omniture

China XD Plastics Announces Third Quarter 2014 Financial Results

-- Revenue Up 20% Sequentially --
-- Gross Margin Expansion up 25% Sequentially --
-- Confirms Confidence In 2014 Guidance --
2014-11-13 21:00 4142

HARBIN, China, November 13, 2014 /PRNewswire/ -- China XD Plastics Company Limited (NASDAQ: CXDC, "China XD Plastics" or the "Company"), one of China's leading specialty chemical companies engaged in the development, manufacture and sale of polymer composite materials primarily for automotive applications, today announced its financial results for the third quarter ended September 30, 2014.

Third Quarter 2014 Financial Highlights:

  • Revenue was $315.7 million, an increase of 7.7% YoY and 19.5% sequentially
  • Gross profit was $65.4 million, a decrease of 0.5% YoY but up 25.4% sequentially
  • Gross margin of 20.7% declined YoY but was up 100 basis points sequentially
  • Net income was $43.2 million, an increase of 5.1% YoY and 126% sequentially
  • Total volume shipped was 95,204 metric tons, up 4.1% YoY

"Strong sequential growth confirms our view that business would accelerate over the course of the year," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer of China XD Plastics. "Revenue growth was fueled by strong domestic demand, success in our geographic diversification efforts outside of China, and improved average selling prices resulting from our strategic shift to higher-end products."

Mr. Han continued, "Looking forward, we continue to see numerous opportunities to grow our business, and are acting accordingly. With the future contribution from the Southwest Campus, we will be able to effectively cover all major markets in China, while products from our Dubai plant will cover overseas markets including Asia, the Middle East, Russia and Europe. Our success in product development this year has broadened our product portfolio from six to now eleven categories. Through our R&D efforts, we have added 3D printing and biodegradable materials to our portfolio. With automobile applications continuing to be our core business, we plan to gradually diversify our product offering to include products for applications in high-speed rail, ships, aircrafts as well as biodegradable and electronics applications."

Third Quarter 2014 Results

Revenues for the third quarter of 2014 were $315.7 million, representing a year-over-year increase of 7.7% from $293.1 million in the third quarter of 2013. The increase in revenues was due to a 4.1% increase in sales volume and 3.9% increase in the average RMB selling price.

The greater sales volume was driven by strong demand for polymer composite materials in the China and Asian markets, higher penetration in the East China and Southeast China markets, as well as marketing efforts to develop new customers. Market demand in general is the result of an increasing appetite for middle and high-end automobiles by Chinese consumers, continuing substitution of imported polymer composite materials by domestic suppliers, and an increase in per-vehicle plastic content. The adoption rate of advanced polymer parts is highest in luxury automobile models, which is a rapidly expanding segment. The increase in average RMB selling price was mainly due to the shift of product mix toward higher-end products.

Gross profit was $65.4 million, down slightly from $65.7 million in the third quarter of 2013. The slight decrease in gross profit was primarily due to higher cost of sales, as the Company utilized some raw materials in the production of PA6 and PA66 that were originally purchased for R&D projects and were left over after the projects were completed. The increased cost of sales was offset by a shift in product mix, with higher-end products (mainly PA6, PA66, POM, PPO and plastic alloy) accounting for 75.5% of total revenue in the third quarter, as compared to 70.7% during the prior year period. Additionally, the average sales discount lower-end products (PP and ABS) in the quarter was 1.2%, as compared to 6.5% during the third quarter of 2013. Gross margin was 20.7%, compared to 22.4% in the same period of the prior year and 19.8% in the second quarter of 2014.

General and administrative (G&A) expenses were $5.4 million in the quarter, compared to $4.4 million in the same period in 2013, representing an increase of 22.7%, or $1.0 million. The increase is primarily due to a $1.0 million increase in non-income taxation due to the expansion of the business.

R&D expenses were $5.1 million during the quarter, unchanged from the same period in 2013, reflecting the Company's consistent R&D activities. R&D expense is primarily a result of consumption of raw materials for various experiments to develop both new automotive and non-automotive applications. The consumption of raw materials for these projects accounted for 90% of total R&D expenses for the quarter. As of September 30, 2014, the number of ongoing research and development projects was 128.

Operating income for the third quarter of 2014 was $54.7 million, or 17.3% of revenue, a decrease of 2.1% from $55.9 million, or 19.1% of revenue, in the same period a year ago.

Net interest expenses was $8.8 million for the quarter, compared to net interest expenses of $2.8 million in the same period of 2013, primarily due to (i) an increase of $4.6 million in interest payments resulting from the Notes issued on February 4, 2014; and (ii) an increase of $1.8 million in interest payments resulting from the bank loans used to fund capacity expansions in Southwest China and Dubai. The average balance of short-term and long-term bank loans during the quarter was $107.8 million as compared to $63.6 million during the third quarter of 2013.

Net income for the third quarter of 2014 was $43.2 million, compared to a net income of $41.1 million for the same period of the prior year. Basic and diluted earnings per share were $0.66 and $0.62, respectively, compared to $0.64 per basic and diluted share in the third quarter of 2013.

Average number of shares used in computation of basic and diluted earnings per share for the three months ended September 30, 2014 were 49.1 million and 49.2 million, respectively, compared to 47.8 million in the same period of the prior year.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the third quarter of 2014 was $64.3 million, an increase of 0.2% from EBITDA of $64.2 million in the same period of the prior year. For a detailed reconciliation of EBITDA, a non-GAAP measure, to its nearest GAAP equivalent, please see the financial tables at the end of this release.

Financial Condition

As of September 30, 2014, the Company had $62.7 million in cash and cash equivalents, $222.4 million in time deposits with commercial banks, $445.3 million in working capital (current assets minus current liabilities) and a current ratio (current assets divided by current liabilities) of 2.5. Stockholders' equity as of September 30, 2014 was $492.8 million, compared to $412.3 million as of December 31, 2013.

Compared to December 31, 2013, Inventories increased by 70.6% due to raw materials stock-up at attractive prices and the anticipation of the increase of customer demand in the following quarters. Long-term prepayments to equipment suppliers increased by 16,300.0% due to the advance for equipments to be used in Dubai and Southwest China facilities. Other non-current assets increased by 1,238.9% due to a long-term restricted time deposit to secure a three-year loan.

The Company paid down short-term loans as it utilized more long-term bank loans to support future capacity expansion in Southwest China and Dubai. As a result, short-term bank loans decreased by 56.6% while long-term bank loans increased by US$167.8 million. The aggregate short-term and long-term bank loans decreased by 3.2% due to the overall consideration of existing lines of credit and maintaining a healthy asset to liability ratio. The Company has been improving its capital structure by replacing its short-term debts with longer tenures in order to maintain its operation stability and support its capacity expansion. Recognized by leading financial institutions for its creditworthiness, the Company has obtained long-term credits from the largest state-owned banks in China as well as well known international banks. Bills payable increased by 68.0% due to the increase of purchases from our domestic raw material suppliers. As of September 30, 2014, notes payable was US$148.6 million due to the issuance of 11.75% guaranteed senior notes due in 2019, net of discount.

Business Outlook and Guidance

Based on the Company's strong performance during the quarter and positive outlook for growing customer demand in the fourth quarter, the Company reiterates its revenue guidance for 2014. The Company expects full-year sales to range between $950 million and $1.05 billion and net income to range between $100 million to $120 million. This forecast is based on constant exchange rates and the anticipated interest expense associated with both its long and short-term debt, and reflects the Company's current and preliminary view, which is subject to change.

Conference Call

China XD Plastics' management will host a conference call at 8:30 a.m. ET on Thursday, November 13, 2014, to discuss its third quarter 2014 financial results. The conference call can be accessed by dialing +1 (855) 298-3404 (for callers in the U.S.), +86-4001-200-539 (for Mainland China callers) or +852 5808 3202 (for Hong Kong callers) and entering pass code 6910713.

A recording of the conference call will be available through November 20, 2014, by calling +1 (866) 846-0868 (for callers in the U.S.) and entering pass code 6910713.

A live webcast and replay of the conference call will be available on the investor relations page of the Company's website at http://www.chinaxd.net.

About China XD Plastics Company Limited

China XD Plastics Company Limited, through its wholly-owned subsidiaries, develops, manufactures and sells polymer composites materials, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 25 automobile brands manufactured in China, including without limitation, AUDI, BMW, Toyota, Buick, Mazda, and VW Passat, Golf, and Jetta. The Company's wholly-owned research center is dedicated to the research and development of polymer composites materials and benefits from its cooperation with well-known scientists from prestigious universities in China. As of September 30, 2014, 311 of the Company's products have been certified for use by one or more of the automobile manufacturers in China. For more information please visit http://www.chinaxd.net.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's ability to raise additional capital to finance the Company's activities; the Company's and its subsidiaries' ability to fully perform all of their obligations under the Notes transaction and other contractual obligations applicable to them; the effectiveness, profitability, and the marketability of its the ongoing mix shift to more advanced products; legal and regulatory risks; the Company's ability to execute its growth strategy and the effectiveness of its marketing strategy; the future trading of the common stock of the Company; the Company's ability to operate as a public company; the period of time for which its current liquidity will enable the Company to fund its operations; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

Contacts:

China XD Plastics

Mr. Taylor Zhang
CFO (New York)
US Phone: +1 (212) 747-1118
Email: cxdc-ir@chinaxd.net

ICR

Mr. Gary Dvorchak, CFA
Senior Vice President
US Phone: +1 (310) 954-1123
China Phone: +86 (138) 1079-1408
Email: Gary.Dvorchak@icrinc.com

-Financial Tables Follow-

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS




September 30, 2014


December 31, 2013



US$


US$

ASSETS





Current assets:





Cash and cash equivalents



62,710,680



95,545,904

Restricted cash



14,539,090



13,708,971

Time deposits



222,385,142



281,343,641

Accounts receivable, net



193,778,969



282,320,819

Amounts due from a related party



4,073



225,752

Inventories



247,200,357



144,885,688

Prepaid expenses and other current assets



11,032,978



8,418,143

Total current assets



751,651,289



826,448,918

Property, plant and equipment, net



239,216,935



233,841,735

Land use rights, net



12,090,697



12,457,001

Long-term prepayments to equipment suppliers



213,173,709



1,332,742

Other non-current assets



24,162,039



1,826,232

Total assets



1,240,294,669



1,075,906,628















LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS' EQUITY

Current liabilities:







Short-term bank loans, including current portion of long-term bank loans



136,689,475



314,682,620

Bills payable



43,011,515



25,604,176

Accounts payable



101,780,984



122,457,396

Amounts due to a related party



361,257



-

Income taxes payable



8,765,362



18,631,698

Warrants liability



537,210



1,063,401

Accrued expenses and other current liabilities



15,254,759



55,893,004

Total current liabilities



306,400,562



538,332,295

Long-term bank loans, excluding current portion



167,751,711



-

Notes payable



148,553,073



-

Income taxes payable



9,375,619



8,224,057

Deferred income tax liabilities



17,787,182



19,428,706

Total liabilities



649,868,147



565,985,058








Redeemable Series D convertible preferred stock



97,576,465



97,576,465

Stockholders' equity:







Series B preferred stock



100



100

Common stock, US$0.0001 par value, 500,000,000 shares authorized, 49,152,418 shares and 47,896,133 shares issued, 49,131,418 shares and 47,875,133 shares outstanding as of September 30, 2014 and December 31, 2013, respectively



4,914



4,789

Treasury stock, 21,000 shares at cost



(92,694)



(92,694)

Additional paid-in capital



77,716,977



76,341,659

Retained earnings



396,038,034



311,047,337

Accumulated other comprehensive income



19,182,726



25,043,914

Total stockholders' equity



492,850,057



412,345,105

Commitments and contingencies



-



-

Total liabilities, redeemable convertible preferred stocks and stockholders' equity



1,240,294,669



1,075,906,628

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME




Three-Month Period Ended

September 30,


Nine-Month Period Ended

September 30,



2014


2013


2014


2013



US$


US$


US$


US$










Revenues



315,746,209



293,139,049



803,535,879



666,256,978

Cost of revenues



(250,378,605)



(227,473,486)



(639,219,994)



(534,250,688)

Gross profit



65,367,604



65,665,563



164,315,885



132,006,290














Selling expenses



(177,287)



(143,573)



(435,240)



(253,565)

General and administrative expenses



(5,413,088)



(4,436,021)



(13,762,596)



(10,775,595)

Research and development expenses



(5,081,833)



(5,139,610)



(27,068,448)



(15,926,298)

Total operating expenses



(10,672,208)



(9,719,204)



(41,266,284)



(26,955,458)














Operating income



54,695,396



55,946,359



123,049,601



105,050,832














Interest income



2,058,843



1,702,488



8,548,857



4,242,205

Interest expense



(10,865,335)



(4,499,497)



(31,059,573)



(10,810,221)

Foreign currency exchange gains (losses)



(120,435)



550,010



(193,146)



1,916,626

Gains (losses) on foreign currency forward contracts



309,999



-



(624,766)



-

Change in fair value of warrants liability



1,594,936



(112,229)



526,191



308,102

Government grant



-



709,655



1,324,213



919,746

Total non-operating expense, net



(7,021,992)



(1,649,573)



(21,478,224)



(3,423,542)














Income before income taxes



47,673,404



54,296,786



101,571,377



101,627,290














Income tax expense



(4,515,418)



(13,235,220)



(16,580,680)



(25,308,256)














Net income



43,157,986



41,061,566



84,990,697



76,319,034














Earnings per common share:













Basic earnings per common share



0.66



0.64



1.30



1.19

Diluted earnings per common share



0.62



0.64



1.29



1.19














Net Income



43,157,986



41,061,566



84,990,697



76,319,034














Other comprehensive income (loss)













Foreign currency translation adjustment, net of nil
income taxes



6,981,015



768,724



(5,861,188)



5,408,011














Comprehensive income



50,139,001



41,830,290



79,129,509



81,727,045

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




Nine-Month Period Ended September 30,



2014


2013



US$


US$

Cash flows from operating activities:





Net cash provided by operating activities



64,066,706



60,137,200








Cash flows from investing activities:







Proceeds from maturity of time deposits



530,549,654



145,189,952

Purchase of time deposits



(475,702,678)



(275,929,213)

Purchases of property, plant and equipment



(275,649,634)



(16,086,974)

Net cash used in investing activities



(220,802,658)



(146,826,235)








Cash flows from financing activities:







Proceeds from bank borrowings



574,971,049



324,695,542

Repayments of bank borrowings



(580,584,760)



(230,155,513)

Release of restricted cash



7,501,176



4,824,298

Placement of restricted cash as collateral for bank borrowings



(20,597,823)



(4,013,492)

Proceeds from the exercise of Series A investor warrants



596,740



-

Proceeds from issuance of the Notes



148,396,175



-

Payment of issuance costs of the Notes



(4,693,152)



-

Net cash provided by financing activities



125,589,405



95,350,835








Effect of foreign currency exchange rate changes on cash and cash equivalents



(1,688,677)



1,772,631

Net increase (decrease) in cash and cash equivalents



(32,835,224)



10,434,431








Cash and cash equivalents at beginning of period



95,545,904



83,822,602

Cash and cash equivalents at end of period



62,710,680



94,257,033








Supplemental disclosure of cash flow information:







Interest paid



27,770,246



8,316,403

Income taxes paid



26,287,989



17,638,502








CHINA XD PLASTICS COMPANY LIMITED

Reconciliation of Net Income to EBITDA

(Amounts expressed in United States dollars)



Three Months Period Ended


September 30,


2014

2013

Net income

$ 43,157,986

$ 41,061,566

Interest expense

10,865,335

4,499,497

Income tax expense

4,515,418

13,235,220

Depreciation and amortization expense

5,788,924

5,394,521

EBITDA

64,327,663

64,190,804

Source: China XD Plastics Company Limited
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