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
25%
- Net Income increased
25%
- 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 ResultsIn 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 ResultsBromineRevenues
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 SaltRevenues 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.”
ChemicalsRevenues 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 GasThe 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 SheetDuring 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 ExpendituresIn 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 GuidanceFor 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 StatementsCertain 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, 2017Unaudited |
|
|
December 31, 2016Audited |
|
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 SUBSIDIARIESCONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME(Expressed in U.S.
dollars)(UNAUDITED) |
|
|
|
|
|
|
|
Three-Month Period EndedMarch 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
Gulf Resources (NASDAQ:GURE)
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