SOURCE: Guanwei Recycling Corp.

Guanwei Recycling Corp.

August 15, 2011 08:00 ET

Guanwei Recycling Corp. Reports 107% Gain in Net Income on 73% Revenue Increase in 2011 Second Quarter

Higher Selling Prices and Strong Demand for Recycled Plastic Generated Record Year Over Year Increase; Investor Conference Call to Be Held Tuesday, August 16, at 8:00am ET

FUQING CITY, CHINA--(Marketwire - Aug 15, 2011) - Guanwei Recycling Corp. (NASDAQ: GPRC), China's leading clean tech manufacturer of recycled low density polyethylene (LDPE), today announced that strong demand for recycled LDPE coupled with higher selling prices generated record results in its second quarter and six months ended June 30, 2011.

  • 2011 Q2 revenues increased 73% to $15.76 million, from $9.12 million in the year earlier quarter.
  • Q2 net income increased 107% to $3.45 million or $0.17 per share, compared with $1.67 million, or $0.09 per share, in the same period last year.
  • 2011 first half revenues grew 61% to $29.9 million compared with $18.61 million in the first half of 2010.
  • Net income increased 59% in the first six months of 2011 to $6.16 million, or $0.31 per share, from $3.88 million, or $0.20 per share, in the first half of 2010.
  • Working capital at June 30, 2011 increased 48% to $19.9 million from $13.4 million as of December 31, 2010. Cash and cash equivalents at the end of the first half were $14.3 million compared with $14.9 million as of Dec. 31, 2010.

The Company reported revenue gains in the quarter were a result of increases in both sales volume and selling price for its recycled LDPE in response to continuing strong domestic demand for the product. Recycled LDPE is a much less costly alternative to the virgin plastic utilized in a wide variety of products produced in China, ranging from shoes and toys, to wiring, plumbing and building materials. During the quarter, the Company maintained its competitive advantage over other producers with its ability to utilize high quality imported plastic waste in its manufacturing process as a consequence of meeting and exceeding the rigorous environmental standards demanded by European exporters of this material.

Tonnage and Selling Price Increases

In the 2011 second quarter, the Company sold 13,136 tons of manufactured recycled LDPE, up 55% from 8,501 tons in the corresponding period of 2010. The average selling price of recycled LDPE in the quarter increased 12.5% from $1,042 per ton in the year earlier period to $1,172 per ton. As a result, sales of recycled LDPE in the period grew 74% to $15.4 million as compared with $8.9 million in the second quarter last year. In the 2011 second quarter, the Company also sold 1,817 tons of sorted non-LDPE material generating approximately $360,000 in revenues, up 40% from the year earlier quarter.

Through the first six months of 2011, manufactured recycled LDPE revenues grew 61% to $29.3 million from $18.2 million in the year earlier first half, as tonnage sold in these periods increased 46% from 17,371 tons last year to 25,369 tons in the 2011 first half. The average selling price in the 2011 first half was $1,156 per ton, up 10.4% from $1,047 per ton a year earlier. Revenue generated from the sale of sorted non-LDPE material in the first half of 2011 was $575,496, up 33% from the prior year.

Second Quarter Gross Profit Margin Increase

Gross profit in the 2011 second quarter rose 80.25% to $5.01 million compared with the same period last year as a result of increases in both sales volume and selling price. The gross profit margin in the 2011 quarter was 32.34%, a 1.33% increase compared with the three months ended June 30, 2010.

Increased Import Quota

As previously reported on July 11, 2011, the Company received official government approval for an expansion of its quota for imported plastic waste, having met all of the rigorous requirements of this process. Prior to the quota expansion, the Company's aggregate annual import quota was 59,000 tons of plastic waste. That has now been increased to an aggregate of 99,000 tons in 2011. It is expected this will increase to 185,000 aggregate tons next year, which represents a tripling of the former quota, following another required abbreviated permitting process. In the Company's view, the increased quota reflects a strong government endorsement of the Company's state of the art, environmentally friendly manufacturing facilities.

Very Favorable Outlook

Commenting on results, Mr. Chen Min, Chairman and CEO of the Company, stated, "Our growth in the quarter and through the first half of the year again demonstrates the very strong demand in China for our recycled LDPE which is used as a direct substitute for virgin plastic or blended with it to lower manufacturing costs. It should be noted that the upgrade of our facilities in the first half of 2010 reduced somewhat our production in that period, but the resulting enhancements to our product have contributed to our success this year and will continue to facilitate future growth." He added, "The expansion of our import quota certainly was the most significant event so far this year, positioning us to meet the strong and growing demand for our product over the foreseeable future."

"At the same time," Mr. Chen continued, "we remain focused on expanding our sources of supply for high quality imported plastic waste to lower our costs and maintain healthy margins. Our leadership in environmentally friendly manufacturing will ensure continued access to this material while permitting us to make an important contribution to improving the quality of life in our society."

"Another top priority is an expansion of our production capacity," Mr. Chen said, "which currently is 65,000 tons annually. Given our strong performance and healthy financial position, we have options available that we continue to study in order to determine the best course going forward."

Conference Call Invitation

The Company will discuss second quarter results during a live conference call and webcast on Tuesday, August 16, 2011, at 8:00am ET.

To participate in the call, interested participants should call 1-877-941-4774 when calling within the United States or 1-480-629-9760 when calling internationally. Please ask for the Guanwei Recycling Corp. 2011 Second Quarter Conference Call, Conference ID: 4464939. There will be a playback available until 08/23/11. 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: 4464939.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=00008B6B or at ViaVid's website at www.viavid.net.

SEE TABLE BELOW

Description of Guanwei Recycling Corp.

Guanwei Recycling Corp. is China's largest manufacturer of recycled low density polyethylene (LDPE). Adhering to the highest "green" standards, it has generated rapid growth producing LDPE from plastic waste procured mostly in Europe for sales to more than 300 customers in ten different industries in China. Guanwei Recycling Corp. is one of the few plastic recyclers in China that has been audited by German authorities, most recently Umweltagentur Erftstadt, for compliance with German pollution and environmental standards. This allows the company to procure high quality plastic waste directly from Germany and other European countries (Spain and Holland), 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 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Expressed in U.S. dollars)
Three Months Ended June 30, Six Months Ended June 30,
2011 2010 2011 2010
Net revenue $ 15,757,662 $ 9,116,737 $ 29,900,274 $ 18,610,963
Cost of revenue 10,662,286 6,289,854 20,569,798 12,463,206
Gross profit 5,095,376 2,826,883 9,330,476 6,147,757
Operating expenses
Selling and marketing expenses 115,154 59,682 203,945 108,181
General and administrative expenses 428,956 410,655 972,726 731,300
544,110 470,337 1,176,671 839,481
Income from operations 4,551,266 2,356,546 8,153,805 5,308,276
Interest income 24,443 8,576 47,413 16,828
Interest expenses (7,779 ) (21,626 ) (25,214 ) (41,786 )
Exchange gain, net 59,828 14,447 131,124 12,136
Others 10,398 - 10,398 -
Income before income taxes 4,638,156 2,357,943 8,317,526 5,295,454
Income taxes 1,184,796 686,958 2,148,884 1,419,865
Net income $ 3,453,360 $ 1,670,985 $ 6,168,642 $ 3,875,589
Comprehensive Income:
Net income $ 3,453,360 $ 1,670,985 $ 6,168,642 $ 3,875,589
Other comprehensive income
- Foreign currency translation adjustments 326,346 64,213 543,528 67,046
Comprehensive income $ 3,779,706 $ 1,735,198 $ 6,712,170 $ 3,942,635
Earnings per share attributable to shareholders of Guanwei Recycling Corp.
- basic and diluted $ 0.17 $ 0.09 $ 0.31 $ 0.20
Weighted average number of share of common stock used in computing
basic and diluted earnings per share 20,000,006 20,000,006 20,000,006 20,000,006

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