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 email@example.com Ken Donenfeld DGI Investor Relations firstname.lastname@example.org Tel: 212-425-5700 Fax: 646-381-9727
Guanwei Recycling Corp. Reports 2013 Full Year Results
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