SOURCE: Guanwei Recycling Corp

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

 

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 linkhttp://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 atwww.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

 

SOURCE: Guanwei Recycling Corp.