SOURCE: Guanwei Recycling Corp

Guanwei Recycling Corp. Reports 2013 Full Year Results

Sales Rebound in Final Quarter of 2013 Couldn't Offset Previously Reported Interruption of Production and Sales Cycle in Third Quarter Stemming From Government's New "Green Fence" Policy; Growth Outlook for 2014 Remains Positive With No Anticipated Negati

FUQING CITY, CHINA - Mar 31, 2014 - Guanwei Recycling Corp. (NASDAQ: GPRC), China's leading clean tech manufacturer of recycled low density polyethylene (LDPE), today announced somewhat lower full year results in 2013 mainly due to the impact in its third quarter of a more than one week production delay and interruption of its sales cycle, stemming from China's tighter "Green Fence" policy with respect to imported waste materials.

 

Despite finishing 2013 on a positive note, with fourth quarter manufactured recycled LDPE sales volume up to 13,679 tons, an increase of approximately 9% from third quarter sales -- and slightly higher year over year average selling prices -- mainly due to the production delays in the second half of 2013, full year revenues from manufactured recycled LDPE decreased 3.74% to approximately $64.81 million. The production delay in the second half also impacted 2013 full year net income, which decreased 18.05% to approximately $9.7 million, or $0.93 per share, from approximately $11.83 million, or $1.15 per share a year earlier.

 

Environmental Leadership: A Competitive Edge

"Given the positive trends we experienced in the first half of the year and again as we closed the year out, the full year result was a disappointment," stated Mr. Chen Min,
Chairman and CEO of the Company. He added, "The government focus on imported waste, which led to heightened examinations of our production and storage facility, is not likely to impact our results in the future. Further, as a leader in maintaining the highest possible environmental standards, we applaud the government's focus on the environment and believe our leadership and the investments we continue to make in environmental improvements will permit our Company to retain its key competitive edge."

 

Financial Highlights

 

-          Revenues for the year ended December 31, 2013 were $72,263,043, down 8.58% from $79,043,356 in 2012. The Company's principal product, self-manufactured recycled LDPE, contributed $64,814,357 to the total, down 3.74% from $67,331,679 in 2012. The decline was mainly a result of a decline in sales volume, which was primarily the result of the interruption in production due to heightened enforcement of examinations of production and storage facilities by local authorities, a consequence of China's tighter policies with respect to imported waste. This new "Green Fence" policy triggered enforcement actions, which delayed production and shipping cycles for one to two weeks in the second half of 2013. Consequently, while the average selling price in 2013 increased 2.64% to approximately $1,246 per ton from $1,214 per ton in the prior year, the Company experienced a 6.15% volume decline in recycled LDPE tons sold to 52,038 tons. In line with this, sales of sorted non-LDPE materials declined 4.57% to $1,826,465 in 2013 as tonnage sales declined approximately 10% to 5,521 tons, while the selling price in 2013 for sorted non-LDPE material increased 6.09% to $331 per ton year over year. Also contributing to revenues in 2013, were sales of 7,889 tons of raw material for $5,622,221. Raw material was acquired in quantity to obtain discounts. This resulted in a need to dispose of excess materials at very small profit near year end to free up storage space. Similar sales in 2012 amounted to $9,797,818 for 16,444 tons of excess materials.

 

-          Net income in 2013 decreased $2,135,798 to $9,699,497 a decline of 18.05% compared with the prior year. This mainly reflected the year over year decrease in sales volume, and gross profit margin (23.45% versus 26.29% excluding the sales of raw materials) for the reasons described above, most significantly, the interruption in second half production. Of note, during the year raw material prices increased 9% to $787 per ton from $722 per ton in 2012. Additionally, the company experienced increased labor costs, reflecting ongoing challenges in recruiting factory workers, as the education level in China continues to improve. The growth in these costs exceeded the increase in selling prices. The Company continues to focus on worker retention and on reducing costs for and securing the availability of raw materials.

 

No Bank Debt, Increased Working Capital

The Company's financial position entering 2014 continued to be very strong. As of December 31, 2013, the Company had no bank debt and cash and cash equivalents of $11,887,032. Additionally, working capital as of the same date was $45,459,190, a nearly $10 million or 28.04% increase year over year. Contributing to the increase was an increase in accounts receivable, an increase in advances to suppliers, and a decrease in accounts payable, which was partially offset by a decrease in inventories.

 

Looking Ahead

"The opportunity for continued growth in 2014 is there," stated Mr. Chen. "In 2012 we increased our manufacturing capacity to 80,000 tons and, in January this year, received approvals for a total of 135,000 tons of imported plastic waste. Our customer list is well diversified and should insulate us from the fluctuating demand in any one industry, as we continue to expand further into the construction equipment industry in line with the Chinese government's stimulus plans." He noted further, "Most importantly, we will continue to aim to maintain a significant price advantage over competitors who in most cases lack the scale or the sophistication to match the environmental standards of our facilities."

 

Conference Call Invitation

The Company will discuss 2013 year end results during a live conference call and webcast on Tuesday, April 1, 2014 at 8:00am ET.

 

To participate in the call, interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally. Please ask for the Guanwei Recycling Corp. 2013 Year End Conference Call, Conference ID: 4675415. There will be a playback available until April 8, 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: 4675415.

 

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=108398 or at ViaVid's website at http://viavid.com.

 

SEE ATTACHED TABLES

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 Umweltagentur Erftstadt, 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.

CONSOLIDATED BALANCE SHEETS

 

 

December 31,

 

2013

 

2012

ASSETS

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

$

11,887,032

 

$

12,083,358

 

Accounts receivable

 

14,837,198

 

 

9,305,104

 

Inventories

 

14,717,808

 

 

18,696,648

 

 

Advances to suppliers

 

7,426,023

 

 

1,827,480

 

 

Prepaid expenses and other current assets

 

136,396

 

 

131,564

Total current assets

 

49,004,457

 

 

42,044,154

 

 

 

 

 

 

Property, plant and equipment, net

 

11,074,021

 

 

10,223,874

Construction in progress

 

534,556

 

 

-

Land use right, net

 

668,597

 

 

663,800

Other assets

 

203,751

 

 

202,346

Total Assets

$

61,485,382

 

$

53,134,174

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

$

612,303

 

$

4,082,982

Accrued expenses and other payables

 

720,888

 

 

796,705

Value added taxes payable

 

827,517

 

 

110,484

Amount due to shareholder

 

934,892

 

 

517,863

Income tax payable

 

449,667

 

 

1,031,092

Total current liabilities

 

3,545,267

 

 

6,539,126

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 December 31, 2013 and December 31, 2012

 

10,408

 

 

10,408

 

Additional paid-in capital

 

2,811,370

 

 

2,767,787

 

 

PRC statutory reserves

 

805,483

 

 

805,483

 

 

Accumulated other comprehensive income

 

4,148,986

 

 

2,546,999

 

 

Retained earnings

 

50,163,868

 

 

40,464,371

Total shareholders' equity

 

57,940,115

 

 

46,595,048

 

 

 

 

 

 

Total liabilities and shareholders' equity

$

61,485,382

 

$

53,134,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GUANWEI RECYCLING CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

 

Year Ended December 31,

 

 

2013

 

 

2012

 

 

 

 

 

 

 

Net revenue

$

72,263,043

 

 

$

79,043,356

 

Cost of revenue

 

56,493,385

 

 

 

60,440,237

 

Gross profit

 

15,769,658

 

 

 

18,603,119

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

 

494,394

 

 

 

417,597

 

General and administrative

 

2,232,352

 

 

 

2,297,782

 

Total operating expenses

 

2,726,746

 

 

 

2,715,379

 

 

 

 

 

 

 

 

 

Income from operations

 

13,042,912

 

 

 

15,887,740

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

Interest income

 

56,387

 

 

 

55,781

 

Interest expense

 

(43,583

)

 

 

-

 

Net foreign exchange gain

 

49,797

 

 

 

62,806

 

Gain (loss) on disposal of property and equipment

 

3,602

 

 

 

(33,452

)

Government subsidy

 

32,308

 

 

 

-

 

Miscellaneous

 

(31,494

)

 

 

6,372

 

Total other income

 

67,017

 

 

 

91,507

 

 

 

 

 

 

 

 

 

Income before income taxes

 

13,109,929

 

 

 

15,979,247

 

 

 

 

 

 

 

 

 

Income taxes

 

3,410,432

 

 

 

4,143,952

 

 

 

 

 

 

 

 

 

Net income

 

9,699,497

 

 

 

11,835,295

 

 

 

 

 

 

 

 

 

Other comprehensive income - foreign currency translation adjustments

 

1,601,987

 

 

 

284,318

 

 

 

 

 

 

 

 

 

Comprehensive income

$

11,301,484

 

 

$

12,119,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - basic and diluted

$

0.93

 

 

$

1.15

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

- basic and diluted

 

10,407,839

 

 

 

10,293,872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GUANWEI RECYCLING CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Year Ended December 31,

 

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

9,699,497

 

 

$

11,835,295

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

1,089,846

 

 

 

884,224

 

Amortization of land use rights

 

 

15,713

 

 

 

15,432

 

(Gain) loss on disposal of property and equipment

 

 

(3,602

)

 

 

33,452

 

Bad debt

 

 

-

 

 

 

69

 

Imputed interest on amount due to shareholder

 

 

43,583

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,173,867

)

 

 

(4,791,673

)

Inventories

 

 

4,503,312

 

 

 

(1,700,239

)

Advances to suppliers

 

 

(5,469,806

)

 

 

(1,826,813

)

Value added taxes refundable

 

 

-

 

 

 

1,223,236

 

Prepaid expenses and other current assets

 

 

(2,913

)

 

 

790,864

 

Other assets

 

 

4,846

 

 

 

4,759

 

Accounts payable

 

 

(3,551,548

)

 

 

(4,728,146

)

Accrued expenses and other payables

 

 

(106,791

)

 

 

(2,264

)

Value added taxes payable

 

 

704,352

 

 

 

110,443

 

Income tax payable

 

 

(605,664

)

 

 

(122,679

)

Net cash provided by operating activities

 

 

1,146,958

 

 

 

1,725,960

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(2,134,849

)

 

 

(2,694,126

)

Proceeds from disposal of property and equipment

 

 

4,846

 

 

 

-

 

Net cash used in investing activities

 

 

(2,130,003

)

 

 

(2,694,126

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Advance from shareholder

 

 

417,029

 

 

 

517,863

 

Net cash flows provided by financing activities

 

 

417,029

 

 

 

517,863

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate change on cash

 

 

369,690

 

 

 

100,858

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(196,326

)

 

 

(349,445

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of year

 

 

12,083,358

 

 

 

12,432,803

 

Cash and cash equivalents at the end of year

 

$

11,887,032

 

 

$

12,083,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contacts:

Richard Sun
guanweirecycling@gmail.com

Ken Donenfeld
DGI Investor Relations
kdonenfeld@dgiir.com
Tel: 212-425-5700
Fax: 646-381-9727

 

 

SOURCE: Guanwei Recycling Corp.