SHANGDONG, China, Aug. 9, 2012 /PRNewswire-Asia-FirstCall/ -- Gulf
Resources, Inc. (GURE) ("Gulf Resources" or the "Company"), a
leading manufacturer of bromine, crude salt and specialty chemical
products in China, today announced
its financial results for the second quarter ended June 30, 2012.
Second Quarter 2012 Highlights
- Revenue was $31.3 million, a
year-over-year decrease of 39.0%
- Gross profit was $9.9 million, a
year-over-year decrease of 62.4%
- Gross margin decreased to 31.6 % compared to 51.3% in the
second quarter of 2011
- Income from operations was $7.6
million as compared to $13.4
million in the second quarter of 2011
- Operating margin was 24.3% compared to 26.1% for the second
quarter of 2011
- Net income was $5.7 million or
$0.16 per basic and diluted share,
versus $10.0 million, or $0.29 per basic and diluted share a year ago,
respectively
- Cash totaled $72.0 million as
of June 30, 2012
"Although the Chinese central government has now adopted a more
flexible credit and monetary policy to cope with the slowdown of
economic growth and the accompanying structural change in the
economy, we are inevitably impacted by the lower demand in private
investing and moderate decrease in consumption by our customers in
the business segments of our company. In comparison to the same
period last year, our operating performance for the second quarter
this year was significantly lower. While bromine average selling
price decreased from $4,333 per tonne
for the second quarter in 2011 to $3,486 per tonne for the same period this year,
we expect bromine prices to remain relatively stable throughout the
year given current economy condition. We expect this economic
condition to continue throughout the rest of the year," said CEO
Mr. Xiaobin Liu.
Second Quarter 2012 Results
For the second quarter of 2012, Gulf Resources' revenue was
$31.3 million, a decrease of 39.0 %,
from $51.3 million for the second
quarter of 2011. The decrease in net revenue was primarily
attributable to the decline in selling price and sales volume in
the segments of bromine and crude salt. Revenue from the bromine
and crude salt segments was $17.5
million and $3.8 million,
respectively, representing a total of 68.1% of sales revenue for
the second quarter of 2012.
Revenue from our chemical products segment was $10.0 million, or 31.9% of total revenue, for the
second quarter of 2012, a decrease of 17.4%, from $12.1 million in the corresponding period in
2011. The decrease in revenue from this product segment was mainly
due to a drop in sales volume for oil and gas exploration additives
and paper manufacturing additives compared to the same quarter last
year, which offset the incremental benefit arising from a higher
sales volume and higher average selling prices for pesticides
manufacturing additives.
Gross profit for the second quarter of 2012 was $9.9 million, a decrease of 62.4%, from
$26.3 million from the second quarter
of 2011, and our gross profit margin for the three months ended
June 30, 2012 was 31.6%, compared to
51.3% for the corresponding period last year. The decrease in gross
margin was mainly due to the decrease in selling prices in bromine
and crude salts segments.
Sales, marketing and other operating expenses for the second
quarter of 2012 were $22,709 compared
with $23,733 for the corresponding
quarter last year. The decrease in these costs in the second
quarter of 2012 was mainly due to a decrease in sales that caused
reduced sales-related expenses.
Due to the replacement of government officials in the government
of Sichuan Daying county, the Company have not made any progress on
the project of underground brine resources in this area, and
therefore no exploration cost was incurred for the quarter.
General and administrative expenses for the second quarter of
2012 were $1.4 million, compared to
$1.7 million for the second quarter
of 2011. The decrease of $0.3 million
was primarily due to the inclusion of demolition and
re-installation expense for the three-month period ended
June 30, 2011 for relocating Factory
No. 4.
Income from operations for the second quarter of 2012 was
$7.6 million, compared to
$13.4 million for the corresponding
quarter of 2011. The operating margin was 24.3% for the second
quarter of 2012, compared to 26.1% for the second quarter of
2011.
Other operating income, which represented the sales of
wastewater at market price, was $76,104 for the second quarter of 2012 as
compared to $392,298 for the same
period in 2011.
For the second quarter of 2012, the Company incurred other
income of $30,660 compared to expense
of $13,009 for the corresponding
quarter last year.
Income taxes were $2.0 million for
the second quarter of 2012, a decrease of 41.2%, from $3.4 million for the second quarter of 2011. The
Company's effective tax rates were 26% and 25% for the three-month
periods ended June 30, 2012 and 2011,
respectively.
Net income was $5.7 million for
the second quarter of 2012, a decrease of 43.0%, from $10 million for the second quarter of 2011. Basic
and diluted earnings per share in second quarter of 2012 were
$0.16 per basic and diluted share
compared to $0.29 per basic and
diluted share respectively in the second quarter of 2011. Weighted
average number of diluted shares for the three months ended
June 30, 2012 was 34,560,743 compared
with 34,733,188 for the three months ended June 30, 2011.
Six Months Ended June 30,
2012
Revenues for the six months ended June
30, 2012 were $55.1 million,
down 43.0% from revenues of $96.7
million for the six months ended June
30, 2011. Gross profit for the six months ended June 30, 2012 was $16.6
million, down 67.5% from gross profit of $51.1 million for the corresponding period of
2011. Gross margin was 30.1%, compared to 52.8% for the first six
months of 2011. Operating income was $12.2
million, a decrease of 63.8%, from $33.7 million for the first six months of 2011.
Net income was $9.0 million, or
$0.26 per basic and diluted share,
respectively, compared to $24.4
million, or $0.70 and
$0.69 per basic and diluted share,
respectively, for the same period a year ago.
"Although the unfavorable economy condition has lowered the
demand of bromine and it negatively impacted our operating
performance in the first half of this year, we decided to adhere to
the 2012 earnings forecast announced earlier this year as we have
confidence that we can accomplish the task set forth in the earning
guidance by the end of this year." Said CEO, Xiaobin Liu.
Financial Condition
As of June 30, 2012, Gulf
Resources had cash of $72.0 million,
current liabilities of $12.0 million,
and shareholders' equity of $251.1
million. For the three months ended June 30, 2012, the Company had working capital of
$106.1 million and a current ratio of
9.8. As of June 30, 2012, the Company
generated $2.3 million in cash flow
from operations, and used $8.3
million for investing activities, mainly for construction of
plant, machinery and equipment.
Subsequent Events
The company has decided to hold 2012 annual shareholders meeting
in mid October. Further information regarding the shareholders
meeting will be disclosed soon.
In an effort to pursue more effective and seamless
communications with our investors and promote accelerated press
releases, the Company has been handling investor relations issues
through its own IR department since April 2012. For future
investor inquiries, investors may continue to reach our IR manager
Max Ma at email
address Max_vx@163.com or our CEO's assistant
Helen Xu at email address
beishengrong@vip.163.com.
Business Outlook
"In the near term, we are likely to encounter operating pressure
due to a foreseeable increase in labor and lowered bromine price
influenced by the nationwide housing price control by the central
government. As soon as the economy pass the phase of structural
change and the condition, turn favorable, we expect we will be able
to benefit from the underground bromine reserve we previously
obtained with our equipment and facilities being consistently
upgraded. In addition, as the market prices of potential
acquisition targets are subjected to undervaluation due to the
current economic environment, we will attempt to retain cash in
order to take advantage of the market by acquiring quality assets
that can enable our company to sustain long term growth in the
future." Said CEO, Xiaobin Liu.
Conference Call
Gulf Resources' management will host a conference call on
Friday, August 10, 2012 at
8:00 AM Eastern Time to discuss its
financial results for the second quarter 2012 ended June 30, 2012.
Hosting the call will be Mr. Xiaobin
Liu, CEO of Gulf Resources. 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 call +1 (706)
643-1666. The conference participant pass code is 19042704.
A replay of the conference call will be available for 14 days
starting from 11:00 AM ET on
Friday, August 10, 2012. To access
the replay, call +1 (855) 859-2056. International callers should
call +1 (404) 537-3406. The pass code is 19042704
This conference call will be broadcast live over the Internet
and can be accessed by all interested parties by clicking
on http://www.gulfresourcesinc.com/events.html. Please access
the link at least fifteen minutes prior to the start of the call to
register, download, and install any necessary audio software. For
those unable to participate during the live broadcast, a 90-day
replay will be available shortly after the call by accessing the
same link.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through two wholly-owned
subsidiaries, Shouguang City Haoyuan Chemical Company Limited
("SCHC") and Shouguang Yuxin Chemical Industry Co., Limited
("SYCI"). 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 & gas field explorations and as
papermaking chemical agents. 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, as amended and Rule 3b-6 under
the Securities Exchange Act of 1934 as amended, 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 of its disclosure.
-Financial tables to follow-
GULF
RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
(UNAUDITED)
|
|
|
June 30,
2012
|
|
|
December 31, 2011
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
72,044,771
|
|
|
$
|
78,576,060
|
|
Accounts
receivable
|
|
|
41,297,358
|
|
|
|
21,919,828
|
|
Inventories
|
|
|
3,955,232
|
|
|
|
4,437,972
|
|
Prepayments and deposits
|
|
|
346,210
|
|
|
|
307,600
|
|
Prepaid
land leases
|
|
|
371,894
|
|
|
|
46,582
|
|
Deferred
tax assets
|
|
|
105,583
|
|
|
|
228,702
|
|
Total
Current Assets
|
|
|
118,121,048
|
|
|
|
105,516,744
|
|
Non-Current Assets
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
142,496,477
|
|
|
|
147,200,740
|
|
Property,
plant and equipment under capital leases, net
|
|
|
2,156,071
|
|
|
|
2,336,920
|
|
Prepaid
land leases, net of current portion
|
|
|
752,385
|
|
|
|
763,814
|
|
Deferred
tax assets
|
|
|
2,461,863
|
|
|
|
2,509,481
|
|
Total
non-current assets
|
|
|
147,866,796
|
|
|
|
152,810,955
|
|
Total
Assets
|
|
$
|
265,987,844
|
|
|
$
|
258,327,699
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
7,556,148
|
|
|
$
|
7,373,643
|
|
Retention
payable
|
|
|
97,804
|
|
|
|
556,450
|
|
Capital
lease obligation, current portion
|
|
|
90,551
|
|
|
|
189,742
|
|
Taxes
payable
|
|
|
4,232,081
|
|
|
|
4,058,550
|
|
Total
Current Liabilities
|
|
|
11,976,584
|
|
|
|
12,178,385
|
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
Capital
lease obligation, net of current portion
|
|
|
2,934,527
|
|
|
|
3,036,558
|
|
Total
Liabilities
|
|
$
|
14,911,111
|
|
|
$
|
15,214,943
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none
|
|
$
|
|
|
|
$
|
|
|
COMMON
STOCK; $0.0005 par value; 100,000,000 shares authorized;
34,745,342 and 34,745,342 shares issued; and
34,560,743 and
34,560,743 shares outstanding as of June 30,
2012 and December 31,
2011, respectively
|
|
|
17,373
|
|
|
|
17,373
|
|
Treasury
stock; 184,599 shares as of June 30, 2012 and December 31,
2011 at cost
|
|
|
(500,000)
|
|
|
|
(500,000)
|
|
Additional
paid-in capital
|
|
|
74,134,279
|
|
|
|
74,107,979
|
|
Retained
earnings unappropriated
|
|
|
141,051,006
|
|
|
|
133,314,581
|
|
Retained
earnings appropriated
|
|
|
15,648,913
|
|
|
|
14,409,557
|
|
Cumulative
translation adjustment
|
|
|
20,725,162
|
|
|
|
21,763,266
|
|
Total
Stockholders' Equity
|
|
|
251,076,733
|
|
|
|
243,112,756
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
265,987,844
|
|
|
$
|
258,327,699
|
|
GULF
RESOURCES, INC.
AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
(Expressed
in U.S. dollars)
(UNAUDITED)
|
|
Three-Month Period Ended June 30,
|
|
|
Six-Month
Period Ended June 30,
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
$
|
31,314,846
|
|
|
$
|
51,300,812
|
|
|
$
|
55,123,520
|
|
|
$
|
96,679,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue
|
|
|
(21,389,651)
|
|
|
|
(24,994,703)
|
|
|
|
(38,505,533)
|
|
|
|
(45,586,087)
|
|
|
Sales, marketing and other operating expenses
|
|
|
(22,709)
|
|
|
|
(23,733)
|
|
|
|
(40,473)
|
|
|
|
(47,745)
|
|
|
Research and development cost
|
|
|
(62,526)
|
|
|
|
(133,519)
|
|
|
|
(105,324)
|
|
|
|
(313,856)
|
|
|
Exploration cost
|
|
|
-
|
|
|
|
(3,867,286)
|
|
|
|
-
|
|
|
|
(3,867,286)
|
|
|
Write-off/Impairment on property, plant
and equipment
|
|
|
(911,995)
|
|
|
|
(7,570,566)
|
|
|
|
(911,995)
|
|
|
|
(7,570,566)
|
|
|
General and administrative expenses
|
|
|
(1,370,866)
|
|
|
|
(1,714,694)
|
|
|
|
(3,483,071)
|
|
|
|
(6,055,985)
|
|
|
Other operating income
|
|
|
76,104
|
|
|
|
392,298
|
|
|
|
133,178
|
|
|
|
415,083
|
|
|
|
|
|
(23,681,643)
|
|
|
|
(37,912,203)
|
|
|
|
(42,913,218)
|
|
|
|
(63,026,442)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
7,633,203
|
|
|
|
13,388,609
|
|
|
|
12,210,302
|
|
|
|
33,652,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(54,255)
|
|
|
|
(65,740)
|
|
|
|
(108,667)
|
|
|
|
(107,956)
|
|
|
Interest income
|
|
|
84,915
|
|
|
|
52,731
|
|
|
|
183,805
|
|
|
|
128,775
|
|
|
INCOME
BEFORE TAXES
|
|
|
7,663,863
|
|
|
|
13,375,600
|
|
|
|
12,285,440
|
|
|
|
33,673,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
(1,975,189)
|
|
|
|
(3,352,345)
|
|
|
|
(3,309,659)
|
|
|
|
(9,285,467)
|
|
|
NET
INCOME
|
|
$
|
5,688,674
|
|
|
$
|
10,023,255
|
|
|
$
|
8,975,781
|
|
|
$
|
24,388,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
|
$
|
5,688,674
|
|
|
$
|
10,023,255
|
|
|
$
|
8,975,781
|
|
|
$
|
24,388,254
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Foreign currency translation adjustments
|
|
|
(1,316,002)
|
|
|
|
2,816,166
|
|
|
|
(1,038,104)
|
|
|
|
4,837,801
|
|
|
COMPREHENSIVE INCOME
|
|
$
|
4,372,672
|
|
|
$
|
12,839,421
|
|
|
$
|
7,937,677
|
|
|
$
|
29,226,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
$
|
0.16
|
|
|
$
|
0.29
|
|
|
$
|
0.26
|
|
|
$
|
0.70
|
|
|
DILUTED
|
|
$
|
0.16
|
|
|
$
|
0.29
|
|
|
$
|
0.26
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
34,560,743
|
|
|
|
34,729,179
|
|
|
|
34,560,743
|
|
|
|
34,732,527
|
|
|
DILUTED
|
|
|
34,560,743
|
|
|
|
34,733,188
|
|
|
|
34,561,394
|
|
|
|
35,128,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GULF
RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(UNAUDITED)
|
|
|
Six-Month
Period Ended June 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
CASH FLOWS
FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
income
|
|
$
|
8,975,781
|
|
|
$
|
24,388,254
|
|
Adjustments to reconcile net income to net cash provided by operating:
|
|
|
|
|
|
|
|
Interest on capital lease obligation
|
|
|
108,044
|
|
|
|
106,835
|
|
Amortization of prepaid land leases
|
|
|
105,051
|
|
|
|
102,831
|
|
Depreciation and amortization
|
|
|
11,290,588
|
|
|
|
7,468,616
|
|
Write-off/Impairment loss on property, plant and
equipment
|
|
|
911,995
|
|
|
|
7,570,566
|
|
Exchange gain on inter-company balances
|
|
|
(92,057)
|
|
|
|
-
|
|
Stock-based compensation expense
|
|
|
26,300
|
|
|
|
3,169,000
|
|
Deferred tax asset
|
|
|
160,826
|
|
|
(1,913,608)
|
|
Changes in
assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(19,514,217)
|
|
|
|
(14,033,743)
|
|
Inventories
|
|
|
467,279
|
|
|
|
(405,227)
|
|
Prepayments and deposits
|
|
|
(38,610)
|
|
|
|
905,669
|
|
Other receivables
|
|
|
-
|
|
|
|
(151,853)
|
|
Accounts payable and accrued expenses
|
|
|
206,207
|
|
|
|
1,468,892
|
|
Retention payable
|
|
|
(457,813)
|
|
|
|
-
|
|
Taxes payable
|
|
|
189,434
|
|
|
|
697,706
|
|
Net
cash provided by operating activities
|
|
|
2,338,808
|
|
|
|
29,373,938
|
|
|
|
|
|
|
|
|
|
CASH FLOWS
USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Additions
of prepaid land leases
|
|
|
(422,877)
|
|
|
|
(348,196)
|
|
Purchase
of property, plant and equipment
|
|
|
-
|
|
|
|
(34,075,105)
|
|
Increase
in construction in progress
|
|
|
(7,871,130)
|
|
|
|
(4,609,456)
|
|
Net
cash used in investing activities
|
|
|
(8,294,007)
|
|
|
|
(39,032,757)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS
USED IN FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Repurchase
of common stock
|
|
|
-
|
|
|
|
(348,147)
|
|
Repayment
of capital lease obligation
|
|
|
(297,598)
|
|
|
|
(288,739)
|
|
Net
cash used in financing activities
|
|
|
(297,598)
|
|
|
|
(636,886)
|
|
|
|
|
|
|
|
|
|
EFFECTS OF
EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
|
|
(278,492)
|
|
|
|
1,539,350
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(6,531,289)
|
|
|
|
(8,756,355)
|
|
CASH AND
CASH EQUIVALENTS - BEGINNING OF PERIOD
|
|
|
78,576,060
|
|
|
|
68,494,480
|
|
CASH AND
CASH EQUIVALENTS - END OF PERIOD
|
|
$
|
72,044,771
|
|
|
$
|
59,738,125
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid
during the period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
2,945,542
|
|
|
$
|
10,341,857
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
1,121
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Inception of capital lease obligation for acquiring property, plant and equipment
|
|
$
|
-
|
|
|
$
|
3,127,913
|
|
Contact:
IR Manager
Max Ma
Max_vx@163.com
SOURCE Gulf Resources, Inc.