maybe it's not as bad it first seemed this morning.
The blackout may not affect Q3 rev at all based on what the Sep PR said (see below) and confirmed later by IR (see sticky note above). Q4 will be strongly affected, even more than the initial 40M that was already built into the reduced guidance of $140M. If that reduces annual rev by another 30M, I still see total annual revenue of 110M, consisting maybe of 50M in Q3 and 35M in Q4. That would yield an est. eps of 0.36-0.39 for the year. Not too bad for a stocktrading now at below $3.5?
Considering all the pent-up demand for scrap steel from all the steel mills that were affected by the Q4 blackouts (affecting 18 provinces!) on top of the already strong demand mentioned in the recent CC and in todays' PR, and no more power supply problems in 2011, I can see them do almost 100% capacity next year to catch up with orders, that's about 350-400M rev from the scrap plant. Add to that 60 to 100M from the trading business, we get about 410 to 500M rev for 2011. Compare that to today's measly market cap of 50M and draw your own conclusion. I think I will be adding here to take advantage of the "bad" news. fwiw
Sep PR: The energy restrictions will significantly reduce our recycling capabilities in the fourth quarter which is expected to impact its revenue in 2010 by as much as $40 million. This has caused management to revise its financial guidance for the full year of 2010 which is now expected to exceed $140 million with net income exceeding $8 million.
Today's PR: Commenting on the announcement, Mr. Kexuan Yao, CEO and Chairman of China Armco Metals, Inc., stated, "While the government's decision to restrict power will further the negative impact on our 2010 performance and we do not have sufficient clarity to assess the full impact in 2010, we do know that it will certainly end before the beginning of 2011. We believe there will be sufficient demand in 2011 for our scrap metal to enable us to quickly recover following this interruption and we intend to rapidly ramp up our production utilization rates in the coming quarters."
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