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 first quarter ended March 31, 2014.
First Quarter 2014 Highlights
- Net revenue was $25.6 million, a year-over-year increase of
14%
- Gross profit was $6.9 million, a year-over-year increase of
52%
- Gross margin increased to 27%, as compared to 20% in the first
quarter of 2013
- Income from operations was $5.6 million, as compared to $2.6
million in the first quarter of 2014, a year-over-year increase of
115%
- Operating margin was 22%, as compared to 12% for the first
quarter of 2013
- Net income was $4.3 million or $0.11 per basic and diluted
share, versus $1.9 million, or $0.05 per basic and diluted share a
year ago, representing a year-over-year increase of 128%.
- Cash totaled $119.3 million as of March 31, 2014
"We are pleased to report that the revenue from
chemical segments products had impressive performance increasing by
36.9% even with the average performance from bromine and crude salt
segments in the First Quarter of 2014 as compared with the same
period of 2013. The Company's income from operations still
increased by 115%, and net income increased by 128% as compared
with the same quarter of 2013," said Mr. Xiaobin Liu, CEO of the
Company.
First Quarter 2014 Financial Results
Gulf Resources' Net revenue was $25,592,176 for three-month
period ended March 31, 2014, an increase of approximately $3.1
million (or 14%) as compared to the same period in 2013. This
increase was primarily attributable to the increase of our chemical
segment products, which increase from $8,317,427 for the
three-month period ended March 31, 2013 to $11,388,365 for the same
period in 2014, an increase of approximately 36.9%.
Gross profit was $6,857,772, or 27%, of net revenue for
three-month period ended March 31, 2014 compared to $4,517,108, or
20%, of net revenue for the same period in 2013. The increase in
gross profit percentage was primarily attributable to an increase
in the margin percentage in all of our three segments.
The total research and development costs incurred for the
three-month periods ended March 31, 2014 and 2013 were $30,780 and
$17,702, respectively, an increase of 74%. Research and development
costs for the three-month period ended March 31, 2014 and 2013
represented raw materials used by SYCI for testing the
manufacturing routine.
General and administrative expenses were $1,320,518 for the
three-month period ended March 31, 2014, a decrease of $648,699 (or
33%) as compared to $1,969,217 for the same period in 2013. The
decrease of $648,699 was primarily due to (i) the legal costs and
expenses incurred in connection with the class action lawsuit as
described in our 2013 Form 10-k, which was $93,200 for the
three-month period ended March 31, 2013 and $0 for the same period
in 2014 since the lawsuit was settled in early 2014.; and (ii) the
unrealized exchange gain in relation to the translation difference
of inter-company balances in USD and RMB for the three-month period
ended March 31, 2014 was in the amount of $235,424, as compared to
the unrealized exchange loss for the same period in 2013 in the
amount of $65,119; and (iii) depreciation of $171,404 for January
and February 2013 related to Factory No.11, acquired in November
2012, which is recorded in general and administrative expenses
instead of cost of goods sold because the factory commenced
operations formally in March 2013.
Other operating income, which represented the sales of
wastewater to some of our customers, was $117,684 for the
three-month period ended March 31, 2014, representing an increase
of $22,122(or 23%) from $95,562 for the same period in 2013.
Wastewater is generated from the production of bromine and
eventually becomes crude salt when it evaporates. Not all of our
bromine production plants have sufficient area on the property to
allow for evaporation of wastewater to produce crude salt. Certain
of our customers who have facilities located adjacent to our
bromine production plants have agreed to channel our wastewater
into brine pans on their properties for evaporation. These
customers then are able to sell the resulting crude salt
themselves. We signed agreements with four of our customers to sell
them our wastewater at market prices.
Income from operations was $5,601,644 for the three-month period
ended March 31, 2014 (or 22% of net revenue), an increase of
$2,996,196, or approximately 115%, over income from operations for
the same period in 2013. The increase resulted primarily from the
increase in the demand for our chemical product segment
products.
Other income, net of $53,763 represented bank interest income,
net of capital lease interest expense for the three -month period
ended March 31, 2014, an increase of $33,926 (or approximately
171%) as compared to the same period in 2013, mainly due to higher
average bank balance held during the three months period ended
March 31, 2014 compared to the same period ended March 31,
2013.
Net income was $4,286,338 for the three-month period ended March
31, 2011, an increase of $2,403,373 (or approximately 128%)
compared to the same period in 2013. This significant increase was
primarily attributable to the overall increase in demand for our
chemical products.
Income taxes were $1.4 million for the first quarter of 2014, an
increase of 84% from $0.7 million for the first quarter of 2013.
The Company's effective tax rate was 24% and 28% for the
three-month periods ended March 31, 2014 and 2013,
respectively.
Financial Condition
As of March 31, 2014, Gulf Resources had cash of $119.3 million,
total liabilities of $13.2 million, and stockholders' equity of
$296.4 million. Ended March 31, 2014, the Company had working
capital of $156.4 million. As of March 31, 2014, the Company
generated $12.8 million in cash flow from operations, and used
approximately $0.3 million cash for the prepayment of land leases,
$0.04 million to acquire property, plant and equipment in the first
quarter of 2014.
Business Outlook
"Although we expect bromine prices to stay at current relatively
low level in fiscal year 2014 due to the continued slowdown of the
economy in China especially from real estate industry, we believe
the strategy to take this great opportunity to expand the business
segments, by exploring more brine water resources and obtaining
bromine assets through acquisitions, the development of new
projects and continually looking for attractive horizontal and
vertical acquisition targets would enable us to achieve long term
growth in the future while considering the sufficient cash flow
from our operating activities, "said Mr. Xiaobin Liu, CEO of Gulf
Resources." In the meantime, the Company will try to improve its
internal control, expand sales markets, increase its production
utilization rate and decrease management and administration
expenses." Given anticipated bromine price trend, the Company
forecasts total revenue approximately $124.3 million, and net
income to range between $22.02 million and $23.1 million in fiscal
year 2014.
Conference Call
Gulf Resources' management will host a conference call on
Monday, May 12, 2014 at 8:00 AM Eastern Time to discuss its
financial results for the first quarter ended March 31, 2014.
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 dial +1 (706)
643-1666. The conference participant pass code is 43967621.
A replay of the conference call will be available for 14 days
starting starting from 11:00 AM ET on Monday, May 12, 2014. To
access the replay, dial +1 (855) 859-2056. International callers
should dial +1 (404) 537-3406. The pass code is 43967621.
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 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.
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
CEO Assistant & Director of Investor Relations
Helen Xu
Beishengrong@vip.163.com
IR Manager
Max Ma
Max_vx@163.com
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