Keyuan Petrochemicals Inc. Announces Fourth Quarter 2011 Financial Results -- FY 2011 production and net revenues both exceeded prior forecasts

-- $1.7 million cash flows from operations in FY2011

-- Provides full year 2012 guidance: $880 million revenues; 760,000 metric tons sales volumes; $30 million net income

NINGBO, China, April 13, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals Inc. (OTC: 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 and twelve months ended December 31, 2011.

"Our 2011 revenues benefitted from solid customer demand and expanded production capacity," declared Mr. Chungfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our margins were negatively impacted by higher raw materials costs, legal and administrative expenses related to the investigation, and 44 days of production interruptions; we generated positive cash flows, which allow us to continue funding our growth initiatives. With a series of initiatives on major projects and SBS facility entering into operation, I believe Keyuan's core earnings potential continues to improve."

Financial Summary


Q4 2011

Q4 2010

Chg.

FY 2011

FY 2010

Chg.

Net Revenues

$164.4M

$158.0M

4.2%

$626.7M

$558.8M

12%

Gross Profits

$10.9M

$17.6M

-38%

$22.0M

$67.8M

-68%

Net Income (loss)(a)

($0.1M)

$6.2M

-97%

($8.3M)

$36.0M

--

EPS (Diluted)

$0.00

$0.11

--

($0.14)

$0.66

--

Diluted Shares O/S

57.6M

56.1M

+3%

57.6M

56.1M

+2.7%

 

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

Fourth Quarter 2011 Financial Results

Sales for the fourth quarter ended December 31, 2011 were $164.4 million, an increase of $6.4 million, or 4% from the fourth quarter of 2010. The Company sold 141,829 metric tons (MT) of petrochemical products at an average price of $1,159 per metric ton in the fourth quarter of 2011 compared to 176,587 MT and $895 per MT, respectively, in the fourth quarter of 2010.

Cost of goods sold was $153.5 million in the fourth quarter of 2011 compared to $140.4 million in the fourth quarter of 2010, with a gross margin profit of $10.9 million in the fourth quarter of 2011compared to a gross profit of $17.6 million in the same period a year ago. The main reason for the decrease in the gross margin was the increase in our raw material prices.

Operating expenses for the fourth quarter of 2011 were approximately $5.3 million, consisting of $0.4 million in selling expenses and $4.9 million in general and administrative expenses. General and administrative expenses were lower by approximately $0.5 million. Operating income was $5.6 million in the three months ended December 31, 2011 compared to $12.1 million in the corresponding period a year ago.

Net loss attributable to common shareholders was $0.1 million for the fourth quarter of 2011, with diluted net loss per share of $0.00 compared to net income of $6.2 million and earnings per share of $0.11 in the fourth quarter of 2010. The weighted average shares outstanding increased slightly from 56.1 million a year ago to 57.6 million in the fourth quarter of 2011.

Full Year 2011 Financial Results

For the year ended December 31, 2011, sales were approximately $626.7 million compared to $558.8 million for the year ended December 31, 2010, an increase of 12%. The Company sold 588,976 metric tons (MT) of petrochemical products, down 10.6% from 658,570 MT of products sold in the corresponding period in 2010. The average sales price per metric ton was $1,064 in 2011, a 25.4% increase from $848 per metric ton in 2010. Keyuan sold approximately 2,622 MT of Styrene-Butadiene-Styrene ("SBS") during the fourth quarter after completing construction and testing in September and October 2011, respectively.

Cost of goods sold increased 23.2% in year ended December 31, 2011 to $604.7 million. Gross margin fell to 3.5% from 12.1% in the corresponding period year due to higher raw material prices and lower utilization rates. The Company lost approximately 44 days of production in 2011 due to shutdowns, equating to 95,000 MT of production and $85 million of revenues.  

Operating expenses for 2011 were approximately $19.1 million compared to $10.1 million in 2010 due primarily to $5.8 million of expenses related to the independent investigation.

Keyuan had an operating income of $2.9 million in 2011 compared to $57.7 million operating profit during 2010. Excluding expenses related to the independent investigation, operating income and operating margin in 2011 were $8.7 million and 1.4%, respectively.

The Company recorded an $8.3 million net loss attributable to shareholders, representing a $0.14 loss per share for 2011 compared to a $36.0 million net income and $0.66 earnings per share in 2010, respectively.

Balance Sheet and Cash Flows

The Company had $163.6 million of cash and restricted cash at December 31, 2011 compared to $127.4 million at December 31, 2010. For 2011, the Company generated $1.7 million in cash flow from operations. Inventories were $38.9 million at December 31, 2011 and advance payments for the suppliers amounted to $15.8 million.

Keyuan had approximately $241.7 million of bank loans outstanding at December 31, 2011 with maturity dates from January 2012 to December 2012 and interest rates from 2.97% to 7.93% per annum. Management expects all unpaid loan balances will be extended at their due date.

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 to $110 million of revenue and $10 to $11 million of net income contribution from its SBS production facility.

Business Updates

The Company completed construction of its new 70,000 MT SBS production facility in September 2011. Trial production commenced in October 2011 and deliveries commenced in December 2011. Management expects to generate between $100 and $110 million in net revenues from SBS in 2012 with a net income between $10 and $11 million.

In January 2012, Keyuan entered into an agreement with Fangchenggang City to build a new 400,000 MT petrochemicals production facility in Guangxi Province. The Company started pre-construction in February 2012 and expects to complete the initial phase of construction by the end of 2013. However, the timeline is subject to revision pending the status of project financing. This facility will produce Acrylonitrile Butadiene Styrene ("ABS") used in household appliances, electronic components, automotive parts and other fields.

Updates on Internal Control

The Company has assigned Mr. Fan Zhang as PRC CFO to replace Mr. Weifeng Xue and Mr. Jingtao Ma as the general manager of Ningbo Keyuan to replace Mr. Chunfeng Tao in order to make proper segregation of senior management duties after reviewing and evaluating their roles and responsibilities.

The Company organized its accounting department staff into to two groups – Planning Finance and Funds Management – according to their primary responsibilities. This will streamline internal reporting and make the department more efficient.

Furthermore, the Company has created and implemented a comprehensive budget management process that will involve every person in every position. This new process will improve the accuracy and timeliness of its financial reporting, reduce its accounting costs and control cash flow.

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

Investor Relations:
Ted Haberfield, President
MZ North America, IR    
Tel: +1-760-755-2716
Email: thaberfield@mzgroup.us
Web: www.mz-ir.com

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIAIRES
CONDENSED CONSOLIDATED BALANCE SHEETS




As of December 31




2011



2010








ASSETS







Current assets:







Cash



$

7,325,017



$

29,336,241

Pledged bank deposits




156,318,066




98,053,146

Bills receivable




1,574,000




9,194,513

Accounts receivable




2,226,288




-

Inventories




38,945,968




86,831,556

Prepayments to suppliers




15,781,294




14,071,219

Income tax receivable




-




-

Consumption tax refund receivable




55,809,560




39,144,688

Amounts due from related parties




39,350




5,332,193

Other current assets




45,978,428




28,608,833

Deferred income tax assets




37,348




469,914










Total current assets




324,035,319




311,042,303










Property, plant and equipment, net




190,867,621




129,781,304

Intangible assets, net




978,503




1,045,466

Land use rights




11,068,762




11,099,875

VAT recoverable




2,893,635




-










Total assets



$

529,843,840



$

452,968,948










LIABILITIES AND STOCKHOLDERS' EQUITY









Current liabilities:








Short-term bank borrowings



$

225,969,421



$

135,768,634

Bills payable




63,550,250




60,224,900

Current portion of long-term bank borrowings




15,740,000




17,445,500

Accounts payable




97,588,137




92,225,936

Advances from customers




7,821,623




10,479,217

Accrued expenses and other payables




30,287,946




18,205,110

Income taxes payable




186,326




10,699,778

Dividends payable




2,381,759




234,393

Amounts due to related parties




621,077




115,535










Total current liabilities




444,146,539




345,399,003

Long-term bank borrowings




-




15,170,000










Total liabilities




444,146,539




360,569,003










Series B convertible preferred stock:




16,451,552




16,701,565

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

6% cumulative dividend, Issued and outstanding:

5,333,340 shares in 2011 and 5,400,010 in 2010,

Liquidation preference of $20,000,000 in 2011 and 20,250,000 in 2010.

Commitments and contingencies




-




-

Stockholders' equity:









Common stock:









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




57,646




57,578

Issued and outstanding: 57,646,160 shares in 2011 

and 57,577,840 shares in 2010

Additional paid-in capital




49,198,278




47,012,061

Statutory reserve




3,744,304




3,075,356

Accumulated other comprehensive income




6,545,811




3,310,416

Retained earnings




9,699,710




22,242,969

Total stockholders' equity




69,245,749




75,698,380

Total liabilities and stockholders' equity



$

529,843,840



$

452,968,948

 

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

 




Year Ended




31-Dec-11



31-Dec-10








Sales







Third parties



$

533,913,328



$

446,891,336

Related parties




92,771,589




111,860,732










Total Sales




626,684,917




558,752,069










Cost of sales









Third parties




504,871,603




388,846,702

Related parties




99,797,931




102,076,731










Cost of sales




604,669,534




490,923,433










Gross profit




22,015,383




67,828,636










Selling expenses




1,240,709




623,652

General and administrative expenses




17,858,807




9,517,814










Total operating expenses




19,099,516




10,141,466










Income from operations




2,915,867




57,687,170










Other income (expense):









Interest income




4,320,393




556,159

Interest expense




(15,796,772)




(9,945,389)

Liquidated damages expense




(2,493,326)




-

Foreign exchange gain, net




3,661,599




2,711,984

Other income (expense), net




3,102,661




(396,797)










Total other expense, net




(7,205,445)




(7,074,043)










Loss(Income) before income taxes




(4,289,578)




50,613,127










Income tax expense




2,851,718




13,492,704










Net (loss)income attributable to Keyuan








Petrochemicals Inc. stockholders




(7,141,296)




37,120,423










Dividends to Series A convertible









Preferred stockholders




-




831,032










Dividends to Series B convertible








Preferred stockholders




1,205,014




306,247










Net (loss)income attributable to Keyuan








Petrochemicals Inc. common stockholders



$

(8,346,310)



$

35,983,144










(Loss)earnings per share:









Attributable to common stock:









- Basic



$

(0.14)



$

0.71

- Diluted



$

(0.14)



$

0.66










Weighted average number of shares of common stock









used in calculation









Basic




57,585,040




50,929,526

Diluted




57,585,040




56,057,994

 

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)  



Year Ended



31-Dec-11


31-Dec-10






Cash flows from operating activities:





Net (loss)income


$

(7,141,296)


$

37,120,423

Adjustments to reconcile net (loss)income to net cash







provided by (used in) operating activities:







Liquidated damages



2,493,326



-

Loss on disposal of property, plant and equipment



3,546



-

Depreciation



8,290,416



7,909,613

Amortization



104,598



99,859

Land use rights amortization



441,234



274,589

Deferred income tax expense



443,243



3,058,129

Share-based compensation expense



2,063,394



1,515,907

Changes in operating assets and liabilities:







Bills receivable



7,842,501



(8,562,744)

Accounts receivable



(2,191,777)



-

Inventories



50,355,316



(53,641,596)

Prepayments to suppliers



1,431,638



(11,295,931)

Consumption tax refund receivable



(14,958,506)



(38,174,457)

Other current assets



(18,500,179)



2,086,940

Accounts payable



4,198,683



58,179,877

Advances from customers



(3,121,937)



(6,357,494)

Income taxes payable



(10,746,276)



10,434,575

Accrued expenses and other payables



(19,276,573)



(228,610)








Net cash provided by operating activities



1,731,351



2,419,080








Cash flows from investing activities:







Purchase of land use rights



-



(5,789,302)

Purchase of property, plant and equipment,



(42,323,976)



(12,706,733)

Proceeds from disposal of property, plant and equipment



10,639



-








Net cash used in investing activities



(42,313,337)



(18,496,035)








Cash flows from financing activities:







Pledged bank deposits used for bank borrowings



(53,734,552)



(89,559,311)

Proceeds from short-term bank borrowings



258,412,312



176,683,746

Repayment of short-term bank borrowings



(170,771,129)



(127,866,341)

Proceeds from bank notes



114,399,220



77,816,440

Repayment of bank notes



(113,353,240)



(32,919,357)

Repayments of long-term bank borrowings



(17,820,400)



(13,610,480)

Short-term financing from related parties



13,303,054



30,839,377

Short-term financing to related parties



(13,188,178)



(30,949,048)

Short-term financing to/from Litong



2,265,533



(961,610)

Proceeds from warrant exercises



7,332



220,000

Proceeds from Series A Private Placement, net



-



23,312,091

Proceeds from Series B Private Placement, net



-



18,949,232

Dividends paid



(2,585,647)



(902,886)








Net cash provided by financing activities



16,934,305



30,651,853








Effect of foreign currency exchange rate changes on cash



1,636,457



730,688








Net (decrease) increase in cash



(22,011,224)



15,305,586








Cash at beginning of year



29,336,241



14,030,655








Cash at end of year


$

7,325,017


$

29,336,241








Supplemental disclosure of cash flow information:







Income taxes paid


$

13,154,751


$

-

Interest paid, net of capitalized interest



15,796,772



9,945,389

Non-cash investing and financing activities:



-



-

Payable for purchase of property, plant and equipment (net of VAT)



21,307,495



45,374,656

Reclassification of input VAT from property, plant and equipment to







other current assets



-



13,006,984

 

SOURCE Keyuan Petrochemicals, Inc.



RELATED LINKS
http://www.keyuanpetrochemicals.com

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