China Shengda Packaging Group Reports First Quarter 2013 Results

HANGZHOU, China, May 13, 2013 /PRNewswire/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) (the "Company"), a leading Chinese paper packaging manufacturer, today announced its financial results for the three months ended March 31, 2013. 

Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging Group commented, "Our revenues for the three months ended March 31, 2013 declined slightly to $27.1 million from $28.5 million for the same period of last year mainly due to the decline in overall sales volume, reflecting continued challenges in macro environment faced by our customers. However, we are pleased to see our gross margin continue to improve, increasing approximately 34 basis points from the same period of last year and 18 basis points sequentially. We are also excited to announce that the construction of our paper mill is finally near its completion and we expect production to commence by the end of the second quarter of 2013."

First Quarter 2013 Financial Highlights:

• Revenues decreased by 4.8% to $27.1 million for the first quarter of 2013, mainly due decrease in sales volume.
• Gross profit decreased by 3.1% to $5.3 million for the first quarter of 2013 from $5.5 million for the same period of 2012. Gross margin increased by 34 basis points to 19.5% for the first quarter of 2013.
• Net income attributable to the Company's common stockholders decreased by $0.6 million, or 43.3%, to $0.9 million for the first quarter of 2013 from $1.5 million for the same period of 2012.
• Basic and diluted earnings per share were $0.02 for the first quarter of 2013, as compared to $0.04 for the same period of last year.

First Quarter 2013 Results

Revenues for the first quarter of 2013 was $27.1 million, an decrease of $1.4 million or 4.8%, from $28.5 million for the same period of 2012. The decrease was mainly due to decline in sales volume. The average sales price was $0.39 per square meter for the first quarter of 2013, essentially unchanged from the same period of last year. Sales volume decreased by 3.4 million square meters, or 4.6%, to 69.2 million square meters for the first quarter of 2013 from 72.6 million square meters for the same period of 2012. The decrease in sales volume was mainly the result of continued challenges in domestic and foreign economic environment.

Color cartons accounted for 28.3% of revenues and flexo cartons accounted for 71.7% of revenues for the first quarter of 2013, compared to 27.2% and 72.8%, respectively, for the same period of 2012. Average sales prices per square meter for color cartons and flexo cartons were $0.40 and $0.39, respectively, for the first quarter of 2013, as compared to $0.44 and $0.38, respectively, for the same period  of 2012.

Consumer and industrial goods manufacturing sectors remained the Company's principal markets. Major customers remained home appliances & electronics manufacturers and food, beverage & cigarette manufacturers in the Yangtze River Delta Region, which accounted for 28.3% and 29.8%, respectively, of revenues for the first quarter of 2013, as compared to 29.4% and 29.6%, respectively, for the same period of 2012.

Gross profit decreased by $0.2 million, or 3.1%, to $5.3 million for the first quarter of 2013, from $5.5 million for the same period of 2012.  The decrease in gross profit was mainly due to decline in sales volume. Gross margin increased by approximately 34 basis points to 19.5% for the first quarter of 2013 from 19.2% for the same period of 2012.

Selling expenses decreased by $0.1 million, or 7.9%, to $1.2 million for the first quarter of 2013, from $1.3 million for the same period of 2012. The decrease was mainly related to decrease in freight expenses. As a percentage of revenues, selling expenses for the first quarter of 2013 decreased to 4.3% from 4.4% for the same period of 2012.

General and administrative expenses increased by $ 0.5 million, or 22.2%, to $2.8 million for the first quarter of 2013, from $2.3 million for the same period of 2012. This was mainly attributable to a $0.2 million increase in R&D expenses, and a 0.2 million increase in staff costs. As a percentage of revenues, general and administrative expenses for the first quarter of 2013 increased to 10.4% from 8.1% for the same period of 2012.

Income tax expense increased to $0.32 million for the first quarter of 2013, as compared to $0.31 million for the same period of 2012. The increase in income tax expense was mainly attributable to the increase in income tax rate of Zhejiang Great Shengda Packaging Co., Ltd. ("Great Shengda") from 15% to 25%, and offset by the decrease in income before income tax expense and noncontrolling interest. Great Shengda is a consolidated subsidiary of the Company.  

In December 2010, Great Shengda qualified as a National High-Tech Enterprise in the PRC, a status recognized by China's Ministry of Science and Technology, Ministry of Finance, and State Administration of Taxation. In December 2010, the status was approved by the local tax bureau who granted Great Shengda a preferential tax rate of 15%, retroactively effective as of January 1, 2010. Such status is subject to review by government authorities every three years. During the review period, as Great Shengda currently is, the income tax is subject to the uniform income tax rate of 25% starting in 2013. Upon passing the review, the preferential tax rate of 15% will be applied retroactively from January 1, 2013. We cannot assure you that we will continue to have such status after 2013 or that the PRC government will continue the preferential tax treatment of designated high-tech enterprises.

Net income attributable to the Company's common stockholders decreased by $0.6 million, or 43.3%, to $0.9 million for the first quarter of 2013 from $1.5 million for the same period of 2012. Basic and diluted earnings per share were $0.02 for the first quarter of 2013, as compared to $0.04 for the same period of 2012.

Financial Condition

As of March 31, 2013, the Company had cash and cash equivalents of $10.0 million and restricted cash of $26.3 million. Shareholders' equity was $106.5 million, compared to $105.0 million at December 31, 2012. Net cash used in operating activities was $2.5 million for the first quarter of 2013, as compared to $1.6 million net cash provided by operating activities for the same period of 2012. This was attributable to net income of $0.9 million, adjusted by depreciation and amortization expenses of $1.1 million, and a net decrease in cash from restricted cash of $3.6 million, and a net decrease in cash from other working capital items of $0.9 million.

Net cash used in investing activities was $2.7 million for the first quarter of 2013, which was essentially unchanged from the same period of 2012. The $2.7 million was used for purchases of property, plant and equipment, primarily related to machinery purchases and plant construction of our paper mill. The construction of the paper mill is approaching its completion and we expect production to start by the end of second quarter of 2013.

Net cash provided by financing activities was $3.2 million for the first quarter of 2013, reflecting the proceeds of short term loans received by the company.

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in China. It is principally engaged in the design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures corrugated paperboards, which are used for the production of its flexo-printed and color-printed cartons. The company provides paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors in China.

Safe Harbor Statements

This press release may contain forward-looking statements. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company's ability to develop and market new products, the ability to commence production of the new paper mill, the ability to access capital for expansion and continued investment in R&D, the ability to acquire other companies, changes from anticipated levels of sales, changes in national or regional economic and competitive conditions, changes in relationships with customers, changes in profit margins of principal product and other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Company Contact:                                                                 

China Shengda Packaging Group Inc.                                   
Cindy Hu, Board Secretary                                                               
Tel: Tel: +86-571 8283 8770                                                  
E-mail: [email protected]                                                          
Website: http://www.cnpti.com                                           

Investor Relations Contact:

Weitian Group LLC  
Tina Xiao
Tel: +1-917-609-0333
Email: [email protected]
Website: http://www.weitian-ir.com     

SOURCE China Shengda Packaging Group Inc.