2014

Keyuan Petrochemicals Inc. Announces Full Year 2013 Financial Results -- Net income increases $10.5M or 179.2% YOY to $4.6M in 2013

-- Adds 50,000 MT of new storage capacity in 2014 which is expected to operate by end of May and bring the total storage capacity to 150,000 MT

NINGBO, China, May 23, 2014 /PRNewswire/ -- 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 twelve months ended December 31, 2013.

"I am pleased to report positive net income for 2013. Our 2013 financial results benefitted from solid customer demand, our realignment of product profiles, along with the general stabilization of the petrochemical industry in China," declared Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "I believe Keyuan's core earnings potential continues to improve as a result of the operation of the SBS facility and a series of initiatives on major projects."

Financial Summary


FY 2013

FY 2012

Chg.

Total Revenues

$646.5M

$750.6M

(13.9)%

Gross Profit

$26.5M

$29.1M

(8.9)%

Net Income (loss)(a)

$4.1M

($5.9M)

179.2%

EPS (Diluted)

$0.07

($0.10)

-

Diluted Shares O/S

57,551,991

57,646,160

-

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

Full Year 2013 Financial Results

Sales for the year ended December 31, 2013 were $646,549 compared to sales of $750,628 for the year ended December 31, 2012, a decrease of $104,078, or 13.9%. The substantial decrease in sales is a result of 41 days production suspension for a routine maintenance of the production facilities which is standard and necessary in the petrochemical production industry and is undertaken every two years, depending on the condition of the facilities.

In 2013, the Company sold 529,957 MT of chemical products at an average price of $1.167 per MT, as compared to sales of 646,753 MT of chemical products at the average price of $1.051 per MT in 2012. This represents a reduction of 116,796 MT, or a decrease of approximately 18.1% in products sold. Compared with 15 days of production suspension for inspection in 2012, the Company lost 41 days of production for system maintenance during 2013.

In 2013, SBS production was 36,959 MT of finished products at an average sale price of $2.110 per MT generating sales of $77,984. In 2012, the SBS facility produced 28,730 MT of finished products at the average sale price of $2.471 per MT generating total sales of $70,992. The sales for SBS products increased $6,992 or 9.8%. The main reason for the increase is that the Company became more experienced in stabilizing the facility operating conditions and reducing interruptions, as well as increasing the output after the first year's trial operation.

Cost of sales was $620,040 for the year ended December 31, 2013, or 96% of sales, compared to cost of sales of $721,519, or 96% of sales for the year ended December 31, 2012, a decrease of $101,479 or 14.06%. The cost of sales are primarily composed of the costs of direct raw materials (mainly heavy oil, benzene and carbinol), labor cost, depreciation and amortization of manufacturing equipment and facilities, and other overhead.

In addition to primary components of cost of sales, cost of sales includes energy costs. Energy required for production of our products consists of water, electricity and steam, the costs of which are attributed to cost of sales rather than operating expense. The supply prices of these energy sources in China have been very stable historically as a result of PRC government policy. Accordingly, the potential impact of changing energy costs to our production is minimal. Total energy cost was approximately $16,262 for the year ended December 31, 2013, which constitutes approximately 2.52 % of sales. Total energy cost was approximately $14,118 for the year ended December 31, 2012, which constitutes approximately 1.88 % of sales.

Gross profit for the year ended December 31, 2013 was $26,509, compared to $29,109 for the year ended December 31, 2012. The decrease of $2,600 in gross profit in 2013 is due to the decrease in sales of products and the higher fixed cost and maintenance cost compared to fiscal year 2012. In addition, the Company also recorded a gross loss of $ 1,637 in connection with the trading of heavy oil in 2013, which also contributed to the decrease of gross profit.

Operating expenses, including selling expenses, and general and administrative expenses, were $16,299, or 2.5 % of sales for the year ended December 31, 2013 as compared to $13,642, or 1.8% of sales for the fiscal year 2012, an increase of $2,657. The increase is due to the outsourcing of our SBS products packing service, which results in an increase of $0.4 million in selling expense. The Company also incurred research and development expense of approximately $ 1.6 million for the purpose of meeting the requirements for our subsidiary, Keyuan Synthetic Rubbers, to apply as a "National High-Tech Enterprise." Once approved, Keyuan Synthetic Rubbers will benefit from a reduced income tax rate of 15% versus 25%. Consequently, the Company will be able to increase the investment in R&D and expansion toward the long-term growth of the Company.

For the year ended December 31, 2013, interest income and expense was approximately $8,422 and $18,809, respectively; as compared to interest income and expense of approximately $5,940 and $25,065, respectively for the year ended December 31, 2012. The increased interest income is mainly from the increased pledged bank deposits for bank borrowings. The decrease in interest expense is mainly due to the decreased rate of discounted bills as well as the decrease in the weighted average interest rate for short term borrowings from 6.21% in 2012 to 5.63% in 2013.

Net Income for the year ended December 31, 2013 was approximately $4,632, as compared to a net loss of approximately $5,850 for the year ended December 31, 2012, an increase of $10,482 or 179.2%. The increase in net income was mainly due to the exchange gain of $10,712 from the appreciation of the RMB.

Balance Sheet and Cash Flows

As of December 31, 2013 and 2012, cash of $12.3 million and $23.3 million, respectively, was held in major financial institutions located in the PRC. Management performs periodic evaluations of the relative credit standings of those financial institutions, and believes that they have high credit ratings.

Net cash used in operating activities was $52,961 for the year ended December 31, 2013, as compared to $7,095 used in operating activities for the same period in 2012. The increase in cash used in operating activities is primarily due to the increase in accounts payable, the prepaid VAT, inventories and prepayment to suppliers. The Company also obtained less advances from customers in 2013 which further contributed to the increase in net cash used in operating activities in 2013.

Net cash used in investing activities was approximately $73,341 and $54,417 for the years ended December 31, 2013 and 2012, respectively. The increase in net cash used in investing activities is primarily due to our increasing investments for the construction of infrastructures and facilities in accordance with our expansion plan.

Net cash provided by financing activities amounted to $115,231 for 2013 and $77,488 for 2012. The increase of $37,743 in net cash provided by financing activities in 2013 is primarily due to the increase in short-term bank borrowings for our operations and expansion plan.

Business Expansion Plan

The Company has been focusing on the following improvements to its infrastructure to expand its manufacturing capacity and profit margin:

a) an ABS production facility in Guangxi Province (the "Guangxi Project") with an annual production capacity of 400,000 MT of ABS;

b) an oil catalytic cracking processing facility to reduce production costs and the market risk in the purchase of raw materials, and to improve the stability and efficiency of project production to 200,000 MT of heavy oil per year;

c) an increased annual design capacity of our ethylene-styrene facility from 80,000 MT to 200,000 MT as a bridge between original products and high-value added products;

d) a transformer oil facility using hydrogen from the ethylene-styrene facility to complete a double hydrogenation process on original products (BTX Aromatic) for refining transformer oil and producing high value transformer oil with a design capability of 100,000 MT per year. Construction of the main facility column was completed at the end of October 2013. We are aiming  to finish the assembly and installation by the end of May 2014 and start trial operations at the end of June 2014;  and

e) a SSBR production facility with a designed capacity of 150,000 MT per year. SSBR can be used as raw material for tires, instead of imported hexakis (methoxymethy) melamine ("HMMM").

The estimated cost of our expansion plan is approximately $491.8 million, including $300 million for the Guangxi Project, $19.8 million for the catalytic cracking processing equipment, $30 million for the transformer oil facility, $99.5 million for the SSBR production facility, $40 million for the increased annual design capacity of our ethylene-styrene production lines, and $2.5 million for additional storage capacity. Upon full completion of our expansion, the Company's total production capacity will reach 1,723,000 MT per year including, but not limited to, the current petrochemical production of 720,000 MT, styrene of 200,000 MT, catalytic cracking oil of 200,000 MT, ABS of 400,000 MT, SSBR of 150,000 MT and transformer oil of 100,000 MT.

The Company's current estimate of the expansion schedule is as follows which is subject to further evaluation and adjustments based on our financial situation and market conditions.

Expansion Project


Expected Completion Date

Oil Catalytic Processing Facility


End of Q4, 2014

Ethylene-Styrene Facility


End of Q2, 2015

Transformer Oil Facility


End of Q3, 2014

SSBR production facility


End of Q4, 2015

ABS Production Facility


End of Q4, 2016

New storage capacity of 50,000 MT


End of Q3, 2015

About Keyuan Petrochemicals, Inc.

Keyuan Petrochemicals, Inc., established in 2007, through its PRC operating subsidiaries, Ningbo Keyuan Plastics Co., Ltd, Ningbo Keyuan Petrochemicals Co., Ltd, Keyuan Synthetic Rubbers Co., Ltd and Guangxi Keyuan Co., Ltd, is engaged in the manufacture and sale of various petrochemical products in the PRC. 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. Keyuan also completed the construction of a Styrene-Butadience-Styrene (the "SBS") production facility with an annual production capacity of 70,000 MT in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August 2012. In order to meet increasing market demand, Keyuan adjusted its original expansion project and is currently working to refine its manufacturing capacity to include an ABS production facility, an oil catalytic cracking processing facility, an increased annual design capacity of its ethylene-styrene facility from 80,000 MT to 200,000 MT, a transformer oil facility and an SSBR (Solution Polymerized Styrene Butadiene Rubber) 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:

US Contact Information:
Jim Jiang
Keyuan Petrochemicals, Inc
Phone: +1-1-646-705-1386
Email: jzm0580@gmail.com

Company Contact Information:
Bill Bai
Keyuan Petrochemicals, Inc.
Phone: +86-138-0588-7777
Email: baih@krcc.cn
Web: www.keyuanpetrochemicals.com

Financial Statements

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)












As of December 31




2013


2012

ASSETS






Current assets:






Cash



$

12,309


$

23,378

Pledged bank deposits




336,363



201,252

Bills receivable




25



3,968

Accounts receivable




7,517



14,248

Inventories




69,914



48,634

Prepayments to suppliers




33,842



23,476

Consumption tax recoverable




46,072



51,334

Amounts due from related parties




43



40

Other current assets




65,189



56,320

Deferred income tax assets




2,641



2,801

Total current assets




573,915



425,451









Property, plant and equipment, net




285,506



227,603

Intangible assets, net




986



880

Land use rights




10,663



10,708

VAT recoverable




3,012



2,232









Total assets



$

874,082


$

666,874









LIABILITIES AND STOCKHOLDERS' EQUITY








Current Liabilities:








Short-term bank borrowings



$

424,436


$

295,146

Bills payable




261,524



102,650

Accounts payable




59,043



130,387

Advances from customers




10,820



24,405

Accrued expenses and other payables




23,767



26,833

Income tax payable




1,849



2,344

Dividends payable




2,382



2,382

Amounts due to related parties




-



479

Total liabilities, all current




783,821



584,626









Series B convertible preferred stock:








Par value:$0.001; Authorized: 8000,000 shares issued and outstanding: 5,333,340 shares, liquidation preference $20,250




16,868



16,452

Commitments and contingencies




-



-









Stockholders' equity:








Common stock:








Par value: $0.001; Authorized: 100,000,000 shares Issued
and outstanding: 57,646,160 and 57,520,012 shares, respectively, as at December 31, 2013 and 2012




58



58

Additional paid-in capital




51,555



50,653

Statutory reserve




5,749



4,071

Accumulated other comprehensive income




10,245



7,491

Retained earnings




5,929



3,523

Treasury stock, at cost, 126,148 shares at December 31, 2013




-143



-

Total stockholders' equity




73,393



65,796









Total liabilities and stockholders' equity



$

874,082


$

666,874









 

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands, except share and per share data)












Year Ended December 31,




2013


2012







Sales



$

646,549


$

750,628

Cost of sales




620,040



721,519

Gross profit




26,509



29,109









Selling expenses




1,563



1,132

General and administration expenses




14,736



12,510

Total operating expenses




16,299



13,642









Income from operations




10,210



15,467









Other income (expense):








Interest income




8,422



5,940

Interest expense




(18,809)



(25,065)

Foreign exchange gain (loss) , net




10,118



(1,319)

Other (expense) income, net




(1,833)



(79)

Total other expense, net




(2,102)



(20,523)









Income (loss) before income taxes




8,108



(5,056)

Income tax expense




3,476



794

Net Income (loss) attributable to Keyuan Petrochemicals Inc. stockholders




4,632



(5,850)

Dividends to Series B convertible preferred stockholders




548



-

Net Income (loss) attributable to Keyuan Petrochemicals Inc. common stockholders




4,084



(5,850)









Other comprehensive income (loss):








Foreign currency translation adjustment




2,754



945

Comprehensive income (loss)



$

7,386


$

(4,905)









Earnings (loss) per share:








Attributable to common stock:








-Basic



$

0


$

(0)

-Diluted



$

0


$

(0)

Weighted average number of shares of common stock used in calculation:








-Basic




57,551,991



57,646,160

-Diluted




57,551,991



57,646,160









  

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share data)










Year Ended



December 31,


December 31,

2013

2012

Cash flows from operating activities:







Net income (loss)


$

4,632


$

(5,850)

Adjustments to reconcile net income to net cash
provided by (used in) operating

activities:







Depreciation



11,232



11,927

Amortization



121



107

Land use rights amortization



461



452

Deferred income tax expense (benefit)



245



(2,763)

Share-based compensation expense



770



1,590

Changes in operating assets and liabilities:







Bills receivable



2,283



(2,379)

Accounts receivable



7,303



(12,249)

Inventories



(19,488)



(9,363)

Prepayments to suppliers



(10,199)



(6,877)

Consumption tax recoverable



6,790



4,934

Other current assets



(7,330)



(9,958)

Accounts payable



(43,268)



281

Advances from (to) customers



(14,128)



16,993

Income taxes payable



(562)



2,155

Accrued expenses and other payables



8,045



3,905

Net cash used in operating activities



(53,093)



(7,095)








Cash flows from investing activities:







Purchase of property, plant and equipment



(73,341)



(54,417)

Net cash used in investing activities



(73,341)



(54,417)








Cash flow from financing activities:







Pledged bank deposits used for bank borrowings



(127,080)



(43,629)

Proceeds from short-term bank borrowings



1,199,005



827,950

Repayment of short-term bank borrowings



(1,111,878)



(729,531)

Proceeds from bank notes



373,265



198,125

Repayments of bank notes



(217,938)



(159,562)

Repayment of long term bank borrowings



-



(15,865)

Repurchase of treasury stock



(143)



-

Net cash provided by financing activities



115,231



77,488








Effect of foreign currency exchange rate

changes on cash



134



77








Net increase (decrease) in cash



(11,069)



16,053








Cash at beginning of period



23,378



7,325

Cash at end of period


$

12,309


$

23,378








Supplemental disclosure of cash flow information:







Income tax paid


$

3,867


$

1,914

Interest paid, net of capitalized interest


$

-


$

843

Non cash investing and financing activities:







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


$

13,845


$

18,653

Dividends on Series B convertible preferred stock


$

(548)


$

-

 

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2013 AND 2012

(Amounts in thousands, except share data)




























Common stock






Accumulated






Total

Additional




other






Number of




paid-in


Statutory


comprehensive


Retained


Treasury


stockholders'

shares

capital


reserve


income


earnings


Stock


equity

Balance as of January 1, 2012



57,646,160


$

58


$

49,198


$

3,744


$

6,546


$

9,700


$

-


$

69,246


























Share-based compensation



-



-



1,455



-



-



-






1,455

Net income



-



-



-



-



-



(5,850)






(5,850)

Statutory reserve



-



-



-



327



-



(327)






-

Other comprehensive income - Foreign currency translation loss



-



-



-



-



945



-






945

Balance as of December 31, 2012



57,646,160



58



50,653



4,071



7,491



3,523



-



65,796


























Fixed dividends for series B Convertible preferred stockholders  



-



-



-



-



-



(548)






(548)

Share-based compensation



-



-



770



-



-



-






770

Change in fair value of the Series C and Series D warrants



-



-



132



-



-



-






132

Net income



-



-



-



-



-



4,632






4,632

Treasury Stock



(126,148)


















(143)



(143)

Statutory reserve



-



-



-



1,678



-



(1,678)






-

Other comprehensive income - Foreign currency translation loss



-



-



-



-



2,754



-






2,754

Balance as of December 31, 2013



57,520,012


$

58


$

51,555


$

5,749


$

10,245


$

5,929


$

(143)


$

73,393


























SOURCE Keyuan Petrochemicals, Inc.



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