NEW YORK and WEIFANG, Shandong, China, Aug. 10 /PRNewswire-Asia-FirstCall/ -- Gulf Resources, Inc. (OTC Bulletin Board: GFRE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced its financial results for the three months ended June 30, 2009.

    Second Quarter Highlights
    -- Net revenue was $29.6 million, a year-over-year increase of 24.5%
    -- Gross profit was $13.1 million, a year-over-year increase of 35.5%
    -- Gross Margin was 44.4%, compared to 40.8% in second quarter of 2008
    -- Net income was $9.0 million, or $0.07 per diluted share, compared to
       $6.3 million, or $0.06 per diluted share a year ago
    -- Cash totaled $38.0 million as of June 30, 2009
    -- Appointed a majority of independent Board of Directors

Second Quarter 2009 Results

"During the second quarter, we experienced strong growth in our chemical and crude salt business, mainly due to a robust recovery of China's chemical industry and the demand from oil and gas exploration companies for our environmentally friendly chemical products," said Xiaobin Liu, Chief Executive Officer of Gulf Resources. "Furthermore, our downstream chemical manufacturing customers began to accelerate purchases of bromine beginning in the second quarter of 2009, although low average selling prices compared to the year ago price level persisted throughout the second quarter. Nonetheless, we achieved a record gross margin due to increased sales of crude salt and environmentally friendly chemical products combined with lower raw materials costs. Environmentally friendly chemical products were introduced in September last year and contributed to 22% of our chemical product sales this quarter compared to 20% in the first quarter of 2009."

Gulf Resources' revenue was $29.6 million for the second quarter of 2009, an increase of 24.5% from $23.8 million for the second quarter of 2008. During the second quarter of 2009, the revenue from the bromine and crude salt segment was $20.5 million, or 69.4% of total revenue, compared to $18.0 million, or 75.8% for the second quarter of 2008. Revenue from bromine increased 1.6%, to $18.2 million from $17.9 million for the second quarter of 2008. Revenue from crude salt increased to $2.3 million, or 16.2% of revenue from the bromine and crude salt segment, from only $112,172, or 0.6% of revenue from the bromine and crude salt segment for the same period of last fiscal year, mainly due to the acquisition of salt pans and the improved utilization of halogen water.

Revenue from the chemical products segment was $9.1 million, or 30.6% of total revenue, for the second quarter of 2009, an increase of 57.4% from $5.8 million, or 24.2% of total revenue in the corresponding period last year. The growth in sales of chemical products was due to the expansion of production capacity and strong demand for new environmentally friendly additive products, including solid lubricant and polyether lubricant used in oil and gas exploration.

Gross profit for the second quarter of 2009 totaled $13.1 million, up 35.5% from $9.7 million for the second quarter of 2008. For the three months ended June 30, 2009, gross profit margin was 44.4%, compared to 40.8% for the corresponding period last year. The increased gross profit margin was due to lower raw material cost for bromine production, operational efficiencies as the Company grew in scale and increased sales of environmentally friendly additive products, which the Company sells at a higher unit price compared to generic oil and gas exploration additives, and crude salt, which has a lower production cost compared to bromine. Environmentally friendly additive products and crude salt had gross margins of approximately 42% and 75%, while bromine had a gross margin of 41% for the second quarter of 2009. These positive effects on gross margin were partially offset by the Company offering more competitive prices to its existing clients to maintain and expand market shares during the second quarter of 2009.

Research and development and general and administrative expenses for the second quarter of 2009 and 2008 were flat at $1.1 million. Income from operations for the second quarter of 2009 was $12.0 million, an increase of 40.5% from $8.6 million a year ago. Operating margin was 40.6% for the second quarter of 2009, compared to 36.0% for the second quarter of 2008.

Net income was $9.0 million for the second quarter of 2009, an increase of 42.7% from $6.3 million for the second quarter of 2008. Basic and diluted earnings per share in second quarter of fiscal year 2009 was $0.07, compared to basic and diluted earnings per share of $0.06 a year ago. Weighted average number of diluted shares for the three months ended June 30, 2009 was 122,168,842, compared to 99,668,842 for the corresponding period of fiscal 2008.

Six Month Results

Revenues for the first six months of 2009 were $53.2 million, up 16.2% from revenues of $45.8 million for the first six months of 2008. Gross profit was $23.2 million, up 21.4% from gross profit of $19.1 million for the six months of 2008. Gross margin was 43.7%, compared to 41.8% for the first six months of 2008. Operating income was $20.9 million, up 22.8% from $17.0 million for the first six months of fiscal 2008. Net income was $15.5 million, or $0.13 per basic and fully diluted share, compared to $12.4 million, or $0.12 per basic and fully diluted share, for the same period a year ago.

Financial Condition

As of June 30, 2009, Gulf Resources had cash of $38.0 million, current assets of $51.0 million, current liabilities of $23.5 million, working capital of $27.6 million, a current ratio of 2.17, and shareholders' equity $90.2 million. The Company had no long term debt outstanding as of June 30, 2009.

For the six months ended June 30, 2009, the Company generated $19.3 million in cash flow from operations. The Company incurred capital expenditures of $19.0 million in the first half of 2009, mainly due to the acquisition of bromine and crude salt manufacturing assets in February 2009 and the construction of new wells, halogen water channels, and a waste water disposal system at its SYCI location. The Company plans to invest approximately $10 million for the second half of fiscal 2009 to upgrade existing chemical production lines and to continue construction of its waste water disposal system. The Company may make additional investments in order to increase its bromine and crude salt production capacity.

Recent Developments

In July 2009, Gulf Resources appointed Mr. Nai Hui Miao to serve as the Company's chief operating officer, effective July 16, 2009. His responsibilities will include overseeing the Company's daily operations, sales and material procurement, in addition to monitoring account receivables. In the same month, the Company also appointed Mr. David Wong to serve as vice president of finance. He is responsible for corporate consolidated financial reporting with U.S GAAP compliance and reconciliation, financial planning and analysis, and strategic communication with the investment community.

In August 2009, the Company's Board of Directors adopted resolutions approving a reverse split of the Company's Common Stock on within a range of 1 for 4 to 1 for 9, so that every four (4) to nine (9) outstanding shares of Common Stock before the reverse stock split shall represent one share of Common Stock after the reverse stock split. The reverse split is part of the Company's strategy to uplist its shares to a senior US stock market.

Business Outlook

"The strong downstream demand for our products was in line with the general expansion of manufacturing industries in China for the last five consecutive months. We expect bromine prices to increase steadily in the remainder of 2009 as we continue to see domestic demand for bromine exceed domestic supply, and as we have seen major customers become more accommodating towards higher offering prices due to optimism regarding future market conditions," commented Mr. Liu. "We intend to leverage our production license by seeking additional bromine mining resources and related production assets through acquisitions in Shandong while improving the utilization of residual halogen water to increase the extraction of crude salt, which is a by-product of bromine production."

"We expect our overall gross margin to remain high for the second half of 2009 as we continue to see strong demand for our higher-margin products, such as environmentally friendly oil and exploration chemical additives and crude salt. Over the next few months, we plan to upgrade our older chemical production line to comply with the development and production of environmentally friendly chemical additives for agricultural applications. Not only do we believe there is strong demand for these products, but the upgrade would entitle us to apply for VAT rebates from the Chinese government. These rebates are designed to promote environmentally friendly investment in China's domestic chemical industry, thereby supporting the competitive position of companies that are offering environmentally friendly products," concluded Mr. Liu.

For fiscal year 2009, Gulf Resources reaffirms the revenue guidance of approximately $98 million to $103 million, net income of approximately $27 million to $29 million, and diluted earnings per share of $0.22 to $0.24, using a share count of 122,168,842.

Conference Call

Gulf Resources' management will host a conference call at 8:00 AM Eastern Daylight Time on Tuesday, August 11, 2009 to discuss its results for the three months ended June 30, 2009. To participate in this live conference call, please dial 866-800-8648 five to ten minutes prior to the scheduled conference call time. International callers should call +1 617-614-2702. The conference participant pass code is 362 483 30.

A replay of the conference call will be available for 14 days starting from 10:00 AM Eastern Daylight Time on Tuesday, August 11 2009. To access the replay, call 888-286-8010. International callers should call +1 617-801-6888. The pass code is 501 433 31.

About Gulf Resources, Inc.

Gulf Resources, Inc. operates through two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil & gas field explorations and as papermaking chemical agents. For more information about the Company, please visit http://www.gulfresourcesinc.cn .

Forward-Looking Statements

Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.

                         -Financial tables to follow-



                             GULF RESOURCES, INC.
                               AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)

                               Three Months Ended         Six Months Ended
                                      June 30,                 June 30,
                                  2009        2008         2009        2008

    NET REVENUE
    Net sales               $29,590,897 $23,766,179  $53,224,436 $45,799,736

    OPERATING EXPENSES
    Cost of net revenue      16,445,804  14,062,903   29,986,744  26,662,623
    Research and
     development cost           125,095     135,275      250,065     267,109
    General and
     administrative expenses    996,441   1,009,088    2,095,821   1,863,630
                             17,567,340  15,207,266   32,332,630  28,793,362

    INCOME FROM OPERATIONS   12,023,557   8,558,913   20,891,806  17,006,374

    OTHER INCOME (EXPENSES)
    Interest expense                (33)         --      (27,043)    (60,111)
    Interest income              23,762      18,581       45,792      44,257
    Sundry income (expense)          --      14,195           --      (4,543)

    INCOME BEFORE INCOME
     TAXES                   12,047,286   8,591,689   20,910,555  16,985,977

    INCOME TAXES - current    3,075,682   2,305,780    5,405,837   4,552,477

    NET INCOME               $8,971,604  $6,285,909  $15,504,718 $12,433,500

    EARNINGS PER SHARE:
    BASIC                         $0.07       $0.06        $0.13       $0.12
    DILUTED                       $0.07       $0.06        $0.13       $0.12

    WEIGHTED AVERAGE NUMBER
     OF SHARES:
    BASIC                   122,168,842  99,668,842  119,442,323  99,668,842
    DILUTED                 122,168,842  99,668,842  119,442,323  99,676,655



                             GULF RESOURCES, INC.
                               AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                     JUNE 30, 2009 AND DECEMBER 31, 2008

                                                      June 30,   December 31,
                                                        2009           2008
                                                   (unaudited)      (audited)
    ASSETS

    CURRENT ASSETS
    Cash                                          $37,957,195    $30,878,044
    Accounts receivable, net of allowance          12,072,883     11,674,645
    Inventories                                       329,800        418,259
    Prepayment and deposit                            639,994        229,408
    Prepaid land lease                                 15,828         15,849
    Deferred tax asset                                  3,449          3,453
    Other receivable                                    2,285          2,641
                                                   51,021,434     43,222,299

    PROPERTY, PLANT AND EQUIPMENT, Net             61,881,863     45,399,456

    PREPAID LAND LEASE, Net of current portion        728,791        737,711

    TOTAL ASSETS                                 $113,632,088    $89,359,466

    LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES
    Accounts payable and accrued expenses          $5,163,201     $4,746,993

    Loan Payable                                    4,028,750      4,034,250
    Note and loan payable - related parties         1,650,000      4,650,000
    Due to related party                            7,667,138        852,068
    Taxes payable                                   4,960,474      4,269,442

    TOTAL CURRENT LIABILITIES                      23,469,563     18,552,753

    NON CURRENT LIABILITIES
    Note payable, net of current portion                   --     18,337,493

    TOTAL LIABILITIES                              23,469,563     36,890,246

    STOCKHOLDERS' EQUITY

    PREFERED STOCK ; $0.001 par value;
     1,000,000 shares authorized none
     outstanding                                           --             --
    COMMON STOCK; $0.0005 par value;
     400,000,000 shares authorized;
     122,168,842 and 99,668,842 shares
     issued and Outstanding in 2009 and
     2008                                              61,084         49,834

    ADDITIONAL PAID-IN CAPITAL                     35,268,268     13,035,293

    RETAINED EARNINGS - UNAPPROPRIATED             47,322,183     31,817,465

    RETAINED EARNINGS - APPROPRIATED                3,223,418      3,223,418

    CUMULATIVE TRANSLATION ADJUSTMENT               4,287,572      4,343,210

    TOTAL STOCKHOLDERS' EQUITY                     90,162,525     52,469,220

    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                      $113,632,088    $89,359,466



                             GULF RESOURCES, INC.
                               AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)

                                                    Six Months Ended June 30,
                                                        2009           2008
    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                    $15,504,718    $12,433,500
    Adjustments to reconcile net income
     to net cash provided by operating
     activities
        Amortization of warrants issued for
         expenses                                     309,500        369,381
        Amortization of prepaid expenses by
         shares issued for consulting fee              32,232        145,484
        Depreciation of fixed assets                3,026,880      2,136,053
        Amortization of prepaid expenses                7,983             --
        Bad debt provision                             61,455             --
    (Increase) decrease in assets
        Accounts receivable                          (475,162)    (8,151,159)
        Inventories                                    88,034     (1,424,086)
        Prepayment and deposit                       (410,997)      (365,382)
    Increase (decrease) in liabilities
        Accounts payable and accrued expenses         419,562      1,968,076
        Taxes payable                                 691,379      2,218,473

    Net cash provided by operating activities      19,255,584      9,330,340

    CASH FLOWS USED IN INVESTING ACTIVITIES
    Restricted cash                                        --     (4,078,833)
    Construction in progress                       (3,299,175)            --
    Property, plant and equipment                 (15,663,051)   (16,845,218)

    Net cash used in investing activities         (18,962,226)   (20,924,051)

    CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
    Proceeds from loan payable                             --      5,590,800
    Advances from related party                     6,829,785      2,998,281
    Repayment on bank loan                                 --     (3,843,675)

    Net cash provided by financing activities       6,829,785      6,745,406

    EFFECTS OF EXCHANGE RATE CHANGE ON CASH           (43,992)       459,343

    NET INCREASE IN CASH                            7,079,151     (4,388,962)

    CASH - BEGINNING OF PERIOD                     30,878,044     10,773,875

    CASH - END OF PERIOD                          $37,957,195     $6,384,913



    For more information, please contact:

    Gulf Resources, Inc.
     David Wong, VP of Finance
     Email: davidw@gulfresourcesinc.com
            gfre.2008@yahoo.com

     Helen Xu
     Email: xuhy@gulfresourcesinc.cn
            beishengrong@163.com
     Web:   http://www.gulfresourcesinc.cn/

    CCG Investor Relations
     Crocker Coulson, President
     Phone: +1-646-213-1915
     Email: crocker.coulson@ccgir.com

     Linda Salo, Financial Writer
     Phone: +1-646-922-0894
     Email: linda.salo@ccgir.com
     Web:   http://www.ccgirasia.com

SOURCE Gulf Resources, Inc.

Back to top

RELATED LINKS
http://www.gulfresourcesinc.cn
http://www.ccgirasia.com