Gulf Resources and the government of Weifang City announce a demolition compensation agreement for Factory #6 of Shouguang Ci...
November 28 2016 - 8:30AM
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 that one of
the Company’s subsidiaries Shouguang City Haoyuan Chemical Company
Limited (SCHC) signed the demolition compensation agreement for its
factory #6 with the Yangzi Street Office of Weifang City Binhai
Economic-Technological Development Zone.
To improve the environment and increase tourism, the government
of Weifang City has created the Taiwan Island Ecological Culture
City Project in its Binhai Economic-Technological Development Zone.
SCHC’s Factory #6 is located within this zone. In order to complete
this project, the government and SCHC have reached a Demolition
Compensation Agreement whereby the government will pay SCHC
approximately USD$2,678,989 (based on the current exchange rate)
for the demolition of Factory #6. This amount is expected to
be roughly slightly above the current book value of its fixed
assets. SCHC will receive 60% of the funds within five days since
signing the agreement and the remainder within five business days
since the acceptance by construction unit. It is a relatively
common experience in China for governments to acquire property for
tourism, housing, infrastructure, and other uses and compensate the
impacted companies accordingly.
Factory #6Factory #6 is in a different
geographic region than Gulf’s other factories. Gulf believes that
none of its other factories may be impacted by government actions
in the foreseeable future.
Factory #6 contains 2,641 acres. It was acquired on January 8,
2008 with the total purchase price of USD$9,722,222. In 2015,
Factory #6 had bromine capacity of 4.539 tons (10% of SCHC’s
total). Production was 1,914 tons (10% of total). Sales were 1,944
tons (10% of total). The utilization ratio was 42%, slightly above
the corporate average of 40%. Factory #6 also produced 36,500 tons
of crude salt (11% of total). Details regarding Factory #6 are
presented in Gulf Resources Annual Report on 10-K.
Financial ImpactGulf Resources is operating at
a relatively low utilization ratio. For the first nine months of
2016, the utilization rate for Bromine was 40%. Gulf Resources
expects that virtually all sales from Factory #6 will be
transferred to other factories. This should result in higher
utilization for the company as a whole.
Costs should be reduced because Gulf Resources will be operating
one less factory. This will mean lower rent, labor costs, utilities
expenditures, depreciation and amortization. With higher
utilization and lower costs, profits should benefit.
In addition, the government may force the demolition of other
small bromine factories near the location of our Factory #6. This
could lead to lower competition and further increases in
utilization.
Mr. Xiaobin Liu, the CEO of Gulf Resources stated, “The
demolition of Factory #6 will allow the government of Weifang to
develop the Taiwan Island Ecological Culture City Project. We will
transfer all business from Factory #6 to our other factories. Given
our current low level of utilization in Bromine and the low margins
in crude salt, demolishing this factory should allow us to increase
our utilization and profits. While we never like to see one of our
factories demolished, in this instance the demolition and sale
should benefit our company.”
About Gulf Resources, Inc.Gulf Resources, Inc.
operates through four wholly-owned subsidiaries, Shouguang City
Haoyuan Chemical Company Limited ("SCHC"), Shouguang Yuxin Chemical
Industry Co., Limited ("SYCI"), Shouguang City Rongyuan Chemical
Co, Limited (“SCRC”) and Daying County Haoyuan Chemical Company
Limited (“DCHC”). 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. SCRC is a
leading manufacturer of materials for human and animal antibiotics
in China and other parts of Asia. 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, 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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