SOURCE: Guanwei Recycling Corp

May 17, 2010 07:30 ET

Guanwei Recycling Corp. Reports 2010 First Quarter Net Income Increased 73.4% Compared With First Quarter Last Year

Core Self-Manufactured Recycled LDPE Revenues Advanced 24.6% Compared With 2009 First Quarter

Reported Net Revenue Declined 58% Compared With Results in Prior Year First Quarter Which Included Discontinued Sales

Investor Earnings Call to Be Held Wednesday, May 19, at 8:00 am ET

FUQING CITY, CHINA--(Marketwire - May 17, 2010) - Guanwei Recycling Corp. (NASDAQ: GPRC), China's leading clean tech manufacturer of recycled low density polyethylene (LDPE), reported today a sharp increase in net income in its first quarter ended March 31, 2010, which rose 73.4% to $2,204,604, or $0.11 per share, compared with $1,271,586, or $0.11 per share, in the same period last year. EPS in the first quarter this year is based on 20 million weighted average fully diluted shares outstanding compared with 12 million weighted average fully diluted shares in the same period of 2009.

The strong advance in net income in the 2010 first quarter was primarily a consequence of a 24.65% increase in the Company's high margin, core self manufactured recycled LDPE revenues in the period, which grew to $9,319,708, as compared to $7,476,990 in the first quarter of 2009, as well as lower raw material costs.

Reported net revenues in the 2010 first quarter, however, were $9,494,226 compared with $22,611,689 in the first three months of 2009, representing a 58.01% decline. The Company explained, as previously reported, that as a result of the prevailing negative industry conditions following the global economic crisis in the 2009 first quarter, it prudently reduced its raw material inventory, resulting in raw material sales of $7,483,107. Additionally, to help build sales to new customers in that period, it sold recycled LDPE manufactured by others, generating revenues of $7,512,903. It has since maintained satisfactory inventory levels, and also has ceased the resale of other manufacturer's products, focusing instead on sales of its own higher quality and higher margin self manufactured recycled LDPE.

Strong Start to Year Points to Continuing Success

Mr. Chen Min, CEO of the Company, stated, "After managing our continued success through the difficult industry conditions in 2009, we are pleased to have started 2010 in very strong fashion. As previously reported, this was fully anticipated, as we began the year with a greatly expanded customer base -- nearly 300 customers in ten different industries -- and with rebounding LDPE prices as demand for our product has continued to grow. Most significant has been our ability to bolster and diversify our long term European raw material supply base, which is what gives us a significant edge over competition. It also is the key element in maintaining our rapid growth, which is what we continue to anticipate in 2010. Underlying this is our commitment to maintaining the highest green standards in the industry in all phases of our operations. In our case, clean tech has and will continue to translate to higher product quality, higher margins and industry leadership."

Lower Cost of Revenues and Higher Gross Profit as LDPE Selling Prices Improved

In the 2010 first quarter, the Company's cost of revenue decreased substantially to $6,173,352 from $20,675,187 in the first quarter of 2009, and represented 65.02% of sales in the 2010 period, compared with 91.44% in the same period last year. The difference is attributable to the fact that, unlike the first quarter of 2009, there were no sales of raw material inventory or of low margin purchased recycled LDPE in the 2010 quarter.

In the 2010 first quarter there also was a significant decline in the cost of revenues from sales of the Company's manufactured LDPE and sorted out non-LDPE (which always represents at least some percentage of the raw material acquired by the Company). In the first three months of 2009, the cost was $7,174,348, or 95.95% of net revenue, while in the 2010 first quarter it was $6,173,352 or 66.24% of net revenue. The Company attributed this improvement primarily to increased selling prices for recycled LDPE and lower raw material costs. It explained that manufactured recycled LDPE and sorted non-LDPE material prices increased 10.28% and 10.98%, respectively, compared to the first quarter last year. In the first quarter of 2010, the average selling price of manufactured recycled LDPE increased to approximately $1,051 per ton from $953 per ton in the first three months of 2009. Additionally, plastic waste purchased at prices agreed to before the global financial crisis cost approximately $509 per ton, or 12.86% higher than the average cost in the 2010 first quarter of $451 per ton.

The Company also reported that overall gross profit in the 2010 first quarter increased 71.49% to $3,320,874 from $1,936,502 in the same quarter a year earlier, and the overall gross margin rose to 34.98% compared with 8.56% in the same period of 2009, primarily due to increased LDPE sales volume and lower raw material costs. For manufactured LDPE and non-sorted LDPE material, the gross profit in the first three months of 2010 increased $2,289,545 to $3,320,874, or 30.33% of net revenue, from $441,331 in the same period last year. The Company attributed the increase to a 13% and 13.73% increase in sales volume, respectively, for recycled LDPE and non-sorted LDPE material, coupled with the higher selling prices for these products achieved in the first three months of 2010. In the 2010 first quarter the Company also reported a 12.86% decrease in production cost per ton compared with the first three months of 2009.

Plastics Market in China: Continuing Growth

The Company noted that, in addition to the recovery in selling prices for recycled LDPE it saw in the first three months of 2010, there were other clear indications of continuing growth in the market in this period. Of note, according to statistics compiled by China Custom, from January to March 2010 total production volume of polyethylene in China increased 19% to 2.84 million tons as compared to the same period a year earlier. Additionally, the volume of plastic products increased 20.7% to 11.28 million tons, while the export of plastic products grew 11.6% to 1.57 million tons. The Company believes these early growth indications will set the pace for continuing growth in the market during the remainder of the year.

Financial Strength

Currently, the Company has no long term debt. Its net working capital as of March 31, 2010 was $5,769,116, an increase of 287% as compared with negative working capital at the same time last year of $2,010,239. The improvement was a result of a $2,979,702 increase in cash and cash equivalents, and decreases in inventories and accounts payable compared with the prior year period.

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 nearly 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 TÜV Rheinland Cert GmbH for compliance with German pollution and environmental standards, which 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.

SEE ATTACHED TABLE

Conference Call Invitation

Guanwei Recycling Corp. will host a conference call to discuss 2010 first quarter results on Wednesday, May 19, 2010 at 8:00 am 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. 2010 First Quarter Earnings Conference Call, Conference ID: 4304411. There will be a playback available until 05/26/2010. To listen to the playback, please call 1-800-406-7325 when calling within the United States or 1-303-590-3030 when calling internationally. Use the Replay Pin Number: 4304411.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://viavid.net/dce.aspx?sid=000075E2 or at ViaVid's website at www.viavid.net.

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 March 31,  
    2010     2009  
                 
Net revenue   $ 9,494,226     $ 22,611,689  
                 
Cost of revenue     6,173,352       20,675,187  
Gross profit     3,320,874       1,936,502  
                 
Operating expenses                
Selling and marketing expenses     48,499       42,938  
General and administrative expenses     322,956       185,900  
      371,455       228,838  
                 
Income from operations     2,949,419       1,708,114  
                 
Interest income     8,252       1,014  
Interest expenses     (20,160 )     (14,263 )
Income before income taxes     2,937,511       1,694,865  
                 
Income taxes     732,907       423,279  
                 
Net income   $ 2,204,604     $ 1,271,586  
                 
Comprehensive Income:                
                 
Net income   $ 2,204,604     $ 1,271,586  
                 
Other comprehensive income (loss)                
  - Foreign currency translation adjustments     2,833       (152,956 )
                 
Comprehensive income   $ 2,207,437     $ 1,118,630  
                 
Earnings per share attributable to shareholders of Guanwei Recycling Corp.                
  – basic and diluted   $ 0.11     $ 0.11  
                 
Weighted average number of share of common stock used in computing                
  basic and diluted earnings per share     20,000,006       12,000,000  
                 
                 

Contact Information

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    Press
    Ken Donenfeld
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