China XD Plastics Announces Third Quarter 2013 Financial Results - Reports Record Third Quarter Revenues and Net Income -

HARBIN, China, Nov. 8, 2013 /PRNewswire/ -- 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 third quarter ended September  30, 2013.

Third Quarter Fiscal 2013 Financial Highlights:

  • Revenue was $293.1 million, an increase of 79.5% from $163.3 million in the third quarter of fiscal 2012
  • Gross profit was $65.7 million, an increase of 64.3% from $40.0 million in the third quarter of fiscal 2012
  • Gross profit margin was 22.4%, compared to 24.5% in the third quarter of fiscal 2012
  • Net income was $41.1 million, compared to $25.3 million in the third quarter of fiscal 2012
  • Total volume shipped was 90,479 metric tons, up 46.9% from 61,589 metric tons in the third quarter of fiscal 2012

Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics, commented, "I am pleased to report our solid revenue and earnings growth and positive business development. Although gross profit margin declined for the three month period ended September 30 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 third quarter of fiscal 2013 increased by 152.8% and 75.7% compared to the third quarter of 2012. Furthermore, we continued our entry into Southwest China Market on a solid footing with 3.2% revenue contribution from the region during the third quarter of 2013. Our gross profit margin improved to 22.4% during the third quarter of 2013, following the trend of the second quarter, primarily due to our gradual reduction of sales discounts and shift to higher margin products. The improvement in gross profit margin during the third quarter as compared to our first two quarters 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.

Third Quarter 2013 Results

Revenues for the third quarter of fiscal 2013 were $293.1 million, representing an increase of 79.5% from $163.3 million in the third quarter of fiscal 2012. The increase in revenues was due to an approximately 46.9% increase in sales volume and an 18.0% increase in 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 third quarter of fiscal 2013 was $65.7 million, increased by 64.3% from $40.0 million in the third quarter of fiscal 2012. Gross profit margin was 22.4%, compared to 24.5% in the same period of the prior year.

(i) The decrease in gross margin was primarily due to an average 6.5% discount on the listed prices for the three-month period ended September 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 32.4% and 3.2% during the three-month period ended September 30, 2013 compared to 22.8% and nil in the same period of 2012, respectively. We plan to maintain such discount rate for the rest of 2013.

(ii) The decrease in gross margin was also due to an increase in shipping expenses to US$4.5 million in the three months ended September 30, 2013 from US$0.3 million in the three months ended September 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 $4.4 million, compared to $3.0 million for the same period of the prior year. This increase is primarily due to an increase in share based compensation, payroll from increased headcount, traveling, and office expenses as a result of business expansion. R&D expenses were $5.1 million, compared to $5.5 million in the same period of the prior year. The decrease in our R&D expenses during this quarter was due to decreased expenses associated with the early conclusion of some R&D experiments after strategic review, which has led to a recalibrating of our R&D efforts to target more longer-term but higher-end applications in fields such as aerospace, high-speed train, biological and medical.

During the quarter ended September 30, 2013, the Company successfully launched 11 new automobile manufacturers certified products ("AMCP"), which increased its total number of AMCP to 274. As of September 30, 2013, the Company had 75 products in the process of being certified by automotive and non-automotive manufacturers.

Operating income for the third quarter of fiscal 2013 was $56.0 million, or 19.1% of revenues, an increase of 77.8% over operating income of $31.5 million, or 19.3% 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 expenses.

Net income for the third quarter of fiscal 2013 was $41.1 million, compared to a net income of $25.3 million for the same period of the prior year. This increase is primarily due to higher gross profit and partially offset by higher G&A.

Basic and diluted earnings per share for the third quarter of fiscal 2013 were $0.64, a significant increase when compared to basic and diluted earnings per share in the same period of the prior year, which were $0.40

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

EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) for the third quarter of 2013 was $64.2 million, an increase of 72.6% from EBITDA of $37.2 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.

As of September 30, 2013, China XD Plastics had $94.3 million in cash and cash equivalents, $180.6 million in time deposits with commercial banks, $238.1 million in working capital and a current ratio of 1.6. Stockholders' equity as of September 30, 2013 was $347.8 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 $960 million and $1 billion and net income for fiscal 2013 to range between $117 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, "With 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 two quarters 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 China's automotive modified plastics market. 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 an annual capacity of 300,000 metric tons in Sichuan is underway. Once our southwest production base is completed and in operation by the end of 2015, 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 Tuesday, November 12, 2013, to discuss its third quarter of fiscal 2013 financial results. The conference call may be accessed by calling +1-855-298-3404 (for callers in the U.S.), +86-4001-200-539 (for Mainland China callers) or +852-5808-3202 (for Hong Kong callers) and entering pass code 9383661.

A recording of the conference call will be available through November 19, 2013, by calling +1-866-846-0868 (for callers in the U.S.) and entering pass code 9383661.

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, 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 September 30, 2013, 274 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; the Company's market penetration abilities in different regional markets; legal and regulatory risks; the construction of the Company's fourth production base and its projected annual 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

 




September 30, 2013



December 31, 2012




US$



US$


ASSETS







Current assets:







Cash and cash equivalents



94,257,033




83,822,602


Restricted cash



5,678,105




16,915,359


Time deposits



180,555,556




47,955,923


Accounts receivable, net



265,245,509




143,843,764


Amounts due from related parties



4,085




219,360


Inventories



119,131,396




78,263,071


Prepaid expenses and other current assets



5,137,641




6,090,232


    Total current assets



670,009,325




377,110,311


Property, plant and equipment, net



215,669,167




223,780,133


Land use rights, net



10,547,002




10,524,451


Other non-current assets



3,046,692




169,414


    Total assets



899,272,186




611,584,309




















LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCKS AND STOCKHOLDERS' EQUITY


Current liabilities:









Short-term loans



260,253,268




162,076,050


Bills payable



8,169,935




15,810,340


Accounts payable



111,716,226




7,061,259


Amounts due to a related party



368,479




-


Income taxes payable



16,216,348




8,511,679


Accrued expenses and other current liabilities



35,218,647




34,442,983


    Total current liabilities



431,942,903




227,902,311


Income taxes payable-non current



1,532,691




-


Deferred income tax liabilities



19,737,237




20,733,959


Warrants liability



700,648




1,008,750


    Total liabilities



453,913,479




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, 49,019,708 shares and 47,584,772 shares issued, 47,788,772 shares and 47,563,772 shares outstanding as of September 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



74,276,260




72,583,910


Retained earnings



253,527,526




177,208,492


Accumulated other comprehensive income



20,066,269




14,658,258


    Total stockholders' equity



347,782,242




264,362,824


Commitments and contingencies



-




-


    Total liabilities, redeemable convertible preferred stocks and stockholders' equity



899,272,186




611,584,309


 


CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 




Three-Month Period Ended September 30,



Nine-Month Period Ended September 30,




2013



2012



2013



2012




US$



US$



US$



US$















Revenues



293,139,049




163,368,820




666,256,978




431,208,409


Cost of revenues



(227,473,486)




(123,326,182)




(534,250,688)




(324,676,853)


    Gross profit



65,665,563




40,042,638




132,006,290




106,531,556



















Selling expenses



(143,573)




(77,399)




(253,565)




(260,151)


General and administrative expenses



(4,436,021)




(2,961,496)




(10,775,595)




(7,597,292)


Research and development expenses



(5,139,610)




(5,471,242)




(15,926,298)




(12,536,739)


    Total operating expenses



(9,719,204)




(8,510,137)




(26,955,458)




(20,394,182)



















    Operating income



55,946,359




31,532,501




105,050,832




86,137,374



















Interest income



1,702,488




1,406,161




4,242,205




3,826,177


Interest expense



(4,499,497)




(1,156,056)




(10,810,221)




(2,555,099)


Foreign currency exchange gains



550,010




726,389




1,916,626




9,126


Government grant



709,655




-




919,746




-


Change in fair value of warrants liability



(112,229)




854,991




308,102




2,717,310


Change in fair value of embedded derivative liability



-




235




-




547


    Total non-operating income (expense), net



(1,649,573)




1,831,720




(3,423,542)




3,998,061



















    Income before income taxes



54,296,786




33,364,221




101,627,290




90,135,435



















Income tax expense



(13,235,220)




(8,091,572)




(25,308,256)




(21,527,651)



















    Net income



41,061,566




25,272,649




76,319,034




68,607,784



















Earnings per common share:

















Basic



0.64




0.40




1.19




1.08


Diluted



0.64




0.40




1.19




1.08



















Net Income



41,061,566




25,272,649




76,319,034




68,607,784



















Other comprehensive income

















Foreign currency translation adjustment, net of nil income taxes



768,724




2,840,914




5,408,011




814,351



















Comprehensive income



41,830,290




28,113,563




81,727,045




69,422,135


 

 


CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 




Nine-Month Period Ended September 30,




2013



2012




US$



US$


Cash flows from operating activities:







Net cash provided by (used in) operating activities



60,137,200




(12,423,558)











Cash flows from investing activities:









Proceeds from maturity of time deposits



145,189,952




-


Purchase of time deposits



(275,929,213)




(28,308,042)


Purchases of property, plant and equipment and land use rights



(16,086,974)




(72,155,807)


Net cash used in investing activities



(146,826,235)




(100,463,849)











Cash flows from financing activities:









Proceeds from bank borrowings



324,695,542




111,408,621


Repayments of bank borrowings



(230,155,513)




(77,879,405)


Release of restricted cash



4,824,298




-


Placement of restricted cash as collateral for bank borrowings



(4,013,492)




(4,733,643)


Dividends paid to redeemable Series C convertible preferred stockholders



-




(60)


Net cash provided by financing activities



95,350,835




28,795,513











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



1,772,631




(360,531)


Net increase (decrease) in cash and cash equivalents



10,434,431




(84,452,425)











Cash and cash equivalents at beginning of period



83,822,602




135,482,386


Cash and cash equivalents at end of period



94,257,033




51,029,961











Supplemental disclosure of cash flow information:









Interest paid



8,316,403




2,084,010


Income taxes paid



17,638,502




19,978,772











 

 

Reconciliation of Net Income to EBITDA

(Amounts expressed in United States dollars)

 


Three Months Period Ended


September 30,


2013

2012

Net income

41,061,566

25,272,649

Interest expense

4,499,497

1,156,056

Income tax expense

13,235,220

8,091,572

Depreciation and amortization expense

5,394,521

2,637,475

EBITDA

64,190,804

37,157,752

SOURCE China XD Plastics Company Limited



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