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Guanwei Recycling Corp. Reports 2013 Full Year Results

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) -- 03/31/14 --  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                                                 =============  =============      Contacts:  Richard Sun guanweirecycling@gmail.com  Ken Donenfeld DGI Investor Relations  kdonenfeld@dgiir.com Tel: 212-425-5700  Fax: 646-381-9727     
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