Tantech Holdings Ltd. Announces Fiscal Year 2018 Financial Results

LISHUI, China, May 16, 2019 /PRNewswire/ -- Tantech Holdings Ltd. (NASDAQ: TANH), ("Tantech" or the "Company"), an alternative energy company with diversified operations, including the manufacturing of bamboo-based charcoal products and Electric Vehicles (EVs), today announced its financial results for its fiscal year ended December 31, 2018.

Financial Highlights (All Figures Approximated)

• Total revenues decreased by approximately $12.7 million, or 30.1%, to approximately $29.6 million 
• Total gross profit from the following segments decreased by 23.9%, or approximately $2.5 million, to $8.0 million 
  - Gross profit from the Company's consumer products segment decreased by 1.9%, or $0.15 million, to $8.04 million
  - Gross profit from the Company's trading segment increased by 17.0%, or $0.1 million, to $0.5million
  - Gross profit from the Company's electronic vehicle segment decreased by 126%, or $2.4 million, to $0.50 million
• Despite the overall decline in revenues and gross profit, the Company was still able to achieve net income attributable to common stockholders of $2.0 million, or $0.07 per share, for fiscal year 2018.

Mr. Zhengyu Wang, Chairman and CEO of Tantech said: "Tantech's overall performance in 2018 did not meet our expectations due to a much more competitive business environment, which led to lower sales of certain products. However, as the Company further streamlined its business lines in 2018, we have reduced the supply chain risks and made some breakthroughs in business, laying down a solid foundation for future growth. As such, we expect that both revenue and earnings growth will be improved this year compared with 2018."

"This year and beyond, the company will focus on manufacturing and selling bamboo charcoal-based consumer products and environment-friendly electric motor vehicles. Since 2019, the Chinese government has further reduced its subsidy for electric motor vehicles. As a result, we expect to receive fewer subsidies from the government going forward. In the past years, during which the Company's sales of electric motor vehicles were subsidized by the government, it took the Company two to three years to recover the subsidies, which contributed to a large accounts receivable balance. As a specialist in the electric logistics vehicle market, the Company expects to continue to improve its competitiveness so as to reach more customers and improve the Company's cash management. Also, the Company expects to expand into the auto parts sector, capitalizing on its rich customer resources in the automotive industry to build a strong brand image in the industry. In addition, assuming sufficient cash flow, the Company expects to increase investment in the mining sector. In 2018, the Company's 18% equity interest in  Libo Haokun, a marble mining company, saw an increase in book value, which to some extent improved shareholder returns.  " Mr. Wang concluded.

Full Year 2018 Financial Results

Revenues

Revenues decreased by approximately $12.7 million, or 30.1%, to approximately $29.6 million in fiscal 2018 from approximately $42.3 million in fiscal 2017. The decrease was mainly attributable to the significant decrease of our consumer products and electronic vehicle ("EV") segments due to a change of our business strategy and less customer demand.  The revenue from our trading segment increased due to higher demands. 

Revenues from the Company's consumer product segment decreased by $9.5 million, or 29.8%, to $22.4 million for fiscal 2018 from $31.9 million for the prior fiscal year. The gross margin of the Company's consumer product segment increased from 25.7% in fiscal 2017 to 35.9% in fiscal 2018. The decrease in revenue from the consumer product segment in 2018 was due to the following reasons. First, as a result of increasing competition from E-commerce retailers and the change of shopping habits among younger consumers, potential customers are increasingly buying consumer products online with unknown brands in order to save money. Therefore, orders from the Company's customers for its consumer products decreased considerably. Second, in 2018, the Company reduced its cooperation with certain supermarket customers with low selling prices and unfavorable profit margins. And third, in response to market competition, the Company also reduced sales of  less popular products with lower gross margin. The overall decrease in the Company's revenue from its consumer product segments reflected the above factors.

Revenue from the Company's trading segment was approximately $3.8 million in fiscal 2018, an increase of 106% from $1.9 million in fiscal 2017. Starting in fiscal 2017, the Company focused on promoting its "Charcoal Doctor" products in the market. As a result, domestic sales of "Charcoal Doctor" products have increased significantly. The decline in gross margin in fiscal 2018 compared to fiscal 2017 was due to the fact that almost all the Company's sales were made to the Chinese domestic market which have lower margins.

In July 2017, the Company completed the acquisition of a 70% equity interest of Suzhou E-Motors Co., Ltd, which became known as Shangchi Automobile in 2019 ("Shangchi Automobile"), a specialty electric vehicles and power batteries manufacturer based in Jiangsu Province, China. The revenue for this EV segment was approximately $3.4 million in fiscal 2018 with negative gross margin of 14.7%. The Company sold 110 types of logistic electronic cars in fiscal 2018 with average price of approximately $15,000, and the Company expects sales growth in fiscal 2019.

Cost of revenues

Cost of revenues decreased by approximately $10.2 million, or 32.2%, to approximately $21.5 million in fiscal 2018 from approximately $31.7 million in fiscal 2017. As a percentage of revenues, the cost of revenue decreased to 73% in fiscal 2018 from 75% in fiscal 2017. The decrease in cost of revenues as a percentage of revenues in fiscal 2018 was mainly attributable to the lower cost of revenues from the consumer products and EV segments due to lower sales. On the other hand, the cost of revenue for trading segment increased to in line with the increased sales.

Gross profit

Gross profit decreased by approximately $2.5 million, or 23.9%, to approximately $8.0 million in fiscal 2018 from approximately $10.5 million in fiscal 2017. The gross profit margin was 27.2% in fiscal 2018, as compared to 25.0% in fiscal 2017. On a segment-by-segment basis, gross margins for consumer product, trading and EV were 35.9%, 12.9%, and (14.7%), respectively, for fiscal 2018, compared to 25.7%, 22.8% and 22.6%, respectively, for fiscal 2017. The decrease in gross margin was primarily attributable to lower selling prices in the trading segment and EV segment in fiscal 2018.

Selling expenses

Selling expenses decreased by approximately $0.4 million to approximately $0.3 million in fiscal 2018 compared to approximately $0.7 million in fiscal 2017. As a percentage of sales, selling expenses were 1.1% of revenues in fiscal 2018, as compared to 1.7% of revenues in fiscal 2017. The decrease of the selling expenses was mainly attribute to decreased sales.

General and administrative expenses

General and administrative expenses increased by approximately $0.3 million, or 7.5%, to approximately $4.9 million in fiscal 2018 from approximately $4.6 million in fiscal 2017. As a percentage of revenues, general and administrative expenses increased to 16.8% in fiscal 2018, compared to 10.9% in fiscal 2017. The slight increase was primarily attributable to the fact that $0.2 million more bad debt and inventory impairment provision was recorded in fiscal 2018.

Research and development expenses

Research and development expenses decreased by $0.2 million, or 38.4%, to $0.4 million in fiscal 2018 from $0.6 million in fiscal 2017. The decrease was primarily due to less R&D activity during fiscal 2018 due to a change of business strategies. We intend to spend more resources on R&D for our electric vehicle segment going forward.

Provision for income taxes 

Provision for income taxes was approximately $1.0 million in fiscal 2018, a decrease of approximately $0.5 million or 32.5%, from approximately $1.5 million in fiscal 2017. The decrease was mainly due to lower income before income taxes from continuing operations in fiscal 2018 compared to fiscal 2017. The Company provided full valuation allowance in fiscal 2018 on bad debt reserves due to uncertainties in realizing those tax benefits in the future.

Net income attributable to common stockholders

Net income attributable to common stockholders was approximately $2.0 million in fiscal 2018, a decrease of approximately $1.8 million from approximately $3.8 million in fiscal 2017. The decrease was attributable to a general overall decline of revenue and gross profits. As of December 31, 2018, the Company ceased operating Tantech Babiku and Lishui Zhongzhu, and it is planning to sell the remaining operations of Tantech Energy because of a business strategy change. The net income for these discontinued operations was approximately $0.08 million in fiscal 2018 compared to $0.07 million in fiscal 2017.

Recent Updates

On February 26, 2019, Tantech Charcoal entered into a short term loan agreement with Bank of China (Lishui Branch) to borrow approximately $1.5 million (RMB 10 million) for one year with an annual interest rate of 4.35%. The purpose of the loan was for working capital needs. The loan was guaranteed by Tantech Bamboo, two individual related parties, Zhengyu Wang and Yefang Zhang and a third party, Zhejiang Meifeng Tea Industry Co., Ltd. The loan was also collateralized by two properties owned by Zhengyu Wang and Yefang Zhang.

On March 18, 2019, Tantech Bamboo entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow approximately $2.8 million (RMB 18.78 million) with an annual interest rate of 6.05%. Repayment of principal of approximately $150,000 (RMB 1 million) will be due on January 14, 2020 and the repayment of the remaining principal of approximately $2.7 million (RMB17,780,000) will be due on March 17, 2020.  The purpose of the loan was to fund working capital needs. The loan was collateralized by building and land use right of Tantech Bamboo with maximum guaranteed amount up to approximately $3.9 million (RMB25,960,000).  The loan was also guaranteed by three related parties, Zhengyu Wang, CEO of the Company and his wife, Yefang Zhang and Lishui Jiuanju Trading Co., Ltd., the president of which was also the COO of the Company.

About Tantech Holdings Ltd.

Established in 2001 and headquartered in Lishui City, Zhejiang Province, China, Tantech Holdings Ltd., together with its subsidiaries, develops and manufactures bamboo-based charcoal products in China and internationally. It operates through three segments: Consumer Products, Trading, and electronic vehicle. The Company provides its products for industrial energy applications, as well as household cooking, heating, purification, agricultural, and cleaning uses. The company also exports its bamboo vinegar, bamboo charcoal purification, and EDLC carbon products. For more information about Tantech Holdings Ltd., please visit: http://www.tantech.cn/en/index.asp

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information please contact:

Tantech Holdings Ltd.
Ms. Ye Ren
IR Manager
+86-578-261-2869
ir@tantech.cn

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