NINGBO, China, August 19, 2013 /PRNewswire/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced the Company's financial results for the quarter ended March 31, 2013.
"We are pleased that our first three months of 2013 revenue benefited from solid customer demands and the improvement of production efficiency," commented Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our gross margins were negatively impacted by extreme fluctuations in international oil prices and the industry environment, I believe Keyuan's core earnings potential will continue to improve as a result of our engagement with research institutes, our initiatives on major projects, and our SBS facility ramping into commercial production."
Financial Summary |
Q1 2013 | Q1 2012 | Chg. | |
Sales | $209.6M | $183.3M | 14.31% |
Gross Profit | $8.8M | $9.5M | (6.87)% |
Net Income (a) | $2.9M | $1.6M | 78.14% |
EPS (Diluted) | $0.05 | $0.03 | 66.67% |
Diluted Shares O/S | 63M | 63M | - |
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Sales for the three months ended March 31, 2013 were approximately $209.6 million, compared to sales of $183.3 million for the three months ended March 31, 2012, an increase of $26.2 million, or 14.31%. The substantial increase in the sales was due to the higher capacity utilization coupled with higher sales volume for the company's products compared to the comparable period in 2012.
In the three months ended March 31, 2013 the Company sold 184,581 metric tons of chemical products at an average price of $1,135 per metric ton, as compared to the sale of 155,235 metric tons of chemical products at an average price of $1,181 per metric ton in the three months ended March 31, 2012. This represents a 19% increase in overall metric tons sold.
Overall cost of sales was approximately $200.7 million for the three months ended March 31, 2013, or 96% of sales, as compared to cost of sales of approximately $173.9 million, or 95% of sales for the three months ended March 31, 2012. The cost of sales are primarily composed of the costs of direct raw materials (mainly heavy oil, benzene, butadiene and carbinol), labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. The increase in the cost of sales was due to the higher sales volume in 2013.
Energy required for production consists of water, electricity and steam, the costs of which are attributed to cost of sales rather than operating expense. The supply prices of these energy sources in China have historically been very stable as a result of PRC government policy. Accordingly, the potential impact of changing energy costs to the production is minimal. Following are the costs for water, electricity and stream for the three months ended March 31, 2013 and 2012 (amounts in thousands):
For the Three Months Ended March 31, | ||||||||
2013 (Unaudited) | 2012 (Unaudited) | |||||||
Water | 395 | 278 | ||||||
Electricity | 3,268 | 2,377 | ||||||
Steam | - | 1,198 | ||||||
Total energy cost was approximately $4,159 for the three months ended March 31, 2013, which constitutes approximately 2% of sales. Total energy cost was approximately $14,110 in fiscal year 2012, which constitutes approximately 1.8% of sales.
Gross profit for the three months ended March 31, 2013 was approximately $8.82 million as compared to $9.5 million for the comparable period in 2012, a decrease of approximately $0.65 million, or 6.87%. The decrease was mainly due to the increased cost of sales of $200.7 million in 2013 compared to $173.9 million in the same period in 2012.
Operating expenses, including selling expenses, and general and administrative expenses, were approximately $3.1 million, or 1.5% of sales for the three months ended March 31, 2013 as compared to $2.9 million, or 1.56% of sales for the comparable period in 2012, an increase of approximately $0.12 million. The increase was due to general increases in welfare expenses and business development expenses.
Net income was approximately $2.9 million for the three months ended March 31, 2013, as compared to net income of approximately $1.6 million in the same period in 2012, an increase of $1.3 million, or 78%. This increase was mainly due to the decrease of financial expense in 2013, compared to the same period of 2012.
Business updates
As of March 31, 2013, the Company has invested a total of approximately $32.02 million in the construction and improvement of its production facility. The current production facility encompasses approximately 1.3 million square feet, including 594,000 square feet for production and 19,500 square feet for laboratories and offices.
The Company has a total of 100,000 MT of storage capacity, consisting of 50,000 MT of storage capacity for raw materials and 50,000 MT for finished products. As part of its expansion plan, the Company intends to add 80,000 MT of new storage capacity in 2013, after which the total storage capacity will be 180,000 MT. The Company entered into the first phase of construction of the new storage capacity in August 2012, and approximately 30,000 MT of new capacity has been completed through June 2013. The project is currently in the anti-rust treatment and commissioning stage.
Most of the facilities have been operating since 2009, so the current utilization rates for each product (except for the newly developed SBS) has been optimized to achieve stable output, less raw material cost and less equipment maintenance. The Company also made slight adjustments to the utilization rate for the BTX Aromatic facility to reduce the output to achieve more stable production conditions. The Company has been working on existing equipment upgrades to achieve increased stabilized production. However, in order to develop the Company's business to meet increasing customer demands, optimizing the utilization rates for its current facilities is not adequate to achieve its goals. More specifically, the increasing market demand in tire and auto parts has resulted in increasing market demand for styrene, ABS and SSBR; and higher requirements related to environmental protection imposed by the PRC government has lead to higher demand for transformer oil and catalytic cracking oil. Based on these market trends, rather than focusing on optimizing the current utilization rates for its different facilities, the Company has been focusing on the following improvements to the infrastructure to expand their manufacturing capacity:
a) | an ABS production facility in Guangxi Province, which will have an annual production capacity of 400,000 MT of ABS. The Company began pre-construction activities in February 2012, and the first phase is expected to be completed by the forth quarter of 2014; |
b) | an oil catalytic cracking processing facility as an extension of the catalytic pyrolysis processing equipment, as well as the feed way of the main raw materials to produce synthetic rubber. This facility can reduce production costs and the market risk in the purchase of raw materials, and improve the stability and efficiency of project production to 200,000 MT of heavy oil per year; |
c) | an increased annual design capacity of the ethylene-styrene facility from 80,000 MT to 200,000 MT, among which 120,000 MT can be used for producing synthetic and 80,000 MT can be sold to downstream petrochemical companies. Ethylene-styrene is the main raw material (eg. Bezene) from the catalytic cracking oil processing facility to produce styrene. This facility can be considered the bridge between original products and high-value added products and will complete the integration of internal resources; |
d) | a transformer oil facility using hydrogen from the ethylene-styrene facility to complete a double hydrogenation process on original products (BTX Aromatic) for refining transformer oil, and producing high value transformer oil with a design capability of 100,000 MT per year; and |
e) | an SSBR (Solution Polymerized Styrene Butadiene Rubber) production facility with a design capability of 150,000 MT per year, that will use its own production process technology in synthetic rubber, combining styrene and butadiene, to produce SSBR. This product can be used as raw materials for tires, instead of imported hexakis (methoxymethy) melamine ("HMMM"). |
The Company registered its catalytic oil processing facility and transformer oil plant with the Ningbo local government in February 2013, and expects it to be completed and operational in late 2013, at which time the Company will be able to produce medical use and edible products such as tubes and chewing gum.
The total estimated cost of processing equipment for product refinement and the SSBR production facility is approximately $149.3 million, including $49.8 million for processing equipment and $99.5 million for the SSBR production facility. The Company is currently going through the governmental approval and design phase of the ABS production facility and estimating the related costs. Upon full completion of their expansion, the total production capacity will reach 2,443,000 MT per year including, but not limited to, the current petrochemical production of 720,000 MT, styrene of 200,000 MT, catalytic cracking oil of 200,000 MT, ABS of 400,000 MT, SSBR of 150,000 MT and transformer oil of 100,000 MT.
About Keyuan Petrochemicals, Inc.
Keyuan Petrochemicals, Inc., established in 2007, through its PRC operating subsidiaries, Ningbo Keyuan Plastics Co., Ltd, Ningbo Keyuan Petrochemicals Co., Ltd, Keyuan Synthetic Rubbers Co., Ltd and Guangxi Keyuan Co., Ltd, is engaged in the manufacture and sale of various petrochemical products in the PRC. Having commenced production in October 2010, Keyuan's operations include an annual petrochemical manufacturing design capacity of 720,000 MT for a variety of petrochemical products, with facilities for the storage and loading of raw materials and finished goods, and a technology that supports the manufacturing process with low raw material costs and high utilization and yields. Keyuan also completed the construction of a Styrene-Butadience-Styrene (the "SBS") production facility with an annual production capacity of 70,000 MT in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August 2012. In order to meet increasing market demand, Keyuan adjusted its original expansion project and is currently working to refine its manufacturing capacity to include an ABS production facility, an oil catalytic cracking processing facility, an increased annual design capacity of its ethylene-styrene facility from 80,000 MT to 200,000 MT, a transformer oil facility and an SSBR (Solution Polymerized Styrene Butadiene Rubber) production facility.
Cautionary Statement Regarding Forward-Looking Information
This press release may contain certain "forward-looking statements" relating to the business of Keyuan Petrochemicals, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf months are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
US Contact Information:
Jim Jiang
Keyuan Petrochemicals, Inc
Phone: +001-1-646-705-1386
Email: jzm0580@gmail.com
Web: www.keyuanpetrochemicals.com
Company Contact Information:
Bill Bai
Keyuan Petrochemicals, Inc.
Phone: +0086-138-0588-7777
Email: baih@krcc.cn
Web: www.keyuanpetrochemicals.com
KEYUAN PETROCHEMICALS, INC. AND SUBSIDIAIRES | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||
(Amounts in thousands, except share data) | |||||
March 31, | December 31, | ||||
2013 | 2012 | ||||
(Unaudited) | |||||
ASSETS | |||||
Current assets: | |||||
Cash | $ | 19,965 | $ | 23,378 | |
Pledged bank deposits | 253,169 | 201,252 | |||
Bills receivable | 6,027 | 3,968 | |||
Accounts receivable | 15,883 | 14,248 | |||
Inventories | 57,264 | 48,634 | |||
Prepayments to suppliers | 32,207 | 23,476 | |||
Consumption tax refund receivable | 76,889 | 51,334 | |||
Amounts due from related parties | 698 | 40 | |||
Other current assets | 56,989 | 56,320 | |||
Deferred income tax assets | 1,682 | 2,801 | |||
Total current assets | 520,773 | 425,451 | |||
Property, plant and equipment, net | 234,360 | 227,603 | |||
Intangible assets, net | 863 | 880 | |||
Land use rights | 10,655 | 10,708 | |||
VAT recoverable | 2,425 | 2,232 | |||
Total assets | $ | 769,076 | $ | 666,874 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Current Liabilities: | |||||
Short-term bank borrowings | $ | 442,853 | $ | 295,146 | |
Bills payable | 114,484 | 102,650 | |||
Accounts payable | 76,674 | 130,387 | |||
Advances from customers | 20,773 | 24,405 | |||
Accrued expenses and other payables | 24,930 | 26,833 | |||
Income tax payable | 937 | 2,344 | |||
Dividends payable | 2,382 | 2,382 | |||
Amounts due to related parties | - | 479 | |||
Total liabilities, all current | 683,033 | 584,626 | |||
Series B convertible preferred stock: | |||||
Par value:$0.001; Authorized: 8000,000 shares issued and outstanding: | |||||
5,333,340 shares, liquidation preference $20,250 | 16,452 | 16,452 | |||
Commitments and contingencies | - | - | |||
Stockholders' equity: | |||||
Common stock: | |||||
Par value: $0.001; Authorized: 100,000,000 shares | |||||
Issued and outstanding: 57,464,160 shares as at March 31,2013 and December 31, 2012 | 58 | 58 | |||
Additional paid-in capital | 51,000 | 50,653 | |||
Statutory reserve | 4,072 | 4,071 | |||
Accumulated other comprehensive income | 8,022 | 7,491 | |||
Retained earnings | 6,439 | 3,523 | |||
Total stockholders' equity | 69,591 | 65,796 | |||
Total liabilities and stockholders' equity | $ | 769,076 | $ | 666,874 | |
KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES | |||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) | |||||
Three Months Ended March 31, | |||||
2013 | 2012 | ||||
Sales | $ | 209,554 | $ | 183,325 | |
Cost of sales | 200,732 | 173,852 | |||
Gross profit | 8,822 | 9,473 | |||
Selling expenses | 167 | 253 | |||
General and administration expenses | 2,970 | 2,610 | |||
Total operating expenses | 3,137 | 2,863 | |||
Income from operations | 5,685 | 6,610 | |||
Other income (expenses): | |||||
Interest income | 751 | 939 | |||
Interest expense | -3,396 | -4,379 | |||
Foreign exchange gain (loss) , net | 1,553 | -178 | |||
Other income (expenses), net | -380 | -8 | |||
Total other income, net | 1,472 | 3,626 | |||
Income before income taxes | 4,213 | 2,984 | |||
Income tax expense | 1,295 | 1,346 | |||
Net income attributable to Keyuan Petrochemicals Inc. stockholders | 2,918 | 1,638 | |||
Dividends to Series B convertible preferred stockholders | - | - | |||
Net income attributable to Keyuan Petrochemicals Inc. common stockholders | $ | 2,918 | $ | 1,638 | |
Net income attributable to Keyuan Petrochemicals Inc. stockholders | 2,918 | 1,638 | |||
Other comprehensive income: | |||||
Foreign currency translation adjustment | 531 | 577 | |||
Comprehensive income | $ | 3,449 | $ | 577 | |
Earnings per share: | |||||
Attributable to common stock: | |||||
-Basic | $ | 0 | $ | 0 | |
-Diluted | $ | 0 | $ | 0 | |
Weighted average number of shares of common stock used in calculation: | |||||
Basic | 57,646,160 | 57,646,160 | |||
Diluted | 62.979,500 | 62.979,500 | |||
KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||
(Amounts in thousands, except share data) | ||||
Three months ended March 31, | ||||
2013 | 2012 | |||
Cash flows from operating activities: | ||||
Net income | $ | 2,918 | $ | 1,638 |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||
Depreciation | 3,117 | 2,817 | ||
Amortization | 27 | 27 | ||
Land use rights amortization | 113 | 113 | ||
Deferred income tax (benefit) expense | 1,133 | - | ||
Share-based compensation expense | 380 | 406 | ||
Changes in operating assets and liabilities: | ||||
Bills receivable | -2,033 | 1,321 | ||
Accounts receivable | -1,559 | 2,246 | ||
Inventories | -8,339 | -15,946 | ||
Prepayments to suppliers | -19,077 | -33,857 | ||
Consumption tax refund receivable | -25,219 | -20,106 | ||
Other current assets | 9,967 | -12,190 | ||
Accounts payable | -24,152 | 20,183 | ||
Advances (to) from customers | -3,757 | 24,439 | ||
Income taxes payable | -1,417 | 1,346 | ||
Accrued expenses and other payables | 780 | -2,456 | ||
Net cash used in operating activities | -67,118 | -30,018 | ||
Cash flows from investing activities: | ||||
Purchase of property, plant and equipment | -11,382 | -10,353 | ||
Net cash used in investing activities | -11,382 | -10,353 | ||
Cash flow from financing activities: | ||||
Pledged bank deposits used for bank borrowings | -50,687 | -3,485 | ||
Proceeds from short-term bank borrowings | 297,548 | 156,025 | ||
Repayment of short-term bank borrowings | -183,067 | -127,183 | ||
Proceeds from bank notes | 57,116 | 65,426 | ||
Repayments of bank notes | -45,884 | -34,936 | ||
Net cash provided by financing activities | 75,027 | 55,847 | ||
Effect of foreign currency exchange rate changes on cash | 60 | 354 | ||
Net (decrease) increase in cash | -3,413 | 15,830 | ||
Cash at beginning of year | 23,378 | 7,325 | ||
Cash at end of year | $ | 19,965 | $ | 23,155 |
Supplemental disclosure of cash flow information: | ||||
Income tax paid | $ | 1,579 | $ | - |
Interest paid, net of capitalized interest | $ | 3,396 | $ | 4,379 |
Non cash investing and financing activities: | ||||
Payable for purchase of property, plant and equipment (net of VAT) | $ | 2,798 | $ | 2,516 |
