SOURCE: Guanwei Recycling Corp.

Guanwei Recycling Corp.

March 31, 2014 07:55 ET

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 Negative Effects From New Government Policy; 2013 Year End Investor Conference Call to Be Held Tuesday, April 1, 2014 at 8:00am ET

FUQING CITY, CHINA--(Marketwired - 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  
                 
                 

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