China XD Plastics Announces Second Quarter 2012 Financial Results -Reports Record Second Quarter Revenues and Net Income-

HARBIN, China, Aug.10, 2012 /PRNewswire-Asia-FirstCall/ -- China XD Plastics Company Limited (NASDAQ: CXDC, "China XD Plastics" or the "Company"), one of China's leading specialty chemical players engaged in the development, manufacture and sale of modified plastics primarily for automotive applications, today announced its financial results for the second quarter ended June 30, 2012.

Second Quarter Fiscal 2012 Financial Highlights:

  • Revenue was $144.7 million, an increase of 64.0% from $88.2 million in the second quarter of fiscal 2011
  • Gross profit was $35.3 million, an increase of 60.0% from $22.0 million in the second quarter of fiscal 2011
  • Gross profit margin was 24.4%, compared to 25.0% in the second quarter of fiscal 2011
  • Net income was $22.8 million, compared to $14.4 million in the second quarter of fiscal 2011
  • Total volume shipped was 53,866 metric tons, up 48.1% from 36,367 metric tons in the second quarter of fiscal 2011

Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics, commented "I am pleased to report another quarter of record revenues and profit growth. Although the global economy has not been as favorable as before in relation to our business, we made timely adjustment to our operation, marketing and business development strategy, by focusing more on the market development in East and North China, which offset slowdown elsewhere and led to the good performance of our business objective during the first half of 2012. As evidenced by the higher volumes shipped, we continue to experience strong demand for our products across our portfolio. The increase in average selling prices was partially due to our continued shift in sales mix to higher value-added products. As market demand grew for these higher margin products and as part of our long-term growth strategy, we remain committed to our investment in research and development. We believe this strategy is the key to further strengthening our market position and will help us deliver long-term value for our stockholders. In line with our schedule, our third production base launched in December 2011, which added an additional 90,000 metric tons of annual production capacity across 20 new production lines, contributed approximately 20,565 tons of production during the second quarter of 2012. In addition, there are three additional workshops which are currently under construction in our third production base and are expected to be completed and deployed with 30 additional production lines in the second half of 2012 to further expand our annual capacity potential by approximately 135,000 metric tons to support our future growth in 2013."

Second Quarter 2012 Results

Revenues for the second quarter of fiscal 2012 were $144.7 million, representing a year-over-year increase of 64.0% from $88.2 million in the second quarter of fiscal 2011. The increase in revenues was due to a 48.1% increase in sales volume and an 11.5% increase in the average selling price of our products on a constant dollar basis, driven by increasing demand for automotive modified plastics used in the plastic parts of mid- and high-end branded automobiles by the Company's major customers, and a shift in product mix to include a greater percentage of sales of higher margin and higher value-added products. For the second quarter of fiscal 2012, sales of higher margin products represented 49.9% of product revenues, compared to 42.0% of product revenues in the same period of 2011.

Gross profit for the second quarter of fiscal 2012 was $35.3 million, up 60.0% from $22.0 million in the second quarter of fiscal 2011. Gross margin was 24.4%, compared to 25.0% in the same period of the prior year.  The year-to-year decrease in gross margin was mainly attributed to increase of the price of raw materials, increase of depreciation, and workers' wages this year, partially offset by our efforts in developing and selling more higher value-added automotive modified plastics towards high-end products as a percentage of total sales in the second quarter ended June 30, 2012.

G&A expenses were $3.0 million, compared to $1.7 million for the same period of the prior year. This increase is primarily due to increase of payroll resulting from raised average salary and increased headcount. R&D expenses were $4.6 million, compared to $3.0 million in the same period of the prior year. The increase in R&D expenses was due to the Company's ongoing efforts to further expand its product offering and obtain new product certifications, ultimately to increase product revenue and maintain margin over the long term. During the second quarter of 2012, the Company successfully launched nine new AM certified products, which increased its total number of AM certified products to 227, and currently has 113 new products under research and development.

Operating income for the second quarter of fiscal 2012 was $27.6 million, or 19.1% of revenues, an increase of 61.8% over operating income of $17.1 million, or 19.3% of revenues, in the same period of the prior year.

Net income for the second quarter of fiscal 2012 was $22.8 million, compared to a net income of $14.4 million for the same period of the prior year.

Basic and diluted earnings per share were $0.36 and $0.33, respectively, a significant increase when compared to last year's results, which were at $0.30 and $0.30, respectively. 

Basic average numbers of shares used in computation of basic earnings per share for the three months ended June 30, 2012 remained at 47.5 million from the same period of the prior year.

Weighted average numbers of shares used in computation of diluted earnings per share for the three months ended June 30, 2012 remained at 47.6 million from  the same period of the prior year.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the second quarter of 2012 was $33.0 million, an increase of 60.8% from EBITDA of $20.6 million in the same period of the prior year. For a detailed reconciliation of EBITDA, a non-GAAP measure, to its nearest GAAP equivalent, please see the financial tables at the end of this release.

Financial Condition

As of June 30, 2012, China XD Plastics had $142.2 million in cash and cash equivalents, $194.2 million in working capital and a current ratio of 3.2. Stockholders' equity as of June 30, 2012 was $215.5 million, compared to $173.9 million as of December 31, 2011.

Business Outlook and Guidance

Given the Company's strong performance during the second quarter of 2012 and positive outlook on customer demand for its products for the remaining of 2012, the Company reiterates its revenues for fiscal 2012 to range between $550 million and $580 million, and non-GAAP adjusted net income to range between $82 million and $85 million, excluding any non-cash charges related to deferred income tax benefit, stock based compensation and change in fair value of existing derivative liabilities. This forecast based on constant exchange rates and reflects the Company's current and preliminary view, which is subject to change.

Mr. Han concluded, "Thanks to our committed practice of business strategy periodic review and timely adjustment in response to the ever-changing business environment, we continue to execute our business plan in multiple fronts. We generated strong operational and financial results and further enhanced our position in the marketplace especially amidst current challenging economic conditions both globally and nationally. During the second quarter, we kept growing our product portfolio to offer our customers more higher-value added products in a cost effective manner and solidified our footprint in North and East China. We are pleased with the development of our product mix and product certifications, both key areas that we believe will give us significant competitive advantages as we continue to expand our customer base and increase sales. Looking ahead, we continue to be enthusiastic about the prospects for our business. Demand for our products remains strong, the production contribution from capacity and product lines installed in December 2011 is on schedule, and we are making the necessary investments in R&D to ensure we are well positioned to leverage positive market dynamics both now and in the future. In light of our strong performance in the second quarter of 2012 and positive growth trends for the sector and our business, we remain optimistic about business and growth in 2012."

Conference Call

China XD Plastics' management will host a conference call at 9:00 a.m. ET on Friday, August 10, 2012, to discuss its second quarter of fiscal 2012 financial results. The conference call may be accessed by calling +1-866-519-4004 (for callers in the U.S.) or +65-6723--9381 (for international callers) and entering pass code 15884910. Please dial in approximately 10 minutes before the scheduled time of the call.

A recording of the conference call will be available through August 18, 2012, by calling +1-866-214-5335 (for callers in the U.S.) or +61-28235-5000 (for callers outside the U.S.) and entering pass code 15884910.

A live webcast and replay of the conference call will be available on the investor relations page of the Company's website at http://www.chinaxd.net.

About China XD Plastics Company Limited

China XD Plastics Company Limited, through its wholly-owned subsidiaries (the "Company"), develops, manufactures and sells modified plastics, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 23 automobile brands manufactured in China, including AUDI, BMW, Toyota, Buick, Mazda, VW Golf, Jetta, and Hafei new energy vehicles. The Company's wholly-owned research center is dedicated to the research and development of modified plastics, and benefits from its cooperation with well-known scientists from prestigious universities in China. As of June 30, 2012, 227 of the Company's products have been certified for use by one or more of the automobile manufacturers in China. For more information please visit http://www.chinaxd.net.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, statements reflecting management's current beliefs regarding anticipated completion and deployment of additional productions lines and capacity; competitive advantages expected to be brought by product mix and product certifications; market trends and continued demand for our products; the growth expansion into different geographic areas and market segments outside the automotive sector; the growth trends for the automotive sector and our business; revenue and net income guidance; and our future growth prospects and market position. These statements and other forward-looking statements are subject to uncertainties and risks detailed in the Company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

Contacts:

China XD Plastics
Mr. Taylor Zhang, CFO (New York)
Phone: +1-212-747-1118
Email: cxdc@chinaxd.net

- Financial Tables Follow -

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS






June 30,


December 31,



2012


2011



US$


US$

ASSETS





Current assets:





Cash and cash equivalents



142,227,509



135,482,386

Restricted cash



18,888,714



11,128,106

Accounts receivable, net of allowance for doubtful accounts



47,822,751



45,232,013

Amounts due from related parties



7,870



78,912

Inventories



58,248,137



44,953,958

Prepaid expenses and other current assets



15,850,921



12,857,223

Total current assets



283,045,902



249,732,598

Property, plant and equipment, net



110,905,997



100,933,429

Land use rights, net



3,990,719



4,055,363

Deposits for purchase of land use rights and plant



5,556,589



5,608,765

Deposits for purchase of equipment



21,308,217



-

Other non-current assets



262,200



264,662

Total assets



425,069,624



360,594,817

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS' EQUITY







Current liabilities:







Short-term bank loans



47,221,785



31,459,032

Bills payable



28,333,071



22,243,760

Accounts payable



97,469



398,043

Amounts due to a related party



168,705



-

Income taxes payable



7,655,800



5,814,988

Accrued expenses and other current liabilities



5,319,109



3,213,181

Total current liabilities



88,795,939



63,129,004

Deferred income tax liabilities



21,158,109



22,102,431

Warrants liability



2,000,608



3,862,927

Embedded derivative liability



298



610

Total liabilities



111,954,954



89,094,972

Redeemable Series C convertible preferred stock



1,829



1,829

Redeemable Series D convertible preferred stock



97,576,465



97,576,465

Stockholders' equity:







Series B preferred stock



100



100

Common stock, US$0.0001 par value, 500,000,000            shares authorized, 47,574,772 shares and 47,548,367            shares issued, 47,553,772 shares and 47,527,367            shares outstanding as of  June 30, 2012 and            December 31, 2011, respectively



4,757



4,754

Treasury stock, at cost: 21,000 shares as of June 30,            2012 and December 31, 2011, respectively



(92,694)



(92,694)

Additional paid-in capital



71,496,969



71,190,659

Retained earnings



134,675,930



91,340,855

Accumulated other comprehensive income



9,451,314



11,477,877

Total stockholders' equity



215,536,376



173,921,551

Commitments and contingencies



-



-

Total liabilities, redeemable convertible preferred    stocks and stockholders' equity



425,069,624



360,594,817









CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME







Three-Month Period Ended June 30,




2012



2011




US$



US$









Revenues



144,662,774




88,194,119


Cost of revenues



(109,395,422)




(66,147,271


    Gross profit



35,267,352




22,046,848











Selling expenses



(53,064)




(256,127


General and administrative expenses



(2,990,272)




(1,682,107


Research and development expenses



(4,610,458)




(3,043,910


    Total operating expenses



(7,653,794)




(4,982,144)











    Operating income



27,613,558




17,064,704











Interest income



1,418,287




17,646


Interest expense



(913,643)




(466,044)


Other income



-




94,384


Other expense



-




(181)


Change in fair value of embedded conversion option



298




213


Change in fair value of warrants liability



1,528,614




2,157,943


    Total non-operating income, net



2,033,556




1,803,961


    Income before income taxes



29,647,114




18,868,665


Income tax expense



(6,874,387)




(4,488,056


    Net income



22,772,727




14,380,609











Earnings per share of common stock:









Basic



0.36




0.30


Diluted



0.33




0.30











Net income



22,772,727




14,380,609











Other comprehensive income (loss)









  Foreign currency translation adjustment, net of nil       income taxes



(1,946,740)




1,510,092











Comprehensive income



20,825,987




15,890,701







CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS







Six-Month Period Ended June 30,




2012



2011




US$



US$


Cash flows from operating activities:







Net cash provided by operating activities



29,360,005




31,856,438











Cash flows from investing activities:









Purchases and deposits for property, plant and equipment and land use rights



(37,490,885)




(17,631,959)


Proceeds from sales of property, plant and equipment



-




40,531


Net cash used in investing activities



(37,490,885)




(17,591,428)











Cash flows from financing activities:









Proceeds from bank borrowings



70,412,507




30,283,168


Repayments of bank borrowings



(54,273,011)




(21,412,341)


Dividends paid to redeemable Series C        convertible preferred stockholders



(60)




(120)


Advance from a related party



-




255,147


Net cash provided by financing activities



16,139,436




9,125,854











Effect of foreign currency exchange rate        changes on cash and cash equivalents



(1,263,433)




748,455


Net increase in cash and cash equivalents



6,745,123




24,139,319











Cash and cash equivalents at beginning of period



135,482,386




22,720,766


Cash and cash equivalents at end of period



142,227,509




46,860,085











Supplemental disclosure of cash flow information:









Interest paid



1,399,043




815,992


Income taxes paid



12,271,078




3,664,701











Non-cash investing and financing activities:









Accrual for purchase of equipment



-




180,536













CHINA XD PLASTICS COMPANY LIMITED

Reconciliation of Net Income to EBITDA

(Amounts expressed in United States dollars)






Three Months Ended


June 30,


2012

2011

Net income

22,772,727

14,380,609

Interest expense

913,643

466,044

Income tax expense

6,874,387

4,488,056

Depreciation and amortization expense

2,489,227

1,216,158

EBITDA

33,049,984

20,550,867




CHINA XD PLASTICS COMPANY LIMITED

Reconciliation of GAAP Net Income Available to Common Stockholders to Non-GAAP Adjusted Net Income Available to Common Stockholders*

(Amounts expressed in United States dollars, except share data)




Three Months Ended
June 30,


2012

2011

Net income available to common stockholders –GAAP

22,772,697

14,380,579

Change in fair value of warrants liability and embedded derivative liability

(1,528,912)

(2,158,156)

Deferred income tax benefit

(350,783)

(229,880)

Share-based compensation

153,608

126,633

Adjusted Net Income Attributable to Common Stockholders – Non GAAP

21,046,610

12,119,176

Weighted average number of shares outstanding



Basic

47,545,938

47,548,367

Diluted

47,552,663

47,548,367

EPS basic and diluted

0.44

0.25

*Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income

GAAP results for the three months ended June 30, 2012 and 2011 include non-cash charges. To supplement the Company's consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP financial information excluding the impact of those items in this release. The calculation of earnings per share in this table does not take into consideration the effect of participating securities' rights to undistributed earnings and hence differs from that applying the two-class method under US GAAP. The Company's management believes that this non-GAAP measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

SOURCE China XD Plastics Company Limited



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