Gulf Resources Announces First Quarter of 2022 Financial Results and Plan to Present 6-year Financial Plan by the end of June 2022
05/13/2022 - 04:38 PM
SHOUGUANG, China, May 13, 2022 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq: GURE) ("Gulf Resources", “we,” or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced financial results for the first quarter ended March 31, 2022 as well as its plan to provide investors with its 6 year financial plan by the end of June 2022.
Despite the closure of all our operating facilities for 51 of the 90 days of the first quarter, 2022 and the additional time to restart production, the costs of our closed facilities, and a negative non-cash charge on foreign currency translation losses, Gulf Resources reported near breakeven results for the first quarter. During this period, our operating loss was reduced 98% to $65,087 from $3,281,424. With the strong increases in bromine pricing, we expect the remaining quarters of 2022 and the year as a whole will be profitable even without contributions from chemicals and natural gas. These estimates exclude any potential nonrecurring factors or write-offs. Company is in the final stages of preparing its 6-year plan. This plan will be presented to investors on a conference call by the end of the next month. First Quarter 2022
In the first quarter, net revenues increased 70% to $8,930,737 from $5,259,243. Our factories were closed for environmental reasons until February 21, 2022. In the previous year, they were closed until February 19, 2021. We had 39 days of operations in 2022 versus 41 days in 2021. Our daily revenues increased 78.5% . Gross profits increased 306% to $4,380,769 from $1,077,854. Direct labor and factory overheads incurred during the plant shutdown were $2,184,591. General and administrative expenses increased 29% to $2,242,501. A major factor impacting G&A was a swing in unrecorded foreign translation losses. The loss from operations decreased 98% to $65,087 from $3,281,424. If the direct labor and factory overheads of $2,242,501 and the foreign translation losses of $283,789 are excluded, the first quarter of 2022 would have been very profitable, even with only 39 days of operations. Business Segment Data Bromine
Revenues in bromine increased 69% to $8,126,015. T onnes produced increased 5% to 1,005. The average selling price increased 60.5% to $8,086. At the present time, based on the spot price from sunsirs.com and the current exchange rate, the selling price of bromine is $8,270 , higher than in the first quarter. Gross profits were $4,205,690 compared to $1,296,944 , an increase of 224% . As a percentage of sales, gross margins were 51.8% compared to 27% . Our utilization rate was 19% compared to 17% in the previous year. Given that our factories were only open for 39 days versus 41 in the previous year, our utilization rate was much improved. Net profits in bromine were $1,348,834 versus a loss of $1,279,565. T hese numbers include overhead costs of the closed factories, G&A, and negative non-cash foreign currency adjustments. Total assets in our bromine business increased to $186 million from $144.7 million in the previous year. We have been drilling new wells, building aqueducts, and making other improvements. We believe we will receive approval to open at least one and potentially more of its closed factories in 2022. Crude Salt
As with bromine, the crude salt facilities were open only 39 of the 90 days in the quarter. In addition, because of low temperatures, winter is a very slow time for crude salt production. Nonetheless, Crude salt revenues increased 68% to 754,044. Despite the substantial revenue increase, the cost of revenues declined 6% to 629,560. Gross profit was $124,484 compared to a loss of $219,090. For the quarter, including its share of costs from closed facilities, corporate overhead, and unrecorded foreign exchange losses, crude salt lost $521,921 versus $1,009,585. Chemicals
Chemicals had $0 revenues and an operating loss of $513,282. T he construction of our new Yuxin factory has been delayed by electricity restrictions as well as by the winter shutdown. On Feb. 22, 2022, we announced that we believed electricity restrictions were being eased. As a result, we contacted our suppliers and will have the remainder of the equipment produced and delivered, so we can complete installation and begin testing and trial production. At this time, we may begin commercial production during 2023. Natural Gas
Our natural gas business reported revenues of $50,678 on the rental of some of our equipment. The business reported a loss of $26,739. The company is still waiting for the provincial government of Sichuan to finalize the land and resource planning for Sichuan Province. The company has no assurances on the timing of these plans. However, since the government of China has approved that privately owned enterprises are allowed to participate in natural gas production and since there is great demand for natural gas in China, the company remains optimistic about this project. Balance Sheet
The company ended the quarter with cash of $105,661,999 , an increase of $9,894,736 from the level in the previous year. Cash per share was $10.05 *. Shareholders’ equity was $288,068,305 Shareholders’ equity per share was $27.39 * Cash Flow
Despite the closure of our facilities for more than half of the quarter, Gulf generated strong cash flow from operating activities of $8,445,682. We spent $395,060 on property plant and equipment. Free cash flow excluding the impact of foreign currency translation was $8,050,622. Subsequent Event
The Company’s wholly-owned subsidiary, Shouguang Hengde Salt Industry Co. LTD, was registered in April 2022 in Shandong Province, China, for future crude salt production and trading. At present, this subsidiary does not have any operations. “We were very pleased with our quarter,” stated Mr. Liu Xiaobin, the CEO of Gulf Resources. “Although our factories were closed for 51 of the 90 days and although we required time to restart them, our bromine business still generated over $8 million in revenues and $4 million in gross profit. Bromine pricing has remained extremely strong. Imports have become more expensive. Capacity in China has been reduced, because of environmental controls, and demand remains strong. We are seeing increased use of bromine in pharmaceuticals and other products, such as zinc-bromine batteries. We also expect to receive permission for at least one of our closed factories in 2022. We are extremely bullish on the opportunity in this sector. Based on the improvements we have made to increase productivity and our current outlook on pricing. We will be providing investors with our 6-year plan by the end of June 2022.”
“Results in our crude salt business should improve as the weather warms,” Mr. Liu continued. “We are very optimistic about the opportunities for our new Yuxin chemical business. We are planning to finish construction and begin test and trial production, and we may begin commercial production during 2023.”
“We are also optimistic that we will receive permission to drill for natural gas and brine in Sichuan Province. China faces great shortages of natural gas and we hope to be part of the solution.”
“Finally,” Mr. Liu concluded, “Our management has been working diligently to complete our 6-year plan, which we have promised investors. Our plan will include detailed projections through 2027. We believe investors will be encouraged when they review our projections. Our plan is to hold a conference call by the end of the next month where we will review these projections with our investors.”
Conference Call http://www.gulfresourcesinc.com/news-28.html
A replay of the conference call will be available two hours after the call's completion and expired by Wednesday, May 23, 2022. To access the replay, call +1 (877) 481-4010. International callers should call +1 (919) 882-2331. The Replay Passcode is 45597.
About Gulf Resources, Inc. www.gulfresourcesinc.com .
Forward-Looking Statements
Web: http://www.gulfresourcesinc.com Director of Investor Relations Helen Xu (Haiyan Xu) beishengrong@vip.163.com
GULF RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars)
March 31, 2022 December 31, 2021 Current Assets Cash $ 105,661,999 $ 95,767,263 Accounts receivable 11,102,039 14,525,807 Inventories, net 515,562 691,111 Prepayments and deposits 4,904,466 4,450,037 Other receivable 644 644 Total Current Assets 122,184,710 115,434,862 Non-Current Assets Property, plant and equipment, net 182,415,845 162,657,546 Finance lease right-of use assets 184,155 184,824 Operating lease right-of-use assets 9,562,685 8,311,127 Prepaid land leases, net of current portion 10,419,032 10,368,469 Deferred tax assets 12,896,492 12,900,034 Total non-current assets 215,478,209 194,422,000 Total Assets $ 337,662,919 $ 309,856,862 Liabilities and Stockholders’ Equity Current Liabilities Payable and accrued expenses $ 35,036,051 $ 10,530,776 Taxes payable-current 1,472,666 775,708 Amount due to a related party 1,854,380 1,849,044 Finance lease liability, current portion 262,033 227,429 Operating lease liabilities, current portion 481,540 506,579 Total Current Liabilities 39,106,670 13,889,536 Non-Current Liabilities Finance lease liability, net of current portion 1,778,089 1,770,526 Operating lease liabilities, net of current portion 8,709,855 7,557,583 Total Non-Current Liabilities 10,487,944 9,328,109 Total Liabilities $ 49,594,614 $ 23,217,645 Commitment and Loss Contingencies $ — $ — Stockholders’ Equity PREFERRED STOCK; $0.00 1 par value; 1,000,000 shares authorized; none outstanding $ — $ — COMMON STOCK; $0.00 05 par value; 80,000,000 shares authorized; 10,517,754 shares issued; and 10,471,924 shares outstanding as of March 31 31, 2022 and December 31, 2021 24,376 24,376 Treasury stock; 45,830 shares as of March 31, 2022 and December 31, 2021 at cost (510,329 ) (510,329 ) Additional paid-in capital 100,569,159 100,569,159 Retained earnings unappropriated 150,343,692 150,463,638 Retained earnings appropriated 24,233,544 24,233,544 Accumulated other comprehensive income 13,407,863 11,858,829 Total Stockholders’ Equity 288,068,305 286,639,217 Total Liabilities and Stockholders’ Equity $ 337,662,919 $ 309,856,862
See accompanying notes to the condensed consolidated financial statements.
GULF RESOURCES, INC.
Three-Month Period Ended 2022 2021 NET REVENUE Net revenue $ 8,930,737 $ 5,259,243 Direct labor and factory overheads incurred during plant shutdown (2,184,591 ) (2,613,483 ) General and administrative expenses (2,242,501 ) (1,736,250 ) Other operating expense (8,404 ) — (8,995,824 ) (8,540,667 ) LOSS FROM OPERATIONS (65,087 ) (3,281,424 ) OTHER INCOME (EXPENSE) Interest expense (34,692 ) (36,862 ) Interest income 75,528 72,453 LOSS BEFORE TAXES (24,251 ) (3,245,833 ) INCOME TAX BENEFIT (95,695 ) 743,709 NET LOSS $ (119,946 ) $ (2,502,124 ) COMPREHENSIVE LOSS: NET LOSS $ (119,946 ) $ (2,502,124 ) OTHER COMPREHENSIVE LOSS - Foreign currency translation adjustments 1,549,034 (2,184,690 ) COMPREHENSIVE INCOME (LOSS) $ 1,429,088 $ (4,686,814 ) LOSS PER SHARE: BASIC AND DILUTED $ (0.01 ) $ (0.25 ) WEIGHTED AVERAGE NUMBER OF SHARES: BASIC AND DILUTED 10,471,924 9,997,477
See accompanying notes to the condensed consolidated financial statements.
GULF RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars) (UNAUDITED)
Three-Month Period Ended March 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (119,946 ) $ (2,502,124 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Interest on capital lease obligation 33,622 35,538 Depreciation and amortization 5,003,078 4,104,357 Unrealized exchange (gain) loss on translation of inter-company balances 283,789 104,812 Deferred tax asset 95,695 (743,709 ) Common stock issued for services — — Changes in assets and liabilities Accounts receivable 3,483,711 1,637,800 Inventories 178,444 (162,099 ) Prepayments and deposits (446,365 ) (71,888 ) Other receivables — — Accounts and Other payable and accrued expenses 487,228 830,751 Retention payable — — Taxes payable 704,492 72,758 Prepaid land leases — — Operating leases (1,258,066 ) 35,199 Net cash provided by operating activities 8,445,682 3,341,395 CASH FLOWS USED IN INVESTING ACTIVITIES Purchase of property, plant and equipment (395,060 ) — Net cash used in investing activities (395,060 ) — EFFECTS OF EXCHANGE RATE CHANGES 1,844,114 (864,609 ) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 9,894,736 2,476,786 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 95,767,263 94,222,538 CASH AND CASH EQUIVALENTS - END OF PERIOD $ 105,661,999 $ 96,699,324
See accompanying notes to the condensed consolidated financial statements.
