Gulf Resources, Inc. (Nasdaq: GURE) ("Gulf Resources", “we,” or the
"Company"), a leading manufacturer of bromine, crude salt and
specialty chemical products in China, today announced financial
results for the three months ended March 31, 2023.
- Revenues:
$9,302,007, representing an increase of 4% over the same period of
2022.
- The Net Loss was
($557,747) compared to a net loss of ($119,946) for the same period
last year.
- Earnings per share
were a loss of $0.05 versus a loss of $0.01 for the same period
last year.
- Cash flow was
$4,831,553.
- Ending cash was
$115,771,833.
- Cash per share
$11.10* (based on 10,431,924 shares issued and outstanding.)
- Net Net Cash
$94,872,257, or$9.09 per share.
- Shareholders’ equity
was $274,839,960 or $26.35* per share.
Financials
Revenues for the 1st quarter of 2023 were $9,302,007,
representing an increase of 4% over the same period of 2022. Cost
of revenues increased to 72.8% from 50.9% primarily due to the
sharp drop in the price of bromine. Gross profit was $2,532,933
compared to $4,380,769 for the same period last year. Direct labor
and factory overheads incurred during plant shutdown were
$2,408,736 compared to $2,184,591 for the same period last year.
General and administrative expenses were $910,051 compared to
$2,242,501 for the same period last year. The Net Loss was
($557,747) compared to a net loss of ($119,946) for the same period
last year. Earnings per share were a loss of $0.05 versus a loss of
$0.01 for the same period last year.
Cash flow was $4,831,553 vs. $8,445,682 year-over-year. Cash
increased by $7,545,619. Ending cash was $115,771,833. Cash per
share was $11.10*. Net net cash (cash minus all liabilities) was
$94,872,257, or $9.09* per share. Shareholders’ equity was
$274,839,960 or $26.35* per share.
By Segment
Bromine and crude salt
For the three-month period ended March 31, 2023,
the net revenue for the bromine segment was $8,470,372 compared to
$8,126,015 for the same period in the previous year. This increase
was due to the 101% increase in tonnes sold and a 48% decrease in
average selling price. The gross profit margin of 27% compared to
52% for the same period last year. The decrease in gross profit
margin was primarily attributable to the lower average selling
price of bromine of $4,193 compared to $8,082 per ton for the same
period last year. Costs of net revenues were $6,148,443 compared to
$3,920,325. The loss from operations was $409,692 compared to a
profit of $1,348,834 for the same period last year.
The net revenue for the crude salt was $748,681 and
$754,044 for the same period of 2023 and 2022, respectively. This
increase in net revenue for the crude salt was due to the 32%
increase in tonnes sold and a 25% decrease in average selling
price. The cost of net revenues was $620,258 compared to $629,560
for the same period last year. Crude salt earned a profit of
$42,930 compared to a loss of $521,921 for the same period in the
previous year.
In May 2022, we separated the bromine and the crude
salt business to conform with government regulations. This
separation required different allocation of costs. The net impact
was to increase the cost allocations to bromine and decrease the
cost allocations to crude salt.
ChemicalsThere was no revenue in chemicals.
Loss from operations from our chemical products segment was
$417,873 for the three-month period ended March 31, 2023, compared
to loss from operations of $513,282 in the same period in 2022.
Natural GasOur natural gas segment had no
revenue from production. We did lease some of our equipment for
$82,954. As a result, income from operations from our natural gas
segment was $12,685 for the three -month period ended March 31,
2023, compared to a loss of $26,739 in the same period in 2022.
Business and Strategic Plan Outlook
Bromine and Crude Salt
The price of bromine has dropped substantially this quarter. We
believe there are three major causes. With the economy closed,
there was a downturn in domestic demand and a sharp drop off in
export sales of downstream products. In addition, because more
people were home and not working during COVID-19 pandemic, there
was less need for disinfectants. We believe that companies
manufacturing disinfectants did not expect the economy to close and
thus had too much inventory.
We believe prices of bromine have bottomed and may rise from
current levels. The supply/demand equation is still very
advantageous. Some factories have been permanently closed. The
economy is improving, and exports are starting to return to normal.
At this time, we are not in a position to project the timing or
extent of the rebound in prices. However, we believe the lack of
bromine mines will offer us strong opportunities.
The company remains optimistic about its ability try to open one
of its two closed factories in 2023. The company is currently
working with the local government on the related issues.
For the existing operating factories, the company has completed
substantial of its capital expenditures. Capital expenditures for
bromine and crude salt in 2023 will be limited to basic
maintenance.
ChemicalsThe company is waiting for the
customized machinery majorly includes that related to environmental
issues, such as the waste gas treatment equipment, solid waste
treatment equipment, and wastewater treatment equipment. The
remaining equipment will be delivered as soon as the environmental
equipment is available. This equipment is expected to be delivered
by the 2nd quarter or the 3rd quarter of 2023.
Once this equipment is delivered, the company will inform
shareholders and post photos on its website.
The Company believes that once all of the
equipment is delivered, it will take 3 to 4 months to get them
installed. After installation, the testing process is anticipated
to take 2 to 3 months, after which it will be in a position to
apply for environmental and safety approval. After we get the
approval, it will take us 4 months to conduct trial production, and
then we may start commercial production.
Chemical Export ProjectMr. Naihui Miao, our COO
and Director, has been named as the Chairman of our task force to
explore export opportunities for chemicals. Management team began
to research which products and markets offer the best opportunities
to exports. The company will try to find these export opportunities
so we can gain the possible and greater financial flexibility to
enhance shareholder value.
Before selecting the specific products and the markets, we will
also have to consider which of the products can be produced in the
highest quality by our new factory.
Sichuan Province
As we have disclosed, The Company plans to proceed with its
applications for the natural gas and brine project approvals with
related government departments until after the governmental
planning has been finalized the land and resource planning for
Sichuan Province. Because of the complexities, we are discussing
the possibility of a Joint Venture with the government of Daying
County for the extraction of bromine water and related products. We
believe such a Joint Venture could help us overcome some of the
government related issues. We will keep investors informed of our
progress.
Comments
“The sharp decline in the price of bromine significantly
impacted our earnings in this quarter,” stated Mr. Xiaobin Liu, the
CEO of Gulf Resources. “We expect these prices have hit bottom and
may rise from here. Nonetheless, despite the decline, we generated
free cash flow and increased our cash position. As of the close of
business on May 12, our cash was almost 4x our market
capitalization and our book value per share was almost 9x our
market capitalization.”
“We believe bromine prices will rebound and we will try to open
one more facility,” Mr. Liu added. “We are very optimistic about
the opportunities for our chemical business. In 2015 and 2016, our
chemical business had income from operations of $33 million and
$25.5 million respectively. We believe our new chemical facility
will be profitable. We also believe that we will get permission to
drill for natural gas and brine in Sichuan Province. While there is
no certainty yet, our discussions with the local government are
going well.”
“Finally, we have established our task force, led by our COO
Naihui Miao,” Mr. Liu concluded, “that will identify opportunities
for the export of chemicals so that we may gain the possible
financial flexibility to undertake critical actions to enhance
shareholder value.”
(*These calculations are based on the number of shares issued
and outstanding of 10,431,924 shares as of March 31, 2023)
|
GULF RESOURCES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Expressed in U.S. dollars) |
|
|
|
|
|
March 31, 2023 (Unaudited) |
|
December 31, 2022 (Audited) |
Current Assets |
|
|
|
Cash |
$ |
115,771,833 |
|
|
$ |
108,226,214 |
|
Accounts receivable |
|
5,224,530 |
|
|
|
5,363,166 |
|
Inventories, net |
|
588,009 |
|
|
|
1,598,572 |
|
Prepayments and deposits |
|
4,369,375 |
|
|
|
4,236,782 |
|
Other receivable |
|
1,163 |
|
|
|
637 |
|
Total Current Assets |
|
125,954,910 |
|
|
|
119,425,371 |
|
Non-Current Assets |
|
|
|
Property, plant and equipment,
net |
|
145,716,571 |
|
|
|
149,916,766 |
|
Finance lease right-of use
assets |
|
164,732 |
|
|
|
163,868 |
|
Operating lease right-of-use
assets |
|
8,543,073 |
|
|
|
8,098,427 |
|
Prepaid land leases, net of
current portion |
|
9,641,075 |
|
|
|
9,508,001 |
|
Deferred tax assets |
|
5,719,175 |
|
|
|
5,318,909 |
|
Total non-current assets |
|
169,784,626 |
|
|
|
173,005,971 |
|
Total Assets |
$ |
295,739,536 |
|
|
$ |
292,431,342 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity |
|
|
|
Current Liabilities |
|
|
|
Payable and accrued expenses |
$ |
7,133,752 |
|
|
$ |
7,823,722 |
|
Taxes payable-current |
|
955,868 |
|
|
|
699,563 |
|
Amount due to a related
party |
|
2,621,146 |
|
|
|
2,605,694 |
|
Finance lease liability, current
portion |
|
244,685 |
|
|
|
213,346 |
|
Operating lease liabilities,
current portion |
|
468,906 |
|
|
|
433,440 |
|
Total Current Liabilities |
|
11,424,357 |
|
|
|
11,775,765 |
|
Non-Current Liabilities |
|
|
|
Finance lease liability, net of
current portion |
|
1,481,471 |
|
|
|
1,461,721 |
|
Operating lease liabilities, net
of current portion |
|
7,993,748 |
|
|
|
7,575,651 |
|
Total Non-Current
Liabilities |
|
9,475,219 |
|
|
|
9,037,372 |
|
Total Liabilities |
$ |
20,899,576 |
|
|
$ |
20,813,137 |
|
|
|
|
|
|
|
|
|
Commitment and Loss
Contingencies |
|
|
|
|
$ |
— |
|
|
$ |
— |
|
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; 10,717,754shares issued; and
10,431,924 shares outstanding as of March 31, 2023 and December 31,
2022 |
|
24,476 |
|
|
|
24,476 |
|
Treasury stock; 285,830 shares as
of March 31, 2023 and December 31, 2022 at cost |
|
(1,372,673 |
) |
|
|
(1,372,673 |
) |
Additional paid-in capital |
|
101,237,059 |
|
|
|
101,237,059 |
|
Retained earnings
unappropriated |
|
157,531,788 |
|
|
|
158,089,535 |
|
Retained earnings
appropriated |
|
26,667,097 |
|
|
|
26,667,097 |
|
Accumulated other comprehensive
income (loss) |
|
(9,247,787 |
) |
|
|
(13,027,289 |
) |
Total Stockholders’ Equity |
|
274,839,960 |
|
|
|
271,618,205 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
295,739,536 |
|
|
$ |
292,431,342 |
|
|
|
|
|
|
GULF RESOURCES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS) |
(Expressed in U.S. dollars) (UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
Three-Month Period |
|
|
|
Ended March 31, |
|
|
2023 |
|
2022 |
NET REVENUE |
|
|
|
Net revenue |
$ |
9,302,007 |
|
|
$ |
8,930,737 |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSE |
|
|
|
Cost of net revenue |
|
(6,769,074 |
) |
|
|
(4,549,968 |
) |
Sales, marketing and other operating expenses |
|
(13,704 |
) |
|
|
(10,360 |
) |
Direct labor and factory overheads incurred during plant
shutdown |
|
(2,408,736 |
) |
|
|
(2,184,591 |
) |
General and administrative expenses |
|
(910,051 |
) |
|
|
(2,242,501 |
) |
Other operating expense |
|
— |
|
|
|
(8,404 |
) |
|
|
(10,101,565 |
) |
|
|
(8,995,824 |
) |
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
(799,558 |
) |
|
|
(65,087 |
) |
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
Interest expense |
|
(29,630 |
) |
|
|
(34,692 |
) |
Interest income |
|
70,885 |
|
|
|
75,528 |
|
LOSS BEFORE INCOME TAXES |
|
(758,303 |
) |
|
|
(24,251 |
) |
|
|
|
|
|
|
|
|
INCOME TAX (EXPENSE) BENEFIT |
|
200,556 |
|
|
|
(95,695 |
) |
NET LOSS |
$ |
(557,747 |
) |
|
$ |
(119,946 |
) |
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS: |
|
|
|
NET LOSS |
$ |
(557,747 |
) |
|
$ |
(119,946 |
) |
OTHER COMPREHENSIVE INCOME |
|
|
|
- Foreign currency translation
adjustments |
|
3,779,502 |
|
|
|
1,549,034 |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS) |
$ |
3,221,755 |
|
|
$ |
1,429,088 |
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER
SHARE |
$ |
(0.05 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
BASIC AND DILUTED WEIGHTED
AVERAGE NUMBER OF SHARES: |
|
10,431,924 |
|
|
|
10,471,924 |
|
|
GULF RESOURCES, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Expressed in U.S. dollars) (UNAUDITED) |
|
|
Three-Month PeriodEnded March 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
Net loss |
$ |
(557,747 |
) |
|
$ |
(119,946 |
) |
Adjustments to reconcile net loss
to net cash (used in) provided by operating activities: |
|
|
Amortization on capital lease obligation |
|
28,560 |
|
|
|
33,622 |
|
Depreciation and amortization |
|
5,360,224 |
|
|
|
5,003,078 |
|
Unrealized exchange (gain) loss on translation of inter-company
balances |
|
(32,352 |
) |
|
|
283,789 |
|
Deferred tax asset |
|
(200,556 |
) |
|
|
95,695 |
|
Changes in assets and
liabilities |
|
|
Accounts receivable |
|
211,870 |
|
|
|
3,483,711 |
|
Inventories |
|
1,035,921 |
|
|
|
178,444 |
|
Prepayments and deposits |
|
(109,604 |
) |
|
|
(446,365 |
) |
Other receivables |
|
(527 |
) |
|
|
— |
|
Accounts and Other payable and accrued expenses |
|
(772,506 |
) |
|
|
487,228 |
|
Taxes payable |
|
282,007 |
|
|
|
704,492 |
|
Operating leases |
|
(413,737 |
) |
|
|
(1,258,066 |
) |
Net
cash
provided
by operating
activities |
|
4,831,553 |
|
|
|
8,445,682 |
|
|
|
|
|
|
|
|
|
CASH FLOWS USED IN INVESTING
ACTIVITIES |
|
|
|
|
|
Purchase of property, plant and
equipment |
|
(32,742 |
) |
|
|
(395,060 |
) |
Net
cash used in
investing activities |
|
(32,742 |
) |
|
|
(395,060 |
) |
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS |
|
2,746,808 |
|
|
|
1,844,114 |
|
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS |
|
7,545,619 |
|
|
|
9,894,736 |
|
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD |
|
108,226,214 |
|
|
|
95,767,263 |
|
CASH AND CASH EQUIVALENTS -
END OF PERIOD |
$ |
115,771,833 |
|
|
$ |
105,661,999 |
|
|
|
GULF RESOURCES,
INC. |
AND
SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED) |
(Expressed in U.S.
dollars) |
|
Years Ended March 31, |
|
2023 |
|
2022 |
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
Paid for taxes |
$ |
1,670,428 |
|
$ |
1,182,137 |
Interest on finance lease obligation |
$ |
28,560 |
|
$ |
33,622 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
Conference Call
Gulf Resources management will host a conference call on
Tuesday, May 16, 2023 at 08:00 AM Eastern Time to discuss its First
Quarter 2023 results ended March 31, 2023.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the
call. The Company management team will be available for investor
questions following the prepared remarks.
To participate in this live conference call, please dial Toll
Free +1(877)545-0523 five to ten minutes prior to the scheduled
conference call time. International callers should dial +1(973)-
528 - 0016, and please reference to “Gulf Resources” or Participant
Access Code: 789787 while dial in.
The webcasting is also available then, just simply click on the
link below:http://www.gulfresourcesinc.com/news-28.html
A replay of the conference call will be available two hours
after the call's completion and expired by Tuesday, May 23, 2023.
To access the replay, call +1 (877) 481-4010. International callers
should call +1 (919) 882-2331. The Replay Passcode is 48463.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned
subsidiaries, Shouguang City Haoyuan Chemical Company Limited
("SCHC"), ShouguangYuxin Chemical Industry Co., Limited ("SYCI"),
Daying County Haoyuan Chemical Company Limited (“DCHC”) and
Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). 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, and materials for human and animal
antibiotics. Through SHSI, the Company manufactures and sell crude
salt. 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, the risks associated with the COVID-19
pandemic outbreak, 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.
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
Director of Investor Relations
Helen Xu (Haiyan Xu)
beishengrong@vip.163.com
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