-- 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