Gulf Resources Reports Fourth Quarter and Fiscal Year 2012 Financial Results

Gulf Resources Reports Fourth Quarter and Fiscal Year 2012 Financial Results

SHOUGUANG, China, March 18, 2013 (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 fourth quarter and fiscal year ended December
31, 2012.

Fourth Quarter 2012 Highlights

  oRevenue was $22.0 million, a year-over-year decrease of 27.8%
  oGross profit was $4.2 million, a year-over-year decrease of 59.5%
  oGross margin decreased to 19.1% from 34.1% for the fourth quarter of 2011
  oIncome from operations was $2.6 million as compared to $1.9 million in the
    fourth quarter of 2011
  oOperating margin was 12.0% compared to 6.2% for the fourth quarter of 2011
  oNet income was $1.9 million or $0.05 per basic and diluted share, versus
    $1.0 million, or $0.03 per basic and diluted share a year ago, a
    year-over-year increase of 90%

Fiscal Year 2012 Highlights

  oRevenue was $101.7 million, a year-over-year decrease of 38.4%
  oGross profit was $28.3 million, a decrease of 62.5%
  oGross margin was 27.8%, compared to 45.7% in 2011
  oNet income was $15.0 million, or $0.43 per basic and diluted share, a
    year-over-year decrease of 51.5% from $31.0 million, or $0.89 per basic
    and diluted share
  oCash totaled $65.2 million as of December 31, 2012

"For the year 2012, our top-line revenue had significantly decreased due to
negative impact from the challenging market environment. The revenue of
bromine, one of our major business segments, had also experienced the largest
decline inrecent years and inevitably affected our overall operating
performance in year 2012. During the year, we engaged in product facilities
acquisitions in order to benefit from the lowered assets pricing and
implemented various cost control and saving measures to overcome the
difficulties of the operating environment. Although the macroeconomic
tightening policies in China continued to result in the weakened market demand
for a number of our products in the fourth quarter of the year, our operating
expenses in the fourth quarter had significantly decreased as a result of the
cost control implementation, and therefore we were able to record a higher
operating profit in the fourth quarter 2012, as compared to the same period
last year," said Xiaobin Liu, Chief Executive Officer of Gulf Resources.

Fourth Quarter 2012 Results

Gulf Resources' revenue was $22.0 million for the fourth quarter of 2012, a
decrease of 27.8% from $30.5 million for the fourth quarter of 2011. The
decrease in net revenue was primarily attributable to the decline in selling
price and sales volume in the bromine segment. Revenue from the bromine and
crude salt segments was $11.4 million and $2.7 million, respectively,
representing a decrease of 42.1% and increase of 12.3% for bromine and crude
salt segments, respectively. The total revenue of both bromine and crude salt
business segments represented 64% of sales revenue for the fourth quarter of
2012.

Revenue from the chemical products segment was $7.9 million, or 36% of total
revenue, for the fourth quarter of 2012, a decrease of 7% from $8.5 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 pesticide manufacturing
additives, which offset the incremental benefit arising from the increase in
chemical product prices for oil field and exploration additives and a higher
sales volume for paper manufacturing additives, as compared to the same
quarter last year.

Gross profit for the fourth quarter of 2012 was $4.2 million, a decrease of
59.5% from $10.4 million from the fourth quarter of 2011, and gross profit
margin for the three months ended December 31, 2012 was 19.1%, as compared to
34.1% for the corresponding period last year. The decrease in gross margin was
mainly due to the decrease in selling prices in bromine segments, as compared
to the same period last year.

Sales, marketing and other operating expenses for the fourth quarter of 2012
were $21,204, as compared with $19,075 for the corresponding quarter last
year.

General and administrative expenses for the fourth quarter of 2012 were $1.0
million, as compared to $6.4 million for the fourth quarter of 2011. The lower
general and administrative expenses for the fourth quarter in 2012 were mainly
due to the lower expenses incurred related to management expenses and
exploration costs.

Income from operations for the fourth quarter of 2012 was $2.6 million, as
compared to $1.9 million for the corresponding quarter of 2011. The operating
margin was 12.0% for the fourth quarter of 2012, as compared to 6.2% for the
fourth quarter of 2011.

For the fourth quarter of 2012, the Company incurred other income of $13,302,
as compared to $18,707 for the corresponding quarter last year.

Income taxes were $0.8 million for the fourth quarter of 2012, a decrease of
11.1% from $0.9 million for the fourth quarter of 2011. The Company's
effective tax rate was 27% during the quarter, as compared to 30% in the same
quarter last year.

Net income was $1.9 million for the fourth quarter of 2012, an increase of 90%
from $1 million for the fourth quarter of 2011. Basic and diluted earnings per
share in the fourth quarter of 2012 were $0.05 per basic and diluted share as
compared to $0.03 per basic and diluted share in the fourth quarter of 2011.
Weighted average number of basic shares for the three months ended December
31, 2012 was 34,706,356, as compared with 34,560,743 for the three months
ended December 31, 2011.

Fiscal Year 2012 Financial Results

Revenue for fiscal year 2012 was $101.7 million, a decrease of 38.4% from
$165.0 million for fiscal year 2011. The decrease in revenue was primarily
attributable to the decreased demand in both the bromine and crude salt
segments which led to lower average selling prices in 2012 on an annual basis.
Gross profit was $28.3 million, a decrease of 62.5% from $75.4 million for
fiscal year 2011. Gross margin for fiscal 2012 was 27.8%, as compared to 45.7%
for fiscal year 2011. Operating income was $20.5 million, a decrease of 53.7%
from $44.3 million for fiscal year 2011. Net income was $15.0 million, or
$0.43 per basic and diluted share, a decrease of 51.5% from 31.0 million, or
$0.89 per basic and diluted share, for fiscal year 2011.

Financial Condition

As of December 31, 2012, Gulf Resources had cash of $65.2 million, current
liabilities of $11.0 million, and shareholders' equity of $264.2 million. At
fiscal year end, the Company had working capital of $96.3 million and a
current ratio of 9.8. For the twelve months ended December 31, 2012, the
Company generated $20.5 million in cash flow from operations, primarily
attributable to net income, and used $37.9 million in investing activities,
mainly due to purchases of property, plant and equipment.

Business Outlook

According to the economic statistic and market observations for the first
quarter in 2013, we believe that the economic condition is recovering at a low
pace as we previously predicted. As the increase in industrial activities
leads to more market demand for our segment products, the market price of
bromine also reached 20,000RMB in the beginning of March 2013. Although the
uncertainties of economic policies and the rising cost of labor and materials
will continue to bring challenges to our operation, we are confident that we
can achieve the earning targets set forth in the financial guidance announced
in January this year.

Subsequent Events

  oIn January 2013, the Company provided its 2013 financial forecast; please
    refer to the link
    http://finance.yahoo.com/news/gulf-resources-provides-2013-fiscal-133000384.html
    for further details.

  oThe Company completed the renovation of the commercial building which was
    acquired on September 25, 2012 and announced the commencement of the new
    office building in January, 2013.

Conference Call

Gulf Resources' management will host a conference call on Tuesday, March 19,
2013 at 8:00 AM Eastern Time to discuss its financial results for the fourth
quarter and fiscal year ended December 31, 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
25549431.

A replay of the conference call will be available for 14 days starting from
11:00 AM ET on Friday, March 22, 2012. To access the replay, call +1 (855)
859-2056. International callers should call +1 (404) 537-3406. The pass code
is 25549431.

This conference call will be broadcast live over the Internet and can be
accessed by all interested parties by clicking on
http://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 Gulf Resources, 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, visit www.gulfresourcesinc.cn.

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 and Rule 3b-6 under the
Securities Exchange Act of 1934, 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 forward-looking
statements to reflect events or circumstances after the date of this release.

GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
                                                               
                                                  As of December 31,
                                                  2012          2011
Current Assets                                                 
Cash                                               $65,241,035 $78,576,060
Accounts receivable                                35,969,900    21,919,828
Inventories                                        5,993,598     4,437,972
Prepayments and deposits                           --            307,600
Prepaid land leases                                47,307        46,582
Deferred tax assets                                6,973         228,702
Total Current Assets                               107,258,813   105,516,744
Non-Current Assets                                              
Property, plant and equipment, net                 165,942,542   147,200,740
Property, plant and equipment under capital        1,996,478     2,336,920
leases, net
Prepaid land leases, net of current portion        748,502       763,814
Deferred tax assets                                2,246,699     2,509,481
Total non-current assets                           170,934,221   152,810,955
Total Assets                                       $278,193,034 $258,327,699
                                                               
Liabilities and Stockholders' Equity                            
Current Liabilities                                             
Accounts payable and accrued expenses              $6,533,236  $7,373,643
Retention payable                                  1,432,690     556,450
Capital lease obligation, current portion          193,164       189,742
Taxes payable                                      2,856,658     4,058,550
Total Current Liabilities                          11,015,748    12,178,385
Non-Current Liabilities                                         
Capital lease obligation, net of current portion   2,952,902     3,036,558
Total Liabilities                                  $13,968,650 $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; 38,552,070 and 34,745,342
shares issued; and 38,367,471 and 34,560,743       19,276        17,373
shares outstanding as of December 31, 2012 and
2011, respectively
Treasury stock; 184,599 shares as of December 31,  (500,000)     (500,000)
2012 at cost
Additional paid-in capital                         79,489,188    74,107,979
Retained earnings unappropriated                   146,745,754   133,314,581
Retained earnings appropriated                     15,973,887    14,409,557
Cumulative translation adjustment                  22,496,279    21,763,266
Total Stockholders' Equity                         264,224,384   243,112,756
Total Liabilities and Stockholders' Equity         $278,193,034 $258,327,699



GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Expressed in U.S. dollars)
                                                              
                                                Years Ended December 31,
                                                2012           2011
NET REVENUE                                                    
Net revenue                                      $101,700,882 $164,980,453
                                                              
OPERATING EXPENSES / INCOME                                    
Cost of net revenue                              (73,439,341)   (89,538,212)
Sales, marketing and other operating expenses    (82,004)       (86,936)
Research and development cost                    (164,586)      (398,842)
Exploration costs                                --             (7,034,153)
Write-off / Impairment on property, plant and    (1,042,138)    (7,570,566)
equipment
General and administrative expenses              (6,792,110)    (17,874,296)
Other operating income                           304,152        1,821,010
                                                (81,216,027)   (120,681,995)
                                                              
INCOME FROM OPERATIONS                           20,484,855     44,298,458
                                                              
OTHER INCOME (EXPENSES)                                        
Interest expense                                 (210,705)      (212,441)
Interest income                                  312,806        269,614
                                                102,101        57,173
INCOME BEFORE TAXES                              20,586,956     44,355,631
                                                              
INCOME TAXES                                     (5,591,453)    (13,402,871)
                                                              
NET INCOME                                       $14,995,503  $30,952,760
                                                              
COMPREHENSIVE INCOME:                                          
NET INCOME                                       14,995,503     30,952,760
OTHER COMPREHENSIVE INCOME                                     
- Foreign currency translation adjustments      733,013        12,493,402
                                                              
COMPREHENSIVE INCOME                             $15,728,516  $43,446,162
                                                              
EARNINGS PER SHARE                                             
BASIC                                            $0.43        $0.89
DILUTED                                          $0.43        $0.89
                                                              
WEIGHTED AVERAGE NUMBER OF SHARES                              
BASIC                                            34,706,356     34,660,866
DILUTED                                          35,067,950     34,673,615



GULF RESOURCES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollars)
                                                               
                                                  Years Ended December 31,
                                                  2012          2011
CASH FLOWS FROM OPERATING ACTIVITIES                            
Net income                                         $14,995,503 $30,952,760
Adjustments to reconcile net income to net cash                 
provided by operating activities:
Interest on capital lease obligation               209,584      210,347
Amortization of prepaid land leases                493,849      424,467
Depreciation and amortization                      23,317,594   17,697,439
Allowance for obsolete and slow-moving inventories 13,023       8,178
Write-off / Impairment loss on property, plant and 1,042,138    7,570,566
equipment
Compensation income from local government for      --          (1,340,026)
demolition of factory
Exchange loss on inter-company balances            61,090       1,398,574
Deferred tax asset                                 489,334      (2,569,647)
Stock-based compensation expense                   510,500      7,481,400
Changes in assets and liabilities:                              
Accounts receivable                                (13,936,332) 995,713
Inventories                                        (1,550,213)  (1,621,118)
Prepayment and deposits                            307,600      648,734
Accounts payable and accrued expenses              (850,229)    551,636
Retention payable                                  866,148      98,174
Due to related parties                             --          --
Taxes payable                                      (1,204,287)  (3,459,768)
Net cash provided by operating activities          24,765,302    59,047,429
                                                               
CASH FLOWS USED IN INVESTING ACTIVITIES                         
Additions of prepaid land leases                   (477,678)     (406,380)
Compensation received for demolition of factory    --            1,340,026
Purchase of property, plant and equipment          (37,399,421)  (52,907,374)
Net cash used in investing activities              (37,877,099)  (51,973,728)
                                                               
CASH FLOWS FROM 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 CHANGESON CASH AND CASH  74,370        3,796,618
EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH           (13,335,025)  10,081,580
EQUIVALENTS
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR      78,576,060    68,494,480
CASH AND CASH EQUIVALENTS - END OF YEAR            $65,241,035 $78,576,060

CONTACT: Gulf Resources, Inc.
         Web: http://www.gulfresourcesinc.com
        
         Max Ma, IR Manager
         Email: Max_vx@163.com
        
         Helen Xu, CEO Assistant
         Email: beishengrong@vip.163.com

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