Revenue from China operation increased by $233,677 from $1,978,436 in 2008 first quarter to $2,212,113 in 2009 first quarter. Revenue from Australia operation decreased by $218,285 from $600,677 in 2008 first quarter to $383,382 in 2009 first quarter. Gross profit decreased $0.23 million or 15% to $1.31 million in the first quarter 2009 from $1.54 million in the first quarter 2008, primarily due to lower profitability in Australia. However, gross profit of China operation decreased only by $85,226 from $1,158,597 in 2008 first quarter to $1,073,371 in 2009 first quarter. In comparison, gross profit of Australia operation decreased sharply by $157,293 from $396,485 in 2008 first quarter to $239,192 in 2009 first quarter. Gross margin decreased from 60% in the 2008 first quarter to 51% in the 2009 first quarter mainly due to a decline in US dollar denominated plastics materials sales in Australia.
“Due to the decline of the Australia dollar and slower economic activity in the country, the quantity of waste materials we processed and sold was significantly lower in Australia than in the year-earlier period, which offset growth in China. We are encouraged that demand in China remains strong, helped by the Chinese Government emphasizing environmental policies and projects for all sectors and entities. Chinese waste management market is one of the fastest growing markets in the world. It is estimated to be $35 billion by 2010,” stated Jack Chen, Sancon’s chief executive officer. “It is for this reason that we continue to invest in growing our position in that market, such as through the recently announced Joint Venture with “Close The Loop” for building printer cartridges and toners recycling facilities for China. We believe this new venture positions us well to work with leading printer cartridge makers in the world, who seek a reliable and cost-effective way to dispose of the cartridge waste. China uses over 100 million of printer cartridges and tonners a year and recycles less than 1%. While we expect our margins and profitability to return to customary levels in the second quarter, we believe that our joint venture with Close The Loop as well as other initiatives to be announced shortly positions us for growth during the latter part of the year and into 2010.”
