Gulf Resources (NASDAQ:GURE) 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, 2023.
- In the third quarter, sales declined by 74%.
- Net income after tax was a loss of $1,775,797 compared to a
profit of $8,967,380.
- Net loss per share was ($0.17*) compared to a net profit of
$0.86*.
- Ending cash was $103,774,977 or $9.95* per share.
- Shareholders’ equity was $260,723,332 or $24.99* per
share.
Results for the Three Months Ended Sept.
30,2023
In the third quarter of 2023, revenue declined by 74% to
$5,865,615 from $22,862,795. Specifically, Bromine revenues
decreased by 75% to $4,908,152 from $19,845,773. The decrease in
net revenues was primarily due to a 43% reduction in the volume of
tonnes sold and a 57% decrease in average selling price. During the
quarter, the average selling price was $3,237 compared to $7,474.
As of November 16, 2023, based on sunsirs.com data, the price of
bromine has seen an increase of 7.4% to $3,477.
The decrease in selling price of bromine reflects both the
economic weakness in China and an excess inventory of antiseptics
following the aftermath of COVID. The reduction in tonnes sold
reflects the company’s strategic decision not to engage in price
competition, aiming to safeguard the long-term value of its
resources.
Additionally, crude salt revenues declined by 70% due to an 18%
decline in pricing and a 63% decrease in tonnes produced. As crude
salt is a by-product of bromine, the decreased production of
bromine resulted in a reduction in production of crude salt. There
were no revenues generated from our chemical products business,
while our natural gas business obtained $67,907 in revenues through
equipment leasing.
Gross profit for the quarter was amounted to a loss of $508,287
compared to a profit of $14,457,101 in the previous year.
Specifically, our bromine business suffered a gross profit loss of
$1,087,344 compared to a profit of $12,483,670 while crude salt
achieved a gross profit of $511,456 compared to $1,891,447
previously.
The Company incurred direct labor and factory overheads
amounting to $1,007,689 during plant shutdowns, compared to
$1,910,318 previously. General & Administrative expenses were
$762,884 compared to $584,473 previously.
Consequently, our loss from operations was amounted to
$2,293,288 compared to a profit of $11,942,592 in the prior period.
The net Income after tax was a loss of $1,775,797 compared to a
profit of $8,967,380, and the net loss per share was ($0.17*)
compared to a net profit of $0.86*.
Results for the 9 months Ended Sept. 30,
2023
Revenues over the 9 months declined by 51%,
decreasing to $23,173,404 from $47,505,246. Specifically, bromine
revenues also fell by 51% to $20,734,871 from $41,865,598. Notably,
there was a 9% increase in bromine tonnes sold, reflecting the
addition of factory No.8. However, despite this, the gross profit
margin decrease to 7%, down from 57%. Throughout the nine months,
the average selling price of bromine was $3,493 per tonne compared
the previous rate of $7,674 per tonne.
Revenues from crude salt also declined by 51% to $2,287,672 from
$5,506,655, while the production volume declined by 51%. No
revenues were generated from chemicals business. Conversely,
revenues from natural gas increased by 13% to $150,861 from
equipment leasing.
The gross profit for the 9 months totaled $2,708,986 compared to
$26,448,464. Specifically, the bromine business accrued a gross
profit of $1,547,251 compared to $23,717,338 in the previous
period. Our crude salt business achieved a gross profit of
$1,011,553 compared to $2,598,547. Meanwhile, Our chemical business
recorded no gross profit, and our natural gas business marked a
gross profit of $150,182 compared to $132,579 previously.
The Company incurred direct labor and factory overheads during
plant shutdowns amounting to $4,471,954 compared to $6,022,206 in
the previous period. General & Administrative expenses were
$2,266,260 compared to $3,384,063 previously.
As a result, our loss from operations was amounted to $4,011,944
compared to a profit of $16,986,668 previously.
Net income was a loss of ($3,015,360) compared to a profit of
$12,749,228 previously, and the net loss per share was ($0.29*)
compared to a profit of $1.22*.
Cash Flow During the 9 months ended September
30, 2023, we generated $9,869,612 from operating activities and
invested $15,197,648 primarily in our flood protection program.
Balance SheetAs of September 30, 2023, our cash
balance was $103,774,977. Based on 10,431,924 shares issued and
outstanding, this translates to $9.95* in cash per share.
Net, net cash (cash minus all liabilities) was $85,605,432 or
$8.21* per share.
Working capital was $105,067,391 or $10.07* per share.
Shareholders’ equity was $260,723,332 or $24.99* per share.
Commentary “In the third quarter,” remarked,
Mr. Liu Xiaobin, our CEO, “our results were adversely impacted by
the deminished price of bromine. We attribute this drop in price to
two major factors. First, the sluggish state of the construction
market in China led to reduced purchases of bromine for fire
retardants applications. Secondly, and the waning impact of the
COVID pandemic resulted in decreased demand for bromine in medical
instruments and sterilization.”
“Despite these challenges, our company remains optimistic about
the long-term equilibrium of bromine’s demand and supply,” Mr. Liu
continued. “We anticipate a resurgence in demand for bromine-based
products. Emerging products, such as zinc/bromine batteries and new
medical products presents opportunities for sustained demand
growth. However, the supply of bromine continues to be constrained.
Notably, based on 2022 production data, we estimate probably
over 75% of global bromine production is concentrated in regions
like Israel, Jordan, and Ukraine, which currently face military
conflicts or wars.”
“We adopt a prudent strategy in navigating the market,” Mr. Liu
added. “We have held back seeking permission to open factories #2
and #10 as we await improved pricing. Additionally, we have
postponed the procurement of the final equipment for our chemical
factory until we gain clearer insights into opportunities for
derivative bromine products. We have scaled back our sales,
anticipating higher returns from future bromine sales.”
“Since the end of the quarter,” Mr. Liu concluded, “we have
observed a gradual but consistent uptick in the market price of
bromine. We are vigilantly monitoring events in the Middle East,
recognizing that any disruptions in the Dead Sea region could
suddenly alter market dynamics. Looking ahead, we envision
returning to profitability in the forthcoming quarters. Moreover,
we aim to progress with the opening of our chemical factory,
obtaining approvals for our remaining two bromine factories, and
ideally resuming our natural gas and brine exploration in Sichuan
Province.”
(*These calculations are based on the number of shares issued
and outstanding of 10,431,924 shares as of September 30, 2023)
Conference Call
Gulf Resources management will host a conference call on Monday,
November 20, 2023 at 07:30 PM Eastern Time to discuss its Third
Quarter 2023 results ended September 30, 2023.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the
call. The Company management team will be available for investor
questions following the prepared remarks.
To participate in this live conference call, please dial Toll
Free +1 (888) 506-0062 five to ten minutes prior to the scheduled
conference call time. International callers should dial +1 (973)
-528-0011, and please reference to “Gulf Resources” or Participant
Access Code: 158196 while dial in.
The webcasting is also available then, just simply click on the
link below:
http://www.gulfresourcesinc.com/news-28.html
A replay of the conference call will be available two hours
after the call's completion and will expire on Monday, November 27,
2023. To access the replay, call +1 (877) 481-4010. International
callers should call +1 (919) 882-2331. The Replay Passcode is
49480.
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Expressed in U.S. dollars) |
|
|
September 30,2023Unaudited |
|
December 31,2022Audited |
Current Assets |
|
|
|
|
|
|
|
Cash |
$ |
103,774,977 |
|
|
$ |
108,226,214 |
|
Accounts receivable |
|
2,150,118 |
|
|
|
5,363,166 |
|
Inventories, net |
|
874,820 |
|
|
|
1,598,572 |
|
Prepayments and deposits |
|
8,135,608 |
|
|
|
4,236,782 |
|
Other receivable |
|
2,571 |
|
|
|
637 |
|
Total Current Assets |
|
114,938,094 |
|
|
|
119,425,371 |
|
Non-Current Assets |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
140,872,750 |
|
|
|
149,916,766 |
|
Finance lease right-of use assets |
|
155,269 |
|
|
|
163,868 |
|
Operating lease right-of-use assets |
|
7,668,554 |
|
|
|
8,098,427 |
|
Prepaid land leases, net of current portion |
|
9,254,124 |
|
|
|
9,508,001 |
|
Deferred tax assets |
|
6,004,086 |
|
|
|
5,318,909 |
|
Total non-current assets |
|
163,954,783 |
|
|
|
173,005,971 |
|
Total Assets |
$ |
278,892,877 |
|
|
$ |
292,431,342 |
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Payable and accrued expenses |
$ |
6,151,025 |
|
|
$ |
7,823,722 |
|
Taxes payable-current |
|
521,826 |
|
|
|
699,563 |
|
Amount due to a related party |
|
2,572,720 |
|
|
|
2,605,694 |
|
Finance lease liability, current portion |
|
188,750 |
|
|
|
213,346 |
|
Operating lease liabilities, current portion |
|
436,382 |
|
|
|
433,440 |
|
Total Current Liabilities |
|
9,870,703 |
|
|
|
11,775,765 |
|
Non-Current Liabilities |
|
|
|
|
|
|
|
Finance lease liability, net of current portion |
|
1,254,618 |
|
|
|
1,461,721 |
|
Operating lease liabilities, net of current portion |
|
7,044,224 |
|
|
|
7,575,651 |
|
Total Non-Current Liabilities |
|
8,298,842 |
|
|
|
9,037,372 |
|
Total Liabilities |
$ |
18,169,545 |
|
|
$ |
20,813,137 |
|
|
|
|
|
|
|
|
|
Commitment and Loss Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
PREFERRED STOCK;
$0.001 par value; 1,000,000 shares
authorized; none outstanding |
$ |
— |
|
|
$ |
— |
|
COMMON STOCK; $0.0005 par
value; 80,000,000 shares
authorized; 10,717,754 shares issued;and
10,431,924 shares outstanding as of September 30,
2023 and December 31, 2022, respectively |
|
24,376 |
|
|
|
24,476 |
|
Treasury stock; 285,830 shares as
of September 30, 2023 and December 31, 2022 at cost |
|
(1,372,673 |
) |
|
|
(1,372,673 |
) |
Additional paid-in capital |
|
101,237,059 |
|
|
|
101,237,059 |
|
Retained earnings unappropriated |
|
155,074,175 |
|
|
|
158,089,535 |
|
Retained earnings appropriated |
|
26,667,097 |
|
|
|
26,667,097 |
|
Accumulated other comprehensive loss |
|
(20,906,802 |
) |
|
|
(13,027,289 |
) |
Total Stockholders’ Equity |
|
260,723,332 |
|
|
|
271,618,205 |
|
Total Liabilities and Stockholders’ Equity |
$ |
278,892,877 |
|
|
$ |
292,431,342 |
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
LOSS |
(Expressed in U.S. dollars) |
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Period EndedSeptember 30, |
|
Nine -Month Period EndedSeptember 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
NET REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
$ |
5,865,615 |
|
|
$ |
22,862,795 |
|
|
$ |
23,173,404 |
|
|
$ |
47,505,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
(EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of net revenue |
|
(6,373,902 |
) |
|
|
(8,405,694 |
) |
|
|
(20,464,418 |
) |
|
|
(21,056,782 |
) |
Sales, marketing and other operating expenses |
|
(14,428 |
) |
|
|
(19,681 |
) |
|
|
(42,850 |
) |
|
|
(47,086 |
) |
Direct labor and factory overheads incurred during plant
shutdown |
|
(1,007,689 |
) |
|
|
(1,910,318 |
) |
|
|
(4,471,954 |
) |
|
|
(6,022,206 |
) |
General and administrative expenses |
|
(762,884 |
) |
|
|
(584,473 |
) |
|
|
(2,266,260 |
) |
|
|
(3,384,063 |
) |
Other operating income (loss) |
|
— |
|
|
|
(37 |
) |
|
|
60,134 |
|
|
|
(8,441 |
) |
|
|
(8,158,903 |
) |
|
|
(10,920,203 |
) |
|
|
(27,185,348 |
) |
|
|
(30,518,578 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME(LOSS) FROM
OPERATIONS |
|
(2,293,288 |
) |
|
|
11,942,592 |
|
|
|
(4,011,944 |
) |
|
|
16,986,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(23,791 |
) |
|
|
(27,715 |
) |
|
|
(81,322 |
) |
|
|
(94,703 |
) |
Interest income |
|
57,758 |
|
|
|
63,470 |
|
|
|
201,127 |
|
|
|
213,546 |
|
Other (income) expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
INCOME(LOSS) BEFORE TAXES |
|
(2,259,321 |
) |
|
|
11,978,347 |
|
|
|
(3,892,139 |
) |
|
|
17,105,511 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
483,524 |
|
|
|
(3,010,967 |
) |
|
|
876,779 |
|
|
|
(4,356,283 |
) |
NET INCOME(LOSS) |
$ |
(1,775,797 |
) |
|
$ |
8,967,380 |
|
|
$ |
(3,015,360 |
) |
|
$ |
12,749,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME(LOSS) |
$ |
(1,775,797 |
) |
|
$ |
8,967,380 |
|
|
$ |
(3,015,360 |
) |
|
$ |
12,749,228 |
|
OTHER COMPREHENSIVE LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Foreign currency translation adjustments |
|
2,247,978 |
|
|
|
(15,930,276 |
) |
|
|
(7,879,513 |
) |
|
|
(30,774,686 |
) |
COMPREHENSIVE
INCOME(LOSS) |
$ |
472,181 |
|
|
$ |
(6,962,896 |
) |
|
$ |
(10,894,873 |
) |
|
$ |
(18,025,458 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME(LOSS) PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED |
$ |
(0.17 |
) |
|
$ |
0.86 |
|
|
$ |
(0.29 |
) |
|
$ |
1.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF
SHARES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED |
|
10,431,924 |
|
|
|
10,471,924 |
|
|
|
10,431,924 |
|
|
|
10,471,924 |
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Expressed in U.S. dollars) |
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
Nine-Month Period EndedSeptember 30, |
|
2023 |
|
2022 |
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
Net income(loss) |
$ |
(3,015,360 |
) |
|
$ |
12,749,228 |
|
Adjustments to reconcile net
loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
Amortization on capital lease |
|
80,252 |
|
|
|
93,630 |
|
Depreciation and amortization |
|
15,385,624 |
|
|
|
16,259,285 |
|
Unrealized exchange gain on translation of inter-company
balances |
|
165,444 |
|
|
|
45,195 |
|
Deferred tax asset |
|
(1,002,511 |
) |
|
|
3,809,038 |
|
Common stock issued for services |
|
— |
|
|
|
— |
|
Issuance of stock options to employee |
|
— |
|
|
|
— |
|
Changes in assets and
liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
3,132,796 |
|
|
|
3,451,924 |
|
Inventories |
|
718,994 |
|
|
|
27,073 |
|
Prepayments and deposits |
|
(3,947,311 |
) |
|
|
324,685 |
|
Other receivables |
|
— |
|
|
|
— |
|
Accounts and Other payable and accrued expenses |
|
(1,503,845 |
) |
|
|
1,553,583 |
|
Retention payable |
|
— |
|
|
|
— |
|
Taxes payable |
|
(229,600 |
) |
|
|
(365,255 |
) |
Prepaid land leases |
|
— |
|
|
|
— |
|
Operating lease |
|
85,129 |
|
|
|
(847,362 |
) |
Net cash provided by
(used in) by operating activities |
|
9,869,612 |
|
|
|
37,101,024 |
|
|
|
|
|
|
|
|
|
CASH FLOWS USED IN INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
Purchase of property, plant
and equipment |
|
(15,197,648 |
) |
|
|
(33,217,987 |
) |
Net cash used in
investing activities |
|
(15,197,648 |
) |
|
|
(33,217,987 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS USED IN FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
Repayment of finance lease
obligation |
|
(267,810 |
) |
|
|
(283,915 |
) |
Net cash used in
financing activities |
|
(267,810 |
) |
|
|
(283,915 |
) |
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS |
|
1,144,609 |
|
|
|
(6,728,107 |
) |
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS |
|
(4,451,237 |
) |
|
|
(3,128,985 |
) |
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD |
|
108,226,214 |
|
|
|
95,767,263 |
|
CASH AND CASH EQUIVALENTS -
END OF PERIOD |
$ |
103,774,977 |
|
|
$ |
92,638,278 |
|
|
Periods Ended September 30, |
|
2023 |
|
2022 |
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION |
|
|
|
Cash paid during the period
for: |
|
|
|
Paid for taxes |
$ |
4,930,601 |
|
|
$ |
6,034,948 |
|
Interest on finance lease
obligation |
$ |
80,252 |
|
|
$ |
93,630 |
|
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
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"),
Daying County Haoyuan Chemical Company Limited (“DCHC”) and
Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). 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, and materials for human and animal
antibiotics. Through SHSI, the Company manufactures and sells crude
salt. 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, the risks associated with the COVID-19
pandemic outbreak, 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 Data
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
Director of Investor Relations
Helen Xu
beishengrong@vip.163.com
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