Specialty Chemical Company China XD Plastics Announces Signing of Deleveraging Investment Framework Agreement with CCB Financial Asset Investment Co., Ltd. and China Construction Bank, Heilongjiang Branch
-Business Outlook-
HARBIN, China, Nov. 5, 2018 /PRNewswire/ -- China XD Plastics Company Limited (NASDAQ: CXDC) ("China XD Plastics" or the "Company"), one of China's leading specialty chemical companies engaged in the development, manufacture and sale of polymer composite materials primarily for automotive applications, today announced signing of deleveraging investment framework agreement (the "Agreement") by and among its subsidiary, Heilongjiang Xinda Enterprise Group Company Limited ("Xinda Group"), CCB Financial Asset Investment Co., Ltd. ("CCB Financial"), and China Construction Bank Heilongjiang Branch ("CCB HLJ"), both of which are wholy owned subsidiaries of China Construction Bank ("CCB").
On, October 31, 2018, management from both the Company and CCB signed the Agreement at the conference center of the Company's Northeast Production Base. CCB Financial and CCB HLJ are planning to provide estimated 2 billion RMB (approximately US$289 million) capital to Xinda Group and or its affiliated entities in debt, equity or other forms, mainly to repay Xinda Group's interest bearing loans, to facilitate the Company to diversify and develop its business and to improve corporate management, subject to the parties entering into one or more definitive agreements. The definitive agreements will be subject to satisfactory due diligence by CCB Financial and CCB HLJ, business arrangement, legal viability, and completion and satisfaction of other standard and customary conditions. The Company will make its best effort to assist CCB Financial and CCB HLK but does not provide timing estimate or make promise of signing of any definitive agreement.
"We are very pleased to welcome CCB Financial as an important strategic and long-term partner of Xinda. Once materialized, the cooperation under this Agreement will not only help our company deleverage its balance sheet and improve its capital structure, but assist the Company to solidify its long term position in its industry," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer. "As the second largest bank in the world by assets, CCB is very selective especially to non-state-owned enterprises in China. The signing of the Agreement reflects CCB's trust to our company after decades of cooperation reaching a new high level and unweavering support to high quality enterprises with focus on long term innovation by the government under the leadership of President Xi.
Business Update
Since the beginning of this third quarter, China auto market has experienced an unexpected and unprecedent turn with both numbers of car produced and sold plummeted. The results from China Auto Industry Association came drastically under its early expectation. China auto sales dropped 4%, 3.8% and 11.6% in this July, August and September, respectively, compared to the same periods in 2017. It has a ripple effect and impact throughout China auto supply chain, including the Company. In light of the foregoing changing market condition and the macro economic environment in China, the Company is updating its financial guidance for fiscal 2018 to range between $1 and $1.2 billion in revenue and net income to range between $70 and $80 million. It assumes the average exchange rate of the US dollar to RMB at 6.9. This financial guidance reflects the Company's current view of its business outlook for fiscal 2018 and is subject to revision based on changing market conditions at any time.
The Company's Dubai production base has completed trial production successfully and official commencement is scheduled on November 11, 2018 with 11.25 thousand metric tons annual capacity in 2019. Dubai Xinda primarily offers long chain nylon alloy and other high-end engineering plastics and has developed and completed product trials with a number of customers overseas from Spain, Itily, UAE, Malysia, and India etc.
About China XD Plastics Company Limited
China XD Plastics Company Limited, through its wholly-owned subsidiaries, develops, manufactures and sells polymer composites materials, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 31 automobile brands manufactured in China, including without limitation, Audi, Mercedes Benz, BMW, Toyota, Buick, Chevrolet, Mazda, Volvo, Ford, Citroen, Jinbei and VW Passat, Golf, Jetta, etc. The Company's wholly-owned research center is dedicated to the research and development of polymer composites materials and benefits from its cooperation with well-known scientists from prestigious universities in China. As of September 30, 2018, 476 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 the Company's English website at http://chinaxd.irpass.com/, and the Chinese website at http://www.xdholding.com.
CCB Financial Financial Asset Investment Co., Ltd
CCB Financial Financial Asset Investment Co., Ltd is the first market-based debt-to-equity swap institution approved by the China Banking Regulatory Commission. It was incorporated on July 26, 2017 and is a wholly-owned subsidiary of China Construction Bank with a registered capital of RMB 12 billion. It is by far the largest registered capital of CCB Group, with a management fund of over RMB 140 billion, and its business scale is in the leading position in the industry.
About China Constructin Bank Heilongjiang Branch
China Construction Bank's main business areas include corporate banking, personal banking and treasury operations, providing customers with comprehensive financial services. China Construction Bank ranked second in the world's leading magazine, the British "Banker" in 2018 and the World's Top 1000 Banks. China Construction Bank Heilongjiang Branch was established in Harbin on July 20, 1986. It is a tier-one branch under the jurisdiction of CCB. Its main business areas include corporate banking, personal banking and treasury operations, and is dominated by China's economic strategic industries. The company maintains close cooperation with a large number of high-end customers to provide comprehensive financial services to customers.
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 growth potential in international markets; the effectiveness and profitability of the Company's product diversification strategy; the impact of the Company's product mix shift to more advanced products and related pricing policies; the effectiveness, profitability, and the marketability of its the ongoing mix shift to more advanced products; the prospects of the Company's Dubai facility, and the associated expansion into Middle East, Europe and other parts of Asia; the prospects of the Company's Sichuan facility, and its penetration into Southwest China; the prospects of the Company's Harbin facility, and its penetration into Northeast China; the Company's projections of its revenues for performance in fiscal 2018. These forward-looking statements can be identified by terminology such as "will," "expect," "project," "anticipate," "forecast," "plan," "believe," "estimate" and similar statements. Forward-looking statements involve inherent risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, the global economic uncertainty which could further impair the automotive industry and limit demand for our products; fluctuations in automotive sales and production which could have a material adverse effect on our results of operations and liquidity; our financial performance which may be affected by the prospect of our Dubai facility and the associated expansion into Middle East, Europe and other parts of Asia; the withdrawal of preferential government policies, the tightening control over the Chinese automotive industry, automobile purchase restrictions imposed in certain major cities which may limit market demand for our products; the slowing of Chinese automotive industry's growth; the concentration of our distributors, customers and suppliers; 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. 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.
The following table shows a reconciliation of cash, cash equivalents and restricted cash on the condensed consolidated balance sheets to that presented in the above condensed consolidated statements of cash flows.
CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES |
||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
June 30, |
December 31, |
|||
2018 |
2017 |
|||
US$ |
US$ |
|||
ASSETS |
||||
Current assets: |
||||
Cash and cash equivalents |
72,721,460 |
190,392,211 |
||
Restricted cash |
263,254,352 |
129,699,454 |
||
Time deposits |
113,351,268 |
288,023,017 |
||
Accounts receivable, net of allowance for doubtful accounts |
308,622,962 |
298,868,984 |
||
Inventories |
549,782,095 |
421,736,682 |
||
Prepaid expenses and other current assets |
85,211,205 |
144,326,151 |
||
Total current assets |
1,392,943,342 |
1,473,046,499 |
||
Property, plant and equipment, net |
813,775,162 |
835,561,739 |
||
Land use rights, net |
31,226,580 |
31,943,652 |
||
Long-term prepayments to equipment and construction suppliers |
507,306,748 |
190,627,514 |
||
Other non-current assets |
16,102,868 |
12,924,279 |
||
Total assets |
2,761,354,700 |
2,544,103,683 |
||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY |
||||
Current liabilities: |
||||
Short-term loans, including current portion of long-term bank loans |
635,504,864 |
775,396,929 |
||
Bills payable |
519,466,191 |
252,768,510 |
||
Accounts payable |
166,693,789 |
227,993,140 |
||
Amounts due to a related party |
75,567,512 |
- |
||
Income taxes payable |
16,612,181 |
17,710,217 |
||
Accrued expenses and other current liabilities |
153,355,737 |
138,605,509 |
||
Total current liabilities |
1,567,200,274 |
1,412,474,305 |
||
Long-term bank loans, excluding current portion |
132,304,205 |
114,208,319 |
||
Deferred income |
105,746,194 |
99,168,276 |
||
Other non-current liabilities |
106,440,118 |
107,898,318 |
||
Total liabilities |
1,911,690,791 |
1,733,749,218 |
||
Redeemable Series D convertible preferred stock (redemption amount of US$252,601,000 |
97,576,465 |
97,576,465 |
||
Stockholders' equity: |
||||
Series B preferred stock |
100 |
100 |
||
Common stock, US$0.0001 par value, 500,000,000 shares authorized, 50,308,731 shares and |
5,031 |
4,975 |
||
49,748,731 shares issued, 50,287,731 shares and 49,727,731 shares outstanding as of |
||||
June 30, 2018 and December 31, 2017, respectively |
||||
Treasury stock, 21,000 shares at cost |
(92,694) |
(92,694) |
||
Additional paid-in capital |
85,789,902 |
83,159,893 |
||
Retained earnings |
695,114,448 |
648,790,469 |
||
Accumulated other comprehensive loss |
(28,729,343) |
(19,084,743) |
||
Total stockholders' equity |
752,087,444 |
712,778,000 |
||
Commitments and contingencies |
- |
- |
||
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
2,761,354,700 |
2,544,103,683 |
CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES |
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||
Three-Month Period Ended |
Six-Month Period Ended |
|||||||
2018 |
2017 |
2018 |
2017 |
|||||
US$ |
US$ |
US$ |
US$ |
|||||
Revenues |
317,329,520 |
313,555,663 |
627,782,553 |
551,395,860 |
||||
Cost of revenues |
(261,175,654) |
(250,446,461) |
(517,761,231) |
(453,514,488) |
||||
Gross profit |
56,153,866 |
63,109,202 |
110,021,322 |
97,881,372 |
||||
Selling expenses |
(3,562,711) |
(705,337) |
(4,613,720) |
(1,224,150) |
||||
General and administrative expenses |
(11,348,767) |
(8,844,582) |
(20,223,776) |
(15,898,253) |
||||
Research and development expenses |
(5,288,636) |
(9,546,922) |
(10,338,534) |
(15,398,022) |
||||
Total operating expenses |
(20,200,114) |
(19,096,841) |
(35,176,030) |
(32,520,425) |
||||
Operating income |
35,953,752 |
44,012,361 |
74,845,292 |
65,360,947 |
||||
Interest income |
1,029,675 |
970,293 |
3,342,298 |
2,133,552 |
||||
Interest expense |
(11,274,575) |
(11,951,851) |
(24,168,780) |
(21,973,827) |
||||
Foreign currency exchange gains (losses) |
5,632,970 |
(1,870,977) |
1,677,162 |
(2,347,062) |
||||
Losses on foreign currency option contracts |
- |
- |
(520,981) |
- |
||||
Government grant |
1,378,484 |
1,023,922 |
2,856,043 |
2,463,453 |
||||
Total non-operating expense, net |
(3,233,446) |
(11,828,613) |
(16,814,258) |
(19,723,884) |
||||
Income before income taxes |
32,720,306 |
32,183,748 |
58,031,034 |
45,637,063 |
||||
Income tax expense |
(5,496,228) |
(4,119,756) |
(11,707,055) |
(7,672,082) |
||||
Net income |
27,224,078 |
28,063,992 |
46,323,979 |
37,964,981 |
||||
Earnings per common share: |
||||||||
Basic and diluted |
0.41 |
0.43 |
0.70 |
0.58 |
||||
Net Income |
27,224,078 |
28,063,992 |
46,323,979 |
37,964,981 |
||||
Other comprehensive income (loss) |
||||||||
Foreign currency translation adjustment, net of nil income taxes |
(39,306,010) |
13,751,361 |
(9,644,600) |
17,669,664 |
||||
Comprehensive income (loss) |
(12,081,932) |
41,815,353 |
36,679,379 |
55,634,645 |
CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES |
||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
Six-Month Period Ended June 30, |
||||
2018 |
2017 |
|||
US$ |
US$ |
|||
Cash flows from operating activities: |
||||
Net cash provided by operating activities |
228,168,429 |
166,636,423 |
||
Cash flows from investing activities: |
||||
Proceeds from maturity of time deposits |
388,105,630 |
244,825,478 |
||
Purchase of time deposits |
(210,380,884) |
(215,714,244) |
||
Purchase of land use rights |
- |
(6,214,207) |
||
Purchase of and deposits for property, plant and equipment |
(334,739,673) |
(281,550,529) |
||
Refund of deposit from an equipment supplier |
60,054,417 |
75,197,802 |
||
Deposits for acquisition of equity |
(3,640,688) |
- |
||
Government grant related to the construction projects |
10,558,608 |
7,136,482 |
||
Net cash used in investing activities |
(90,042,590) |
(176,319,218) |
||
Cash flows from financing activities: |
||||
Proceeds from bank borrowings |
470,494,396 |
441,425,024 |
||
Repayments of bank borrowings |
(587,236,484) |
(311,342,509) |
||
Net cash (used in) provided by financing activities |
(116,742,088) |
130,082,515 |
||
Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash |
(5,499,604) |
7,995,135 |
||
Net increase in cash, cash equivalents and restricted cash |
15,884,147 |
128,394,855 |
||
Cash, cash equivalents and restricted cash at beginning of period |
320,091,665 |
271,575,847 |
||
Cash, cash equivalents and restricted cash at end of period |
335,975,812 |
399,970,702 |
||
Supplemental disclosure of cash flow information: |
||||
Interest paid, net of capitalized interest |
23,267,235 |
17,323,875 |
||
Income taxes paid |
12,906,780 |
7,353,371 |
||
Non-cash investing and financing activities: |
||||
Accrual for purchase of equipment and construction included in accrued expenses and other |
6,057,014 |
5,379,730 |
||
The following table shows a reconciliation of cash, cash equivalents and restricted cash on the condensed consolidated |
||||
balance sheets to that presented in the above condensed consolidated statements of cash flows. |
||||
June 30, |
||||
2018 |
2017 |
|||
US$ |
US$ |
|||
Cash and cash equivalents |
72,721,460 |
279,825,075 |
||
Restricted cash |
263,254,352 |
120,145,627 |
||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows |
335,975,812 |
339,970,702 |
CHINA XD PLASTICS COMPANY LIMITED |
||||
Reconcilation of Net Income to EBITDA |
||||
(Amounts expressed in United States Dollars) |
||||
Three Months Ended |
||||
June 30, |
||||
2018 |
2017 |
|||
Net income |
$27,224,078 |
$28,063,992 |
||
Interest expense |
11,274,575 |
11,951,851 |
||
Provision for income taxes |
5,496,228 |
4,119,756 |
||
Depreciation and amortization expense |
11,348,832 |
10,585,602 |
||
EBITDA |
55,343,713 |
54,721,201 |
SOURCE China XD Plastics Company Limited
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