Gulf Resources Reports Third Quarter 2012 Financial Results

Gulf Resources Reports Third Quarter 2012 Financial Results

SHANGDONG, China, Nov. 8, 2012 (GLOBE NEWSWIRE) -- Gulf Resources, Inc.
(Nasdaq:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of
bromine, crude salt and specialty chemical products in China, today announced
its financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights

  oRevenue was $24.5 million, a year-over-year decrease of 35.0%
  oGross profit was $7.4 million, a year-over-year decrease of 46.7%
  oGross margin decreased to 30.3 % compared to 36.9 % in the third quarter
    of 2011
  oIncome from operations was $5.6 million as compared to $8.7 million in the
    third quarter of 2011
  oOperating margin was 23.0% compared to 23.2% for the third quarter of 2011
  oNet income was $4.1 million or $0.12 per basic and diluted share, versus
    $5.6 million, or $0.16 per basic and diluted share a year ago,
    respectively
  oCash totaled $58.6 million as ofSeptember 30, 2012

"Over the past few months, the Chinese economy had experienced its slowest
growth in a quarter since the start of 2009.As influenced by the economy
condition due to rapidly decreased demand in private investment and continuing
tight control over property prices, bromine price reached the bottom in
mid-September this year as a result of reduction of market demand, therefore
our operating performance for the third quarter this year was significantly
lower compared to the same period last year. While bromine average selling
price decreased from $3,597 per tonne for the third quarter in 2011 to $2,899
per tonne for the same period this year, we anticipate that the bromine prices
are likely to rise slightly further after the pick-ups from the bottoming in
September," said Mr. Xiaobin Liu, CEO of the Company.

Third Quarter 2012 Results

For the third quarter of 2012, Gulf Resources' revenue was $24.5 million, a
decrease of 35.0%, from $37.8 million for the third quarter of 2011. The
decrease in net revenue was primarily attributable to the reduction of overall
demand for all of the segment products, especially in bromine segment, where
the decrease was the greatest among the three segments. Revenue from the
bromine and crude salt segments were $14.0 million and $2.4 million,
respectively, representing a total of 67.0% of sales revenue for the third
quarter of 2012.

Revenue from our chemical products segment was $8.2 million, or 33.0% of total
revenue, for the third quarter of 2012, a decrease of 22%, from $10.5 million
in the corresponding period in 2011. The decrease in revenue from this product
segment was mainly due to a drop in sales volume for oil and gas exploration
additives and paper manufacturing additives compared to the same quarter last
year, which offset the incremental benefit generated from a higher sales
volume for pesticides manufacturing additives and higher selling price of oil
and gas exploration additives.

Gross profit for the third quarter of 2012 was $7.4 million, a decrease of
46.7%, from $13.9 million from the third quarter of 2011, and our gross profit
margin for the three months ended September 30, 2012 was 30.3%, compared to
36.9% for the corresponding period last year. The decrease in gross profit
margin was mainly due to the decrease in selling prices in bromine segments.

Sales, marketing and other operating expenses for the third quarter of 2012
were $20,327 compared with $20,116 for the corresponding quarter last year.

General and administrative expenses for the third quarter of 2012 were $2.3
million, compared to $5.5 million for the third quarter of 2011. The decrease
of $3.2 million was primarily due to the inclusion of a non-cash expense
related to cancellation of non-vested stock options for the three-month period
ended September 30, 2011

Income from operations for the third quarter of 2012 was $5.6 million,
compared to $8.7 million for the corresponding quarter of 2011. The operating
margin was 23.0% for the third quarter of 2012, which remained approximately
the same compared to the third quarter of 2011.

Other operating income, which represented the sales of wastewater at market
price etc,, was $0.7 million for the third quarter of 2012 as compared to $1.4
million for the same period in 2011.

For the third quarter of 2012, the Company incurred other income of $13,661
compared to income of $17,647 for the corresponding quarter last year.

Income taxes were $1.5 million for the third quarter of 2012, a decrease of
52% from $3.2 million for the third quarter of 2011. The Company's effective
tax rates were 27% and 36% for the three-month periods ended September 30,
2012 and 2011, respectively.

Net income was $4.1 million for the third quarter of 2012, a decrease of 26%,
from $5.6 million for the third quarter of 2011. Basic and diluted earnings
per share in third quarter of 2012 were $0.12 per basic and diluted share
compared to $0.16 per basic and diluted share respectively in the third
quarter of 2011. Weighted average number of diluted shares for the three
months ended September 30, 2012 was 34,699,989 compared with 34,620,004 for
the three months ended September 30, 2011.

"Although the slowdown in economy and uncertain future government policies to
be released after the leadership change will continuously bring significant
challenges to our business operations, we will manage to overcome the
difficulties onwards and strive to accomplish the 2012 earnings forecast
announced earlier this year," stated Mr. Xiaobin Liu, CEO of the Company.

Financial Condition

As of September 30, 2012, Gulf Resources had cash of $58.6 million, current
liabilities of $11.2 million, and shareholders' equity of $254.9 million. For
the three months ended September 30, 2012, the Company had working capital of
$94.7 million and a current ratio of 9.4. As of September 30, 2012, the
Company generated $10.7 million in cash flow from operations, and used $29.9
million for investing activities, mainly for the purchase and enhancement of
plant, machinery and equipment.

Business Outlook

"The slowdown in China this year has affected different industries to varying
degrees, the effect also spread to the downstream users of our product
segments who had been through the process of deleveraging in inventory while
dealing with overcapacity. Despite the bottoming of bromine price in
mid-September and pick-up since October, we remain conservative in regards to
any further significant rebound in growth in the coming quarters," Mr. Liu
continued.

"In such business environment, we would like to retain cash in the near future
for any possible liquidity constraint or change in need of working capital,
etc. However, if investment opportunity arises from current economy condition
featuring undervaluation or strategically fits our long term growth, it would
also be duly evaluated and considered for the goal of profit enhancement or
shareholder's value maximization," concluded Mr. Liu.

Subsequent Events

The company has held the 2012 annual shareholders meeting on October 16 in
Shouguang, China. For information related to the voting results of the
meeting, please refer to our current report on Form 8-K filed on October 16
that is available on the website of the U.S. Securities and Exchange
Commission.

Since the launch of the internal IR department in April this year, Gulf
Resources has received many positive feedback and helpful suggestions. For
future investor inquiries, investors may continue to reach our IR manager Max
Ma at email addressMax_vx@163.comor our CEO's assistant Helen Xu at email
address beishengrong@vip.163.com.

Conference Call

Gulf Resources' management will host a conference call on Friday, November 9,
2012 at 8:00 AM Eastern Time to discuss its financial results for the third
quarter 2012 ended September 30, 2012.

Hosting the call will be Mr. Xiaobin Liu, CEO of Gulf Resources. The Company's
management team will be available for investor questions following the
prepared remarks.

To participate in this live conference call, please dial +1 (877) 275-8968
five to ten minutes prior to the scheduled conference call time. International
callers should call +1 (706) 643-1666. The conference participant pass code is
69009541.

A replay of the conference call will be available for 14 days starting from
11:00 AM ET on Friday, November 9, 2012. To access the replay, call +1 (855)
859-2056. International callers should call +1 (404) 537-3406. The pass code
is 69009541.

This conference call will be broadcast live over the Internet and can be
accessed by all interested parties by clicking
onhttp://www.gulfresourcesinc.com/events.html. Please access the link at
least fifteen minutes prior to the start of the call to register, download,
and install any necessary audio software. For those unable to participate
during the live broadcast, a 90-day replay will be available shortly after the
call by accessing the same link.

About GulfResources, Inc.

Gulf Resources, Inc. operates through two wholly-owned subsidiaries, Shouguang
City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical
Industry Co., Limited ("SYCI"). The Company believes that it is one of the
largest producers of bromine in China. Elemental Bromine is used to
manufacture a wide variety of compounds utilized in industry and agriculture.
Through SYCI, the Company manufactures chemical products utilized in a variety
of applications, including oil & gas field explorations and as papermaking
chemical agents. For more information, visitwww.gulfresourcesinc.com.

The Gulf Resources, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=15631

Forward-Looking Statements

Certain statements in this news release contain forward-looking information
about Gulf Resources and its subsidiaries business and products within the
meaning of Rule 175 under the Securities Act of 1933, as amended and Rule 3b-6
under the Securities Exchange Act of 1934 as amended, and are subject to the
safe harbor created by those rules. The actual results may differ materially
depending on a number of risk factors including, but not limited to, the
general economic and business conditions in the PRC, future product
development and production capabilities, shipments to end customers, market
acceptance of new and existing products, additional competition from existing
and new competitors for bromine and other oilfield and power production
chemicals, changes in technology, the ability to make future bromine asset
purchases, and various other factors beyond its control. All forward-looking
statements are expressly qualified in their entirety by this cautionary
statement and the risks factors detailed in the Company's reports filed with
the Securities and Exchange Commission. Gulf Resources undertakes no duty to
revise or update any of its disclosure.

                                                           
                                                           
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
(UNAUDITED)
                                                           
                                         September 30, 2012 December 31, 2011
Current Assets                                              
Cash                                      $58,644,360      $78,576,060
Accounts receivable                       41,930,959         21,919,828
Inventories                               4,787,395          4,437,972
Prepayments and deposits                  321,030            307,600
Prepaid land leases                       236,281            46,582
Deferred tax assets                       44,340             228,702
Total Current Assets                      105,964,365        105,516,744
Non-Current Assets                                          
Property, plant and equipment, net        157,937,334        147,200,740
Property, plant and equipment under       2,064,695          2,336,920
capital leases, net
Prepaid land leases, net of current       746,176            763,814
portion
Deferred tax assets                       2,406,132          2,509,481
Total non-current assets                  163,154,337        152,810,955
Total Assets                              $269,118,702     $258,327,699
                                                           
Liabilities and Stockholders' Equity                        
Current Liabilities                                         
Accounts payable and accrued expenses     $6,381,418       $7,373,643
Retention payable                         1,419,707          556,450
Capital lease obligation, current portion 140,890            189,742
Taxes payable                             3,303,887          4,058,550
Total Current Liabilities                 11,245,902         12,178,385
Non-Current Liabilities                                     
Capital lease obligation, net of current  2,926,918          3,036,558
portion
Total Liabilities                         $14,172,820      $15,214,943
                                                           
Stockholders' Equity                                        
PREFERRED STOCK; $0.001 par value;
1,000,000 shares authorized; none                           
outstanding
COMMON STOCK; $0.0005 par value;
100,000,000 shares authorized; 34,745,342
and 34,745,342 shares issued; and         $17,373          $17,373
34,560,743 and 34,560,743 shares
outstanding as of September 30, 2012 and
December 31, 2011, respectively
Treasury stock; 184,599 shares as of
September 30, 2012 and December 31, 2011  (500,000)          (500,000)
at cost
Additional paid-in capital                74,611,279         74,107,979
Retained earnings unappropriated          144,913,088        133,314,581
Retained earnings appropriated            15,900,047         14,409,557
Cumulative translation adjustment         20,004,095         21,763,266
Total Stockholders' Equity                254,945,882        243,112,756
Total Liabilities and Stockholders'       $269,118,702     $258,327,699
Equity

                                                            
                                                            
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Expressed in U.S. dollars)
(UNAUDITED)
                                                            
                     Three-Month Period Ended    Nine-Month Period Ended
                      September 30,               September 30,
                     2012          2011          2012          2011
                                                            
NET REVENUE                                                  
Net revenue           $24,530,332 $37,761,975 $79,653,852 $134,441,319
                                                            
OPERATING INCOME                                             
(EXPENSES)
Cost of net revenue   (17,099,890)  (23,823,944)  (55,605,423)  (69,410,031)
Sales, marketing and
other operating       (20,327)      (20,116)      (60,800)      (67,861)
expenses
Research and          (28,478)      (33,565)      (133,802)     (347,421)
development cost
Exploration cost      --            (1,047,110)   --            (4,914,396)
Write-off/Impairment
on property, plant    (130,143)     --            (1,042,138)   (7,570,566)
and equipment
General and
administrative        (2,336,581)   (5,459,069)   (5,819,652)   (11,515,054)
expenses
Other operating       713,968       1,368,074     847,146       1,783,157
income
                     (18,901,451)  (29,015,730)  (61,814,669)  (92,042,172)
                                                            
INCOME FROM           5,628,881     8,746,245     17,839,183    42,399,147
OPERATIONS
                                                            
OTHER INCOME                                                 
(EXPENSE)
Interest expense      (50,896)      (51,994)      (159,563)     (159,950)
Interest income       64,557        69,641        248,362       198,416
INCOME BEFORE TAXES   5,642,542     8,763,892     17,927,982    42,437,613
                                                            
INCOME TAXES          (1,529,326)   (3,179,546)   (4,838,985)   (12,465,013)
NET INCOME            $4,113,216  $5,584,346  $13,088,997 $29,972,600
                                                            
COMPREHENSIVE INCOME:                                        
NET INCOME            $4,113,216  $5,584,346  $13,088,997 $29,972,600
OTHER COMPREHENSIVE                                          
INCOME
- Foreign currency
translation           (721,067)     4,168,644     (1,759,171)   9,006,445
adjustments
COMPREHENSIVE INCOME  $3,392,149  $9,752,990  $11,329,826 $38,979,045
                                                            
EARNINGS PER SHARE:                                          
BASIC                 $0.12       $0.16       $0.38       $0.86
DILUTED               $0.12       $0.16       $0.37       $0.86
                                                            
WEIGHTED AVERAGE                                             
NUMBER OF SHARES:
                                                            
BASIC                 34,560,743    34,620,004    34,560,743    34,694,607
DILUTED               34,699,989    34,620,004    34,957,219    34,695,664

                                                          
                                                          
GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
(UNAUDITED)
                                                          
                                        Nine-Month Period Ended September 30,
                                        2012               2011
                                                          
CASH FLOWS FROM OPERATING ACTIVITIES                       
Net income                               $13,088,997      $29,972,600
Adjustments to reconcile net income to
net cash provided by operating                             
activities:
Interest on capital lease obligation     158,673            159,950
Amortization of prepaid land leases      298,910            262,567
Depreciation and amortization            16,995,684         12,543,179
Write-off/Impairment loss on property,   1,042,138          7,570,566
plant and equipment
Exchange gain on inter-company balances  (154,998)          --
Compensation income from local           --                 (1,340,026)
government for demolition of factory
Stock-based compensation expense         503,300            7,467,000
Deferred tax asset                       271,261            (1,823,019)
Changes in assets and liabilities:                         
Accounts receivable                      (20,255,706)       (1,792,588)
Inventories                              (376,048)          (350,201)
Prepayments and deposits                 (13,430)           3,005
Other receivables                        --                 (300,000)
Accounts payable and accrued expenses    (953,261)          3,444,367
Retention payable                        865,769            --
Taxes payable                            (728,775)          (2,275,794)
Net cash provided by operating           10,742,514         53,541,606
activities
                                                          
CASH FLOWS USED IN INVESTING ACTIVITIES                    
Additions of prepaid land leases         (477,678)          (403,834)
Compensation received for demolition of  --                 1,340,026
factory
Purchase of property, plant and          (29,447,905)       (34,457,775)
equipment
Increase in construction in progress     --                 (5,230,232)
Net cash used in investing activities    (29,925,583)       (38,751,815)
                                                          
CASH FLOWS USED IN FINANCING ACTIVITIES                    
Repurchase of common stock               --                 (500,000)
Repayment of capital lease obligation    (297,598)          (288,739)
Net cash used in financing activities    (297,598)          (788,739)
                                                          
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (451,033)          3,326,324
AND CASH EQUIVALENTS
NET (DECREASE)/INCREASE IN CASH AND CASH (19,931,700)       17,327,376
EQUIVALENTS
CASH AND CASH EQUIVALENTS - BEGINNING OF 78,576,060         68,494,480
PERIOD
CASH AND CASH EQUIVALENTS - END OF       $58,644,360      $85,821,856
PERIOD
                                                          
SUPPLEMENTAL DISCLOSURE OF CASH FLOW                       
INFORMATION
Cash paid during the period for:                           
Income taxes                             $4,829,992       $16,893,973
Interest paid                            $ --             $1,743
SUPPLEMENTAL DISCLOSURE OF NON-CASH                        
INVESTING AND FINANCING ACTIVITIES
Inception of capital lease obligation
for acquiring property, plant and        $ --             $3,127,913
equipment
Issuance of common stock for exercising  $ --             $5
stock options

CONTACT: IR Manager
        
         Max Ma
         Max_vx@163.com

Gulf Resources, Inc. logo
 
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