Guanwei Recycling Corp. Reports 2014 First Quarter Results
May 15 2014 - 6:40AM
Marketwired
Guanwei Recycling Corp. Reports 2014 First Quarter Results
Weaker Than Anticipated Economic Environment Impacts Results and
Near Term Outlook
2014 First Quarter Investor Conference Call to Be Held Friday,
May 16, 2014 at 8:00am ET
FUQING CITY, CHINA--(Marketwired - May 15, 2014) - Guanwei
Recycling Corp. (NASDAQ: GPRC), China's leading clean tech
manufacturer of recycled low density polyethylene (LDPE), today
reported that weaker than anticipated demand from customers, a
worsened South China labor shortage in the quarter, and changes in
manufacturing implemented to comply with new government
environmental rules, were key factors in generating lower year over
year comparisons in its first quarter ended March 31, 2014.
While the Company saw prices for its manufactured LDPE continue
to advance moderately in the 2014 first quarter, sales volume
declined approximately 22% year over year, leading to a 20.6% year
over year decrease in first quarter revenues to
$11,780,338. This was coupled with an increase in the cost of
manufacturing to 85.93% of net revenue from 73.86% in the first
quarter last year which, combined with lower sales, resulted in a
68.04% year over year reduction in 2014 first quarter net income to
$756,066.
Mr. Chen Min, Chairman and CEO of the Company, commented, "While
the economic outlook for most of our customers going into the year
was uncertain, as the quarter developed it became clear they were
proceeding with much more caution than anticipated. At the
same time, the labor situation in Southern China also got a lot
tougher as reflected in the fact that following the Chinese Spring
Festival in February, many more experienced workers than
anticipated, including ours, did not return to their
positions. This slowed our production and increased our labor
costs as we raised wages and benefits to try to quickly attract and
train new workers. This occurred as the government imposed new
procedures on the industry to further improve environmental
standards which also slowed production and increased our cost
structure. This unusual confluence of negative occurrences,
coupled with a somewhat higher than planned increase in raw
material costs, is reflected in our results. Mr. Chen added,
"Unfortunately, at least for the next quarter or two, these events
are likely to continue to affect year over year comparisons, unless
and until we see, in particular, an improvement in the domestic
Chinese economy."
Continued Financial Strength
Mr. Chen noted further that the Company remained in a strong
financial position, with no bank debt and cash and cash equivalents
of $14,860,475 as of March 31, 2014, up from $13,491,880 at the
same time last year. Working capital as of March 31, 2014 was
$45,553,532, an increase of $94,342 from December 31, 2013.
Financial Highlights
- Revenues for the three months ended March 31, 2014 were
$11,780,338, down 20.62% from $14,839,806 in last year's first
quarter. The lower results were mainly a consequence of lower
sales of the Company's principal product, self-manufactured
recycled LDPE, down 20.64% year over year as customers facing
economic uncertainty reduced orders.
- Average selling prices of recycled LDPE increased 1.55% per ton
to approximately $1,242 in the 2014 first quarter. However,
during the quarter the Company sold 9,275 tons of recycled LDPE, a
decline of 21.84% from the 11,867 tons sold in the first quarter
last year. Sales of non-LDPE materials also declined year over
year by approximately 19.7%, and prices for this material were
slightly lower.
- Net income in the 2014 first quarter was $756,066 or $0.07 per
share, compared with $2,365,393, or $0.23 per share in the first
quarter of 2013. The primary factor in this decline as
described above was the decrease in sales volume year over year as
a result of the economic slowdown in China, and increases in key
costs, namely raw material costs which increased 13.05% to $866 per
ton and outpaced the increase in selling prices, as well as a 27%
increase in labor costs to $61 per ton for the reasons described
above. Additional costs were incurred for new infrastructure
procedures required by the government to limit pollution.
- In January 2014, the Company received government approval for
an import quota of 100,000 tons of raw material for the year, which
brought the Company's total quota for the year to 135,000 tons,
based on its ability to also utilize the import quota of Fuqing
Huan Li Plastics Company.
Outlook
"While the near term outlook has become cloudier," Mr. Chen
stated, "we are doing what we can about the situation and are
fortunate to have strong financials and a committed and experienced
management team to help weather the storm. In particular, we
are focused on maintaining the cost differential between recycled
and virgin plastic and working closely with our customer base to be
responsive to their needs. The key boost required to improve
the outlook must come, though, from an improved economy."
Conference Call Invitation The Company will discuss 2014 first
quarter results during a live conference call and webcast on
Friday, May 16, 2014 at 8:00am ET.
To participate in the call, interested participants should call
1-877-941-2068 when calling within the United States or
1-480-629-9712 when calling internationally. Please ask for the
Guanwei Recycling Corp. 2014 First Quarter Conference Call,
Conference ID: 4683630. There will be a playback available
until May 23, 2014. To listen to the playback, please call
1-877-870-5176 when calling within the United States or
1-858-384-5517 when calling internationally. Use the Replay Pin
Number: 4683630.
This call is being webcast by ViaVid Broadcasting and can be
accessed by clicking on this link
http://public.viavid.com/index.php?id=109286 or at ViaVid's website
at http://viavid.com.
Description of Guanwei Recycling Corp.
Adhering to the highest "green" standards, Guanwei Recycling
Corp. (the "Company") has generated rapid growth producing recycled
low density polyethylene (LDPE) from plastic waste procured mostly
in Europe. The Company sells the recycled LDPE to more than
300 customers (including over 150 active recurring customers) in
more than ten different industries in China. The Company is
licensed by Chinese authorities and also has been issued a
Compliance Certificate by TÜV Rheinland, which issues certificates
of approval for certain plastics manufacturers that meet Germany's
strict environmental standards. This enables the Company to procure
high quality plastic waste directly from Germany and other European
countries with no middlemen, and permits highly economic production
of the highest grades of LDPE. Additional information regarding
Guanwei Recycling Corp. is available at
www.guanweirecycling.com.
Information Regarding Forward-Looking Statements
Except for historical information contained herein, the
statements in this press release are forward-looking statements
that are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties, which
may cause our actual results in future periods to differ materially
from forecasted results. These risks and uncertainties include,
among other things, product demand, market competition, and risks
inherent in our operations. These and other risks are described in
our filings with the U.S. Securities and Exchange Commission.
|
GUANWEI RECYCLING CORP. |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
March 31, 2014 |
|
December 31, 2013 |
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
14,860,475 |
|
$ |
11,887,032 |
|
Accounts receivable |
|
|
8,505,822 |
|
|
9,367,569 |
|
Accounts receivable from affiliate |
|
|
- |
|
|
5,469,629 |
|
Inventories |
|
|
17,315,339 |
|
|
14,717,808 |
|
Advances to suppliers |
|
|
6,939,501 |
|
|
7,426,023 |
|
Value added tax refundable |
|
|
977,480 |
|
|
- |
|
Prepaid expenses and other current assets |
|
|
218,318 |
|
|
136,396 |
|
|
Total
current assets |
|
|
48,816,935 |
|
|
49,004,457 |
Property, plant and equipment, net |
|
|
11,799,360 |
|
|
11,074,021 |
Construction in progress |
|
|
- |
|
|
534,556 |
Land use right, net |
|
|
659,063 |
|
|
668,597 |
Other assets |
|
|
200,831 |
|
|
203,751 |
|
|
Total
Assets |
|
$ |
61,476,189 |
|
$ |
61,485,382 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
1,343,926 |
|
$ |
612,303 |
|
Accrued expenses and other payables |
|
|
549,803 |
|
|
720,888 |
|
Value added taxes payable |
|
|
- |
|
|
827,517 |
|
Amount due to shareholder |
|
|
1,070,201 |
|
|
934,892 |
|
Income tax payable |
|
|
299,473 |
|
|
449,667 |
|
|
Total
current liabilities |
|
|
3,263,403 |
|
|
3,545,267 |
Commitments and contingencies |
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
Common stock, $0.001 par value, 500,000,000 shares
authorized, 10,407,839 shares issued and outstanding, as of March
31, 2014 and December 31, 2013 |
|
|
10,408 |
|
|
10,408 |
|
Additional paid-in capital |
|
|
2,826,408 |
|
|
2,811,370 |
|
PRC statutory reserves |
|
|
805,483 |
|
|
805,483 |
|
Accumulated other comprehensive income |
|
|
3,650,553 |
|
|
4,148,986 |
|
Retained earnings |
|
|
50,919,934 |
|
|
50,163,868 |
|
|
Total
shareholders' equity |
|
|
58,212,786 |
|
|
57,940,115 |
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity |
|
$ |
61,476,189 |
|
$ |
61,485,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GUANWEI RECYCLING CORP. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME |
|
|
|
Three Months Ended March 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Net revenue |
|
$ |
11,780,338 |
|
|
$ |
14,839,806 |
|
Cost of revenue |
|
|
10,122,495 |
|
|
|
10,960,865 |
|
|
|
Gross
profit |
|
|
1,657,843 |
|
|
|
3,878,941 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
73,513 |
|
|
|
155,906 |
|
|
General and administrative |
|
|
662,433 |
|
|
|
599,287 |
|
|
|
Total
operating expenses |
|
|
735,946 |
|
|
|
755,193 |
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
921,897 |
|
|
|
3,123,748 |
|
|
|
|
|
|
|
|
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
10,511 |
|
|
|
13,402 |
|
|
Interest expense |
|
|
(15,038 |
) |
|
|
- |
|
|
Net foreign exchange gain |
|
|
146,388 |
|
|
|
59,943 |
|
|
Miscellaneous |
|
|
(5,952 |
) |
|
|
(681 |
) |
|
|
Total
other income |
|
|
135,909 |
|
|
|
72,664 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
1,057,806 |
|
|
|
3,196,412 |
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
301,740 |
|
|
|
831,019 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
756,066 |
|
|
|
2,365,393 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) - foreign currency
translation adjustments |
|
|
(498,432 |
) |
|
|
263,295 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
257,634 |
|
|
$ |
2,628,688 |
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic and diluted |
|
$ |
0.07 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding -
basic and diluted |
|
|
10,407,839 |
|
|
|
10,407,839 |
|
|
|
|
GUANWEI RECYCLING CORP. |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
|
|
|
Three Months Ended March 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
756,066 |
|
|
$ |
2,365,393 |
|
Adjustments to reconcile net income to net cash provided by
operating activities |
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
|
324,320 |
|
|
|
243,715 |
|
Amortization of land use rights |
|
|
3,976 |
|
|
|
3,874 |
|
Imputed interest on advances from shareholder |
|
|
15,038 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
789,386 |
|
|
|
1,666,653 |
|
Accounts receivable from affiliate |
|
|
5,464,978 |
|
|
|
- |
|
Inventories |
|
|
(2,741,136 |
) |
|
|
2,148,983 |
|
Advances to suppliers |
|
|
427,670 |
|
|
|
(565,584 |
) |
Value
added taxes refundable |
|
|
(984,881 |
) |
|
|
(131,445 |
) |
Prepaid expenses and other current assets |
|
|
(83,090 |
) |
|
|
(24,388 |
) |
Other
assets |
|
|
1,226 |
|
|
|
1,195 |
|
Accounts payable |
|
|
742,318 |
|
|
|
(3,915,641 |
) |
Accrued expenses and other payables |
|
|
(166,461 |
) |
|
|
(52,857 |
) |
Value
added taxes payable |
|
|
(826,813 |
) |
|
|
(110,910 |
) |
Income tax payable |
|
|
(147,545 |
) |
|
|
(204,048 |
) |
Net
cash provided by operating activities |
|
|
3,575,052 |
|
|
|
1,424,940 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(614,306 |
) |
|
|
(256,362 |
) |
Net
cash used in investing activities |
|
|
(614,306 |
) |
|
|
(256,362 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities |
|
|
|
|
|
|
|
|
Advance from shareholder |
|
|
135,308 |
|
|
|
171,219 |
|
Net
cash provided by financing activities |
|
|
135,308 |
|
|
|
171,219 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash |
|
|
(122,611 |
) |
|
|
68,725 |
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents |
|
|
2,973,443 |
|
|
|
1,408,522 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of period |
|
|
11,887,032 |
|
|
|
12,083,358 |
|
Cash
and cash equivalents at the end of period |
|
$ |
14,860,475 |
|
|
$ |
13,491,880 |
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Income taxes paid |
|
$ |
449,285 |
|
|
$ |
1,035,067 |
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Construction in progress transferred to property, plant and
equipment |
|
$ |
534,101 |
|
|
$ |
- |
|
Accrued expense related to purchases of property, plant and
equipment |
|
$ |
- |
|
|
$ |
7,966 |
|
|
|
|
|
|
|
|
|
|
Contacts: Richard Sun guanweirecycling@gmail.com Ken Donenfeld
DGI Investor Relations kdonenfeld@dgiir.com Tel: 212-425-5700 Fax:
646-381-9727
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