NEW YORK and SHANDONG, China, May 11
/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 first quarter ended March 31,
2010.
First Quarter 2010 Highlights
-- Revenue was $29.7 million, a year-over-year increase of 25.6%
-- Gross profit was $13.5 million, a year-over-year increase of 33.3%
-- Gross margin increased to 45.3% from 42.7% for the first quarter of
2009
-- Income from operations was $11.1 million, a year-over-year increase of
24.7%
-- Operating margin was 37.2% compared to 37.5% for the first quarter of
2009
-- Net income was $8.0 million, or $0.23 per basic and diluted share, an
increase of 22.3% from $6.5 million, or $0.23 per basic and diluted
share a year ago
-- Cash totaled $55.6 million as of March 31, 2010
First Quarter 2010 Results
"Our strong performance for the first quarter was mainly due to
the positive pricing environment for bromine. For the first quarter
2010, our average selling price for bromine was $2,470 per metric ton, an increase of 39.1% from
the corresponding quarter last year. Bromine prices have since
continued to increase, mainly due to the asymmetry between growing
demand for and limited supply of the raw material in China. However, due to the extremely cold
weather in Shandong this winter,
production volumes were slightly lower than anticipated due to
increased downtime of production equipment. This affected the
bromine industry as a whole in Shandong," said Xiaobin Liu, the Chief Executive Officer of Gulf
Resources. "Our new pesticide intermediate chemicals and the strong
demand for our environmentally friendly oil and gas exploration
chemicals boosted growth of our chemical products segment.
Throughout the first quarter, we have continued taking measures to
raise the profile of our chemical products segment through the
introduction of new, more value-added products. The construction of
a new chemical production line focusing on intermediates for
wastewater treatment chemicals is progressing according to plan
with expected production start in July
2010."
Gulf Resources' revenue was $29.7
million for the first quarter of 2010, an increase of 25.6%
from $23.6 million for the first
quarter of 2009. The increase in net revenue was primarily
attributable to growth in the Company's bromine and crude salt
segment as a result of the increased sales price of bromine and
crude salt. Revenue from the bromine and crude salt product segment
was $19.9 million, or 67.0% of total
revenue for the first quarter of 2010, an increase of 28.1% from
$15.5 million last year.
Revenue from the chemical products segment was $9.8 million, or 33.0% of total revenue, for the
first quarter of 2010, an increase of 20.9% from $8.1 million in the corresponding period last
year. The increase in revenue from the Company's chemical product
segment was mainly due to increased demand for the Company's
environmentally friendly additive products, solid lubricant and
polyether lubricant, for use in oil and gas field exploration and
the Company's improved pesticide intermediate products.
Gross profit for the first quarter of 2010 totaled $13.5 million, compared to $10.1 million for the first quarter of 2009 and
gross profit margin for the three months ended March 31, 2010 was 45.3%, compared to 42.7% for
the corresponding three-month period last year. The improved gross
profit margin was due to an increase in net revenue, which enabled
the Company to leverage its fixed costs, as well as a lower
inflation of raw material prices compared with the selling prices
of the Company's products.
Selling, general and administrative expenses for the first
quarter of 2010 were $2.3 million,
compared with $1.1 million for the
first quarter of 2009. The increase was mainly due to non-cash
stock compensation expenses relating to incentive stock options
granted to key managers who have contributed to the Company's
success. Research and development expenses were $0.1 million, unchanged from the first quarter of
2009.
As a result, income from operations for the first quarter of
2010 was $11.1 million, an increase
of 24.7% compared with $8.9 million
for the corresponding quarter of 2009. Operating margin was 37.2%
for the first quarter of 2010, compared with 37.5% for the first
quarter of 2009.
For first quarter of 2010, the Company incurred other income of
$75,585 compared with other expense
of $4,980 for the corresponding
quarter last year.
Income taxes were $3.1 million for
the first quarter of 2010, an increase of 34.7% from $2.3 million for the first quarter of 2009. The
Company's effective income rate was 28.2% compared to 26.3% in the
year ago period. The Company's effective income tax rate increased
due to the recognition of non- cash stock compensation expenses,
which are not allowed to be deducted for income tax purposes.
Net income was $8.0 million for
the first quarter of 2010, an increase of 22.3% from $6.5 million for the first quarter of 2009. Basic
and diluted earnings per share in first quarter of 2010 were
$0.23 compared to $0.23 per basic and diluted share in the first
quarter of 2009.
Weighted average number of diluted shares for the three months
ended March 31, 2010 was 34,762,991
compared with 28,763,044 for the three months ended March 31, 2009.
Financial Condition
As of March 31, 2010, Gulf
Resources had cash of $55.6 million,
current liabilities of $11.9 million,
and shareholders' equity $143.6
million. At quarter end, the Company had working capital of
$58.9 million and a current ratio of
6.0. For the three months ended March 31,
2010, the Company generated $12.3
million in cash flow from operations, primarily attributable
to net income, and used $4.4 million
in investing activities, mainly due to the construction of a new
chemical additives production line for waste water treatment
chemicals. In the second quarter, the Company's plans to invest an
additional $2.9 million for the
construction of this line. The Company plans to introduce additives
for wastewater treatment chemicals that utilize bromine in their
formulation in July 2010.
Recent Developments
In April 2010, the Company
announced that it passed the Class 1 supplier audits of China
Petroleum & Chemical Corporation ("Sinopec") and PetroChina
Company Ltd. ("PetroChina") for the fifth and seventh consecutive
year, respectively.
In April 2010, the Company also
announced that the construction of a production line for wastewater
treatment chemical additives at its SYCI location is proceeding
according to plan. The Company expects to complete the process and
start production in July 2010 and
expects that it will contribute approximately $9 to $10 million in revenues in the first year
of operation with an estimated gross profit margin over 40% going
forward.
Business Outlook
Gulf Resources expects the expansion of traditional end user
markets, such as pesticide, papermaking, pharmaceutical and flame
retardant production to continue supporting bromine prices in the
near and intermediate term. The Company expects bromine demand in
China to follow general domestic
economic conditions.
Since the end of the first quarter, improved weather conditions
have allowed bromine production to return to normal in the
Shandong province, and the Company
has resumed operating at its usual rate of 75-80% of full
utilization.
"The current pricing environment is extremely supportive of
bromine producers. As it takes approximately three months for our
contract prices to fully absorb changes in market prices, we expect
to see continued strong performance from our bromine and crude salt
segment for the upcoming quarters. Moreover, the increased
production due to milder weather has allowed us to fill orders that
were pushed back in first quarter," said Mr. Liu. "Expanding our
production capacity remains an integral part of our growth
strategy, and we expect to close an additional two bromine
production asset acquisitions in 2010. Our acquisition strategy is
supported by our strong cash balance."
In addition to increasing bromine production capacity, the
Company also plans to move downstream in the bromine market by
integrating its business segments. The introduction of additives
for wastewater treatment chemicals that utilize bromine in their
formulation is the first step to commercialize chemical products
that utilize the Company's bromine resources as raw material.
The Company reiterates guidance of revenue between $146 million and $150 million and net income
between $44 million and $46 million
for fiscal year 2010.
Conference Call
Gulf Resources' management will host a conference call
Tuesday, May 11, 2010 at 7:00 AM Eastern Time to discuss its financial
results for the first quarter 2010 ended March 31, 2010.
Hosting the call will be Mr. Xiaobin
Liu, CEO of Gulf Resources and Mr. David Wang, VP Finance of Gulf Resources.
To participate in this live conference call, please dial +1
(877) 440-3774 five to ten minutes prior to the scheduled
conference call time. International callers should call +1 (706)
902-4014. The conference participant pass code is 74144212.
A replay of the conference call will be available for 14 days
starting from 9:00 AM EDT on
Tuesday, May 11, 2010. To access the
replay, call +1 (800) 642-1687. International callers should call
+1 (706) 645-9291. The pass code is 74144212.
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.
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
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.
-- Financial tables to follow --
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
March 31, December 31,
2010 2009
Current Assets (Unaudited) (Audited)
Cash $ 55,571,241 $ 45,536,735
Accounts receivable 14,194,076 14,960,002
Inventories 597,009 650,332
Prepayment and deposit 229,267 233,330
Prepaid land lease 51,356 46,133
Deferred tax asset 87,283 85,672
Other receivable 2,289 2,195,208
Total Current Assets 70,732,520 63,707,412
Property, plant and equipment, net 83,985,334 81,993,894
Prepaid land lease, net of current
portion 718,487 721,862
Total Assets $155,436,341 $146,423,168
Liabilities and
Stockholders' Equity
Current Liabilities
Accounts payable and accrued
expenses 6,057,340 $ 5,823,745
Retention payable 660,150 660,150
Due to related parties 1,190 1,190
Taxes payable 5,155,325 5,555,113
Total Current Liabilities 11,874,005 12,040,198
Total Liabilities 11,874,005 12,040,198
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;
34,569,447 and 34,541,066 shares
issued and outstanding as of
March 31, 2010 and December 31,
2009, respectively 17,285 17,271
Additional paid in capital 65,924,978 64,718,026
Retained earnings unappropriated 67,800,425 59,808,289
Retained earnings appropriated 5,679,769 5,679,769
Cumulative translation adjustment 4,139,879 4,159,615
Total Stockholders' Equity 143,562,336 134,382,970
Total Liabilities and Stockholders'
Equity $155,436,341 $146,423,168
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. dollars)
(UNAUDITED)
Three Months Ended March 31,
2010 2009
NET REVENUE
Net sales $ 29,693,418 $ 23,633,538
OPERATING EXPENSES
Cost of net revenue (16,235,499) (13,540,940)
General and administrative expenses (2,277,492) (1,099,380)
Research and development cost (125,202) (124,969)
(18,638,193) (14,765,289)
INCOME FROM OPERATIONS 11,055,226 8,868,249
OTHER INCOME (EXPENSES)
Interest expense (174) (27,009)
Interest income 53,761 22,029
Sundry income 21,998 --
INCOME BEFORE INCOME TAXES 11,130,810 8,863,269
INCOME TAXES - current (3,138,674) (2,330,155)
NET INCOME $ 7,992,136 $ 6,533,114
EARNINGS PER SHARE
BASIC $ 0.23 $ 0.23
DILUTED $ 0.23 $ 0.23
WEIGHTED AVERAGE NUMBER OF SHARES
BASIC 34,561,233 28,763,044
DILUTED 34,762,991 28,763,044
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in U.S. dollars)
(UNAUDITED)
Three Months Ended March 31,
2010 2009
NET INCOME $ 7,992,136 $ 6,533,114
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment 19,734 (49,438)
COMPREHENSIVE INCOME $ 8,011,870 $ 6,483,676
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(UNAUDITED)
Three Months Ended March 31,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,992,136 $ 6,533,114
Adjustments to reconcile net income
Amortization of warrants -- 238,027
Amortization of prepaid expenses 22,057 3,957
Depreciation and amortization 2,377,621 1,469,822
Stock-based compensation expense 1,188,966 --
Deferred tax asset (1,609) --
Bad debt provision -- 64,117
Changes in assets and liabilities
Accounts receivable 772,311 (1,059,675)
Inventories 53,304 (82,293)
Prepayment and deposit 4,129 105,421
Other receivable -- --
Accounts payable and accrued expenses 251,535 2,238,313
Taxes payable (312,408) (382,458)
Net cash provided by operating activities 12,348,042 9,128,345
CASH FLOWS USED IN INVESTING ACTIVITIES
Additions of prepaid land lease (23,912) --
Purchase of Property, plant and equipment (4,399,500) (10,019,262)
Net cash used in investing activities (4,423,412) (10,019,262)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Proceeds from exercising stock options 18,000 --
Proceeds from private placement 2,192,919 --
Net cash provided by financing activities 2,210,919 --
EFFECTS OF EXCHANGE RATE CHANGE ON CASH
& CASH EQUIVALENTS (101,043) (36,709)
NET INCREASE IN CASH & CASH EQUIVALENT 10,034,506 (927,626)
CASH & CASH EQUIVALENT - BEGINNING OF
PERIOD 45,536,735 30,878,044
CASH & CASH EQUIVALENT - END OF PERIOD $ 55,571,241 $ 29,950,418
For more information, please contact:
Gulf Resources, Inc.
David Wang, VP of Finance
Email: gfre.2008@vip.163.com
Helen Xu
Email: beishengrong@vip.163.com
Web: http://www.gulfresourcesinc.cn/
CCG Investor Relations
Ms. Linda Salo, Sr. Financial Writer
Phone: +1-646-922-0894
Email: linda.salo@ccgir.com
Mr. Crocker Coulson, President
Phone: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Web: http://www.ccgirasia.com/
SOURCE Gulf Resources, Inc.