China XD Plastics Announces Second Quarter Fiscal 2013 Financial Results - Reports Record Second Quarter Revenues -

- Reiterates Fiscal 2013 full year guidance -

HARBIN, China, Aug. 12, 2013 /PRNewswire-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, 2013.

Second Quarter Fiscal 2013 Financial Highlights:

  • Revenues were $202.2 million, an increase of 39.7% from $144.7 million in the second quarter of 2012
  • Gross profit was  $37.2 million, an increase of 5.4% from $35.3 million in the second quarter of 2012
  • Gross profit margin was 18.4%, compared to 24.4% in the second quarter of 2012
  • Net income was $20.8 million, compared to $22.8 million in the second quarter of 2012
  • Total volume shipped was 69,915 metric tons, up 29.8% from 53,866 metric tons in the second quarter of 2012

Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics, commented, "I am pleased to report our solid revenue growth and positive business development especially during the changing and challenging macro environment affecting different industries in China. Although gross profit margin declined during the first half of 2013 mainly due to our marketing strategy such as discounts on listed prices since the fourth quarter of 2012, this strategy has helped us achieve tremendous progress in market penetration, especially in East China, the largest automobile market in China. Revenues from East China and North China during the second quarter of Fiscal 2013 increased by 88.5% and 44.8% compared to the second quarter of 2012. Furthermore, we initiated our entry to Southwest China Market on a solid footing with 4.8% revenue contribution from the region during the second quarter of 2013. As previously reported during the first quarter's earnings release, we expected gross margin in the second quarter to improve to approximately 18.0% due to our gradual reduction of the sales discounts. The improvement in gross margin during the second quarter as compared to our first quarter speaks volume of our strategy execution. As evidenced by the higher volumes shipped, we continue to experience strong demand for our products across our portfolio. As market demand grows for our higher-end products and as part of our long-term growth strategy, we remain committed to our investment in research and development in order to enhance our product offerings especially for the higher-end applications. We believe this strategy is the key to further strengthening our market position and will help us deliver long-term value for our stockholders."

Second Quarter 2013 Results

Revenues for the second quarter of fiscal 2013 were $202.2 million, representing an increase of 39.7% from $144.7 million in the second quarter of fiscal 2012. The increase in revenues was due to approximately 29.8% increase in sales volume and 3.3% increase average RMB selling price of our products, driven by increasing demand for automotive modified plastics used in the parts of mid- and high-end branded automobiles by the Company's major customers.

Gross profit for the second quarter of fiscal 2013 was $37.2 million, increased by 5.4% from $35.3 million in the second quarter of fiscal 2012. Gross margin was 18.4%, compared to 24.4% in the same period of the prior year.

(i) The decrease of gross margin was primarily due to an average 6.4% discount on the listed prices for the three month period ended June 30, 2013 to distributors as part of our marketing initiatives to increase our market share in East China and Southwest China. The discount is primarily aimed at further expanding into the East China and Southwest China market. As a result, revenues contribution from East China and Southwest China grew to 29.8% and 4.8% during the three-month period ended June 30, 2013 compared to 21.5% and nil in the same period of 2012, respectively. We plan to maintain such discount rate for the rest of 2013.

(ii) The decrease of gross margin was also due to increase in shipping expenses to US$3.4 million in the three months ended June 30, 2013 from US$0.3 million in the three months ended June 30, 2012. We started managing logistics on our own to better serve our customers in a more timely manner and to better understand our customer demands and control our sales channel since the first quarter of 2013. Such arrangement is expected to continue in the future.

G&A expenses were $2.9 million, compared to $2.3 million for the same period of the prior year. This increase is primarily due to increase of professional fees, payroll resulting from an increase in both average salary and headcount and bank charges. R&D expenses were $5.8 million, compared to $4.6 million in the same period of the prior year. The increase in R&D expenses was due to the Company's ongoing efforts in research and development activities on new products primarily in consumption of raw materials for various experiments for automotive applications from automobile manufacturers as well as other non-automotive applications. During the quarter ended June 30, 2013, the Company successfully launched 10 new automobile manufacturers certified products ("AMCP"), which increased its total number of AMCP to 263. As of June 30, 2013, the Company had 69 products in the process of being certified by automotive and non-automotive manufacturers.

Operating income for the second quarter of fiscal 2013 was $28.5 million, or 14.1% of revenues, an increase of 0.4% over operating income of $28.4 million, or 19.6% of revenues, in the same period of the prior year. This increase is primarily due to higher gross profit, partially offset by higher G&A and R&D expenses.

Net income for the second quarter of fiscal 2013 was $20.8 million, compared to a net income of $22.8 million for the same period of the prior year. This decrease is primarily due to increase of payroll resulting from an increase in both average salary and headcount and higher interest expenses, partially offset by slight increase in operating income.

Basic and diluted earnings per share were $0.32, compared to $0.36 and $0.33 of the same period of the prior year, respectively.

Basic average numbers of shares used in computation of basic earnings per share for the three months ended June 30, 2013 was 47.8 million, compared to 47.5 million in 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, 2013 was 47.8 million, compared to 47.6 million in the same period of the prior year.

EBITDA (Earnings before Interest Expense, Taxes, Depreciation, and Amortization) for the second quarter of 2013 was $36.6 million, an increase of 10.9% from EBITDA of $33.0 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.

Non-GAAP Financial Measures

Non-GAAP Financial Measures Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. We provide "EBITDA", which is a non-GAAP financial measure. EBITDA consists of net income before (a) interest income (expense), (b) income tax provision (benefit), and (c) depreciation and amortization.

The Company believes that this non-GAAP financial measure provides important supplemental information to management and investors. This non-GAAP financial measure reflects an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the accompanying reconciliation to corresponding GAAP financial measures, provides a more complete understanding of factors and trends affecting the Company's business and results of operations. Additionally, lenders or potential lenders use EBITDA to evaluate the Company's ability to repay loans.

This non-GAAP financial measure should be considered in addition to financial measures presented in accordance with GAAP, but should not be considered as a substitute for, or superior to, financial measures presented in accordance with GAAP. For a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, please see the financial information included elsewhere in this press release.

Financial Condition

As of June 30, 2013, China XD Plastics had $66.0 million in cash and cash equivalents, $175.2 million in time deposits with commercial banks, $193.4 million in working capital and a current ratio of 1.5. Stockholders' equity as of June 30, 2013 was $304.8 million, compared to $264.4 million as of December 31, 2012.

Business Outlook and Guidance

Given the Company's positive outlook on customer demand and successful geographic market penetration with the backdrop of on schedule ramp-up of its production capacity during the second quarter of 2013, the Company now reiterates its annual guidance and expects revenues for fiscal 2013 to range between $935 million and $1 billion and net income for fiscal 2013 to range between $100 million and $132 million. This forecast excludes any non-cash charges related to deferred income tax benefit, stock based compensation and change in fair value of existing derivative liabilities and is 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 solid operational results and further enhanced our position in the marketplace especially amidst current challenging economic conditions both globally and nationally. We are pleased with the development of our product mix, gross margin improvement over the first quarter of 2013 and our market penetration in different regional markets, all key areas that we believe will give us significant competitive advantages as we continue to expand our customer base and increase sales in East and Southwest China markets. In light of our business development so far this year and positive growth trends for the sector and our business, we remain optimistic about our business and growth this year. 2013 marks an exciting year with both opportunities and challenges for China XD. The construction of our fourth production base with annual capacity of 300,000 metric tons in Sichuan is underway. Once our southwest production base is completed and in operation, we will be able to effectively cover the entire country geographically and reach our goal of 10% market penetration with our major products, with our southwest production base covering southwest and central China and reaching into east China and our northeast production bases covering northeast and north China and reaching into east China."

Conference Call

China XD Plastics' management will host a conference call at 9:00 a.m. ET on Monday, August 12, 2013, to discuss its second quarter of fiscal 2013 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 31534578.

A recording of the conference call will be available through August 21, 2013, by calling +1-855 452 5696 (for callers in the U.S.) or +61-28199 0299 (for callers outside the U.S.) and entering pass code 31534578.

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 24 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, 2013, 263 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, the Company's ability to raise additional capital to finance the Company's activities; the effectiveness, profitability, and the marketability of its products; legal and regulatory risks; the ability for the 30 new production lines added in the fiscal year 2012 to increase the Company's annual production capacity; the Company's ability to execute its growth strategy; the future trading of the common stock of the Company; the Company's ability to operate as a public company; the period of time for which its current liquidity will enable the Company to fund its operations; the Company's ability to protect its proprietary information; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other 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
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, 2013


December 31, 2012



US$


US$

ASSETS                                                                                                                                                        





Current assets:





Cash and cash equivalents



66,011,897



83,822,602

Restricted cash



11,862,515



16,915,359

Time deposits



175,155,603



47,955,923

Accounts receivable, net



207,115,047



143,843,764

Amounts due from related parties



8,147



219,360

Inventories



102,439,195



78,263,071

Prepaid expenses and other current assets



5,931,739



6,090,232

    Total current assets



568,524,143



377,110,311

Property, plant and equipment, net



218,380,146



223,780,133

Land use rights, net



10,572,538



10,524,451

Other non-current assets



2,335,044



169,414

    Total assets



799,811,871



611,584,309















LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS' EQUITY

Current liabilities:







Short-term loans



245,225,991



162,076,050

Bills payable



14,256,851



15,810,340

Accounts payable



74,400,321



7,061,259

Amounts due to a related party



170,743



-

Income taxes payable



8,966,254



8,511,679

Accrued expenses and other current liabilities



32,093,456



34,442,983

    Total current liabilities



375,113,616



227,902,311

Income taxes payable-non current



1,528,345



-

Deferred income tax liabilities



20,155,409



20,733,959

Warrants liability



588,419



1,008,750

    Total liabilities



397,385,789



249,645,020








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, 47,809,772 shares and 47,584,772 shares issued, 47,788,772 shares and 47,563,772 shares outstanding as of June 30, 2013 and December 31, 2012, respectively



4,781



4,758

Treasury stock, 21,000 shares at cost



(92,694)



(92,694)

Additional paid-in capital



73,173,925



72,583,910

Retained earnings



212,465,960



177,208,492

Accumulated other comprehensive income



19,297,545



14,658,258

    Total stockholders' equity



304,849,617



264,362,824

Commitments and contingencies



-



-

    Total liabilities, redeemable convertible preferred stocks and stockholders' equity



799,811,871



611,584,309

 

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME




Three-Month
Period Ended June 30


Six-Month
Period Ended June 30,



2013


2012


2013


2012



US$


US$


US$


US$










Revenues                                                                                      



202,150,358



144,662,774



373,117,929



267,839,589

Cost of revenues



(164,965,762)



(109,395,422)



(306,777,202)



(201,350,671)

    Gross profit



37,184,596



35,267,352



66,340,727



66,488,918














Selling expenses



(47,218)



(53,064)



(109,992)



(182,752)

General and administrative expenses



(2,855,659)



(2,281,661)



(6,339,574)



(4,635,796)

Research and development expenses



(5,775,769)



(4,610,458)



(10,786,688)



(7,065,497)

    Total operating expenses



(8,678,646)



(6,945,183)



(17,236,254)



(11,884,045)














    Operating income



28,505,950



28,322,169



49,104,473



54,604,873














Interest income



1,470,113



1,418,287



2,539,717



2,420,016

Interest expense



(3,374,738)



(913,643)



(6,310,724)



(1,399,043)

Foreign currency exchange gains (losses)



877,423



(708,611)



1,366,616



(717,263)

Change in fair value of warrants liability



400,007



1,528,614



420,331



1,862,319

Government grant



1,172



-



210,091



-

Change in fair value of embedded derivative liability



-



298



-



312

    Total non-operating income (expense), net



(626,023)



1,324,945



(1,773,969)



2,166,341














    Income before income taxes



27,879,927



29,647,114



47,330,504



56,771,214














Income tax expense



(7,073,314)



(6,874,387)



(12,073,036)



(13,436,079)














    Net income



20,806,613



22,772,727



35,257,468



43,335,135














Earnings per common share:













Basic



0.32



0.36



0.55



0.68

Diluted



0.32



0.33



0.55



0.65














Net Income



20,806,613



22,772,727



35,257,468



43,335,135














Other comprehensive income (loss)













Foreign currency translation adjustment, net of nil income taxes



3,758,011



(1,946,740)



4,639,287



(2,026,563)














Comprehensive income



24,564,624



20,825,987



39,896,755



41,308,572

 

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




Six-Month Period Ended June 30,



2013


2012



US$


US$

Cash flows from operating activities:





Net cash provided by operating activities



38,925,612



29,360,005








Cash flows from investing activities:







Proceeds from maturity of time deposits



56,618,325



-

Purchase of time deposits



(182,063,524)



-

Purchases of property, plant and equipment



(13,419,444)



(37,490,885)

Net cash used in investing activities



(138,864,643)



(37,490,885)








Cash flows from financing activities:







Proceeds from bank borrowings



226,906,170



70,412,507

Repayments of bank borrowings



(146,861,566)



(54,273,011)

Release of restricted cash



1,629,354



-

Placement of restricted cash as collateral for bank borrowings



(888,846)



-

Dividends paid to redeemable Series C convertible preferred stockholders



-



(60)

Net cash provided by financing activities



80,785,112



16,139,436








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



1,343,214



(1,263,433)

Net increase (decrease) in cash and cash equivalents



(17,810,705)



6,745,123








Cash and cash equivalents at beginning of period



83,822,602



135,482,386

Cash and cash equivalents at end of period



66,011,897



142,227,509








Supplemental disclosure of cash flow information:







Interest paid



4,476,797



1,399,043

Income taxes paid



11,108,922



12,271,078

 

CHINA XD PLASTICS COMPANY LIMITED.

Reconciliation of Net Income to EBITDA




Three-Month Period Ended June 30,


2013


2012


US$


US$

Net income

20,806,613


22,772,727

Interest expense

3,374,738


913,643

Income tax expense

7,073,314


6,874,387

Depreciation and amortization expense

5,348,440


2,489,227

EBITDA

36,603,105


33,049,984

SOURCE China XD Plastics Company Limited



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