China Shengda Packaging Group Inc. Announces Third Quarter 2012 Results

   China Shengda Packaging Group Inc. Announces Third Quarter 2012 Results

PR Newswire

HANGZHOU, China, Nov. 13, 2012

HANGZHOU, China, Nov. 13, 2012 /PRNewswire-FirstCall/ -- China Shengda
Packaging Group Inc. (NASDAQ: CPGI), a leading Chinese paper packaging
manufacturer, today announced its financial results for the three months ended
September 30, 2012.

"The third-quarter results were below our expectations due to slack demand
resulting from macroeconomic headwinds faced by our customers. Although this
led to a decline in both sales volume and revenues, we managed to control raw
material costs, largely maintain pricing, and improve sales mix in favor of
higher-margin color cartons.We therefore achieved higher gross margin both
sequentially and on a year-over-year basis. However, we continued to face a
challenging and competitive business environment that required increased sales
and marketing spending making it harder to control operating expenses," said
Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging.

FINANCIAL HIGHLIGHTS THIRD QUARTER ENDED SEPTEMBER 30, 2012
                                                                SecondQuarter
                          Third Quarter      Third Quarter      Ended
Sales Analysis            Ended             Ended
                          September30, 2012 September30, 2011 June30,
                                                                2012
Sales Volume (M sq        84.4               87.6               91.9
meters)
Color Cartons (% of       31.3               28.3               30.3
total revenues)
Flexo Cartons (% of       68.7               71.7               69.7
total revenues)
Color Cartons (avg price  $0.41              $0.44              $0.41
per sq meter)
Flexo Cartons (avg price  $0.38              $0.36              $0.39
per sq meter)
Summary Results
(Millions)
Revenues                  $33.0              $33.6              $36.7
Gross Profit              $6.0               $6.0               $5.9
Gross Margin (%)          18.2%              17.7%              16.0%
Operating Expenses        $4.3               $3.5               $3.9
Operating Income          $1.7               $2.7               $1.9
Operating Margin (%)      5.2%               8.0%               5.3%
Net Income attributable   $1.4               $2.3               $1.7
to common stockholders
EPS Basic & Diluted       $0.04              $0.06              $0.04
Wtd Avg Shares            38.8               39.3               38.8
Outstanding (millions)

Third Quarter 2012 Results

Revenues decreased 1.8% to $33.0 million from $33.6 million in the prior year
period.The decrease was attributable to the decrease of sales volume,
partially offset by the increase in average prices per square meter. Sales
volume decreased by 3.2 million square meters, or 3.6%, to 84.4 million square
meters for the three months ended September 30, 2012, from 87.6 million square
meters for the same period of 2011. The decreased sales volume was mainly the
result of the challenges associated with unfavorable domestic and foreign
economic environment, which adversely affected the business of many customers.
The average price per square meter increased by 1.9% to $0.39 for the three
months ended September 30, 2012 from $0.38 in the same period of 2011.

Color cartons accounted for 31.3% of the revenues and flexo cartons accounted
for 68.7% of the revenues, compared to 28.3% and 71.7%, respectively, for the
same period of 2011. Average per square meter prices for the color cartons and
flexo cartons for the three months ended September 30, 2012 were approximately
$0.41 and $0.38, respectively, as compared to approximately $0.44 and $0.36,
respectively, for the same period of 2011.

Consumer and industrial goods manufacturing sectors are the Company's
principal markets. The major customers remained home appliances and
electronics manufacturers and food, beverage and cigarette manufacturers in
the YRD, which accounted for 23.6% and 36.4%, respectively, of the revenues
for the three months ended September 30, 2012.

Gross profit remained largely the same at $6.0 million as in the same period
of 2011. Gross profit from flexo cartons decreased 1.5% to $3.8 million for
the three months ended September 30, 2012, from $3.9 million for the same
period of 2011. Gross profit from color cartons increased 7.4% to $2.1 million
for the three months ended September 30, 2012, from $2.0 million for the same
period of 2011. Gross margin was 18.2% for the three months ended September
30, 2012, as compared to 17.7% for the same period of 2011. The flat gross
profit was mainly due to the 2.4% decrease in cost of goods sold associated
with decreased sales volume compared to the same period last year.

Selling expenses increased 25.4% to $1.4 million for the three months ended
September 30, 2012, from $1.1 million for the same period of 2011. Such
increase resulted mainly from staff cost and freight. As a percentage of
revenues, selling expenses for the three months ended September 30, 2012
increased to 4.2%, from 3.3% for the same period of 2011.

General and administrative expenses increased 24.9% to $2.9 million for the
three months ended September 30, 2012, from $2.4 million in the year-ago
quarter, as a result of increasing staff cost, office and travelling expenses.
As a percentage of revenues, general and administrative expenses for the three
months ended September 30, 2012 increased to 8.9%, as compared to 7.0% for the
same period of 2011.

Income tax expense was largely flat at $0.4 million for the three months ended
September 30, 2012.

Net income attributable to common stockholders decreased 41.1% to $1.4
million, or $0.04 per diluted share, from $2.3 million, or $0.06 per diluted
share, in the same period of 2011.

Nine Months Ended September 30, 2012

Revenue for the first nine months of 2012 was $98.2 million, up 5.4% from
revenue of $93.2 million for the first nine months of 2011, mainly due to
increased sales volume. The sales volume increased 7.6 million square meters,
or 3.2%, to 249.0 million square meters from 241.4 million square meters
during the same period of 2011. Gross profit was $17.3 million, compared to
$19.2 million for the nine months of 2011. Gross margin was 17.7%, compared to
20.6% for the first nine months of 2011. Net income attributable to the
Company's common stockholders was $4.5 million, or $0.12 per diluted share,
compared to $8.0 million, or $0.20 per diluted share, for the same period a
year ago.

Financial Condition

As of September 30, 2012, China Shengda Packaging had cash and cash
equivalents of $16.7 million and restricted cash of $19.3 million. Accounts
receivable were $35.7 million as of September 30, 2012 compared with $36.8
million as of year-end 2011. Working capital was $46.3 million compared to
$50.5 million in the prior year period. Shareholders' equity was $104.1
million, compared with $98.8 million as of December 31, 2011.

Net cash provided by operating activities was $22.0 million for the nine
months ended September 30, 2012, as compared to $7.5 million net cash used in
operating activities for the same period of 2011. The provision of cash in the
first nine months of 2012 was attributable to the net income of $4.6 million,
adjusted by depreciation and amortization expenses of $3.3 million, and a net
increase in cash from working capital items of $14.1 million.

Net cash used in investing activities was $17.8 million for the nine months
ended September 30, 2012, as compared to $4.0 million for the same period of
2011. The $17.8 million net cash used in investing activities during the nine
months ended September 30 was attributable to the purchases of property,
plant and equipment and prepayment paid for construction in progress,
primarily related to the machinery purchases and plant construction of the
Company's paper mill.

Net cash used in financing activities was $6.9 million for the nine months
ended September 30, 2012, as compared to $2.6 million for the same period of
2011. During the nine months ended September 30, 2012, the Company received
proceeds from borrowings amounting to $11.2 million, repaid loans amounting to
$13.3 million, and deposited restricted cash amounting to $5.0 million for the
loans as collateral.

Recent Events

On October 15, 2012, China Shengda Packaging announced that that its Board of
Directors has received a preliminary, non-binding proposal (the "Proposal")
from its Chairman, Mr. Nengbin Fang ("Mr. Fang"), in which Mr. Fang has
offered to acquire all of the outstanding shares of the Company's common stock
he and his family currently do not own in a going-private transaction at a
proposed price of $1.40 per share to be paid in cash.According to the
Proposal, Mr. Fang intends to fund the acquisition with a combination of debt
and equity financing. Currently, Mr. Fang and his family collectively
beneficially own approximately 54.03% of the Company's common stock.

On November 2, 2012, the Company announced that it has regained compliance
with the minimum bid-price requirement of the NASDAQ Stock Market for
continued listing of the Company's common stock.

Business Outlook

For fiscal 2012, China Shengda Packaging maintains its expectations for
revenues of between $115 million and $125 million. However, the Company now
expects net income of between $5.5 million and $6.5 million and diluted
earnings per share of between $0.14 and $0.17, lower than its previous
estimates of net income of between $6.5 million and $7.5 million, and diluted
earnings per share of $0.17 and $0.19.

The Company foresees increasing raw material costs remaining a challenge while
it looks to monitor its operating efficiency more closely and promote the sale
of higher-price and higher margin color cartons.In an environment of muted
demand from its client base as industries in the Yangtze River Delta
experience modest growth in domestic demand and reduced export demand for
their products, the Company is addressing its challenges with better service
levels, keen prices, new products and robust marketing efforts. The costs
associated with these efforts are expected to reduce profitability for the
remainder of the year. 

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in
China. It is principally engaged in the design, manufacturing and sale of
flexo-printed and color-printed corrugated paper cartons in a variety of sizes
and strengths. It also manufactures corrugated paperboards, which are used for
the production of its flexo-printed and color-printed cartons. The company
provides paper packaging solutions to a wide variety of industries, including
food, beverage, cigarette, household appliance, consumer electronics,
pharmaceuticals, chemicals, machinery and other consumer and industrial
sectors in China. For more information, visit http://www.cnpti.com.

Safe Harbor Statements

This press release may contain forward-looking statements. Any statements set
forth above that are not historical facts are forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Such factors include,
but are not limited to, the Company's ability to develop and market new
products, the ability to access capital for expansion and continued investment
in R&D, the ability to acquire other companies, changes from anticipated
levels of sales, changes in national or regional economic and competitive
conditions, changes in relationships with customers, changes in profit margins
of principal product and other factors discussed from time to time in the
Company's filings with the Securities and Exchange Commission. The Company
undertakes no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise, except as
required by law.

Company Contact:                    Investor Relations Contact:
China Shengda Packaging Group Inc. CCG Investor Relations
Cindy Hu, Board Secretary           Mark Collinson
Tel: +86-571 8283 8770             Tel: +1-310-954-1343
E-mail: cindy.hu@cnpti.com         Email: mark.collinson@ccgir.com
Website: http://www.cnpti.com      Website: http://www.ccgasiair.com



CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in US$)
                                                 September30,   December31,
                                                 2012            2011
ASSETS                                           (Unaudited)
Current assets
Cash and cash equivalents                        $ 16,674,879    $ 19,294,089
Restricted cash                                  19,273,619      7,851,387
Accounts and notes receivable, net               35,695,488      36,835,095
Inventories                                      16,005,196      19,449,954
Prepayments and other receivables                2,073,798       929,126
Amount due from related parties                  105,260         133,608
Total current assets                             89,828,240      84,493,259
Non-current assets
 Property, plant and equipment, net            46,386,604      34,573,246
Prepayment for land use right to related party   11,868,967      11,805,000
Prepayment for construction in progress          7,899,127       5,424,412
Customer relationship, net                       194,241         550,316
Deferred tax assets                              362,806         409,845
Goodwill                                         175,443         174,497
 Total assets                                 $ 156,715,428   $ 137,430,575
LIABILITIES AND EQUITY
Current liabilities
Accounts and notes payable                       $ 34,629,268    $ 18,750,719
Amounts due to related parties                   653,067         137,689
Accrued expenses and other payables              3,376,072       1,651,283
Taxes payable                                    1,377,996       3,358,902
Short-term loans                                 3,500,000       10,073,600
Total current liabilities                        43,536,403      33,972,193
Non-current liabilities
                                                 9,000,000       4,500,000
 Long-term loans
 Deferred tax liabilities                  48,560          137,579
Total liabilities                               52,584,963      38,609,772
Commitment and contingencies                                     -
Equity
Stockholders' equity
Common stock (US$0.001 par value,
 190,000,000shares authorized,
39,456,311
shares issued at September 30, 2012
and                                              39,456          39,456
 December 31, 2011, 38,790,811
outstanding at
 September 30, 2012 and December 31,
2011,
 respectively)
Treasury stock (665,500 shares both at
 September 30, 2012 and December 31,  (729,444)       (729,444)
2011)
Additional paid-in capital                      43,765,243      43,765,243
Appropriated retained earnings                   6,843,616       6,843,616
Unappropriated retained earnings                 44,994,987      40,438,219
Accumulated other comprehensive income           8,807,289       8,258,441
Total stockholder's equity                       103,721,147     98,615,531
 Noncontrolling interest                409,318         205,272
Total equity                                     104,130,465     98,820,803
Total liabilities and equity                    $ 156,715,428  $ 137,430,575



CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in US$)
                  ThreemonthsendedSeptember30,  NinemonthsendedSeptember30,
                  2012              2011            2012              2011
                  (Unaudited)       (Unaudited)     (Unaudited)       (Unaudited)
Revenues          $33,033,566       $33,643,951     $ 98,151,414      $ 93,155,316
Cost of goods     27,019,968        27,693,050      80,827,790        73,920,644
sold
Gross profit      6,013,598         5,950,901       17,323,624        19,234,672
Operating
expenses
Selling expenses  1,379,774         1,100,302       3,961,498         3,382,469
General and
administrative    2,940,979         2,354,326       7,847,277         7,173,391
expenses
                  4,320,753         3,454,628       11,808,775        10,555,860
Other income
(expenses)
Interest income   118,520           89,150          298,716           300,560
Interest expense  (115,577)         (145,378)       (487,640)         (474,966)
Subsidy income    46,309            259,002         263,714           965,652
Other             (16,878)          -               7,142             -
                  32,374            202,774         81,932            791,246
Income before
income tax
expense and       1,725,219         2,699,047       5,596,781         9,470,058
noncontrolling
interest
Income tax        365,352           386,023         1,044,868         1,444,026
expense
Net income        1,359,867         2,313,024       4,551,913         8,026,032
Less: net loss
attributable to   1,663             -               4,855             -
noncontrolling
interest
Net income
attributable to   $ 1,361,530       $ 2,313,024     $ 4,556,768       $ 8,026,032
company's common
stockholders
Basic and
diluted earnings  $ 0.04           $ 0.06         $ 0.12           $ 0.20
per share
Weighted-average
number of shares
outstanding -     38,790,811        39,347,806      38,790,811        39,419,745
basic and
diluted
Comprehensive
income:
Net income        1,359,867         2,313,024       4,551,913         8,026,032
Foreign currency
translation       (164,829)         1,064,392       548,508           3,016,379
adjustment
Comprehensive     1,195,038         3,377,416       5,100,421         11,042,411
income
Less:
comprehensive
loss              1,800             -               5,195             -
attributable to
noncontrolling
interest
                                    
                  $ 1,196,838                      $ 5,105,616       $ 11,042,411
                                    $ 3,377,416



CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in US$)
                                               NinemonthsendedSeptember30,
                                               2012             2011
                                               (Unaudited)      (Unaudited)
Cash flows from operating activities
Net income                                     $ 4,551,913      $ 8,026,032
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization expenses         3,333,527        2,963,822
Change in operating assets and liabilities:
Restricted cash                                (3,426,845)      7,476,662
Accounts and notes receivable                  1,345,391        (7,243,674)
Inventories                                    3,556,059        1,754,660
Prepayments and other receivables              (436,701)        953,133
Accounts and notes payable                     12,824,684       (21,247,121)
Amount due to related party                    544,609          (360,247)
Deferred tax                                   (40,572)         (39,441)
Accrued expenses and other payables            1,718,696        (172,777)
Tax payables                                   (2,002,434)      349,857
Net cash  provided by (used in) operating      21,968,327       (7,539,094)
activities
Cash flows from investing activities
Purchase of property, plant and equipment      (14,619,240)     (3,931,437)
Prepayment paid for construction in progress   (3,150,000)      -
Net cash used in investing activities          (17,769,240)     (3,931,437)
Cash flows from financing activities
Proceeds from short-term loans                 6,662,447        18,029,700
Proceeds from long-term loan                   4,495,863        -
Repayment of short-term loans                  (13,301,664)     (20,033,000)
Restricted cash                                (4,993,263)      -
Share purchase                                 -                (729,444)
Investment from noncontrolling interests       208,894          103,290
Net cash flows used in financing activities   (6,927,723)      (2,629,454)
Effect of foreign currency exchange rate
fluctuation on cash                            109,426          915,998
 andcash equivalents
Net changes in cash and cash equivalents       (2,619,210)      (13,183,987)
Cash and cash equivalents, beginning of        19,294,089       35,581,323
period
Cash and cash equivalents, end of period       $ 16,674,879     $ 22,397,336
Cash paid during the period for:
Interest paid                                  $ 475,204        $ 474,966
Income taxes paid                              $ 885,290        $ 2,346,838

SOURCE China Shengda Packaging Group Inc.

Website: http://www.cnpti.com
Website: http://www.ccgasiair.com
 
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