China Shengda Packaging Group Reports Third Quarter 2013 Results

HANGZHOU, China, Nov. 13, 2013 /PRNewswire-FirstCall/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) ("Shengda" or the "Company"), a leading Chinese paper packaging company, today reported its financial results for the third quarter ended September 30, 2013. 

Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging Group commented, "Despite continued challenges in economic environment, we continued to grow our paper cartons business in the third quarter which grew 3.1% to the highest level since 2Q12. We are also pleased to see our paper mill starting to contribute meaningfully to our business, generating $5.9 million, or approximately 15% of total revenues, in the third quarter. With the continuing ramp of the paper mill and our heightened efforts in sales and marketing for our paper carton business, we believe Shengda is well positioned in years to come."

Third Quarter 2013 Financial Highlights:

• Revenues increased by 20.9% year-over-year to $39.9.million for the third quarter of 2013 with revenues for paper cartons and other paper products increasing 3.1% to $34.1 million and revenues for raw paper contributing $5.9 million.
• Gross profit decreased by 10.8% to $5.4 million for the third quarter of 2013 from $6.0 million for the same period of 2012. Gross margin of 13.4% for the third quarter of 2013 compared to 18.2% for the same period of last year.
• Net income attributable to the Company's stockholders decreased by $0.9 million, or 60.7%, to $0.5 million for the third quarter of 2013 from $1.4 million for the same period of last year.
• Basic and diluted earnings per share were $0.01 for the third quarter of 2013, as compared to $0.04 for the same period of last year.

Three Months Ended September 30, 2013 Results

Total revenues for the third quarter of 2013 increased by $6.9 million, or 20.9%, to $39.9 million from $33.0 million for the same period of 2012. Revenues of paper cartons and other paper products increased by $1.1 million, or 3.1%, to $34.1 million for the third quarter of 2013 from $33.0 million for the same period of last year. Our paper mill, which went into production in June 2013, contributed $5.9 million, or 14.7% of total revenues, with sales volume of 16.4 thousand tons and average price of $357 per ton. The increase in both sales volume and average price contributed to the increase in revenues from paper cartons. The sales volume of paper cartons increased by 0.7 million square meters to 85.1 million square meter for the third quarter of 2013 from 84.4 million square meters for the same period of 2012. Average sales price increased 2.4% to approximately $0.40 per square meter for the third quarter of 2013 from approximately $0.39 per square meter in the third quarter of 2012. The increase in sales volume of paper cartons was mainly because of greater efforts by our sales team, despite challenging domestic and foreign economic environment.

Color cartons and flexo cartons accounted for 29.5% and 70.5% of revenues of paper cartons and other paper products for the third quarter of 2013, compared to 31.3% and 68.7%, respectively, for the same period of 2012. Average sales prices per square meter for color cartons and flexo cartons were $0.41 and $0.40, respectively, for the third quarter of 2013, as compared to $0.41 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 22.5% and 24.6%, respectively, of revenues of paper cartons and other paper products for the third quarter of 2013, as compared to 23.6% and 36.4%, respectively, for the same period of 2012.

Gross profit decreased by $0.6 million, or 10.8%, to $5.4 million for the third quarter of 2013 from $6.0 million for the same period of 2012. Gross margin decreased by approximately 4.8 points to 13.4% for the third quarter of 2013 from 18.2% for the same period of 2012.

Selling expenses increased by approximately $0.5 million, or 37.8%, to $1.9 million for the third quarter of 2013 from $1.4 million for the same period of 2012. The increase was mainly related to increase in freight expenses and increase in marketing expenses related to the paper mill in 2013.  As a percentage of revenues, selling expenses for the third quarter of 2013 increased to 4.8% from 4.2% for the same period of 2012.

General and administrative expenses decreased by $ 0.1 million, or 5.3%, to $2.8 million for the third quarter of 2013 from $2.9 million for the same period of 2012. This decrease was mainly related to the decline in office expenses.  As a percentage of revenues, general and administrative expenses for the third quarter of 2013 decreased to 7.0% from 8.9% for the same period of 2012.

Income tax expense decreased to $0.2 million for the third quarter of 2013 compared to $0.4 million for the same period of 2012. The decrease in income tax expense was mainly attributable to the decrease in income before income tax expense and non controlling interest.

Net income attributable to the Company's stockholders decreased by $0.9 million, or 60.7%, to approximately $0.5 million for the third quarter of 2013 from $1.4 million for the same period of 2012. Basic and diluted earnings per share were $0.01 for the third quarter of 2013, as compared to $0.04 for the same period of 2012.

Total revenues for the nine months ended September 30, 2013 increased by $2.3 million, or 2.4% to $100.5 million from $98.2 million for the same period of 2012. Revenues of paper cartons and other paper products decreased by $4.2 million, or 4.3%, to $94 million for the nine months ended September 30, 2013 from $98.2 million for the same period of last year. Our paper mill went into production in June 2013 and contributed $6.5 million, or 6.5% of total revenues with sales volume of 18.3 thousand tons and the average price of $357 per ton. The decrease in revenues of paper cartons was a result of continued challenges in domestic and foreign economic environment that led to 4.7% decline in sales volume of paper cartons to 237.3 million square meters for the nine months ended September 30, 2013 from 249 million square meters for the same period of last year.

Color cartons and flexo cartons accounted for 29.0% and 71.0% of revenues of paper cartons and other paper products, respectively, for the nine months ended September 30, 2013, as compared to 29.7% and 70.3%, 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 nine months ended September 30, 2013, as compared to $0.42 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 24.9% and 26.0%, respectively, of revenues of paper cartons and other paper products for the nine months ended September 30, 2013, as compared to 26.1% and 32.8% respectively, for the same period of 2012.

Gross profit decreased by $1.8 million, or 10.6%, to $15.5 million for the nine months ended September 30, 2013 from $17.3 million for the same period of 2012. Gross margin dropped by approximately 2.2 points to 15.4% for the nine months ended September 30, 2013 from 17.6% for the same period of 2012.

Selling expenses increased by $0.1 million, or 4.3%, to $4.1 million for the nine months ended September 30, 2013 from $4.0 million for the same period of 2012. The increase was mainly due to increased marketing expenses at our paper mill in 2013. As a percentage of revenues, selling expenses for the nine months ended September 30, 2013 increased to 4.1% from 4.0% for the same period of 2012.

General and administrative expenses increased by $ 0.8 million, or 9.4%, to $8.6 million for the nine months ended September 30, 2013 from $7.8 million for the same period of 2012. This increase was mainly due to the increase in R&D expenses.  As a percentage of revenues, general and administrative expenses for the nine months ended September 30, 2013 increased to 8.5% from 8.0% for the same period of 2012.

Income tax expense decreased to $0.7 million for the nine months ended September 30, 2013 from $1.0 million for the same period of 2012. The decrease in income tax expense was mainly attributable to the decrease in income before income tax expense and non controlling interest.

Net income attributable to the Company's common stockholders decreased by $2.4 million, or 52.5%, to $2.2 million for the nine months ended September 30, 2013, from $4.6 million for the same period of 2012. Basic and diluted earnings per share were $0.06 for the nine months ended September 30, 2013, as compared to $0.12 for the same period of 2012.

Financial Condition

As of September 30, 2013, the Company had cash and cash equivalents of $6.2 million and restricted cash of $14.3 million. Shareholders' equity was $109.8 million, compared to $105.0 million at December 31, 2012. Net cash used in operating activities was $8.8 million for the nine months ended September 30, 2013, as compared to net cash provided by operating activities of $22.0 million for the same period of 2012. This was attributable to net income of $2.1 million, adjusted by depreciation and amortization expenses of $4.3 million, and a net decrease in cash from working capital items of $15.2 million. Net cash used in investing activities was $3.6 million for the nine months ended September 30, 2013, as compared to $17.8 million for the same period of 2012. The $3.6 million was used for purchases of property, plant and equipment and prepayment for construction, primarily related to machinery purchases and plant construction of Shuangsheng paper mill which was completed in June 2013. Net cash provided by financing activities was $6.4 million for the nine months ended September 30, 2013, as compared to $6.9 million net cash used in financing activities for the same period of 2012. During the third quarter of 2013, we received loan proceeds amounting to $6.4 million.

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in China. It is principally engaged in design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures raw paper and corrugated paperboards, which are used for the production of 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 reach full production capacity 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: +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.