SHANGDONG, China, May 7, 2012 /PRNewswire-Asia-FirstCall/ -- Gulf Resources, Inc. (GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced its financial results for the first quarter ended March 31, 2012.

First Quarter 2012 Highlights

• Revenue was $23.8 million, a year-over-year decrease of 47.5%
• Gross profit was $6.7 million, a year-over-year decrease of 73.0%
• Gross margin decreased to 28.1 %  compared to 54.6% in the first quarter of 2011
• Income from operations was $4.6 million as compared to $20.3 million in the first quarter of 2011
• Operating margin was 19.3% compared to 44.7% for the first quarter of 2011
• Net income was $3.3 million or $0.10 per basic and diluted share, versus $14.4 million, or $0.41 and $0.4 per basic and diluted share a year ago, respectively.
• Cash totaled $81.9 million as of  March 31, 2012

"Due to the lower demand of bromine as influenced by continuing macroeconomic tightening policy imposed by the Chinese government, the average selling price of bromine decreased from $4,596 per tonne for the first quarter in 2011 to $3,569 per tonne for the same period this year, with stable cost of raw material and increasing cost of labor, we reported significantly lower operating performance in this quarter in comparison to the same period of last year as we were unable to benefit from the upgrades and enhancement made to our equipment and the acquisition of the factory completed in 2011 under current economic condition," said CEO Mr. Xiaobin Liu.

 

First Quarter 2012 Results

 

Gulf Resources' revenue was $23.8 million for the first quarter of 2012, a decrease of 47.5% from $45.4 million for the first quarter of 2011. The decrease in net revenue was primarily attributable to the decline in selling price and sales volume in the segments of bromine and crude salt. Revenue from the bromine and crude salt segments was $13.5 million and $2.3 million, respectively, representing a total of 66.0% of sales revenue for the first quarter of 2012.

 

Revenue from the chemical products segment was $8.1 million, or 34.0% of total revenue, for the first quarter of 2012, a decrease of 20.5% from $10.2 million in the corresponding period in 2011. The decrease in revenue from this product segment was mainly due to a drop in sales volume for oil and gas exploration additives and paper manufacturing additives due to the continuing high price level of oil prices compared to the same quarter last year, which offset the incremental benefit arising from a higher sales volume for pesticides manufacturing additives and the increase in prices of all chemical products.

 

Gross profit for the first quarter of 2012 was $6.7 million, a decrease of 73.0% from $24.8 million from the first quarter of 2011, and gross profit margin for the three months ended March 31, 2012 was 28.1%, compared to 54.6% for the corresponding period last year. The decrease in gross margin was mainly due to the decrease in selling prices in bromine and crude salts segments.

 

Sales, marketing and other operating expenses for the first quarter of 2012 were $17,764 compared with $24,012 for the corresponding quarter last year. The decrease in these costs in the first quarter of 2012 was mainly due to the decrease in sales that caused reduced sales-related expenses.

 

General and administrative expenses for the first quarter of 2012 were $2.1 million, compared to $4.3 million for the first quarter of 2011. The significant decrease was primarily due to the decrease in non-cash expenses related to options granted to employees and a warrant issued to our previous investor relations firm.

 

Income from operations for the first quarter of 2012 was $4.6 million, compared to $20.3 million for the corresponding quarter of 2011. The operating margin was 19.3% for the first quarter of 2012, compared to 44.7% for the first quarter of 2011.

 

Other operating income, which represented the sales of wastewater at market price, was $57,074 for the first quarter of 2012 as compared to $22,785 for the same period in 2011.

 

For the first quarter of 2012, the Company incurred other income of $44,478 compared to $33,828 for the corresponding quarter last year.

 

Income taxes were $1.3 million for the first quarter of 2012, a decrease of 78.0% from $5.9 million for the first quarter of 2011. The Company's effective tax rate was 29% for both the three-month periods ended March 31, 2012 and 2011.

 

Net income was $3.3 million for the first quarter of 2012, a decrease of 77.1% from $14.4 million for the first quarter of 2011. Basic and diluted earnings per share in first quarter of 2012 were $0.10 per basic and diluted share compared to $0.41 and $0.40 per basic and diluted share respectively in the first quarter of 2011. Weighted average number of diluted shares for the three months ended March 31, 2012 was 34,561,520 compared with 35,590,982  for the three months ended March 31, 2011.

 

Financial Condition

 

As of March 31, 2012, Gulf Resources had cash of $81.9 million, current liabilities of $12.1 million, and shareholders' equity of $246.7 million. For the three months ended March 31, 2012, the Company had working capital of $102.5 million and a current ratio of 9.5. As of March 31, 2012, the Company generated $3.3 million in cash flow from operations, which approximately equaled our net income for the first quarter this year, and used $109,076 in investing activities for additions of prepaid land leases.

 

Subsequent Events

 

In an effort to pursue more effective and seamless communications with our investors and promote accelerated press releases, the Company has now set up its own investor relations department to handle investor relations issues.  For future investor inquiries, investors may reach our IR manager  Max Ma at email address Max_vx@163.com or CEO assistant Helen Xu at email addressbeishengrong@vip.163.com.

 

Business Outlook

 

"Although the potential benefit of our recently acquired manufacturing capacity and upgrades on production efficiency was not positively reflected in our operating results in this quarter, we believe that the company in the long run will benefit from exploration and acquisition of businesses with proven reserve and cooperation with overseas large-scale bromine manufacturers in the same sector with sophisticated manufacturing technology." said Xiaobin Liu, the CEO of the company, "therefore, we intend to retain our cash for potential attractive opportunities of future expansion of our bromine and crude salt businesses that can enable the company to achieve long term sustainable growth."

 

Conference Call

 

Gulf Resources' management will host a conference call on Tuesday, May 8, 2012 at 8:00 AM Eastern Time to discuss its financial results for the first quarter 2012 ended March 31, 2012.

 

Hosting the call will be Mr. Xiaobin Liu, CEO of Gulf Resources. The Company's management team will be available for investor questions following the prepared remarks. 

 

To participate in this live conference call, please dial +1 (877) 275-8968 five to ten minutes prior to the scheduled conference call time. International callers should call +1 (706) 643-1666. The conference participant pass code is 77195667.

 

A replay of the conference call will be available for 14 days starting from 11:00 AM ET on Tuesday, May 8, 2012. To access the replay, call +1 (855) 859-2056. International callers should call +1 (404) 537-3406. The pass code is 77195667.

 

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.gulfresourcesinc.com/events.html. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.

 

About Gulf Resources, Inc.

Gulf Resources, Inc. operates through two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil & gas field explorations and as papermaking chemical agents. For more information, visit www.gulfresourcesinc.com.

 

Forward-Looking Statements

 

Certain statements in this news release contain forward-looking information about Gulf Resources and its subsidiaries business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. The actual results may differ materially depending on a number of risk factors including, but not limited to, the general economic and business conditions in the PRC, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competitors for bromine and other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risks factors detailed in the Company's reports filed with the Securities and Exchange Commission. Gulf Resources undertakes no duty to revise or update any forward-looking statements to reflect events or circumstances after the date of this release.

 

CONTACT:

 

Max Ma
Max_vx@163.com