China XD Plastics Announces Second Quarter Fiscal 2013 Financial Results

- Reports Record Second Quarter Revenues -

- Reiterates Fiscal 2013 full year guidance -

Aug 12, 2013, 08:00 ET from China XD Plastics Company Limited

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



RELATED LINKS

http://www.chinaxd.net