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Keyuan Petrochemicals Inc. Announces First Quarter 2012 Financial Results

-- Q1 2012 revenues increased 24.9% YOY to approximately $183.3 million

-- Reaffirms FY 2012 revenue and production guidance of $880.0 million and 760,000 MT, respectively

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NINGBO, China, May 22, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced the Company's financial results for the three months ended March 31, 2012.

"Our first three months 2012 revenues benefitted from solid customer demand and expanded production capacity," declared Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our margins were negatively impacted by higher raw materials costs, with a series of initiatives on major projects and our SBS facility ramping into commercial production, I believe Keyuan's core earnings potential continues to improve."

Financial Summary

Three months ended

March 31, 2012

Q1 2012

Q1 2011

Chg.

Net Revenues

$183.3M

$146.8M

24.9%

Gross Profit

$9.5M

$12.7M

-25.2%

Net Income (a)

$1.6M

$4.9M

-67.3%

EPS (Diluted)

$0.03

$0.08

-62.5%

Weighted Average Diluted Shares Outstanding

57.6M

63.9M

-9.9%

 

(a) Net Income (loss) attributable to KEYP common stockholders.

First Quarter 2012 Financial Results

Sales for the first quarter ended March 31, 2012 were $183.3 million, an increase of $36.5 million, or 24.9% from the first quarter of 2011. The Company sold 157,853 metric tons (MT) of petrochemical products at an average price of $1,161 per MT in the first quarter of 2012 compared to 148,768 MT and $834 per MT, respectively, in the first quarter of 2011.

Cost of goods sold was $173.9 million in the first quarter of 2012 compared to $134.1 million in the first quarter of 2011, with a gross profit of $9.5 million or 5.18% in the first quarter of 2012 compared to a gross profit of $12.7 million or 8.65% in the same period a year ago. The main reason for the decrease in the gross margin was the increase in our raw materials prices. The Company uses fuel oil as its raw material for production, which is a product of heavy crude oil. For crude oil, the average Brent oil price for the three months ended March 31, 2012 was $118 per barrel, as compared to $103 in the same period of 2011, an increase of 15%. Going  forward, management believes that major fluctuations in the price of raw materials will continue to have a major impact on our gross margin.  Accordingly, the Company plans to conduct a series of initiatives to improve yield rate in order to minimize the impact on our gross margin in future quarters.

Operating expenses for the first quarter of 2012 were approximately $2.9 million, consisting of $0.3 million in selling expenses and $2.6 million in general and administrative expenses. General and administrative expenses were lower by approximately $0.6 million compared to the same period in 2011. Operating income was $6.6 million in the three months ended March 31, 2012 compared to $8.9 million in the corresponding period in 2011.

Net income attributable to common shareholders was $1.6 million for the first quarter of 2012, with diluted net loss per share of $0.03 compared to net income of $4.9 million and diluted earnings per share of $0.08 in the first quarter of 2011. The diluted weighted average number of the shares outstanding decreased from 63.9 million to 57.6 million in the first quarter of 2012.

Full Year 2012 Guidance

Management is forecasting $880 million of revenues, $30 million of net income and 760,000 MT of production for 2012. This assumes approximately $100 million to $110 million of revenue and $10 million to $11 million of net income contribution from its SBS production facility.

Updates on Internal Control

Since early 2012, the Company has implemented an overall comprehensive budget management system ("The General Rule of Budget Performance Assessment"), which is executed and controlled by the planning finance department to review and instruct all other departments. The budget control system includes evaluating a "Budget Enforcement Monthly Assessment Form" and a "Budget Enforcement Monthly Record Form" on monthly basis  to greatly improve the Company's operating efficiency.

The Company began to implement a management and evaluation system for personnel position responsibility standards, training, assessment and promotion which defines the talent introduction plan and payroll multiplication plan; forms the effective incentive system and commitment system;  and is designed to retain personnel and prevent talent losses.

About Keyuan Petrochemicals, Inc.

Keyuan Petrochemicals, Inc., established in 2007 and operating through its wholly-owned subsidiary, Keyuan Plastics, Co. Ltd., is located in Ningbo, China and is a leading independent manufacturer and supplier of various petrochemical products. Having commenced production in October 2010, Keyuan's operations include an annual petrochemical manufacturing design capacity of 720,000 MT for a variety of petrochemical products, with facilities for the storage and loading of raw materials and finished goods, and a technology that supports the manufacturing process with low raw material costs and high utilization and yields. In order to meet increasing market demand, Keyuan plans to expand its manufacturing capacity to include a SBS production facility which was completed in September 2011 and one production line has entered into commercial production by November 2011. The Company plans to add additional storage capacity, a raw material pre-treatment facility, an asphalt production facility, and an ABS production facility.

Cautionary Statement Regarding Forward-Looking Information

This press release may contain certain "forward-looking statements" relating to the business of Keyuan Petrochemicals, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf months are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

Angel Gu
Keyuan Petrochemicals, Inc
Phone: +0086-1-381-986-4827
Email: angelgu@keyuanpetrochemicals.com
Web: www.keyuanpetrochemicals.com

 

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS










March 31,


December 31,




2012


2011




(unaudited)



ASSETS






Current assets:






Cash 


$

23,155,356

$

7,325,017

Pledged bank deposits



160,787,809


156,318,066

Bills receivable



266,701


1,574,000

Accounts receivable 



0


2,226,288

Inventories



55,098,878


38,945,968

Prepayments to suppliers



52,411,212


15,781,294

Consumption tax refund receivable



76,219,573


55,809,560

Amounts due from related parties



39,600


39,350

Other current assets



55,837,854


45,978,428

Deferred income tax assets



37,585


37,348













Total current assets



423,854,568


324,035,319







Property, plant and equipment, net



197,107,187


190,867,621

Intangible assets, net



957,990


978,503

Land use rights



11,026,335


11,068,762

VAT recoverable



2,589,946


2,893,635







Total assets


$

635,536,026

$

529,843,840







LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:






Short-term bank borrowings 


$

256,521,610

$

225,969,421

Bills payable



94,366,800


63,550,250

Current portion of long-term bank borrowings



15,840,000


15,740,000

Accounts payable 



118,709,156


97,588,137

Advances from customers



32,249,204


7,821,623

Accrued expenses and other payables



25,537,857


30,287,946

Income taxes payable



1,530,600


186,326

Dividends payable



2,381,759


2,381,759

Amounts due to related parties



113,798


621,077







Total  liabilities, all current



547,250,784


444,146,539













Series B convertible preferred stock: 






   Par value: $0.001; Authorized: 8,000,000 shares






   6% cumulative dividend with liquidation preference 






   over common stock






    Issued and outstanding: 5,333,340 shares,






    liquidation preference of $ 20,000,000



16,451,552


16,451,552







Commitments and contingencies



0


0













Stockholders' equity:






Common stock: 






Par value:$0.001; Authorized: 100,000,000 shares;






Issued and outstanding: 57,646,160 shares as at March 31, 2012 and






 December 31, 2011



57,646


57,646

Additional paid-in capital



49,571,104


49,198,278

Statutory reserve



3,744,304


3,744,304

Accumulated other comprehensive income



7,123,222


6,545,811

Retained earnings



11,337,414


9,699,710







Total stockholders' equity



71,833,690


69,245,749







Total liabilities and stockholders' equity


$

635,536,026

$

529,843,840

  

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)











Three Months Ended March 31,





2012


2011





(unaudited)


(unaudited)


Sales







External parties


$

183,324,688

$

124,154,798


Related parties



0


22,609,819


Total Sales



183,324,688


146,764,617









Cost of sales







External parties



173,851,709


113,814,197


Related parties



0


20,299,359









Cost of sales



173,851,709


134,113,556









Gross profit



9,472,979


12,651,061
















Selling expenses



252,906


539,132


General and administrative expenses



2,610,195


3,235,080









Total operating expenses



2,863,101


3,774,212


Income from operations



6,609,878


8,876,849
















Other income(expense):







Interest income



939,234


906,944


Interest expense



-4,378,700


-3,196,629


Other income (expense), net



-186,228


879,130









Total other expense, net



-3,625,694


-1,410,555


Income before income taxes



2,984,184


7,466,294









Income tax expense



1,346,483


2,252,151









Net income attributable to Keyuan







Petrochemicals Inc. stockholders



1,637,701


5,214,143









Dividends to Series B convertible







Preferred stockholders



0


296,260









Net income attributable to Keyuan







Petrochemicals Inc. common stockholders



1,637,701


4,917,883









Other comprehensive income:







Foreign currency translation adjustment                                                                                                  

577,412


557,297









Other comprehensive income                                                                                                                    

577,412


557,297









Comprehensive income  


$

2,215,113

$

5,771,440









Earnings per share:







Attributable to common stock:







- Basic 


$

0.03

$

0.09


- Diluted


$

0.03

$

0.08
















Weighted average number of shares of common stock







used in calculation







Basic



57,646,160


57,578,300


Diluted



57,646,160


63,880,139









  

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


















Three Months Ended March 31,





2012


2011





(unaudited)


(unaudited)


Cash flows from operating activities:







Net income


$

1,637,701

$

5,214,143


Adjustments to reconcile net income to net cash







provided by (used in) operating activities:







   Loss on disposal of property and equipment



0


3,483


   Depreciation



2,816,623


2,500,670


   Amortization



26,798


25,680


   Land use rights amortization



113,034


108,353


   Share-based compensation expense



406,440


668,427


Changes in operating assets and liabilities:







   Bills receivable



1,320,625


-137,963


   Accounts receivable



2,246,090


0


   Inventories



-15,945,642


32,506,267


   Prepayments to suppliers



-33,856,552


-4,611,229


   Consumption tax refund receivable



-20,106,087


14,385,368


   Other current assets



-12,190,406


-5,762,117


   Accounts payable



20,183,367


13,330,081


   Advances from customers



24,439,449


-1,950,637


   Income taxes payable



1,346,483


-3,190,044


   Accrued expenses and other payables



-2,456,395


-442,096









Net cash (used in) provided by operating activities



-30,018,472


52,648,387









Cash flows from investing activities:







   Proceeds from property disposal



0


10,448


   Purchase of property, plant and equipment, including capitalized interest



-10,352,581


-46,014









Net cash used in investing activities



-10,352,581


-35,566









Cash flows from financing activities:







   Pledged bank deposits used for bank borrowings



-3,485,396


-18,904,378


   Proceeds from short-term bank borrowings



156,025,477


40,705,375


   Repayment of short-term bank borrowings



-127,182,606


-30,283,820


   Proceeds from bills payable



65,425,600


33,175,240


   Prepayment of bills payable



-34,936,000


-43,066,940


   Repayments of long-term bank borrowings



0


-12,935,300


   Short-term financing from related parties



0


7,738,095


   Short –term financing to related parties



0


-7,609,000


   Proceeds from warrants exercise



0


4,865


   Dividends paid



0


-219,976









Net cash provided by (used in) financing activities



55,847,075


-31,395,839









Effect of foreign currency exchange rate changes on cash



354,317


208,968









Net increase in cash



15,830,339


21,418,950









Cash at beginning of the period



7,325,017


29,336,241









Cash at end of the period


$

23,155,356

$

50,755,191









Supplemental disclosure of cash flow information:







   Income taxes paid


$

0

$

5,442,195


   Interest paid, net of capitalized interest



4,378,701


3,196,629


   Dividends accrued



0


296,260


  Non-cash financing activities:







   Payable for purchase of property, plant and equipment



2,516,115


12,736,521


SOURCE Keyuan Petrochemicals, Inc.



RELATED LINKS
http://www.keyuanpetrochemicals.com

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