Gulf Resources Accelerates Its Transformation, Enters Into an Equity Interests Transfer Agreement With Shouguang City Rongyua...
January 13 2015 - 8:30AM
Gulf Resources, Inc. (Nasdaq:GURE) has accelerated its
transformation from a manufacturer of raw materials into an
integrated producer of value added downstream products with its
acquisition of Shouguang City Rongyuan Chemical Co., Ltd. (SCRC), a
leading manufacturer of materials for human and animal antibiotics
in China and other parts of Asia.
Xiaobin Liu, the Chief Executive Officer of Gulf Resources
stated, "As our shareholders know, we have generated substantial
cash flow and at the end of the third quarter, GURE had cash of
$132 million and shareholder's equity of $307.1 million. We
informed our shareholders that we intended to use our excess cash
to build a faster growing and higher margin business that was not
as subject to the economic cycles that has impacted our bromine
business."
"In 2014, despite the weakness in the overall Chinese economy,
our chemical business, which has higher margins and return on
investment than our other business segments, has shown improved
profits," Xiaobin Liu continued. "With the acquisition of SCRC we
are moving into a downstream business that we believe will help
GURE increase its profit margins, improve its return on investment,
produce more consistent and reliable earnings and lessen our
dependence on the economically sensitive bromine industry."
SCRC is a leading manufacturer of materials for human and animal
antibiotics in China. We believe there will be an
increased demand for these products due to the wide reform of
the medical system in China. We also believe there will be an
increased demand in other Asian countries. SCRC has been a solid
customer for our company in the past. In 2014, SCRC purchased
approximately $5.4 million of bromine from GURE.
In this transaction, our wholly owned subsidiary, Shouguang City
Haoyuan Chemical Company Limited (SCHC) signed an equity interest
transfer agreement with the four individual shareholders of SCRC.
Consideration for this transaction consists of $66.2 million in
cash and the issuance of shares of approximately 7.27 million
shares of common stock at a price of $2.00 per share which is a 73%
premium over the previous 10 day closing price, bringing the total
consideration for the purchase of SCRC to $80.8 million. Following
the transaction, we will have approximately 46.17 million shares
outstanding.
The shareholders of SCRC have guaranteed that SCRC's
audited 2014 net income will not be less than RMB70 million
(approximately $11.4 million), otherwise the purchase price shall
be proportionally adjusted based on a percentage less than the
RMB70 million threshold. From the effective date of the transaction
until the closing date, all of SCRC's income and rights shall
belong to SCHC. The closing of this transaction shall occur when
the equity interests transfer under the agreement is approved by
regulatory authorities, and updates have been made to the register
of members which will then be filed with relevant industrial and
commercial bureaus in China.
GURE believes SCRC will generate net income for 2014 in the
range of $11-12 million. In 2015, GURE believes that SCRC will
contribute additional revenue of approximately $60 million, with a
contribution to net income of approximately $15 million.
Overall, we expect that the Chinese economy and bromine demand
will remain relatively soft. However, with the acquisition and the
expansion of our chemical business, we expect 2015 total revenue
will increase to $190 million, and net income will increase to the
range of $33 million to $34 million (approximately $0.74 per share)
based on current bromine price levels.
Xiaobin Liu states "We will continue to pursue a long-term
growth strategy by expanding our business segments, exploring more
brine water resources, obtaining bromine assets through
acquisition, developing new projects, and continually looking for
and making attractive horizontal and vertical acquisitions, while
evaluating our cash flow from operating activities, which will help
the company achieve a sustainable long-term competitive
advantage."
"With a solid base in bromine, crude salt, chemicals, and
now materials for human and animal antibiotic products," Xiaobin
Liu stated, "We believe we can generate higher income and return on
investment that will greatly enhance shareholder value."
The closing of the transaction is subject to certain closing
conditions. Further details on the terms of this transaction can be
found in the company's 8-K, which is expected to be filed with the
U.S. Securities and Exchange Commission on January 14, 2015.
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 and
gas field explorations and 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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