NEW YORK, NY–(Marketwire – May 16, 2012) – China Carbon Graphite Group, Inc. (OTCBB: 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 first quarter ended March 31, 2012.

First Quarter (Q1) 2012 Highlights:

• Gross profit margin grew from 22.5% in Q1 2011 to 29.0% in Q1 2012
• Continues to advance its product mix optimization process, with higher margin products made from fine grain and high purity graphite key development priorities
• Work in progress increased as high-end products made from fine grain and high purity graphite have longer production cycles

Summarized Q1 2012 Results:

“We continued to focus on developing our higher margin business this past quarter and see an improvement of gross profit rate and a deduction of our general and administrative expenses,” said Donghai Yu, Chief Executive Officer of China Carbon. “When comparing Q1 2011 with Q1 2012, we raised the percentage of our sales of fine grain and high purity graphite products, which are both higher margin products compared to our other business segment, graphite electrodes, while running at 75% of our 30,000 ton annual production capacity. Moreover, when further comparing these two quarters, raw material prices continued to increase, resulting in the average unit-selling price of our products increasing 49 percent with the average unit-selling price of our high purity graphite products increasing 47 percent in particular. We anticipated this trend and were able to offset rising graphite prices by making advance deposits to suppliers with available cash to lock in favorable prices.”

Mr. Yu added, “While our increase in inventories this past quarter is a reflection of the rise in the cost of raw materials, it is also a result of an increase in the amount of our work in progress. Our high-end products made from fine grain and high purity graphite require longer production cycles, causing our work in progress to increase during the quarter. We feel comfortable with our order book that the robust demand for our fine grain and high purity graphite products will continue into 2012, and we anticipate that we will see improved demand for our ultra-high graphite electrodes during this time as well.”

First Quarter 2012 Financial Results

Revenue

China Carbon had sales of $10.1 million in Q1 2012 compared to sales of $11.5 million in Q1 2011, a decrease of $1.4 million. This decrease was mainly attributable to a decrease of $654,030 in the sales of the Company’s low-end graphite electrodes products, as well as a $223,034 decrease in sales of China Carbon’s other products, during Q1 2012, which is a reflection of the Company’s decision to focus on the manufacturing and selling of its higher margin products.

China Carbon’s Q1 2012 sales included $1.1 million in graphite electrodes, $4.5 million in fine grain graphite, and $4.4 million in high purity graphite. In Q1 2011, the Company’s sales included $1.8 million in graphite electrodes, $4.7 million in fine grain graphite, and $4.6 million in high purity graphite. When further comparing Q1 2011 with Q1 2012, the average unit-selling price of China Carbon’s products increased 49% and the average unit-selling price of its high purity graphite products increased 47%. The increase in the average unit-selling price of high purity graphite is due to a large demand for such products in the market in addition to an increase in the cost for raw materials. The manufacturing of solar and mold products increased the demand for China Carbon’s products as raw materials during this time as well.

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 $7.1 million in Q1 2012 compared to cost of goods sold of $8.9 million in Q1 2011, a decrease of $1.8 million. This decrease was directly associated with the decrease in China Carbon’s sales.

China Carbon’s gross margin however increased from 22.5% for Q1 2011 to 29.0% for Q1 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 products and high purity graphite products, which are higher margin products compared to graphite electrodes and other products.

EBITDA

China Carbon’s EBITDA in Q1 2012 was $2.29 million compared to $2.52 million in Q1 2011, a decrease of $0.23 million or 10.0%. EBITDA includes warrant expenses and non cash stock compensation totaling $658,662 for the three months ended March 31, 2012.

Net Income

As a result of the factors described above, China Carbon’s net income was $0.25 million in Q1 2012 as compared to $0.33 million in Q1 2011, a decrease of $0.8 million.

Business Outlook

“While we continue to grow our fine grain and high purity graphite businesses, we are confident that our top line results will be better in future quarters as the demand for graphite electrodes improves,” commented Mr. Yu. “We project increasing demand in the fine grain, high purity and ultra-high power graphite electrode markets to continue in 2012, especially from China’s evolving iron, steel, automobile, aerospace and defense industries. In particular, steel plants in China have been modernizing their current facilities with Electric Arc Furnaces, fueling the demand for large size ultra-high power graphite electrodes.”

“Notably, the margin for large size ultra-high power graphite electrodes is high due to the shortage of supply compared to demand,” remarked Mr. Yu. “Accordingly, we are working hard to get our new facility that specializes in the manufacture of fine grain and high purity graphite products completely up and running, as this facility will double our annual production capacity to 60,000 tons and will enable us to manufacture a new product: ultra-high power graphite electrodes with a diameter ranging from 600 to 800 millimeters. By improving our production capacity and capabilities in regards to these products, and by enhancing our ultra-high graphite electrodes business, we believe that we will see better financial results in upcoming quarters.”

The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

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.