INNER MONGOLIA, CHINA--(Marketwire - Aug 15, 2012) - China Carbon Graphite Group, Inc. (OTCQB: CHGI) (PINKSHEETS: CHGI) ("China Carbon" or the "Company"), the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top manufacturers of carbon and graphite products, today announced its financial results for the second quarter ended June 30, 2012.

Second Quarter (Q2) 2012 Highlights:

• Gross profit grew 7.6%, from $2.69 million in Q2 2011 to $2.89 million in Q2 2012
• Gross profit rate grew 10.0%, from 22.1% in Q2 2011 to 24.4% in Q2, 2012
• Further advanced its product mix optimization process, with higher margin products made from fine grain and high purity graphite still key development priorities
• Our working capital increased from $1.06 million as of December 31, 2011 to $7.83 million as of June 30, 2012

Summarized Q2 2012 Results:

		Q2 2012		Q2 2011		CHANGE
Revenue		$11.88 million		$12.15 million		-2.2%
Gross Profit		$2.89 million		$2.69 million		+7.6%
Net Income		$0.87 million		$0.88 million		-1.3%
EPS(Diluted) *		$0.04		$0.04		-
* Earnings per diluted share of $0.04 on 24.25 million shares for Q2 2012. For Q2 2011, China Carbon reported fully diluted earnings per share of $0.04 on 23.19 million shares.

"We further ramped-up our higher margin business this past quarter," said Donghai Yu, Chief Executive Officer of China Carbon. "Notably, we were able to sustain growth in the percentage of sales of our higher margin products made from fine grain and high purity graphite products. This strategy together with our effort in price and profit control allowed us to increase our gross profit rate during the three months ended June 30, 2012 compared to the same period last year."

Second Quarter 2012 Financial Results

Revenue

China Carbon had sales of $11.88 million in Q2 2012 compared to sales of $12.14 million in Q2 2011, a decrease of $0.27 million or 2.2%. This decrease was mainly attributable to a decrease of $424,116 in the sales of the Company's low-end graphite electrodes products during Q2 2012, which is a reflection of the Company's decision to continue focusing on the manufacturing and selling of its higher margin products.

China Carbon's Q2 2012 sales included $1.50 million in graphite electrodes, $5.31 million in fine grain graphite, and $5.07 million in high purity graphite. In Q2 2011, the Company's sales included $1.92 million in graphite electrodes, $5.28 million in fine grain graphite, and $4.94 million in high purity graphite.

When further comparing Q2 2011 with Q2 2012, the average unit-selling price of China Carbon's products increased 6%, which was offset by the 10% decrease in tonnage sold for the period. During this period, the average unit-selling price of its high purity graphite products, in particular, increased 8%, which is a reflection of an increase in the cost for raw materials for such products. This increase in the average unit-selling price of high purity graphite products was offset by the 7% decrease in tonnage sold for the period as a result of less orders from certain customers due to price increases and a slight dip in the Chinese construction industry. The main reason for the Company's lower sales was due to the average unit-selling price of graphite electrodes products decreased 14%, combined with a 12% decrease in tonnage sold, from Q2 2011 to Q2 2012. The decrease in the average unit selling price and tonnage sold of graphite electrodes products is mainly due to decreased demand on the lower end products.

Cost of Sales & Gross Margin

China Carbon's cost of goods sold consists of the cost of raw materials, utilities, labor, and depreciation expenses in its manufacturing facilities. The Company's cost of goods sold was $8.99 million in Q2 2012 compared to cost of goods sold of $9.46 million in Q2 2011, a decrease of $0.47 million or 4.99%. This decrease was directly associated with the decrease in China Carbon's sales.

China Carbon's gross margin however increased from 22.1% for Q2 2011 to 24.4% for Q2 2012. This increase reflects the variance in China Carbon's product mix, which is attributable to an increase of percentage in the Company's sales of fine grain graphite and high purity graphite products, which are higher margin products compared to graphite electrodes and other products.

Net Income

As a result of the factors described above, China Carbon's net income was $0.87 million in Q2 2012 as compared to $0.88 million in Q2 2011, a decrease of $0.01 million.

Business Outlook

"As we continue to refine our strategy of focusing on our higher margin products made from fine grain and high purity graphite, we will see improved financial results in upcoming quarters," remarked Mr. Yu. "This strategy enables us to maintain profitability while also exploring the significant potential market for these products. High purity and fine grain graphite products have numerous applications in fast developing fields like the nuclear, solar and defense industries, and we are working hard to be in a better position to meet any potential rises in demand for these products, including getting our new facility that will specialize in the manufacture of fine grain and high purity graphite products, plus double our annual production capacity to 60,000 tons, completely up and running."

About China Carbon Graphite Group, Inc.

China Carbon Graphite Group, through its affiliate, Xingyong Carbon Co., Ltd., manufactures graphite and carbon based products in China. The company is the largest wholesale supplier of fine-grain and high-purity graphite in China and one of the nation's top overall producers of carbon and graphite products. Fine grain graphite is widely used in smelting for colored metals and rare earth metal smelting as well as the manufacture of molds. High purity graphite is used in metallurgy, mechanical industry, aviation, electronic, atomic energy, chemical industry, food industry and a variety of other fields. In September 2007, the Company was approved and designated by the Ministry of Science & Technology as a "National Hi-tech Enterprise," a distinction that the Company still holds. Of the more than 400 carbon graphite producers in China, China Carbon is the only non-state-owned company to receive this honor. For more information, please visit www.chinacarboninc.com.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors set forth in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q.

PART 1 - FINANCIAL INFORMATION

Item 1.

Financial Statements.

China Carbon Graphite Group, Inc. and subsidiaries
Condensed Consolidated Balance Sheets
				June 30, 2012			December 31, 2011
				(Unaudited)			(Audited)
ASSETS
	Current Assets
Cash and cash equivalents				$	1,350,890		$	521,450
Restricted cash					10,703,200			11,694,820
Accounts receivable, Net					13,095,700			12,541,321
Notes receivable					444,895			188,880
Advance to suppliers					2,410,409			5,921,970
Inventories					44,151,224			37,430,248
Prepaid expenses					234,917			452,730
Other receivables, net of allowance of $24,397					544,646			513,000
		Total current assets			72,935,881			69,264,419
	Property And Equipment, Net				35,742,753			36,719,595
	Construction In Progress				7,518,640			6,220,451
	Land Use Rights, Net				10,359,654			10,699,059
	Total Assets			$	126,556,928		$	122,903,524
LIABILITIES AND STOCKHOLDERS' EQUITY
	Current Liabilities
Accounts payable and accrued expenses				$	3,866,990		$	1,340,498
Advance from customers					1,552,654			1,360,989
Short term bank loans					38,720,400			45,488,600
Notes payable					17,786,200			16,763,100
Other payables					2,951,364			3,032,671
Loan from unrelated parties					185,610			-
Dividends payable					37,742			28,099
	Total current liabilities				65,100,960			68,013,957
	Amount Due To A Related Party				5,432,675			5,542,855
	Long term bank loan				4,690,520			-
	Warrant Liabilities				208,605			174,805
	Total Liabilities				75,432,760			73,731,617
Redeemable convertible series B preferred stock, $0.001 par value; 3,000,000 shares authorized; 305,810 and 426,110 shares issuedand outstanding at June 30, 2012 and December 31, 2011, respectively.					366,972			511,332
	Stockholders' Equity
Common stock, $0.001 par value; 100,000,000 shares authorized 24,231,708 and 22,981,408 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively					24,231			22,981
Additional paid-in capital					18,044,688			17,054,045
Accumulated other comprehensive income					7,933,485			7,943,542
Retained earnings					24,754,792			23,640,007
	Total stockholders' equity				50,757,196			48,660,575
	Total Liabilities and Stockholders' Equity			$	126,556,928		$	122,903,524

The accompanying notes are an integral part of these condensed consolidated financial statements.

China Carbon Graphite Group, Inc and subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
For the Three Months and Six Months Ended June 30, 2012 and 2011
(Unaudited)
				Three months ended June 30,								Six months ended June 30,
				2012				2011				2012				2011
Sales				$	11,877,543			$	12,145,024			$	21,938,753			$	23,608,359
Cost of Goods Sold					8,985,125				9,456,762				16,128,731				18,340,023
Gross Profit					2,892,418				2,688,262				5,810,022				5,268,336
Operating Expenses
		Selling expenses			29,152				57,312				75,950				107,175
		General and administrative			1,170,462				1,049,666				2,021,861				2,603,728
		Depreciation and amortization			46,826				47,152				103,830				93,754
	Total operating expenses				1,246,440				1,154,130				2,201,641				2,804,657
Operating Income Before Other Income (Expense)					1,645,978				1,534,132				3,608,381				2,463,679
Other Income (Expense)
		Interest expense			(1,220,173	)			(693,274	)			(2,449,918	)			(1,406,804	)
		Interest income			21				-				43				-
		Other expense			(215,468	)			(765	)			(215,468	)			(766	)
		Other income, net			215,190				15,670				215,190				76,550
		Change in fair value of warrants			445,763				26,540				(33,800	)			82,692
	Total other expense				(774,667	)			(651,829	)			(2,483,953	)			(1,248,328	)
Net Income				$	871,311			$	882,303			$	1,124,428			$	1,215,351
Dividend Distribution					(4,625	)			(6,985	)			(9,643	)			17,882
Net Income Available To Common Shareholders				$	866,686			$	875,318			$	1,114,785			$	1,233,233
Other Comprehensive Income (Loss)
Foreign currency translation gain (loss)					(433,954	)			553,200				(10,057	)			821,448
Total Comprehensive Income				$	437,357			$	1,435,503			$	1,114,371			$	2,036,799
Share Data
		Basic earnings per share		$	0.04			$	0.04			$	0.05			$	0.05
		Diluted earnings per share		$	0.04			$	0.04			$	0.05			$	0.05
		Weighted average common shares outstanding, basic			23,948,851				22,350,263				23,632,248				21,993,435
		Weighted average common shares outstanding, diluted			24,254,661				23,194,542				23,938,058				22,671,285

The accompanying notes are an integral part of these condensed consolidated financial statements.

China Carbon Graphite Group, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2012 and 2011
(Unaudited)
					Six months ended June 30,
					2012				2011
Cash flows from operating activities
	Net Income				$	1,124,428			$	1,215,351
	Adjustments to reconcile net cash provided by operating activities
			Depreciation and amortization			1,360,692				870,310
			Related party interest expenses contribution			222,860				-
			Stock compensation			374,333				623,450
			Change in fair value of warrants			33,800				(82,692	)
	Change in operating assets and liabilities
			Accounts receivable			(557,196	)			(4,308,178	)
			Notes receivable			(257,316	)			173,556
			Other receivable			(31,808	)			(1,107,235	)
			Advance to suppliers			3,529,409				(889,008	)
			Inventories			(6,755,136	)			(4,121,825	)
			Prepaid expenses			(2,719	)			226,703
			Accounts payable and accrued liabilities			2,684,917				(141,785	)
			Advance from customers			192,640				2,807,114
			Taxes payable			(444,341	)			1,476,262
			Other payables			353,241				90,132
Net cash provided by (used in) operating activities						1,827,804				(3,167,845	)
Cash flows from investing activities
			Acquisition of property and equipment			(37,756	)			(27,088	)
			Construction in progress			(1,109,403	)			(2,459,521	)
Net cash used in investing activities						(1,147,159	)			(2,486,609	)
Cash flows from financing activities
	Proceeds from issuing common stock					472,000				-
	Proceeds from warrants exercise					-				371,714
	Dividends paid for series B preferred stock					-				(32,996	)
		Proceeds from short-term bank loans				11,074,000				11,176,300
		Payment to short-term bank loans				(17,876,600	)			(6,047,450	)
	Proceeds from long-term bank loans					4,714,360
		Proceeds from loans from unrelated parties				9,162,944				-
		Payment of loans from unrelated parties				(9,162,944	)
		Payments to an related party				(142,380	)			-
		Proceeds from an related party				31,640				-
		Proceeds from stock not yet issued				(145,000	)			-
	Restricted cash					996,660				(6,491,440	)
	Proceeds from notes payable					17,876,600				10,410,800
	Payment to notes payable					(16,848,300	)			-
Net cash provided by financing activities						152,980				9,386,928
Effect of exchange rate fluctuation						(4,185	)			42,368
Net increase in cash						829,440				3,774,842
Cash and cash equivalents at beginning of period						521,450				296,312
Cash and cash equivalents at end of period					$	1,350,890			$	4,071,154
Supplemental disclosure of cash flow information
	Interest paid				$	1,643,371			$	1,406,804
Non-cash activities:
	Preferred stock conversion to common stock				$	144			$	753
	Reclassfication of warrant liability with equity				$	-			$	14,993
	Issuance of common stock for compensation				$	153,800			$	1,787,600