our master agreements, mainly in Yunnan and Hunan.

Plantation fibre sales comprised 61.5% of total revenue in the three months ended June 30, 2010, compared to 70.8% in the same period in 2009.

Trading of Wood Logs

Revenue from trading of imported and domestic wood products and logs increased 76.9% to $100.4 million in Q2 2010, compared to $56.8 million in the same period in 2009. This increase was primarily due to a higher volume of Russian wood logs sold.

Sales from trading of wood logs comprised 32.9% of total revenue in the second quarter of 2010, compared to 25.3% of total revenue in the same period in 2009.

Manufacturing and Other Operations Revenue

Revenue from manufacturing and other operations increased 97.3% to $17.3 million in Q2 2010, compared to $8.8 million in the same period in 2009, mainly due to increased sales of engineered wood flooring.

Gross Profit

Gross profit increased 49.9% to $123.3 million in the three months ended June 30, 2010, compared to $82.2 million in the same period in 2009. Gross profit margin, being gross profit expressed as a percentage of revenue, increased to 40.3% in Q2 2010 compared to 36.6% in the same period in 2009, mainly as a result of improved margins from plantation fibre operations.

Wood Fibre Operations Gross Profit Margins

Plantation Fibre

The overall gross profit margin from sales of standing timber increased to 66.4% or $64 per m(3) in Q2 2010, compared to 49.7% or $30 per m(3) in same period last year, mainly due to the increase in average selling price of standing timber. The overall margin from sales of harvested logs was 31.2% or $23 per m(3) in Q2 2010.

Trading of Wood Logs

The gross profit margin from trading of imported and domestic wood products and logs increased to 5.5% in Q2 2010 compared to 5.0% in the same period in 2009.

Manufacturing and Other Operations Gross Profit Margin

The gross profit margin from our manufacturing and other operations increased to 12.6% in the three months ended June 30, 2010, compared to 4.6% in the same period in 2009. This was mainly due to improvement in the engineered wood flooring business segment.

Selling, General and Administration Expenses

Our SG&A expenses increased 10.1% to $17.9 million in Q2 2010, compared to $16.3 million in the same period in 2009. The increase was in line with the business growth of the Company.

Net Income for the Period

As a result of the foregoing, net income for the period increased 41.4% to $63.7 million in Q2 2010, compared to $45.0 million in the same period in 2009. Overall net income for the period as a percentage of revenue increased slightly to 20.8% in Q2 2010, compared to 20.1% in the same period in 2009.

Cash flows from operating activities of continuing operations

Net cash provided from operating activities decreased to $100.3 million in Q2 2010, compared to $151.8 million in the same period in 2009. The decrease was due to cash used in working capital that mainly resulted from an increase in accounts receivable, offset by the increase in cash provided by operations.

Capital Expenditures

    
    -------------------------------------------------------------------------
                                            Second Quarter ended June 30
                                              2010                2009
                                      Hectares $'million  Hectares $'million
    -------------------------------------------------------------------------
    Tree acquisition                    38,306     204.3    41,114     152.5
    Tree acquisition - acq of
     subsidiaries                                      -                   -
    Re-planting and maintenance of
     plantations                                     9.4                 7.9
    Panel manufacturing and others                  10.8                 2.6
    Panel manufacturing & others - acq
     of subsidiaries                                   -                   -
    -------------------------------------------------------------------------
    Total                                          224.5               163.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                              First Half ended June 30
                                              2010                2009
                                      Hectares $'million  Hectares $'million
    -------------------------------------------------------------------------
    Tree acquisition                    76,084     387.6   117,091     398.1
    Tree acquisition - acq of
     subsidiaries                       86,786     283.1                   -
    Re-planting and maintenance of
     plantations                                    16.5                13.7
    Panel manufacturing and others                  13.0                 7.8
    Panel manufacturing & others - acq
     of subsidiaries                                 6.6                   -
    -------------------------------------------------------------------------
    Total                                          706.8               419.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

For fiscal 2010, capital expenditures are expected to be around $1,300 million for plantation acquisitions, replanting and maintenance, and approximately $30 million for the development of manufacturing facilities integrated with plantation operations.

Recent Developments

During the second quarter of 2010, we acquired 2,638,469,000 ordinary shares of Greenheart Resources Holdings Limited ("Greenheart"), representing approximately 34.4% of Greenheart's total issued share capital, for total consideration of approximately $33 million. During the same quarter, we increased our ownership in Omnicorp Limited ("Omnicorp") to 53.5% from 19.8% of the enlarged issued share capital of Omnicorp, for total cash consideration of HK$418.6 million (approximately $53.7 million). In July, we signed a co-operative framework agreement with China Development Bank Corporation (Guangzhou Branch) for project financing of up to Rmb10 billion (equivalent to US$1.5 billion) to support our wholly-owned subsidiary Sino-Panel (China) Investments Limited's projects in China.

Outlook

We remain upbeat about China's wood fibre market in the long term as there are several market factors that support a positive outlook for Sino-Forest. The Central Government continues to provide stimulus spending for infrastructure improvements, construction of low-income housing, and economic development in rural and western regions of the PRC. As demand for wood logs increases while the flow of imported logs slows, China's wood deficit continues to grow and log prices continue to rise. Sino-Forest has access to a substantial supply of fibre at fixed prices. We continue to improve the productive yield at our plantations through scientific advancements and silviculture expertise. In addition, the Company is producing competitively-priced plantation logs that could substitute for certain imported wood logs as raw material for downstream manufactured wood products.

We will continue to acquire plantation fibre through our six long-term master agreements, and to re-plant harvested land, as part of our long-term strategy to strengthen our position as one of China's leading operators of sustainable forest plantations.

Notice of Conference Call

Sino-Forest will hold a conference call for analysts and investors to further discuss its second quarter results on Tuesday, August 10, 2010 at 8:30 am EST / 8:30 pm HKT. To participate, please dial +1-647-427-7450 for local and international callers, or for North America toll-free access 888-231-8191. Alternatively, to listen to the live webcast and replay in a listen-only mode, go to Sino-Forest's website under "Investor Relations - Earnings Releases" or click on the following link: http://www.sinoforest.com/earningsreleases.asp.

About Sino-Forest Corporation

Sino-Forest is a leading, commercial forest plantation operator in China. Its principal businesses include the ownership and management of forest plantation trees and sales of standing timber, wood logs, and complementary manufacturing of downstream engineered-wood products. Sino-Forest also holds a majority interest in Omnicorp Limited (HK:0094), a Hong Kong listed investment holding company with hardwood concessions and harvesting rights in Suriname, South America. Sino-Forest's common shares have traded on the Toronto Stock Exchange under the symbol TRE since 1995. Learn more at www.sinoforest.com.

Note (1) to the Financial Highlights table: Gross profit for any period is defined as total revenue less cost of sales. Gross profit is presented as additional information because we believe that it is a useful measure for certain investors to determine our operating performance. Gross profit is not a recognized term under Canadian GAAP and should not be considered as an alternative to net income as an indicator of our operating performance or any other measure of performance derived in accordance with Canadian GAAP. Because it is not a Canadian GAAP measure, gross profit may not be comparable to similar measures presented by other companies.

Note (2) to the Financial Highlights table: EBITDA for any period is defined as income from continuing operations for the period after adding back depreciation and amortization and depletion of timber holdings from cost of sales, for the period. EBITDA is presented as additional information because we believe that it is a useful measure for certain investors to determine our operating cash flow and historical ability to meet debt service and capital expenditure requirements. EBITDA is not a measure of financial performance under Canadian GAAP and should not be considered as an alternative to cash flows from operating activities, a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with Canadian GAAP.

Cautionary note: No stock exchange or regulatory authority has approved or disapproved of information contained herein. Certain information included in this news release is forward-looking and is subject to important risks and uncertainties. When used in this news release, the words "believe", "intend", "estimate", "expect", "plan" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations. The results or events predicted in these statements may differ materially from actual results or events and are no guarantees of future performance of Sino-Forest. Factors which could cause results or events to differ from current expectations include, among other things: our ability to acquire rights to additional standing timber, our ability to meet our expected plantation yields, the cyclical nature of the forest products industry and price fluctuation in and the demand and supply of logs, our reliance on joint venture partners, authorized intermediaries, key customers, suppliers and third party service providers, our ability to operate our production facilities on a profitable basis, changes in currency exchange rates and interest rates, and PRC economic, political and social conditions and government policy, and stock market volatility, other factors not currently viewed as material could cause actual results to differ materially from those described in the forwarding-looking statements. For additional information with respect to certain of these and other factors, see the reports filed by Sino-Forest Corporation with applicable Canadian securities administrators. Sino-Forest Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

    
                    CONSOLIDATED STATEMENTS OF INCOME AND
                              RETAINED EARNINGS
    (Expressed in thousands of United States dollars, except for earnings
                     per share information) (Unaudited)

                              Three months ended            Six months ended
                                         June 30,                    June 30,
                              2010          2009          2010          2009
                                 $             $             $             $
    -------------------------------------------------------------------------
    Revenue                   305,758      224,419      556,773      401,653

    Costs and expenses
    Cost of sales             182,496      142,173      338,307      253,882
    Selling, general and
     administration            17,924       16,285       35,340       31,089
    Depreciation and
     amortization               1,053        1,161        2,276        2,290
    -------------------------------------------------------------------------
                              201,473      159,619      375,923      287,261
    -------------------------------------------------------------------------
    Income from operations
     before the undernoted    104,285       64,800      180,850      114,392
    Interest expense          (30,190)     (17,036)     (57,884)     (33,831)
    Interest income             3,567        2,276        6,992        4,180
    Exchange losses              (965)        (270)        (893)        (363)
    (Loss) gain on changes
     in fair value of
     financial instruments     (3,278)       2,588       (3,987)       1,607
    Other income                  137        1,051          455        1,272
    -------------------------------------------------------------------------
    Income before income
     taxes                     73,556       53,409      125,533       87,257
    Provision for income
     taxes                     (9,567)      (6,390)     (18,351)     (12,316)
    -------------------------------------------------------------------------
    Net income from
     continuing operations     63,989       47,019      107,182       74,941
    Net loss from
     discontinued operations     (277)      (1,970)        (696)      (6,887)
    -------------------------------------------------------------------------
    Net income before non-
     controlling interests     63,712       45,049      106,486       68,054
    Non-controlling
     interests                    (25)           -           (1)           -
    -------------------------------------------------------------------------
    Net income for the
     period                    63,687       45,049      106,485       68,054
    -------------------------------------------------------------------------

    Earnings per share
    Basic, for net income
     for the period              0.26         0.23         0.44         0.36
    Diluted, for net
     income for the period       0.26         0.23         0.44         0.36
    -------------------------------------------------------------------------

    Earnings per share
     from continuing
     operations
    Basic, for net income
     for the period              0.26         0.24         0.44         0.40
    Diluted, for net
     income for the period       0.26         0.24         0.44         0.39
    -------------------------------------------------------------------------

    Loss per share from
     discontinued operations
    Basic, for net loss
     for the period             (0.00)       (0.01)       (0.00)       (0.04)
    Diluted, for net loss
     for the period             (0.00)       (0.01)       (0.00)       (0.04)
    -------------------------------------------------------------------------

    Retained earnings
    Retained earnings,
     beginning of period    1,097,053      792,562    1,054,257      769,557
    Net income for the
     period                    63,687       45,049      106,485       68,054
    Transfer from
     statutory reserve             19            -           17            -
    -------------------------------------------------------------------------
    Retained earnings,
     end of period          1,160,759      837,611    1,160,759      837,611
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
        (Expressed in thousands of United States dollars) (Unaudited)

                              Three months ended            Six months ended
                                         June 30,                    June 30,
                              2010          2009          2010          2009
                                 $             $             $             $
    -------------------------------------------------------------------------
    Net income for the
     period                    63,687       45,049      106,485       68,054
    Other comprehensive
     income:
      Unrealized gains on
       foreign currency
       translation of
       self-sustaining
       operations              15,225        1,230       15,013          494
      Unrealized gains on
       financial assets
       designated as
       available-for-sale,
       after tax impact of
       $143 for the three
       and six months ended
       June 30, 2010
       (2009: $Nil)               466        5,515        2,005        4,305
    -------------------------------------------------------------------------
    Other comprehensive
     income                    15,691        6,745       17,018        4,799
    -------------------------------------------------------------------------
    Comprehensive income       79,378       51,794      123,503       72,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                         CONSOLIDATED BALANCE SHEETS
        (Expressed in thousands of United States dollars) (Unaudited)

                                                          As at        As at
                                                        June 30, December 31,
                                                           2010         2009
                                                              $            $
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents                           922,732    1,102,366
    Short-term deposits                                  62,821       70,387
    Accounts receivable                                 316,758      282,306
    Inventories                                          68,999       45,978
    Prepaid expenses and other                           70,646       54,747
    Convertible bonds                                    29,090       29,446
    Assets of discontinued operations                         -        1,531
    -------------------------------------------------------------------------
    Total current assets                              1,471,046    1,586,761
    -------------------------------------------------------------------------
    Timber holdings                                   2,746,883    2,183,489
    Capital assets, net                                  93,010       77,377
    Intangible assets                                     8,103          636
    Other assets                                        138,078      115,636
    -------------------------------------------------------------------------
                                                      4,457,120    3,963,899
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                   153,891      103,991
    Accounts payable and accrued liabilities            291,439      250,287
    Income taxes payable                                  9,011        7,346
    Liabilities of discontinued operations               12,543       12,156
    -------------------------------------------------------------------------
    Total current liabilities                           466,884      373,780
    -------------------------------------------------------------------------
    Long-term debt                                    1,121,480      925,466
    Future income tax liabilities                        39,108            -
    -------------------------------------------------------------------------
    Total liabilities                                 1,627,472    1,299,246
    -------------------------------------------------------------------------

    Non-controlling interests                             1,234            -
    -------------------------------------------------------------------------

    Shareholders' equity
    Equity portion of convertible senior notes          158,883      158,883
    Share capital                                     1,253,561    1,213,495
    Contributed surplus                                  12,392       12,200
    Accumulated other comprehensive income              241,166      224,148
    Statutory reserve                                     1,653        1,670
    Retained earnings                                 1,160,759    1,054,257
    -------------------------------------------------------------------------
    Total shareholders' equity                        2,828,414    2,664,653
    -------------------------------------------------------------------------
                                                      4,457,120    3,963,899
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commitments and Contingencies



                    CONSOLIDATED STATEMENTS OF CASH FLOWS
        (Expressed in thousands of United States dollars) (Unaudited)

                              Three months ended            Six months ended
                                         June 30,                    June 30,
                              2010          2009          2010          2009
                                 $             $             $             $
    -------------------------------------------------------------------------
    CASH FLOWS FROM OPERATING
     ACTIVITIES
    Net income for the
     period                 63,687        45,049       106,485        68,054
    Net loss from
     discontinued operations   277         1,970           696         6,887
    Add (deduct) items not
     affecting cash
      Depletion of timber
       holdings included in
       cost of sales        68,800        79,432       137,056      143,637
      Depreciation and
       amortization          1,801         1,161         3,620         2,290
      Accretion of
       convertible senior
       notes                 6,453         3,045        12,657         5,904
      Stock-based
       compensation          1,000         1,239         2,172         2,325
      Loss (gain) on
       changes in fair
       value of financial
       instruments           3,278        (2,589)      3,987        (1,608)
      Unrealized exchange
       losses (gains)          282            22          (919)            3
      Interest income from
       Mandra                    -          (300)         (117)         (600)
      Other                   (926)         (232)       (1,579)        1,062
    -------------------------------------------------------------------------
                           144,652       128,797       264,058       227,954
    Net change in non-cash
     working capital
     balances              (44,381)       27,951      (112,352)       96,379
    -------------------------------------------------------------------------
    Cash flows from
     operating activities
     of continuing
     operations            100,271       156,748       151,706       324,333
    -------------------------------------------------------------------------
    Cash flows (used in)
     from operating
     activities of
     discontinued
     operations                (90)          215          (325)       (2,574)
    -------------------------------------------------------------------------
    CASH FLOWS USED IN
     INVESTING ACTIVITIES
    Additions to timber
     holdings             (174,950)     (191,912)     (364,717)     (425,773)
    Increase in other
     assets                 (8,717)         (351)      (12,049)       (5,608)
    Additions to capital
     assets                 (5,710)       (2,610)      (14,770)       (5,873)
    Decrease (increase)
     in non-pledged
     short-term deposits       731          (614)        7,920        (1,478)
    Business acquisitions     (132)            -         4,019             -
    Acquisition of
     convertible bonds           -             -             -          (200)
    Proceeds from
     disposal of capital
     assets                     96           111           133           111
    -------------------------------------------------------------------------
    Cash flows used in
     investing activities (188,682)     (195,376)     (379,464)     (438,821)
    Cash flows from
     investing activities
     of discontinued
     operations                  -        10,068         1,478         9,139
    -------------------------------------------------------------------------
    CASH FLOWS FROM
     FINANCING ACTIVITIES
    Payment on deferred
     financing costs             -             -        (5,893)            -
    Increase (decrease)
     in bank indebtedness   28,682        (6,286)       48,408         2,025
    (Increase) decrease
     in pledged short-term
     deposits                 (311)        1,074          (174)        1,302
    Issuance of shares,
     net of issue costs      3,014       323,947         4,896       323,947
    Payment on derivative
     financial instrument        -             -             -        (2,891)
    Repayment of long-term
     debts                    (530)            -          (530)            -
    -------------------------------------------------------------------------
    Cash flows from
     financing activities   30,855       318,735        46,707       324,383
    Cash flows from
     financing activities
     of discontinued
     operations                  -             1             -             -
    -------------------------------------------------------------------------
    Effect of exchange
     rate changes on cash
     and cash equivalents        5           145           264           (93)
    -------------------------------------------------------------------------
    Net (decrease)
     increase in cash and
     cash equivalents      (57,641)      290,536      (179,634)      216,367
    Cash and cash
     equivalents,
     beginning of period   980,373       367,002     1,102,366       441,171
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                922,732       657,538       922,732       657,538
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental cash
     flow information
    Cash payment for
     interest charged to
     income                 11,255         2,695        36,048        27,264
    Interest received        1,429           506         2,429         1,187
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Sino-Forest Corporation

For further information: For further information: DAVE HORSLEY, Senior Vice President and Chief Financial Officer, Tel: +905 281 8889, Email: davehorsley@sinoforest.com; LOUISA WONG, Senior Manager, Investor Communications & Relations, Tel: +852 2514 2109, Email: louisa-wong@sinoforest.com

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