SHOUGUANG, China, May 12, 2017 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq: GURE ) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt, specialty chemical products, and natural gas in China, today announced its financial results for the first quarter ended March 31, 2017.
First Quarter 2017 Highlights
- Operating Income increased 2 5 %
- Net Income increased 2 5 %
- Earning per share increased 21%
- Free cash flow equaled $0 . 17 per share*
- Cash balances increased to $172,804,078 ($3.69 per share*).
- Net Net Cash per share equaled $3.29 *
- Working capital per share equaled $4.76*
- Book Value per share equaled $7.68*
First Quarter Results In the first quarter of 2017, revenues declined 5% to $32,788,493 from $34,495,450. Cost of goods sold declined by 15%. As a result, gross margins dollars improved 18%. As a percentage of sales, gross margins increased to 38% from 31%.
Sales expenses declined by 7%. R&D increased by 3%. G&A declined by 10%. Total expenses declined by 15%.
Income from operation increased 25% to $10,812,997 from $8,666,318. Earnings before taxes also increased by 25% to $10,896,946. Net income increased by 25% to $8,075,120. Earnings per share increased by 21% to $0.17 from $0.14.
Mr. Liu Xiaobin, the President and CEO of Gulf Resources stated, “We are extremely proud of our much improved margins, cost controls, and profitability during the seasonably slow first quarter. We believe we will continue to produce strong results during the remainder for 2017.”
Segment Results Bromine Revenues in Bromine increased by 6% to $13,922,394. Volume in bromine declined by 0.2%. The average selling price per tonne increased 6% to $4071, continuing the strong increases the company has been experiencing.
Cost per tonne of bromine declined 10% to $2,522. Overall costs in bromine declined by 14.8% to $7,800,986. With higher pricing and lower costs, gross margins increased 52.6% to $6,121,408 from $4,011,515. Gross margin as a percentage of sales increased to 44.0% from 30%.
Income before taxes in the Bromine segment increased 75.4% to $5,271,933. As a percentage of revenues, income was 37.9% versus 22.9%., an increase of 1500 basis points. Income after taxes increased 75% to $3,941,830. As a percentage of revenues, income after tax was 28.3% versus 17.2%.
“We are very pleased with the results of our bromine segment,” Mr. Liu Xiaobin stated. “Bromine pricing continues to increase. It is even up since the end of the quarter. We expect prices to remain strong in the future. We are investing in our facilities to improve utilization. We believe we can continue to increase both sales and profits in bromine. Stricter government regulations are forcing many smaller competitors to close, which should allow us to increase our market share.”
“While we are not making projections,” Mr. Liu continued, “we would like to remind investors that our bromine segment has historically had significantly higher earnings from operations during year 2009-2011. We are very optimistic about the opportunities in this segment.”
Crude Salt Revenues in crude salt increased 3% to $1,813,778 from $1,766,608. Gross profits in crude salt were $962,945 compared to $322,974, an increase of 198%. Gross margins were 53% compared to 18%. Income from operations for crude salt equaled $885,888, an increase of 289%. Income after tax was $662,306, an increase of 285%. “We are very pleased,” Mr. Liu stated, “to see a stabilization and improvement in our crude salt sector.”
Chemicals Revenues in chemical products declined 12.8% to $17,052,31 from $19,559,314. By product line, revenues in oil and gas additives decreased 15% to $3,977,298. Paper manufacturing additives declined 15% to $688,276. Pesticides additives declined 16% to $2,216,710. Pharmaceutical intermediaries declined 13% to $6,963,509, while pharmaceutical by products declined 7% to $3,206,528. This decrease was primarily attributable to the decreased sales volume of all of our chemical products due to the slowdown in the Chinese economy and the financial tightening, which has affected our customers’ industries.
With regard to pricing, oil and gas, and paper additives had pricing declines of 2%, and 3%, Pesticides had a 3% increase in pricing. Pharmaceutical intermediaries had a 6% increase in pricing. This was caused largely by a change in mix to slightly lower quality products. Pharmaceutical by products had a 1.4% decrease in pricing.
The cost of revenues declined by 12.9% to $11,562,044. Gross margins were flat at 32%. Income from operations declined 13.6% to $4,946,177. Net income declined 13.7% to $3,678,036.
“While our chemical business is still showing declines over the previous year,” Mr. Liu stated, “the declines were much lower than in the fourth quarter of 2016 when sales and gross profits increased 3% and 3% respectively as compared to the fourth quarter 2016. Although the economy in China is still soft and although some of our customers still have capital constraints, we believe we have reached the bottom and are starting to see real improvements. We believe we are becoming cautiously optimistic about these businesses.”
Natural Gas The company had signed a contract with Sichuan Heshun Natural Gas Sales Co., Ltd, its first customer for its natural gas production in Sichuan Province. It received the product quality inspection report, and trained its labors got operator certificates.
“We are very pleased to have secured our first contract for natural gas,” stated Liu Xiaobin, the CEO of Gulf Resources. “During this initial period, it is very important that we can deliver the natural gas we are promising. We believe our first well can produce a large amount of natural gas. We further believe that there will be opportunities to drill many more wells. However, we must be careful to make sure that we can successfully deliver on all of our commitments. We do not want to take any short cuts that could jeopardize the substantial opportunity that we believe we have before us.”
Cash Flow and Balance Sheet During the first quarter, we generated $8,422,769 from operations. This equals $0.18 per share. We spent $384,718 on PPE and prepaid leases. Free cash flow equaled $8,038,051 or $0.17 *per share.
Our balance sheet continues to strengthen. We ended the quarter with cash of $172,804,078 ($3.69 per share*). This is an increase in cash of $8,919,504. Net net cash per share equaled $3.29*. Current assets per share were $5.11*, while current liabilities were $0.35*. As a result, working capital per share equaled $222,533,394 or $4.76* per share. Book value increased to $359,582,590 ($7.68 per share*.)
We have maintained a flexible policy with our accounts receivable. Receivables of over 90 days old increased 16.6% to $23,185,593 as compared to the fourth quarter 2016. Virtually all are with customers we know very well. During this period of strong capital constraints in China, we believe it is in our interest to give our good customers at little extra leeway. Unlike many other companies, we have a balance sheet that will allow us this luxury. However, we are constantly reviewing the credit worthiness of all of our customers.
Capital Expenditures In 2017, we expect to spend about $10 million on drilling 2-3 new wells in Sichuan. We will also spend some money on improving our bromine and chemical production facilities. The amount of these expenditures will depend on regulations by the local government. While we do not know what new regulations will be enacted, we believe any further regulations will enhance our competitive position versus our less well-financed competitors.
We are continuing to look for vertical and horizontal acquisitions. At the present time, we believe we may have the opportunity to acquire more bromine resources and factories at very attractive prices. In addition, we are considering acquisitions of companies that export chemical products. If we can acquire companies that export chemical products, we will be able to gain financial flexibility that will enable us to help improve shareholder value.
2017 Guidance For the second quarter of 2017, we expect continued strong pricing in bromine. We also believe we should be able to slightly increase the volume of bromine sold. The chemical business should be slightly lower in sales and earnings than in the previous year, however the gap should continue to close. Earnings for the quarter should be higher than those in the previous year.
For the year as a whole, we expect sales to increase between 3% and 8%. Bromine should continue to be strong. The chemical business should improve and show an increase by the fourth quarter. Net Income and earnings per share should increase by at least 10%.
“We believe,” Mr. Liu continued, “there are a number of factors that could lead to larger increases in earnings, however because many things are currently unknown, we prefer to remain conservative.”
“We at Gulf have continued to deliver on our promises,” Mr. Liu continued. “We have many exciting things ahead of us. We are going to see real revenues from our natural gas project. We believe we have significant additional leverage in Bromine. We think our chemical business has bottomed and is starting to show improvement. We see very exciting acquisition opportunities that could significantly add to earnings, and we are committed to finding ways to help recognize shareholder value.”
“We appreciate the support of our shareholders,” Mr. Liu continued. “We are implementing our plan that we believe will lead to significantly higher sales and earnings in the years ahead and that will give us the opportunity to help our shareholders recognize the value they see in our company.”
(*All calculations based on 46,793,791 shares outstanding )
Conference Call
Gulf Resources' management will host a conference call on Monday, May 15, 2017 at 9:00 a.m. Eastern Daylight Time to discuss its financial results for the first quarter ended March 31, 2017.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the call. The Company's management team will be available for investor questions following the prepared remarks.
To participate in this live conference call, please dial +1 (877) 275-8968 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (706) 643-1666. The conference participant pass code is 22780829 .
The webcasting is also available then, just simply click on the link below: http://www.gulfresourcesinc.com/events.html
A replay of the conference call will be available two hours after the call's completion during 05/15/2017 11:00 EDT - 06/14/2017 22:59 EDT. To access the replay, call +1 (855) 859-2056. International callers should call +1 (404) 537-3406. The conference ID is 22780829 .
About Gulf Resources, Inc. Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"), Shouguang City Rongyuan Chemical Co, Limited (“ SCRC”) and Daying County Haoyuan Chemical Company Limited (“DCHC”). The company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents. SCRC is a leading manufacturer of materials for human and animal antibiotics in China and other parts of Asia. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com .
Forward-Looking Statements Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the company's reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
| GULF RESOURCES, INC. | ||||||||
| AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Expressed in U.S. dollars) | ||||||||
| March 31, 2017 Unaudited | December 31, 2016 Audited | |||||||
| Current Assets | ||||||||
| Cash | $ | 172,804,078 | $ | 163,884,574 | ||||
| Accounts receivable | 60,626,001 | 51,835,218 | ||||||
| Inventories, net | 5,147,763 | 5,881,681 | ||||||
| Prepayments and deposits | 30,000 | 117,338 | ||||||
| Prepaid land leases | 378,684 | 47,255 | ||||||
| Other receivable | 2,008 | 1,424 | ||||||
| Deferred tax assets | - | - | ||||||
| Total Current Assets | 238,988,534 | 221,767,490 | ||||||
| Non-Current Assets | ||||||||
| Property, plant and equipment, net | 104,154,220 | 108,731,126 | ||||||
| Property, plant and equipment under capital leases, net | 478,451 | 554,257 | ||||||
| Prepaid land leases, net of current portion | 4,665,917 | 4,754,169 | ||||||
| Deferred tax assets | 2,227,916 | 2,215,772 | ||||||
| Goodwill | 27,820,174 | 27,668,539 | ||||||
| Total non-current assets | 139,346,678 | 143,923,863 | ||||||
| Total Assets | $ | 378,335,212 | $ | 365,691,353 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 10,366,776 | $ | 8,682,318 | ||||
| Retention payable | 2,418 | 733,869 | ||||||
| Capital lease obligation, current portion | 230,380 | 187,678 | ||||||
| Taxes payable | 5,855,566 | 4,341,331 | ||||||
| Total Current Liabilities | 16,455,140 | 13,945,196 | ||||||
| Non-Current Liabilities | ||||||||
| Capital lease obligation, net of current portion | 2,297,482 | 2,284,959 | ||||||
| Total Liabilities | $ | 18,752,622 | $ | 16,230,155 | ||||
| Stockholders’ Equity | ||||||||
| PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding | $ | - | $ | - | ||||
| COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 47,052,940 and 47,052,940 shares issued; and 46,793,791 and 46,793,791 shares outstanding as of March 31, 2017 and December 31, 2016, respectively | 23,525 | 23,525 | ||||||
| Treasury stock; 259,149 and 259,149 shares as of March 31, 2017 and December 31, 2016 at cost | (577,141 | ) | (577,141 | ) | ||||
| Additional paid-in capital | 94,165,679 | 94,156,679 | ||||||
| Retained earnings unappropriated | 256,172,033 | 248,941,696 | ||||||
| Retained earnings appropriated | 23,755,749 | 22,910,966 | ||||||
| Accumulated other comprehensive loss | (13,957,255 | ) | (15,994,527 | ) | ||||
| Total Stockholders’ Equity | 359,582,590 | 349,461,198 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 378,335,212 | $ | 365,691,353 | ||||
| GULF RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Expressed in U.S. dollars) (UNAUDITED) | ||||||||
| Three-Month Period Ended March 31, | ||||||||
| 2017 | 2016 | |||||||
| NET REVENUE | ||||||||
| Net revenue | $ | 32,788,493 | $ | 34,495,450 | ||||
| OPERATING INCOME (EXPENSE) | ||||||||
| Cost of net revenue | (20,213,863 | ) | (23,881,646 | ) | ||||
| Sales, marketing and other operating expenses | (75,833 | ) | (81,901 | ) | ||||
| Research and development cost | (61,898 | ) | (59,837 | ) | ||||
| General and administrative expenses | (1,728,460 | ) | (1,916,030 | ) | ||||
| Other operating income | 104,558 | 110,282 | ||||||
| (21,975,496 | ) | (25,829,132 | ) | |||||
| INCOME FROM OPERATIONS | 10,812,997 | 8,666,318 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest expense | (41,911 | ) | (46,129 | ) | ||||
| Interest income | 125,860 | 114,446 | ||||||
| INCOME BEFORE TAXES | 10,896,946 | 8,734,635 | ||||||
| INCOME TAXES | (2,821,826 | ) | (2,267,671 | ) | ||||
| NET INCOME | $ | 8,075,120 | $ | 6,466,964 | ||||
| COMPREHENSIVE INCOME: | ||||||||
| NET INCOME | $ | 8,075,120 | $ | 6,466,964 | ||||
| OTHER COMPREHENSIVE INCOME | ||||||||
| - Foreign currency translation adjustments | 2,037,272 | 1,893,061 | ||||||
| COMPREHENSIVE INCOME | $ | 10,112,392 | $ | 8,360,025 | ||||
| EARNINGS PER SHARE: | ||||||||
| BASIC | $ | 0.17 | $ | 0.14 | ||||
| DILUTED | $ | 0.17 | $ | 0.14 | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES: | ||||||||
| BASIC | 46,793,791 | 46,007,120 | ||||||
| DILUTED | 46,804,241 | 46,740,326 | ||||||
| GULF RESOURCES, INC. | |||||||||
| AND SUBSIDIARIES | |||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (Expressed in U.S. dollars) | |||||||||
| (UNAUDITED) | |||||||||
| Three-Month Period Ended March 31, | |||||||||
| 2017 | 2016 | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
| Net income | $ | 8,075,120 | $ | 6,466,964 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Interest on capital lease obligation | 41,753 | 45,891 | |||||||
| Amortization of prepaid land leases | 107,461 | 131,544 | |||||||
| Depreciation and amortization | 5,439,098 | 6,869,721 | |||||||
| Unrealized exchange loss on translation of inter-company balances | 137,255 | 130,462 | |||||||
| Stock-based compensation expense | 9,000 | 7,300 | |||||||
| Changes in assets and liabilities, net of effects of acquisition : | |||||||||
| Accounts receivable | (8,523,139 | ) | (1,380,964 | ) | |||||
| Inventories | 767,825 | 255,763 | ) | ||||||
| Prepayments and deposits | (29,129 | ) | (30,000 | ) | |||||
| Other receivables | (580 | ) | - | ||||||
| Accounts payable and accrued expenses | 1,641,677 | 2,000,630 | |||||||
| Retention payable | (736,894 | ) | (501,556 | ) | |||||
| Taxes payable | 1,493,322 | 376,559 | |||||||
| Net cash provided by operating activities | 8,422,769 | 14,372,314 | |||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | |||||||||
| Additions of prepaid land leases | (324,743 | ) | (326,526 | ) | |||||
| Purchase of property, plant and equipment | (59,975 | ) | (57,286 | ) | |||||
| Net cash used in investing activities | (384,718 | ) | (383,812 | ) | |||||
| EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 881,453 | 816,906 | |||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 8,919,504 | 14,805,408 | |||||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 163,884,574 | 133,606,392 | |||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 172,804,078 | $ | 148,411,800 | |||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||
| Cash paid during the period for: | |||||||||
| Income taxes | $ | 1,798,807 | $ | 2,319,477 | |||||
CONTACT: Gulf Resources, Inc. Web: http://www.gulfresourcesinc.com Director of Investor Relations Helen Xu (Haiyan Xu) beishengrong@vip.163.com
