SOURCE: Guanwei Recycling Corp.

Guanwei Recycling Corp.

November 13, 2013 07:25 ET

Guanwei Recycling Corp. Reports Third Quarter Results

Positive Trends Continued in Selling Prices, Raw Material and Labor Costs but an Approximately One Week Unplanned Interruption in Production Slightly Lowered Results; Company Maintains Favorable Outlook for Remainder of the Year; Investor Conference Call to Be Held Thursday, November 14th at 8:00am ET

FUQING CITY, CHINA--(Marketwired - Nov 13, 2013) - Guanwei Recycling Corp. (NASDAQ: GPRC), China's leading clean tech manufacturer of recycled low density polyethylene (LDPE), reported today that the positive trends it began to see in the second half of 2012 in selling prices and stabilized labor and raw material costs continued through its third quarter ended September 30, 2013. An approximately one week interruption in production and shipping cycles in the 2013 third quarter, however, slightly lowered revenues and net income in the quarter compared with the prior year.

Mr. Chen Min, Chairman and CEO of the Company, explained that the interruption in production was a consequence of heightened inspections of its facilities by various government agencies stemming from the government's new "Green Fence" policy which tightens requirements for imported waste materials.

"Going forward," he said, "we anticipate maintaining our industry leading environmental practices and see no material impact on our business from this new policy. We are therefore maintaining our favorable outlook for the remainder of the year, based on anticipated moderately improved demand and selling prices for our products, in an improving economy, coupled with continuing anticipated stabilization in our labor and raw material costs."

Financial Highlights

  • Reflecting the approximately one week interruption in production described above, net revenues in the 2013 third quarter were $16,299,676, down 8.97% from the same period last year. This decrease reflected a 9.61% decrease in year over year sales of manufactured recycled LDPE from $17,430,616 to $15,755,342 in the 2013 third quarter, and sales of $544,334 of sorted non-LDPE materials in the 2013 third quarter, up 14.51% from $475,358 in the same period in 2012. Revenues from LDPE sales in the 2013 third quarter reflected a 3.89% increase in average selling prices in the quarter to approximately $1,255 per ton, compared with approximately $1,208 per ton a year earlier. The average selling price in this year's first quarter was $1,223 per ton. Labor costs in the 2013 third quarter remained steady at approximately $51 per ton, while the per ton raw material costs for recycled LDPE and sorted non-LDPE material increased 7.6% to $750, compared with $697 in the 2012 third quarter, and $748 in the second quarter this year. The reduced LDPE sales volume in the 2013 third quarter of 12,553 tons, compared with 14,427 tons in the corresponding quarter last year.

  • Net income in the 2013 third quarter was $2,857,806, or $0.27 per share, compared with $3,622,832, or $0.35 per share in the same quarter last year. The diluted weighted average number of common shares in both periods was 10,407,839. The decrease in net income in the 2013 third quarter primarily reflects the reduced production volume stemming from the approximately one week interruption in the period in production and sales cycles as previously described. Gross margins in the quarter also were impacted by the reduced production, as many of the costs relating to production are fixed costs.

  • For the nine months ended September 30, 2013, revenues from the sale of manufactured recycled LDPE were $47,534,161, down 0.73% from the same period last year. Primarily reflecting the approximately week long interruption of production in the 2013 third quarter, in the 2013 nine month period the sales volume of manufactured recycled LDPE was down 3.05% to 38,359 tons from 39,565 tons in the corresponding period the prior year. This was somewhat offset by a 2.4% increase in selling price in the first nine months of 2013 to approximately $1,239 per ton, from $1,210 per ton in the year earlier period. Year over year revenues from sales of sorted non-LDPE material also declined in the 2013 nine month period by 6.09% to $1,337,668. A 3.5% year over year increase in average selling price to $325 per ton could not fully offset a 9.61% decline in year over year tonnage sold to 4,119 tons. Combined sales of manufactured LDPE and sorted non-LDPE materials were $48,871,829 in the first nine months of 2013. In 2012, revenues in the comparable period of $52,772,402 also included $3,462,238 in sales of excess raw material inventory. The cost of plastic waste raw material in the first nine months of 2013 increased 5.88% to $756 per ton, compared with the same period in 2012, while labor costs remained stable throughout 2013 at approximately $51 per ton.

  • Net income in the first nine months of 2013 decreased $389,922, or 4.41%, to $8,461,196 or $0.81 per share, from $8,851,118, or $0.86 per share in the same period last year. These results primarily reflect the decline in sales volume stemming from the approximately one week long interruption of production and sales cycles in the 2013 third quarter, and the resulting slight decline in margins. The diluted weighted average number of common shares outstanding was 10,407,839 in the first nine months of 2013, as compared with 10,254,521 in the year earlier period.

No Bank Debt, Increased Working Capital and Cash and Cash Equivalents

As of the end of the 2013 third quarter, the Company continued to improve its already strong financial position. As of September 30, 2013, working capital increased approximately $9.37 million to $44,877,259 from $35,505,028 as of December 31, 2012. This reflected, in part, an increase in cash and cash equivalents to $15,643,526, and a decrease in accounts receivable reflecting continuing efforts to speed collections from clients. The Company also reported that it had no outstanding bank debt as of the end of the quarter.

Continuing Optimism

"Although disappointed by the week long interruption in our production and sales volume in the quarter," Mr. Chen stated, "we continue to be pleased by the steady improvements in other core elements of our business, as well as growing indications of an improving economic environment in China. By retaining the advantages that come from our environmental leadership -- including the very competitive selling prices we expect to continue to be able to offer our customers -- we remain very confident in a favorable growth outlook for our Company."

Conference Call Invitation

The Company will discuss 2013 third quarter results during a live conference call and webcast on Thursday, November 14th, at 8:00am ET.

To participate in the call, interested participants should call 1-877-941-1429 when calling within the United States or 1-480-629-9857 when calling internationally. Please ask for the Guanwei Recycling Corp. 2013 Third Quarter Conference Call, Conference ID:. 4650133 There will be a playback available until November 21, 2013. 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: 4650133

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=106885 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 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 (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 BALANCE SHEETS
 
         
    September 30,
2013
  December 31,
2012
ASSETS        
Current assets        
  Cash and cash equivalents   $ 15,643,526   $ 12,083,358
  Accounts receivable     6,895,178     9,305,104
  Inventories     21,341,585     18,696,648
  Advances to suppliers     3,436,370     1,827,480
  Value added tax refundable     421,737     -
  Prepaid expenses and other current assets     188,271     131,564
    Total current assets     47,926,667     42,044,154
             
Property, plant and equipment, net     10,678,366     10,223,874
Land use right, net     669,728     663,800
Other assets     204,110     202,346
    Total Assets   $ 59,478,871   $ 53,134,174
             
LIABILITIES AND SHAREHOLDERS' EQUITY            
Current liabilities            
  Accounts payable   $ 663,151   $ 4,082,982
  Accrued expenses and other payables     612,603     796,705
  Value added taxes payable     -     110,484
  Amount due to shareholder     848,315     517,863
  Income tax payable     925,339     1,031,092
    Total current liabilities     3,049,408     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 September 30, 2013 and December 31, 2012     10,408     10,408
  Additional paid-in capital     2,767,787     2,767,787
  PRC statutory reserves     805,483     805,483
  Accumulated other comprehensive income     3,920,218     2,546,999
  Retained earnings     48,925,567     40,464,371
    Total shareholders' equity     56,429,463     46,595,048
             
    Total liabilities and shareholders' equity   $ 59,478,871   $ 53,134,174
   
   
   
GUANWEI RECYCLING CORP.  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME  
   
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2013     2012     2013   2012  
                       
Net revenue   $ 16,299,676     $ 17,905,974     $ 48,871,829   $ 52,772,402  
Cost of revenue     11,866,421       12,374,450       35,424,151     38,793,696  
    Gross profit     4,433,255       5,531,524       13,447,678     13,978,706  
                               
Operating expenses:                              
  Selling and marketing     131,103       125,536       403,574     293,286  
  General and administrative     555,375       524,112       1,725,905     1,647,140  
    Total operating expenses     686,478       649,648       2,129,479     1,940,426  
                               
Income from operations     3,746,777       4,881,876       11,318,199     12,038,280  
                               
Other income (expenses)                              
  Interest income     15,218       14,395       43,160     42,903  
  Gain (loss) on disposal of property, plant and equipment    
3,589
     
(1,046
)     3,589     (1,046 )
  Net foreign exchange gain (loss)     36,171       (92,074 )     83,236     (121,754 )
  Miscellaneous     (21,441 )     3,455       (31,243     3,455  
    Total other income (expense)     33,537       (75,270 )     98,742     (76,442 )
                               
Income before income taxes     3,780,314       4,806,606       11,416,941     11,961,838  
                               
Income taxes     922,508       1,183,774       2,955,745     3,110,720  
                               
Net income     2,857,806       3,622,832       8,461,196     8,851,118  
                               
Other comprehensive income - foreign currency translation adjustments    
335,231
      (47,331 )     1,373,219     166,087  
                               
Comprehensive income   $ 3,193,037     $ 3,575,501     $ 9,834,415   $ 9,017,205  
                               
Earnings per share - basic and diluted   $ 0.27     $ 0.35     $ 0.81   $ 0.86  
                               
                               
Weighted average number of common shares outstanding - basic and diluted     10,407,839       10,407,839       10,407,839     10,254,521  
   
   
   
GUANWEI RECYCLING CORP.  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
   
    Nine Months Ended 
September 30,
 
    2013     2012  
                 
Cash flows from operating activities                
Net income   $ 8,461,196     $ 8,851,118  
                 
Adjustments to reconcile net income to net cash provided by operating activities                
Depreciation of property, plant and equipment     785,250       622,531  
Amortization of land use rights     11,742       11,564  
(Gain) loss on disposal of property, plant and equipment     (3,589 )     1,046  
                 
Change in operating assets and liabilities:                
Accounts receivable     2,626,799       (1,589,634 )
Inventories     (2,116,631 )     (4,683,299 )
Advances to suppliers     (1,540,560 )     -  
Value added taxes refundable     (416,524 )     (581,644 )
Prepaid expenses and other current assets     (54,407 )     770,237  
Other assets     3,621       3,567  
Accounts payable     (3,485,792 )     (685,283 )
Accrued expenses and other payables     (210,404 )     15,870  
Value added taxes payable     (112,047 )     -  
Income tax payable     (131,777 )     33,083  
Net cash provided by operating activities     3,816,877       2,769,156  
                 
Cash flows from investing activities                
Proceeds from disposal property, plant and equipment     4,828       -  
Purchase of property, plant and equipment     (956,300 )     (2,412,469 )
Net cash used in investing activities     (951,472 )     (2,412,469 )
                 
Cash flows from financing activities                
Advance from shareholder     330,452       383,118  
Net cash provided by financing activities     330,452       383,118  
                 
Effect of exchange rate change on cash     364,311       64,288  
                 
Net increase in cash and cash equivalents     3,560,168       804,093  
                 
Cash and cash equivalents at the beginning of period     12,083,358       12,432,803  
Cash and cash equivalents at the end of period   $ 15,643,526     $ 13,236,896  
Supplemental disclosure of cash flow information                
Income taxes paid   $ 3,087,522     $ 3,077,637  
Non-cash investing and financing activities                
Accrued expense related to purchases of property, plant and equipment   $ 8,047     $ 79,258  
Issuance of common stock to repay debt to shareholder   $ -       1,468,167  
                 
                 

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