Gulf Resources Reports Third Quarter 2009 Results, Increases 2009 Revenue and Net Income Guidance
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NEW YORK & SHANDONG PROVINCE, China, Nov. 9 /PRNewswire-Asia-FirstCall/ --
Gulf Resources, Inc. (Nasdaq: GFRE) ("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 three and nine months
ended September 30, 2009.
Third Quarter 2009 Highlights and Recent Events
-- Net revenue was $27.7 million, a year-over-year increase of 57.6%
-- Gross profit was $12.1 million, a year-over-year increase of 96.8%
-- Gross margin was 43.9%, compared to 35.1% in the third quarter of 2008
-- Net income was $8.3 million, or $0.27 per basic and diluted share, up
122.9% from $3.7 million, or $0.15 per basic and diluted share, a year
ago
-- Cash totaled $19.3 million as of September 30, 2009
-- Appointed Mr. Nai Hui Miao as chief operating officer
-- Completed seventh acquisition of bromine and crude salt manufacturing
assets, adding 4,000 metric tons (MT) of bromine and 150,000 MT of
crude salt annual production capacity
-- Began trading on the NASDAQ Global Select Market on October 27, 2009;
management celebrated the event by ringing the closing bell that same
day
Third Quarter 2009 Results
"During the third quarter, our bromine business has continued to benefit
from the recovery of China's chemical industry, mainly from the increased
demand from oil and gas exploration companies and manufacturers of flame
retardants. Although the impressive year-over-year growth in our bromine sales
was partly due to the adverse effects of the Beijing 2008 Olympic Games on
bromine production and shipments in the third quarter of 2008, the overall
demand for bromine and specialty chemical products was strong throughout the
third quarter. Bromine prices also continued recovering in the third quarter,
with the average price per MT of bromine at $1,833, up almost 9% from $1,685
per MT in the second quarter of 2009," said Xiaobin Liu, Chief Executive
Officer of Gulf Resources.
"The slight decrease in revenue compared with the second quarter of 2009
was mainly due to a stabilization of sales after our customers drastically
increased orders in the second quarter in order to build up their inventories
to compensate for fewer orders placed in the beginning of the year. Our gross
margin remained high, mainly due to increased sales of crude salt and
environmentally friendly chemical products, both of which have higher gross
margins than bromine. Environmentally friendly chemical products were
introduced in September last year and accounted for 24% of our chemical
product sales this quarter compared to 22% in the second quarter of 2009," Mr.
Liu continued.
Gulf Resources' revenue was $27.7 million for the third quarter of 2009,
an increase of 57.6% from $17.6 million for the third quarter of 2008. During
the third quarter of 2009, the revenue from the bromine and crude salt segment
was $18.8 million, or 68.0% of total revenue, an increase of 43.6% from $13.1
million, or 74.7% for the third quarter of 2008. Revenue from bromine
increased 29%, to $16.1 million from $12.45 million for the third quarter of
2008. Revenue from crude salt increased to $2.7 million from only $0.65 for
the same period of last fiscal year, mainly due to the acquisition of salt
pans and the improved utilization of halogen water.
Revenue from the chemical products segment was $8.9 million, or 32.0% of
total revenue, for the second quarter of 2009, an increase of 99.0% from $4.4
million, or 25.3% of total revenue in the corresponding period last year. The
growth in sales of chemical products was due to the expansion of production
capacity, completed in September 2008, and strong demand for new
environmentally friendly additive products, including solid lubricant and
polyether lubricant used in oil and gas exploration.
Gross profit for the third quarter of 2009 totaled $12.1 million, up 96.8%
from $6.2 million for the third quarter of 2008. For the three months ended
September 30, 2009, gross profit margin was 43.9%, compared to 35.1% for the
corresponding period last year. The increased gross profit margin was due to
operational efficiencies as the Company grew in scale and increased sales of
environmentally friendly additive products, which the Company sells at a
higher unit price compared to generic oil and gas exploration additives, and
crude salt, which has a lower production cost compared to bromine.
Environmentally friendly additive products and crude salt had gross margins of
approximately 42% and 74%, while bromine had a gross margin of 39% for the
third quarter of 2009.
Research and development and general and administrative expenses for the
third quarter of 2009 were $1.0 million, down 8.1% from $1.1 million a year
ago due to lower consulting fees. Income from operations for the third quarter
of 2009 was $11.1 million, an increase of 119.1% from $5.1 million a year ago.
Operating margin was 40.3% for the third quarter of 2009, compared to 29.0%
for the third quarter of 2008.
Net income was $8.3 million for the third quarter of 2009, an increase of
122.9% from $3.7 million for the third quarter of 2008. Basic and diluted
earnings per share in the third quarter of fiscal year 2009 was $0.27,
compared to basic and diluted earnings per share of $0.15 a year ago. Weighted
average number of basic and diluted shares for the three months ended
September 30, 2009 was 30,806,546, compared with 24,917,211 for the
corresponding period of fiscal 2008, adjusted for a one-for-four reverse split
effected October 12, 2009.
Results for Nine Months
Revenues for the nine months ended September 30, 2009 were $80.9 million,
up 27.7% from revenues of $63.4 million for the nine months ended September 30,
2008. Gross profit for the nine months ended September 30, 2009 was $35.4
million, up 39.8% from gross profit of $25.3 million for the corresponding
period of 2008. Gross margin was 43.7%, compared to 39.9% for the first nine
months of 2008. Operating income was $32.0 million, up 44.7% from $22.1
million for the first nine months of 2008. Net income was $23.8 million, or
$0.79 per basic and diluted share, compared to $16.2 million, or $0.65 per
basic and diluted share, for the same period a year ago.
Financial Condition
As of September 30, 2009, Gulf Resources had cash of $19.3 million,
working capital of $22.2 million, a current ratio of 2.67:1, and shareholders'
equity $104.1 million. The Company had no long term debt outstanding as of
September 30, 2009.
For the nine months ended September 30, 2009, the Company generated $28.0
million in cash flow from operations. For the same period, the Company used
$33.8 million in investing activities, mainly due to the acquisition of
bromine and crude salt manufacturing assets in February and September 2009 and
the construction of new wells, halogen water channels used for bromine and
crude salt production, and a waste water disposal system at its SYCI location.
The Company is also in the process of completing upgrades to its existing
chemical production lines.
Recent Developments
In September 2009, Gulf Resources acquired bromine and crude salt
manufacturing assets. The Company estimates the manufacturing assets will add
4,000 metric tons to its annual bromine production capacity and 150,000 metric
tons to its annual crude salt production capacity. In consideration for the
assets, the Company paid approximately $11.5 million in cash and agreed to
issue 1,057,342 shares of common stock valued at approximately $5.4 million.
The shares have not been issued as of November 2, 2009.
On October 9, the Company effected a one-for-four reverse stock split in
order to meet the listing requirements of NASDAQ. After the reverse split and
including the shares to be issued to the sellers of bromine and crude salt
manufacturing assets discussed above, the Company will have approximately
31,599,553 shares of common stock outstanding.
Business Outlook
"We have experienced an increase in bromine prices in line with the
general expansion of the manufacturing industry in China. The strong demand
from end-user customers, mainly producers of flame retardants and oil and gas
field drilling chemicals, and the optimism regarding future market conditions
has allowed us to increase our contract prices for the remainder of 2009, and
we expect to see the effect of higher selling prices in the fourth quarter
this year," commented Mr. Liu. "We also have a positive outlook for continued
strong demand for our chemical business in the fourth quarter. As a result, we
are increasing our revenue and net income guidance for 2009."
For fiscal year 2009, Gulf Resources updates financial guidance to
approximately $100 million to $105 million in revenue from the previous range
of $98 million to $103 million, approximately $29 million to $31 million in
net income from the previous range of $27 million to $29 million, and diluted
earnings per share of $0.92 to $0.98 from the previous range of $0.85 to $0.92,
using a share count of 31,599,553.
"We expect the positive momentum in the bromine industry to continue in
2010, which should reflect positively on bromine prices. Moreover, we expect
our environmentally friendly chemical products to continue to gain traction in
the market, especially as we complete the upgrades to our existing chemical
production line and start commercial production of environmentally friendly
chemicals for pesticide production early next year," concluded Mr. Liu.
Conference Call
Gulf Resources' management will host a conference call on November 10 at
8:00 a.m. Eastern Standard Time to discuss its results for the three and nine
months ended September 30, 2009. To participate in this live conference call,
please dial 888-419-5570 five to ten minutes prior to the scheduled conference
call time. International callers should call +1-617-896-9871. The conference
participant pass code is 106 766 49.
This conference call will be broadcast live over the Internet and can be
accessed by all interested parties by clicking on
http://www.gulfresourcesinc.cn/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.
A replay of the conference call will be available for 14 days starting
from 10:00 AM Eastern Standard Time on Tuesday, November 10, 2009. To access
the replay, call 888-286-8010. International callers should call
+1-617-801-6888. The pass code is 60534507.
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 about the Company, please visit
http://www.gulfresourcesinc.cn .
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.
For further information, please contact:
Gulf Resources, Inc.
David Wong, VP of Finance
Email: gfre.2008@vip.163.com
Helen Xu
Email: beishengrong@vip.163.com
Web: http://www.gulfresourcesinc.cn/
CCG Investor Relations
Mr. Crocker Coulson, President
Phone: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Ms. Linda Salo, Financial Writer
Phone: +1-646-922-0894
Email: linda.salo@ccgir.com
Web: http://www.ccgirasia.com/
- Financial tables to follow-
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
September 30, December 31,
2009 2008
(unaudited) (audited)
ASSETS
CURRENT ASSETS
Cash $19,256,504 $30,878,044
Accounts receivable, net of allowance 15,431,176 11,674,645
Inventories 471,469 418,259
Prepayment and deposit 362,915 229,408
Prepaid land lease 15,849 15,849
Deferred tax asset 3,453 3,453
Other receivable 2,289 2,641
35,543,655 43,222,299
PROPERTY, PLANT AND EQUIPMENT, Net 81,136,111 45,399,456
PREPAID LAND LEASE, Net of current
portion 725,824 737,711
TOTAL ASSETS $117,405,590 $89,359,466
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $6,653,162 $4,746,993
Loan Payable -- 4,034,250
Retention Payable 660,150 --
Note and loan payable - related
parties -- 4,650,000
Due to related party 769,090 852,068
Taxes payable 5,253,780 4,269,442
TOTAL CURRENT LIABILITIES 13,336,182 18,552,753
NON CURRENT LIABILITIES
Note payable, net of current portion -- 18,337,493
TOTAL LIABILITIES 13,336,182 36,890,246
STOCKHOLDERS' EQUITY
PREFERRED STOCK; $0.001 par value;
1,000,000 shares authorized none
outstanding -- --
COMMON STOCK; $0.0005 par value;
100,000,000 shares authorized;
31,599,552 and 24,917,210 issues and
Outstanding in 2009 and 2008 15,800 12,459
ADDITIONAL PAID-IN CAPITAL 40,743,524 13,072,668
RETAINED EARNINGS - UNAPPROPRIATED 55,649,994 31,817,465
RETAINED EARNINGS - APPROPRIATED 3,223,418 3,223,418
CUMULATIVE TRANSLATION ADJUSTMENT 4,436,672 4,343,210
TOTAL STOCKHOLDERS' EQUITY 104,069,408 52,469,220
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $117,405,590 $89,359,466
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
NET REVENUE
Net sales $27,667,158 $17,554,873 $80,891,594 $63,354,609
OPERATING EXPENSES
Cost of net revenue 15,533,613 11,388,348 45,520,357 38,050,971
Research and
development cost 125,122 122,744 375,187 389,853
General and
administrative
expenses 870,554 960,747 2,966,375 2,824,377
16,529,289 12,471,839 48,861,919 41,265,201
INCOME FROM OPERATIONS 11,137,869 5,083,034 32,029,675 22,089, 408
OTHER INCOME
(EXPENSES)
Interest expense (102) -- (27,144) (60,111)
Interest income 19,815 26,143 65,607 70,400
Sundry income
(expense) -- 779 -- (3,764)
INCOME BEFORE INCOME
TAXES 11,157,582 5,109,956 32,068,138 22,095,933
INCOME TAXES current 2,829,772 1,373,055 8,235,609 5,925,532
NET INCOME $8,327,810 $3,736,901 $23,832,529 $16,170,401
EARNINGS PER SHARE:
BASIC $0.27 $0.15 $0.79 $0.65
DILUTED $0.27 $0.15 $0.79 $0.65
WEIGHTED AVERAGE
NUMBER OF SHARES:
BASIC 30,806,546 24,917,211 30,179,367 24,917,211
DILUTED 30,806,546 24,917,211 30,179,367 24,919,164
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
NET INCOME $8,327,810 $3,736,901 $23,832,529 $16,170,401
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation adjustment 148,833 228,921 93,462 2,341,313
COMPREHENSIVE INCOME $8,476,643 $3,965,822 $23,925,991 $18,511,714
GULF RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
Nine Months Ended September 30,
2009 2008
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES
Net income $23,832,529 $16,170,401
Adjustments to reconcile net income
to net cash provided by operating
activities
Amortization of warrants issued for
expenses 309,500 602,142
Amortization of prepaid expenses by
shares issued for consulting fee 48,616 145,484
Amortization and prepaid expense 11,943 --
Depreciation and amortization 4,816,540 3,426,455
Bad debt provision 78,150
(Increase) decrease in assets
Accounts receivable (3,831,618) (4,426,119)
Inventories (53,099) (1,659,098)
Prepayment and deposit (133,215) (713,470)
Income tax receivable -- --
Increase (decrease) in liabilities --
Accounts payable and accrued expenses 1,874,951 3,102,777
Taxes payable 1,004,489 969,282
Net cash provided by operating
activities 27,958,786 17,617,854
CASH FLOWS USED IN INVESTING
ACTIVITIES
Property, plant and equipment (33,828,480) (17,365,195)
Net cash used in investing activities (33,828,480) (17,365,195)
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES
Proceeds from bank loan -- --
Repayment to bank loan -- (3,843,675)
Proceeds from loan payable -- 4,023,250
Repayment to loan payable (4,031,775)
Proceeds from Note and loan payable
(related parties) -- 13,635,405
Repayment to Note and loan payable
(related parties) -- (2,670,192)
Proceeds from related party 8,452,194
Repayment to related party (10,168,016) --
Net cash used in provided by
financing activities (5,747,597) 11,144,788
EFFECTS OF EXCHANGE RATE CHANGE ON
CASH (4,249) 703,038
NET INCREASE (DECREASE) IN CASH (11,621,540) 12,100,485
CASH - BEGINNING OF PERIOD 30,878,044 10,773,875
CASH - END OF PERIOD $19,256,504 $22,874,360
SOURCE Gulf Resources, Inc.
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