SHANGDONG, China, Nov. 8, 2012 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2012.

 

Third Quarter 2012 Highlights

• Revenue was $24.5 million, a year-over-year decrease of 35.0%
• Gross profit was $7.4 million, a year-over-year decrease of 46.7%
• Gross margin decreased to 30.3 % compared to 36.9 % in the third quarter of 2011
• Income from operations was $5.6 million as compared to $8.7 million in the third quarter of 2011
• Operating margin was 23.0% compared to 23.2% for the third quarter of 2011
• Net income was $4.1 million or $0.12 per basic and diluted share, versus $5.6 million, or $0.16 per basic and diluted share a year ago, respectively
• Cash totaled $58.6 million as of September 30, 2012

"Over the past few months, the Chinese economy had experienced its slowest growth in a quarter since the start of 2009. As influenced by the economy condition due to rapidly decreased demand in private investment and continuing tight control over property prices, bromine price reached the bottom in mid-September this year as a result of reduction of market demand, therefore our operating performance for the third quarter this year was significantly lower compared to the same period last year. While bromine average selling price decreased from $3,597 per tonne for the third quarter in 2011 to $2,899 per tonne for the same period this year, we anticipate that the bromine prices are likely to rise slightly further after the pick-ups from the bottoming in September," said Mr. Xiaobin Liu, CEO of the Company.

 

Third Quarter 2012 Results

For the third quarter of 2012, Gulf Resources' revenue was $24.5 million, a decrease of 35.0%, from $37.8 million for the third quarter of 2011. The decrease in net revenue was primarily attributable to the reduction of overall demand for all of the segment products, especially in bromine segment, where the decrease was the greatest among the three segments. Revenue from the bromine and crude salt segments were $14.0 million and $2.4 million, respectively, representing a total of 67.0% of sales revenue for the third quarter of 2012.

Revenue from our chemical products segment was $8.2 million, or 33.0% of total revenue, for the third quarter of 2012, a decrease of 22%, from $10.5 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 compared to the same quarter last year, which offset the incremental benefit generated from a higher sales volume for pesticides manufacturing additives and higher selling price of oil and gas exploration additives.

Gross profit for the third quarter of 2012 was $7.4 million, a decrease of 46.7%, from $13.9 million from the third quarter of 2011, and our gross profit margin for the three months ended September 30, 2012 was 30.3%, compared to 36.9% for the corresponding period last year. The decrease in gross profit margin was mainly due to the decrease in selling prices in bromine segments.

Sales, marketing and other operating expenses for the third quarter of 2012 were $20,327 compared with $20,116 for the corresponding quarter last year.

General and administrative expenses for the third quarter of 2012 were $2.3 million, compared to $5.5 million for the third quarter of 2011. The decrease of $3.2 million was primarily due to the inclusion of a non-cash expense related to cancellation of non-vested stock options for the three-month period ended September 30, 2011

Income from operations for the third quarter of 2012 was $5.6 million, compared to $8.7 million for the corresponding quarter of 2011. The operating margin was 23.0% for the third quarter of 2012, which remained approximately the same compared to the third quarter of 2011.

Other operating income, which represented the sales of wastewater at market price etc,, was $0.7 million for the third quarter of 2012 as compared to $1.4 million for the same period in 2011.

For the third quarter of 2012, the Company incurred other income of $13,661 compared to income of $17,647 for the corresponding quarter last year.

Income taxes were $1.5 million for the third quarter of 2012, a decrease of 52% from $3.2 million for the third quarter of 2011. The Company's effective tax rates were 27% and 36% for the three-month periods ended September 30, 2012 and 2011, respectively.

Net income was $4.1 million for the third quarter of 2012, a decrease of 26%, from $5.6 million for the third quarter of 2011. Basic and diluted earnings per share in third quarter of 2012 were $0.12 per basic and diluted share compared to $0.16 per basic and diluted share respectively in the third quarter of 2011. Weighted average number of diluted shares for the three months ended September 30, 2012 was 34,699,989 compared with 34,620,004 for the three months ended September 30, 2011.

"Although the slowdown in economy and uncertain future government policies to be released after the leadership change will continuously bring significant challenges to our business operations, we will manage to overcome the difficulties onwards and strive to accomplish the 2012 earnings forecast announced earlier this year," stated Mr. Xiaobin Liu, CEO of the Company.

Financial Condition

As of September 30, 2012, Gulf Resources had cash of $58.6 million, current liabilities of $11.2 million, and shareholders' equity of $254.9 million. For the three months ended September 30, 2012, the Company had working capital of $94.7 million and a current ratio of 9.4. As of September 30, 2012, the Company generated $10.7 million in cash flow from operations, and used $29.9 million for investing activities, mainly for the purchase and enhancement of plant, machinery and equipment.

Business Outlook

"The slowdown in China this year has affected different industries to varying degrees, the effect also spread to the downstream users of our product segments who had been through the process of deleveraging in inventory while dealing with overcapacity. Despite the bottoming of bromine price in mid-September and pick-up since October, we remain conservative in regards to any further significant rebound in growth in the coming quarters," Mr. Liu continued.

"In such business environment, we would like to retain cash in the near future for any possible liquidity constraint or change in need of working capital, etc. However, if investment opportunity arises from current economy condition featuring undervaluation or strategically fits our long term growth, it would also be duly evaluated and considered for the goal of profit enhancement or shareholder's value maximization," concluded Mr. Liu.

Subsequent Events

The company has held the 2012 annual shareholders meeting on October 16 in Shouguang, China. For information related to the voting results of the meeting, please refer to our current report on Form 8-K filed on October 16 that is available on the website of the U.S. Securities and Exchange Commission.

Since the launch of the internal IR department in April this year, Gulf Resources has received many positive feedback and helpful suggestions. For future investor inquiries, investors may continue to reach our IR manager Max Ma at email address Max_vx@163.com or our CEO's assistant Helen Xu at email address beishengrong@vip.163.com.

Conference Call

Gulf Resources' management will host a conference call on Friday, November 9, 2012 at 8:00 AM Eastern Time to discuss its financial results for the third quarter 2012 ended September 30, 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 69009541.

A replay of the conference call will be available for 14 days starting from 11:00 AM ET on Friday, November 9, 2012. To access the replay, call +1 (855) 859-2056. International callers should call +1 (404) 537-3406. The pass code is 69009541.

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, as amended and Rule 3b-6 under the Securities Exchange Act of 1934 as amended, 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 of its disclosure.