Gulf Resources Announces Fourth Quarter and Full Year 2021 Financial Results
04/12/2022 - 04:45 PM
SHOUGUANG, China, April 12, 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 fourth quarter and full fiscal year 2021 ended December 31, 2021.
Highlights:
For the year ending 12/31/2021, revenues were $55,030,586 compared to $28,207,024, an increase of 95% . Cost of Net Revenue was $27,132,372 compared to $19,415,034, an increase of 40% . Gross profit was $27,898,214 compared to $8,791,990, an increase of 217% . Gross margins were 50.7% Vs. 31.2% in the prior year. Direct labor increased 31% to $10,718,605. General & Administrative expenses decreased by 7% to $9,525,235. Other operating expenses increased $2,358,154. Profit before taxes improved $14,894,262 from a loss of $9,683,392 t o a profit of $5,210,870. Taxes increased $7,406,689 from a credit of $1,108,471 t o a charge of $6,298,218. The loss after taxes declined 89% to $924,718 from $8,420,044. Three factors contributed to the net loss: a depreciation expenses of $4,303,266 for closed factories #2,#8, & #10, $2,723,189 for the cancellation of deferred tax assets, and $3,134,080 in compensation charges for shares issued to company management.
By Segment
Bromine
Revenues in bromine increased by 78% to $48,871,396. T he increase was due to an increase in volume of 24% and an increase in pricing of 57% . For 2021, the average selling price of bromine was RMB 42,644. The current price is RMB 55,600. Costs in bromine increased by 43% to $22,848,348. Gross profits increased by 182% to $26,023,048 from $9,233,996. Gross profits margins were 53% compared to 37% . Net income in bromine increased by 727% to $13,364,649 from $1,616,542. Crude Salt
Revenues in crude salt increased by 101% to $6,080,242. Volume increased 4% . Pricing increased 93.4% . Cost of net revenues increased by 27% to $4,284,024. Gross profit increased to $1,796,218 from a net loss of ($442,006). For the fiscal year, the crude salt segment lost $1,078,320 compared to a loss of $3,589,494 in the previous year. Chemicals & Natural Gas
The Chemical products segment sustained a loss of $2,500,561 roughly in line with the loss of $2,745,297 in the previous year. The chemical business did not operate in 2021. The natural gas segment sustained a loss of $167,139 in 2021. The natural gas segment did not operate in 2021. Cash Flow
The Company generated $23,311,169 from operations compared to $9,305,627 in the previous year. Capital expenditures were $30,093,140 compared to $21,719,369 in the previous year. The table below reflects the capital expenditures by segment for the full year and for the 4th quarter. (Numbers for the 9 months are from the 10Q of Nov15. 2021).
Capital Expenditures Bromine （ $) Crude Salt ($) Chemicals ($) Total($) 2021(A) 18,205,560 2,250,126 9,637,454 30,093,140 9Months(B) 188,529 - 8,371,623 8,560,152 Q4 2021(C) 18,017,031 2,250,126 1,265,831 21,532,988
(A) Information represents are audited by company auditor$20.3 million on its bromine and crude salt segments, drilling new wells and building new aqueducts.
Balance Sheet
The Company ended the year with cash of $95,767,263. On a per share basis, this equates to $9.15*. Net cash per share (current assets minus all liabilities) were $81,877,727 or $7.82 per share. Working capital was $101,545,326 or $9.70* per share. Shareholders’ equity was $286,639,217 or $27.37* per share. Fourth Quarter
The results for the fourth quarter of 2021 are calculated by using the reported results for the full year in the 10-K and then subtracting the results filed in the 10-Q for the nine months ended September 30, 2021.
2021 2020 % Change Net Revenue $20,869,666 $11,807,686 76.7 % COGS $7,837,512 $6,720,763 16.6 % Gross Margin $13,032,154 $5,086,923 156.2 % GP % 62.4 % 43.1 % Sales & Marketing $18,759 $13,797 36.0 % Direct Labor & Factory O.H. $5,481,347 $1,284,175 326.8 % G&A Expenses $1,374,466 $2,942,933 -53.3 % Income before taxes $3,822,175 $880,195 334.2 % Taxes $4,935,164 $603,280 718.1 % Income -$1,112,989 $276,915
In the 4th quarter of 2021 compared to the same period of 2020,
Net revenue increased 76.7% Gross margin increased 156.2% Direct labor and factory overhead increased 326.8% Income from operations increased 350% Income before taxes increased 334.2% Taxes increased 718.1% The Company incurred a loss of $1,112,989 versus a profit in the previous year. A number of below listed unique accounting factors impacted the fourth quarter.
As can be seen from the table below taken from the 10-K and the 10-Q for September 30, 2021. Depreciation in the fourth quarter was more than $4 million higher than the previous year’s quarter. The main contributory factor was that the depreciation for the three closed factories (#2,#8, and #10) to the fourth quarter.
Depreciation Cost 2021 2020 Full Year 2021 $20,543,425 $15,987,860 9 months $12,316,639 $11,907,702 Q4 $8,226,786 $4,080,158 Difference $4,146,628
The second major contributing factor was the tax rate. In the first 9 months, the tax rate approximated the 25% statutory tax rate. In the fourth quarter, the Company took a charge of $2,723,189 for the offset of deferred tax assets.
Subsequent Events
On February 22, 2022, the Company announced that discussions with the government have convinced management that the electricity restrictions are being eased. Accordingly, the Company had contacted its suppliers and will have most of the remainder of the equipment produced and delivered.
2022 Outlook
The Company expects bromine prices to remain at current high levels or even increase. The Company is encouraged by the opportunity in zinc-bromine batteries for power and EVs.
The Company also expects to receive approval to open at least one and potentially more of its closed factories in 2022.
The Company has now ordered most of the equipment for its chemical factory. While some equipment may be delayed because of COVID issues in China, the Company believes installation should be completed near the end of the third quarter 2022. Commercial production may begin during 2023. The Company believes the delay could increase the cost of the project by about $5 million . However, it remains encouraged about the opportunity. The Company will continue to post photographs on its website showing the progress of construction.
Sichuan Project: Natural Gas and Brine: 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 the natural gas production and since there is great demand for natural gas in China, the company remains optimistic about this project.
2022 Q1
“We are very encouraged about the continuing high price of bromine,” Mr. Liu Xiaobin, CEO of Gulf Resources stated. “As we noted in our press release, we are seeing new demand for bromine, such as the zinc/bromine batteries and supply remains highly constrained. At these levels, our bromine and crude salt business should be profitable. We also believe we will be able to open at least one of our factories this year.”
“Now that following the electricity restrictions are being eased,” Mr. Liu continued, “we are moving as fast as we can to finish construction and begin test and trial production in our new chemical factory. We expect this factory, which will primarily produce pharmaceutical intermediate products with higher margin. In addition, despite the delays, we remain confident that we will be able to produce natural gas and bromine in Sichuan. Natural gas pricing continues to hit record highs. Our exploration area has significant natural gas resources. This continues to be a potentially very exciting project.”
“Meanwhile,” Mr. Liu concluded, “our balance sheet remains strong and we have the capabilities of taking advantage of new opportunities as they arise.”
(*These calculations are based on the number of shares outstanding of 10,471,924 shares as of December 31, 2021)
Conference Call
The webcasting is also available then, just simply click on the link below: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, April 20, 2022. To access the replay, call +1 (877) 481-4010. International callers should call +1 (919) 882-2331. The Replay Passcode is 45205.
About Gulf Resources, Inc. www.gulfresourcesinc.com .
Forward-Looking Statements
GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Expressed in U.S. dollars) December 31, December 31, Current Assets Cash $ 95,767,263 $ 94,222,538 Accounts receivable, net 14,525,807 6,521,798 Inventories, net 691,111 419,609 Prepayments and deposits 4,450,037 6,146,461 Prepaid land leases — — Other receivables 644 559 Total Current Assets 115,434,862 107,310,965 Non-Current Assets Property, plant and equipment, net 162,657,546 148,947,689 Finance lease right-of use assets 184,824 186,272 Operating lease right-of-use assets 8,311,127 8,868,661 Prepaid land leases, net of current portion 10,368,469 10,134,004 Deferred tax assets 12,900,034 18,590,227 Total non-current assets 194,422,000 186,726,853 Total Assets $ 309,856,862 $ 294,037,818 Commitment and Contingencies Liabilities and Stockholders’ Equity Current Liabilities Payable and accrued expenses $ 10,530,776 $ 5,081,701 Retention payable — — Taxes payable-current 775,708 1,326,179 Amount due to a related party 1,849,044 — Finance lease liability, current portion 227,429 217,070 Operating lease liabilities, current portion 506,579 477,350 Total Current Liabilities 13,889,536 7,102,300 Non-Current Liabilities Finance lease liability, net of current portion 1,770,526 1,888,903 Operating lease liabilities, net of current portion 7,557,583 8,022,342 Total Non-Current Liabilities 9,328,109 9,911,245 Total Liabilities 23,217,645 17,013,545 Commitment and Contingencies — — Stockholders’ Equity PREFERRED STOCK; $0.001 par value; 1,000,000 shares authorized; none outstanding COMMON STOCK; $0.0005 par value; 80,000,000 shares authorized; 10,517,754 and 10,043,307 shares issued; and 10,471,924 and 9,997,477 shares outstanding as of December 31, 2021 and December 31, 2020 24,376 24,139 Treasury stock; 45,830 and 45,830 shares as of December 31, 2021 and December 31, 2020 at cost (510,329 ) (510,329 ) Additional paid-in capital 100,569,159 97,435,316 Retained earnings unappropriated 150,463,638 151,388,356 Retained earnings appropriated 24,233,544 24,233,544 Accumulated other comprehensive income (loss) 11,858,829 4,453,247 Total Stockholders’ Equity 286,639,217 277,024,273 Total Liabilities and Stockholders’ Equity $ 309,856,862 $ 294,037,818
The accompanying notes are an integral part of these consolidated financial statements.
GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Expressed in U.S. dollars) Years Ended December 31, 2021 2020 NET REVENUE $ 55,030,586 $ 28,207,024 OPERATING EXPENSE Cost of net revenue (27,132,372 ) (19,415,034 ) Sales, marketing and other operating expenses (62,964 ) (42,663 ) Direct labor and factory overheads incurred during plant shutdown (10,718,605 ) (8,170,390 ) General and administrative expenses (9,525,235 ) (10,239,943 ) Other operating expense (2,380,540 ) (22,386 ) (49,819,716 ) (37,890,416 ) LOSS FROM OPERATIONS 5,210,870 (9,683,392 ) OTHER INCOME (EXPENSE) Interest expense (137,178 ) (136,430 ) Interest income 295,172 291,307 Other (income) expenses 4,636 — INCOME (LOSS) BEFORE INCOME TAXES 5,373,500 (9,528,515 ) INCOME TAX (EXPENSE) BENEFIT (6,298,218 ) 1,108,471 NET LOSS $ (924,718 ) $ (8,420,044 ) COMPREHENSIVE INCOME (LOSS): NET LOSS $ (924,718 ) $ (8,420,044 ) OTHER COMPREHENSIVE INCOME (LOSS) - Foreign currency translation adjustments 7,405,582 19,945,054 COMPREHENSIVE INCOME (LOSS) $ 6,480,864 $ 11,525,010 BASIC AND DILUTED LOSS PER SHARE $ (0.09 ) $ (0.87 ) BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES: 10,471,924 9,650,619
The accompanying notes are an integral part of these consolidated financial statements.
GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. dollars) Years Ended December 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (924,718 ) $ (8,420,044 ) Adjustments to reconcile net income to net cash (used in) provided by operating activities: Interest on capital lease obligation 135,707 135,936 Depreciation and amortization 20,543,425 15,987,860 Unrealized translation difference 782,660 1,832,026 Deferred tax asset 6,298,218 (1,108,471 ) Stock-based compensation expense 3,134,080 2,392,163 Shares issued from treasury stock for services — — Changes in assets and liabilities Accounts receivable (7,749,127 ) (1,161,704 ) Inventories (259,999 ) 292,101 Prepayment and deposits (2,849,670 ) (6,925 ) Other receivables (85 ) — Accounts and other payable and accrued expenses 2,856,504 342,790 Amount due to a related party 1,852,230 — Taxes payable (534,307 ) (449,915 ) Prepaid land leases — (372,259 ) Operating lease 26,251 (157,931 ) Net cash provided by (used in) operating activities 23,311,169 9,305,627 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (30,093,140 ) (21,719,369 ) Net cash used in investing activities (30,093,140 ) (21,719,369 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of finance lease obligation (290,597 ) (264,976 ) Net cash used in financing activities (290,597 ) (264,976 ) EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 8,617,293 6,599,270 NET DECREASE IN CASH AND CASH EQUIVALENTS 1,544,725 (6,079,448 ) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 94,222,538 100,301,986 CASH AND CASH EQUIVALENTS - END OF YEAR $ 95,767,263 $ 94,222,538
GULF RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Expressed in U.S. dollars) Years Ended December 31, 2021 2020 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest on finance lease obligation $ 136,709 $ 136,774 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Purchase of property, plant and equipment included in payables and accrued expenses $ — $ 3,537,644
The accompanying notes are an integral part of these consolidated financial statements.
