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Gulf Resources, Inc. Announces First Quarter 2007 Financial Results

Gulf Resources, Inc.
2007-05-15 19:47 1133

-- First Quarter Revenues Increase 35% to $10.1 million

-- First Quarter Net Income Increases 50% to $2.6 million

LOS ANGELES and SHENZHEN, China, May 15 /Xinhua-PRNewswire-FirstCall/ -- Gulf Resources, Inc. (the "Company") (OTC Bulletin Board: GUFR) through its wholly-owned subsidiaries Shuoguang City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical Industry Company Limited ("SYCI"), today announced its results for the first quarter ended March 31, 2007.

Net Revenues for the first quarter of 2007 increased 35% to $10.1 million compared to $7.5 million for the same quarter in 2006. Revenues from the production of bromine and crude salt increased 33% to $5.3 million during the first quarter of 2007 compared to $4 million in 2006. During the quarter, 2,868 tons of bromine were sold with an average selling price (ASP) of $1,850 per ton and 20,000 tons of crude salt with an ASP of $11 per ton. Capacity utilization for the Company's bromine production facilities was seventy-five percent. Capacity utilization for the Company's crude salt production facilities was fifty-four percent. The manufacturing of chemical products by SYCI, which was acquired on February 5, 2007, increased 37% to $4.8 million in sales for the first quarter of 2007 compared to $3.5 million for the same period in 2006.

Cost of net revenue for the first quarter of 2007 was $6 million, yielding a gross profit of $3.9 million and gross margins of 40.2 percent. These results compared to $4.8 million in cost of revenues during the first quarter of 2006, yielding a gross profit of $2.6 million and gross margins of 35.9 percent. The increase in gross margin was attributable to a number of factors, including increased efficiencies in production waste control and recycling; efficiencies in the use of electricity; the shifting of certain transportation costs to the customer which resulted in a decrease in transportation costs and the fact that the cost of raw material consumed in the First Quarter 2007 decreased on a per unit basis compared to the same period in 2006. The Company expects to continue realizing these efficiencies.

Operating income for the first quarter of 2007 totaled $3.9 million compared to $2.6 million for the same period in 2006, representing a 50% increase. Net income for the 2007 first quarter totaled $2.6 million with earnings per share of $0.06 based on 44.1 million diluted weighted shares outstanding compared to $1.7 million with earnings per share of $0.04 in 2006, utilizing 43.2 million shares and represented a 50% increase in net income.

"During the first quarter of 2007, Gulf Resources continued to grow both revenues and earnings through its SCHC subsidiary, one of the premier bromine producers in China," stated Mr. Ming Yang, CEO of Gulf Resources. "Business initiatives implemented for SCHC during 2006 have resulted in increased production while margins were enhanced through prudent cost controls. In addition, our recently acquired SYCI subsidiary is delivering solid organic growth which will further benefit from recent new contract wins with recognized industry players, including Huaneng Yimin Power Plant and Daqing Oilfied."

From a balance sheet perspective, the Company reported $14.2 million in total assets and $1.86 million in total liabilities resulting in stockholders' equity of $12.4 million at March 31, 2007, up from $8.2 million at December 31, 2006. The Company's current ratio improved significantly from 1.37 at December 31, 2006 to 4.95 at March 31, 2007.

Mr. Yang continued, "Our acquisition of the assets of the Shouguang City Qinshuibo Area completed on April 10, 2007 significantly increases our bromine reserves and production capacity and will benefit our second quarter financial results. This facility currently produces approximately 3,500 tons of bromine and 125,000 tons of crude salt annually, equating to $7.8 million in sales at current ASPs. We anticipate that our plans to expand production will further increase our overall bromine production yield, while SCHC benefits from further economies of scale by integrating these operations."

On May 10, 2007 the Company had 49.4 million shares outstanding.

About Gulf Resources, Inc.

Gulf Resources, Inc. operates through two wholly-owned subsidiaries: SCHC which is engaged in manufacturing and trading Bromine and Crude Salt in China. Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture, and SYCI which manufactures chemical products utilized in oil & gas field explorations and as papermaking chemical agents. For more information, please visit http://www.gulfresourcesco.com .

Safe Harbor Statement:

Certain statements in this news release may 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, this specific supply agreement with Huaneng Yimin Coal & Electricity Co. Ltd., 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, 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.

-- FINANCIAL TABLES FOLLOW --

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2007 AND DECEMBER 31, 2006

March 31, December 31,

2007 2006

(Unaudited) (Audited)

ASSETS

CURRENT ASSETS

Cash $3,309,606 $5,692,608

Accounts receivable 1,613,708 1,403,564

Inventories 526,544 470,615

Deposits 1,813,000 --

Prepaid expenses 862,888 --

Due from related party -- 555,464

Prepaid land lease 12,562 12,436

Income tax receivable 1,076,204 1,111,154

9,214,512 9,245,841

PROPERTY, PLANT AND EQUIPMENT, Net 4,390,930 4,462,407

DUE FROM RELATED PARTY -- 641,000

PREPAID LAND LEASE, Net of current portion 608,822 605,820

TOTAL ASSETS $14,214,264 $14,955,068

LIABILITIES AND STOCKHOLDERS’

EQUITY

CURRENT LIABILITIES

Accounts payable and accrued expenses $937,450 $6,225,818

Due to related party 32,230 15,384

Taxes payable 890,769 481,405

TOTAL LIABILITIES 1,860,449 6,722,607

STOCKHOLDERS’ EQUITY

COMMON STOCK; $0.001 par value;

70,000,000 shares authorized;

48,645,340 and 43,205,440 shares

issued and outstanding 48,645 43,205

ADDITIONAL PAID-IN CAPITAL 8,900,272 2,668,817

RETAINED EARNINGS - UNAPPROPRIATED 1,096,784 3,535,252

RETAINED EARNINGS - APPROPRIATED

Statutory Common Reserve Fund 1,872,477 1,077,864

Statutory Public Welfare Fund -- 538,932

CUMULATIVE TRANSLATION ADJUSTMENT 435,637 368,391

TOTAL STOCKHOLDERS’ EQUITY 12,353,815 8,232,461

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $14,214,264 $14,955,068

GULF RESOURCES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2007 AND 2006

(UNAUDITED)

2007 2006

REVENUE

Net Sales $9,934,201 $7,458,453

Maintenance service income 129,126 --

10,063,327 7,458,453

OPERATING EXPENSES

Cost of net revenue 6,024,702 4,781,647

General and administrative expenses 182,180 102,732

6,206,882 4,884,379

INCOME FROM OPERTATIONS 3,856,445 2,574,074

OTHER INCOME

Interest Income 6,842 420

INCOME BEFORE INCOME TAXES 3,863,287 2,574,494

INCOME TAXES - current 1,306,474 874,921

NET INCOME $2,556,813 $1,699,573

BASIC AND DILUTED EARNINGS PER SHARE $0.06 $0.04

BASIC AND DILUTED WEIGHTED

AVERAGE NUMBER OF SHARES 44,091,290 43,205,440

For more information, please contact:

Ethan Chuang

Gulf Resources, Inc.

Tel: +1-714-858-1147

Email: Ethan@gulfresourcesco.com

Matthew Hayden

HC International, Inc.

Tel: +1-858-704-5065

Email: matt@haydenir.com

Source: Gulf Resources, Inc.
Keywords: Oil/Energy
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