Gulf Resources, Inc. (Nasdaq: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 third quarter ended September 30, 2012.
Third Quarter 2012 Highlights
- Revenue was $24.5 million, a year-over-year decrease of
35.0%
- Gross profit was $7.4 million, a year-over-year decrease of
46.7%
- Gross margin decreased to 30.3 % compared to 36.9 % in the
third quarter of 2011
- Income from operations was $5.6 million as compared to $8.7
million in the third quarter of 2011
- Operating margin was 23.0% compared to 23.2% for the third
quarter of 2011
- Net income was $4.1 million or $0.12 per basic and diluted
share, versus $5.6 million, or $0.16 per basic and diluted share a
year ago, respectively
- Cash totaled $58.6 million as of September 30, 2012
"Over the past few months, the Chinese economy had experienced
its slowest growth in a quarter since the start of 2009. As
influenced by the economy condition due to rapidly decreased demand
in private investment and continuing tight control over property
prices, bromine price reached the bottom in mid-September this year
as a result of reduction of market demand, therefore our operating
performance for the third quarter this year was significantly lower
compared to the same period last year. While bromine average
selling price decreased from $3,597 per tonne for the third quarter
in 2011 to $2,899 per tonne for the same period this year, we
anticipate that the bromine prices are likely to rise slightly
further after the pick-ups from the bottoming in September," said
Mr. Xiaobin Liu, CEO of the Company.
Third Quarter 2012 Results
For the third quarter of 2012, Gulf Resources' revenue was $24.5
million, a decrease of 35.0%, from $37.8 million for the third
quarter of 2011. The decrease in net revenue was primarily
attributable to the reduction of overall demand for all of the
segment products, especially in bromine segment, where the decrease
was the greatest among the three segments. Revenue from the bromine
and crude salt segments were $14.0 million and $2.4 million,
respectively, representing a total of 67.0% of sales revenue for
the third quarter of 2012.
Revenue from our chemical products segment was $8.2 million, or
33.0% of total revenue, for the third quarter of 2012, a decrease
of 22%, from $10.5 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 generated from a higher
sales volume for pesticides manufacturing additives and higher
selling price of oil and gas exploration additives.
Gross profit for the third quarter of 2012 was $7.4 million, a
decrease of 46.7%, from $13.9 million from the third quarter of
2011, and our gross profit margin for the three months ended
September 30, 2012 was 30.3%, compared to 36.9% for the
corresponding period last year. The decrease in gross profit margin
was mainly due to the decrease in selling prices in bromine
segments.
Sales, marketing and other operating expenses for the third
quarter of 2012 were $20,327 compared with $20,116 for the
corresponding quarter last year.
General and administrative expenses for the third quarter of
2012 were $2.3 million, compared to $5.5 million for the third
quarter of 2011. The decrease of $3.2 million was primarily due to
the inclusion of a non-cash expense related to cancellation of
non-vested stock options for the three-month period ended September
30, 2011
Income from operations for the third quarter of 2012 was $5.6
million, compared to $8.7 million for the corresponding quarter of
2011. The operating margin was 23.0% for the third quarter of 2012,
which remained approximately the same compared to the third quarter
of 2011.
Other operating income, which represented the sales of
wastewater at market price etc,, was $0.7 million for the third
quarter of 2012 as compared to $1.4 million for the same period in
2011.
For the third quarter of 2012, the Company incurred other income
of $13,661 compared to income of $17,647 for the corresponding
quarter last year.
Income taxes were $1.5 million for the third quarter of 2012, a
decrease of 52% from $3.2 million for the third quarter of 2011.
The Company's effective tax rates were 27% and 36% for the
three-month periods ended September 30, 2012 and 2011,
respectively.
Net income was $4.1 million for the third quarter of 2012, a
decrease of 26%, from $5.6 million for the third quarter of 2011.
Basic and diluted earnings per share in third quarter of 2012 were
$0.12 per basic and diluted share compared to $0.16 per basic and
diluted share respectively in the third quarter of 2011. Weighted
average number of diluted shares for the three months ended
September 30, 2012 was 34,699,989 compared with 34,620,004 for the
three months ended September 30, 2011.
"Although the slowdown in economy and uncertain future
government policies to be released after the leadership change will
continuously bring significant challenges to our business
operations, we will manage to overcome the difficulties onwards and
strive to accomplish the 2012 earnings forecast announced earlier
this year," stated Mr. Xiaobin Liu, CEO of the Company.
Financial Condition
As of September 30, 2012, Gulf Resources had cash of $58.6
million, current liabilities of $11.2 million, and shareholders'
equity of $254.9 million. For the three months ended September 30,
2012, the Company had working capital of $94.7 million and a
current ratio of 9.4. As of September 30, 2012, the Company
generated $10.7 million in cash flow from operations, and used
$29.9 million for investing activities, mainly for the purchase and
enhancement of plant, machinery and equipment.
Business Outlook
"The slowdown in China this year has affected different
industries to varying degrees, the effect also spread to the
downstream users of our product segments who had been through the
process of deleveraging in inventory while dealing with
overcapacity. Despite the bottoming of bromine price in
mid-September and pick-up since October, we remain conservative in
regards to any further significant rebound in growth in the coming
quarters," Mr. Liu continued.
"In such business environment, we would like to retain cash in
the near future for any possible liquidity constraint or change in
need of working capital, etc. However, if investment opportunity
arises from current economy condition featuring undervaluation or
strategically fits our long term growth, it would also be duly
evaluated and considered for the goal of profit enhancement or
shareholder's value maximization," concluded Mr. Liu.
Subsequent Events
The company has held the 2012 annual shareholders meeting on
October 16 in Shouguang, China. For information related to the
voting results of the meeting, please refer to our current report
on Form 8-K filed on October 16 that is available on the website of
the U.S. Securities and Exchange Commission.
Since the launch of the internal IR department in April this
year, Gulf Resources has received many positive feedback and
helpful suggestions. 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.
Conference Call
Gulf Resources' management will host a conference call on
Friday, November 9, 2012 at 8:00 AM Eastern Time to discuss its
financial results for the third quarter 2012 ended September 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 69009541.
A replay of the conference call will be available for 14 days
starting from 11:00 AM ET on Friday, November 9, 2012. To access
the replay, call +1 (855) 859-2056. International callers should
call +1 (404) 537-3406. The pass code is 69009541.
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.
The Gulf Resources, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=15631
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.
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GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED BALANCE
SHEETS |
(Expressed in U.S.
dollars) |
(UNAUDITED) |
|
|
|
|
September 30, 2012 |
December 31, 2011 |
Current Assets |
|
|
Cash |
$ 58,644,360 |
$ 78,576,060 |
Accounts receivable |
41,930,959 |
21,919,828 |
Inventories |
4,787,395 |
4,437,972 |
Prepayments and deposits |
321,030 |
307,600 |
Prepaid land leases |
236,281 |
46,582 |
Deferred tax assets |
44,340 |
228,702 |
Total Current Assets |
105,964,365 |
105,516,744 |
Non-Current Assets |
|
|
Property, plant and equipment, net |
157,937,334 |
147,200,740 |
Property, plant and equipment under capital
leases, net |
2,064,695 |
2,336,920 |
Prepaid land leases, net of current
portion |
746,176 |
763,814 |
Deferred tax assets |
2,406,132 |
2,509,481 |
Total non-current assets |
163,154,337 |
152,810,955 |
Total Assets |
$ 269,118,702 |
$ 258,327,699 |
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Liabilities and Stockholders' Equity |
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Current Liabilities |
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Accounts payable and accrued expenses |
$ 6,381,418 |
$ 7,373,643 |
Retention payable |
1,419,707 |
556,450 |
Capital lease obligation, current
portion |
140,890 |
189,742 |
Taxes payable |
3,303,887 |
4,058,550 |
Total Current Liabilities |
11,245,902 |
12,178,385 |
Non-Current Liabilities |
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|
Capital lease obligation, net of current
portion |
2,926,918 |
3,036,558 |
Total Liabilities |
$ 14,172,820 |
$ 15,214,943 |
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Stockholders' Equity |
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PREFERRED STOCK; $0.001 par value; 1,000,000
shares authorized; none outstanding |
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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 September 30,
2012 and December 31, 2011, respectively |
$ 17,373 |
$ 17,373 |
Treasury stock; 184,599 shares as of
September 30, 2012 and December 31, 2011 at cost |
(500,000) |
(500,000) |
Additional paid-in capital |
74,611,279 |
74,107,979 |
Retained earnings unappropriated |
144,913,088 |
133,314,581 |
Retained earnings appropriated |
15,900,047 |
14,409,557 |
Cumulative translation adjustment |
20,004,095 |
21,763,266 |
Total Stockholders' Equity |
254,945,882 |
243,112,756 |
Total Liabilities and Stockholders'
Equity |
$ 269,118,702 |
$ 258,327,699 |
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GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME |
(Expressed in U.S.
dollars) |
(UNAUDITED) |
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|
Three-Month Period Ended
September 30, |
Nine-Month Period Ended
September 30, |
|
2012 |
2011 |
2012 |
2011 |
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NET REVENUE |
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Net revenue |
$ 24,530,332 |
$ 37,761,975 |
$ 79,653,852 |
$ 134,441,319 |
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OPERATING INCOME (EXPENSES) |
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Cost of net revenue |
(17,099,890) |
(23,823,944) |
(55,605,423) |
(69,410,031) |
Sales, marketing and other
operating expenses |
(20,327) |
(20,116) |
(60,800) |
(67,861) |
Research and development
cost |
(28,478) |
(33,565) |
(133,802) |
(347,421) |
Exploration cost |
-- |
(1,047,110) |
-- |
(4,914,396) |
Write-off/Impairment on
property, plant and equipment |
(130,143) |
-- |
(1,042,138) |
(7,570,566) |
General and administrative
expenses |
(2,336,581) |
(5,459,069) |
(5,819,652) |
(11,515,054) |
Other operating income |
713,968 |
1,368,074 |
847,146 |
1,783,157 |
|
(18,901,451) |
(29,015,730) |
(61,814,669) |
(92,042,172) |
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INCOME FROM OPERATIONS |
5,628,881 |
8,746,245 |
17,839,183 |
42,399,147 |
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OTHER INCOME (EXPENSE) |
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|
Interest expense |
(50,896) |
(51,994) |
(159,563) |
(159,950) |
Interest income |
64,557 |
69,641 |
248,362 |
198,416 |
INCOME BEFORE TAXES |
5,642,542 |
8,763,892 |
17,927,982 |
42,437,613 |
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INCOME TAXES |
(1,529,326) |
(3,179,546) |
(4,838,985) |
(12,465,013) |
NET INCOME |
$ 4,113,216 |
$ 5,584,346 |
$ 13,088,997 |
$ 29,972,600 |
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COMPREHENSIVE INCOME: |
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|
NET INCOME |
$ 4,113,216 |
$ 5,584,346 |
$ 13,088,997 |
$ 29,972,600 |
OTHER COMPREHENSIVE INCOME |
|
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|
|
- Foreign currency translation
adjustments |
(721,067) |
4,168,644 |
(1,759,171) |
9,006,445 |
COMPREHENSIVE INCOME |
$ 3,392,149 |
$ 9,752,990 |
$ 11,329,826 |
$ 38,979,045 |
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EARNINGS PER SHARE: |
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BASIC |
$ 0.12 |
$ 0.16 |
$ 0.38 |
$ 0.86 |
DILUTED |
$ 0.12 |
$ 0.16 |
$ 0.37 |
$ 0.86 |
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WEIGHTED AVERAGE NUMBER OF SHARES: |
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BASIC |
34,560,743 |
34,620,004 |
34,560,743 |
34,694,607 |
DILUTED |
34,699,989 |
34,620,004 |
34,957,219 |
34,695,664 |
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GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Expressed in U.S.
dollars) |
(UNAUDITED) |
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|
Nine-Month Period Ended
September 30, |
|
2012 |
2011 |
|
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CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
Net income |
$ 13,088,997 |
$ 29,972,600 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Interest on capital lease
obligation |
158,673 |
159,950 |
Amortization of prepaid land
leases |
298,910 |
262,567 |
Depreciation and
amortization |
16,995,684 |
12,543,179 |
Write-off/Impairment loss on
property, plant and equipment |
1,042,138 |
7,570,566 |
Exchange gain on inter-company
balances |
(154,998) |
-- |
Compensation income from local
government for demolition of factory |
-- |
(1,340,026) |
Stock-based compensation
expense |
503,300 |
7,467,000 |
Deferred tax asset |
271,261 |
(1,823,019) |
Changes in assets and liabilities: |
|
|
Accounts receivable |
(20,255,706) |
(1,792,588) |
Inventories |
(376,048) |
(350,201) |
Prepayments and deposits |
(13,430) |
3,005 |
Other receivables |
-- |
(300,000) |
Accounts payable and accrued
expenses |
(953,261) |
3,444,367 |
Retention payable |
865,769 |
-- |
Taxes payable |
(728,775) |
(2,275,794) |
Net cash provided by operating
activities |
10,742,514 |
53,541,606 |
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CASH FLOWS USED IN INVESTING ACTIVITIES |
|
|
Additions of prepaid land leases |
(477,678) |
(403,834) |
Compensation received for demolition of
factory |
-- |
1,340,026 |
Purchase of property, plant and
equipment |
(29,447,905) |
(34,457,775) |
Increase in construction in progress |
-- |
(5,230,232) |
Net cash used in investing
activities |
(29,925,583) |
(38,751,815) |
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|
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CASH FLOWS USED IN FINANCING ACTIVITIES |
|
|
Repurchase of common stock |
-- |
(500,000) |
Repayment of capital lease obligation |
(297,598) |
(288,739) |
Net cash used in financing
activities |
(297,598) |
(788,739) |
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|
EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |
(451,033) |
3,326,324 |
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS |
(19,931,700) |
17,327,376 |
CASH AND CASH EQUIVALENTS - BEGINNING OF
PERIOD |
78,576,060 |
68,494,480 |
CASH AND CASH EQUIVALENTS - END OF
PERIOD |
$ 58,644,360 |
$ 85,821,856 |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION |
|
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Cash paid during the period for: |
|
|
Income taxes |
$ 4,829,992 |
$ 16,893,973 |
Interest paid |
$ -- |
$ 1,743 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES |
|
|
Inception of capital lease
obligation for acquiring property, plant and equipment |
$ -- |
$ 3,127,913 |
Issuance of common stock for
exercising stock options |
$ -- |
$ 5 |
CONTACT: IR Manager
Max Ma
Max_vx@163.com
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