-- 2007 Revenues Increase 71% to $54.2 million
-- 2007 Net Income Increases 223% to $12.2 million
-- 2007 EPS Increases 192% to $0.13 per diluted share
NEW YORK and SHANDONG PROVINCE, China, March 10 /Xinhua-PRNewswire-FirstCall/ -- Gulf Resources, Inc. (the "Company") (OTC Bulletin Board: GFRE), a leading producer of bromine, crude salt and specialty chemicals in China, today announced operating results for the fourth quarter and year-end 2007 and its outlook for 2008.
Net revenues for the fourth quarter of 2007 increased 108% to $15.4 million compared to $7.4 million for the fourth quarter of 2006. Fourth quarter net income was $2.6 million, compared to a loss of $1.6 million for the fourth quarter of 2006, with earnings per share increasing to $0.03 per diluted share compared to a loss of $0.02 per diluted share for the comparable period of 2006. This improvement reflected $5.3 million of pre-tax organizational expenses that the Company incurred in the fourth quarter of 2006 that were not repeated in the fourth quarter of 2007. Without this, the net income and earnings per share for the fourth quarter of 2006 would have been $1.9 million and $0.02, respectively.
Net revenues for the full year 2007 increased 71% to $54.2 million compared to $31.7 million for the full year 2006. Full year 2007 net income was $12.2 million, an increase of $8.4 million, or 221%, from the full year 2006 with earnings per share increasing to $0.13 earnings per diluted share compared to $0.04 per diluted share for the comparable period in 2006, based on 96.7 million and 86.4 million diluted weighted average shares outstanding, respectively. This improvement also reflected the $5.3 million of pre-tax organizational expenses incurred in 2006. Without this, the net income and earnings per share for 2006 would have been $7.1 million and $0.04, respectively.
Mr. Ming Yang, Chief Executive Officer of Gulf Resources stated, "During the fourth quarter we continued to flawlessly integrate the businesses of the four bromine producers we acquired earlier in the year. We are particularly pleased with our employees’ efforts in this regard, which enabled the Company to significantly increase revenues and net income from the prior year’s comparable quarter."
Commenting on the year, Mr. Yang continued, "2007 was a notable year for Gulf Resources. We became the largest independent bromine producer in China with a market share of approximately 20%, as we more than doubled our production capacity. Including the acquisition we made in early 2008, our annual capacity is now 31,400 metric tons. Also, during the year, we acquired Shouguang Yu Xin Chemical Industry Co. which enabled us to vertically integrate into the bromine derivatives and specialty chemicals markets -- an area we are particularly excited about. Additionally, 2007 was a year where we took the necessary steps to enhance our corporate governance. The Company elected two US independent directors to our Board, Mr. Richard Khaleel and Mr. Biagio Vignolo, who both have a wealth of experience that we will draw upon."
Fourth Quarter Highlights
The $8.0 million increase in fourth quarter net revenues was attributable to strong growth in sales in our bromine and crude salt segment, which increased 98% to $10.1 million in the fourth quarter 2007 from $5.1 million in the fourth quarter 2006. This was primarily as a result of the four bromine asset purchases completed in 2007, as well as enhancing the production of our existing facilities. Another factor contributing to the Company’s revenue increase was the more than doubling of chemical product sales, reaching $4.8 million in the fourth quarter 2007 as compared to $2.3 million for the fourth quarter 2006. This increase resulted from equipment upgrades made during December 2006, the introduction of new products and the addition of new customers.
Gross profit in the quarter was $6.1 million with a gross margin of 39.8%, compared to $2.8 million in gross profit and gross margin of 37.4% recorded during the fourth quarter 2006. The favorable variances resulted from increased sales of products resulting in large part due to the asset acquisitions, operational efficiencies and cost control.
General, administrative, and research and development expenses in the quarter were $0.9 million, up $0.7 million from last year’s fourth quarter level reflects the costs of the new corporate structure. As noted previously, fourth quarter 2006 reflected $5.3 million of costs associated with developing the Gulf organization.
Net income in the fourth quarter was $2.6 million, reflecting an effective tax rate in the quarter of 50% due to the disallowance in 2007 of certain prior year’s organizational costs which resulted in an adverse tax effect of $0.7 million. This quarter’s net income improved by $4.2 million from the prior year’s loss of $1.6 million.
Full Year Highlights
The $22.5 million full year increase in net revenues was attributable to strong growth of sales within our bromine and crude salt segment, which increased 90 % to $34.0 million in 2007 from $17.8 million in 2006. This was primarily a result of the four bromine asset purchases completed in 2007, as well as enhancing the production of our existing facilities. Another factor contributing to the Company’s revenue growth was the increase in chemical product sales, reaching $20.2 million in 2007 as compared to $13.9 million for 2006. This increase resulted from equipment upgrades made late in 2006, the introduction of new products and the addition of new customers.
Gross profit for the year was of $22.1 million with a gross margin of 40.8%, compared to $11.2 million in gross profit and gross margin of 35.4% recorded during 2006. The favorable variances resulted from increased sales resulting largely due to the asset acquisitions, operational efficiencies and cost control.
General, administrative and research and development expenses for the year were $2.1 million, up $1.6 million for last year’s fourth quarter level due to the costs of the new organizational structure. As noted previously, 2006 included $5.3 million of organizational costs.
Net income for the year was $12.2 million, reflecting an effective tax rate of 38.9% due to the disallowance in 2007 of some of the prior year’s organizational costs. This year’s net income increased $8.4 million from the prior year’s $3.8 million.
Balance Sheet and Cash Flow
The Company had $10.8 million in cash and equivalents, and $15.4 million in notes payable as of December 31, 2007. During the year, the Company generated $16.0 million in cash from operations, an increase of $9.6 million over the 2006 level, which reflected the improved level of net income.
Fiscal 2008 Outlook
Mr. Yang concluded, "As we continue through 2008, we will seek to grow our Company through meaningful and profitable acquisitions, in both our business segments. We will leverage our expertise and capabilities to achieve further profitable growth for our Company and provide increased value to our shareholders. Our future is very bright and we eagerly look forward to executing on our strategy and thus realizing opportunities ahead."
Gulf Resources updated guidance for its 2008 full year financial results below. This guidance includes the expected contributions from previously announced acquisitions, a continuation of current exchange rates, and a five percentage point reduction in the expected Chinese tax rate. It does not include the impact of unusual charges, potential acquisitions, or funding for those acquisitions.
-- Revenues are expected to be between $84 million to $90 million.
-- Net income is expected to be between $22 million to $25 million.
-- Diluted earnings per share are expected to be between $0.22 and $0.25.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through two wholly-owned subsidiaries. SCHC is engaged in manufacturing and trading bromine and crude salt in China. Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. SYCI manufactures chemical products utilized in oil & gas field explorations and as papermaking chemical agents.
For more information, please visit http://www.gulfresourcesco.com .
Forward-Looking Statements
Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company’s reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.
Gulf Resources, Inc. and Subsidiaries
Consolidated Statements of Operations
($ in millions, except per share amounts)
(unaudited) (unaudited)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
Revenue $ 15.4 $ 7.4 $ 54.2 $ 31.7
Cost of revenue 9.3 4.6 32.1 20.5
General, administrative, and
research and development
expenses 0.9 0.2 2.1 0.5
Organizational costs -- 5.3 -- 5.3
Income from operations 5.2 (2.7) 20.0 5.4
Other income (expenses) 0.1 0.3 -- 0.3
Income before income taxes 5.3 (2.5) 20.0 5.7
Income taxes - current 2.6 (0.9) 7.8 1.9
Net income $ 2.6 $ (1.6) $ 12.2 $ 3.8
Basic and diluted earnings
per share $ 0.03 $ (0.02) $ 0.13 $ 0.04
Basic and diluted weighted
Average number of shares 99,687,468 96,390,680 96,688,504 86,410,880
Segment Information
(unaudited)
($ in millions)
Bromine
and Chemical Segment
Crude Corporate Consolidated
Salt Products Total Total
Twelve months ended
December 31, 2007
Net revenue $ 34.0 $ 19.8 $ 53.8 $ -- $ 53.8
Maintenance service
income -- 0.4 0.4 -- 0.4
Income (loss) from
operations $ 14.2 $ 7.2 $ 21.3 $ (1.3) $ 20.0
Twelve months ended
December 31, 2006
Net revenue $ 17.8 $ 13.9 $ 31.7 $ -- $ 31.7
Income from
operations $ 1.7 $ 3.7 $ 5.4 $ -- $ 5.4
Gulf Resources, Inc. and Subsidiaries
Selected Consolidated Balance Sheet Items($ in millions)
December 31, December 31,
2007 2006
Cash and cash equivalents $ 10.8 $ 5.7
Accounts receivable 4.0 1.4
Property, plant and equipment, net 30.1 4.5
Notes payable
Short term 9.9 --
Long term 5.5 --
Accounts payable and accrued expenses 2.9 6.2
Taxes payable 1.5 0.5
Total stockholders’ equity $ 26.5 $ 8.2
Selected Consolidated Cash Flow Items
($ in millions)
(unaudited)
Twelve months ended
December 31,
2007 2006
Net cash provided by operating activities $ 16.0 $ 6.4
Property, plant and equipment, (22.7) (1.6)
Proceeds from issuance of notes payable 14.8 --
Dividends paid (4.7) (5.7)
Free cash flow (use) $ (6.7) $ 4.8
Free cash flow (use) is defined by the Company as net cash provided by operating activities, less spending on property, plant and equipment. The Company believes that this measure, which is a non-GAAP financial measure, is useful to investors as an indicator of cash flow available or required for debt and other investing activities, such as acquisitions. The Company utilizes free cash flow (use) as a further indicator of operating performance and for planning investing activities.
For more information, please contact:
Kevin McEnery
Managing Director - Finance
Gulf Resources, Inc.
Tel: +1-646-200-6302
Email: Kevin@gulfresourcesco.com
Ethan Chuang
Vice President - Corporate Development
Gulf Resources, Inc.
Tel: +1-646-200-6316
Email: Ethan@gulfresourcesco.com
Adam Jacobs
Winning IR Company, Ltd.
Tel: +1-646-200-6351
Email: Adam.Jacobs@winningir.com
