Correcting and Replacing - Gulf Resources Announces Fourth Quarter and Full Year 2020 Financial Resu

Published May 14th, 2021

SHOUGUANG, China, April 09, 2021 (GLOBE NEWSWIRE) -- In a table titled Income (Loss) from Operations contained in the press release published at 16:45PM ET on April 8, 2021, titled “Gulf Resources Announces Fourth Quarter and Full Year 2020 Financial Results, ” the Income (loss) from Operations for the bromine segment and the crude salt segment for the fourth quarter was changed to $3,999,802 and $(980,162), respectively. The changes did not affect the Company’s income (loss) from operations before corporate costs for the quarter ended December 31, 2020 or for the year ended December 31, 2020.

Set out below is the corrected press release in its entirety.

Gulf Resources, Inc. (Nasdaq: GURE) ("Gulf Resources", “we,” or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced financial results for the fourth quarter and full fiscal year 2020 ended December 31, 2020.

Highlights:

• First profitable quarter in three years
• Positive cash flow from operations
• Strong balance sheet. Large cash reserves
• Rising price of bromine and expected completion of the new Yuxin Chemical Factory in 2021 supports increasingly optimistic view of the future.

Fourth Quarter 2020 Financial Results

Despite the facts that our new chemical factory is still under construction, our trial production at our natural gas well in Sichuan has to be temporarily halted, only 4 of our 7 bromine and crude salt factories are open, the government forced the seasonal closing of all factories from December 25, 2020 to February 19, 2021, and winter is normally the slowest production season of the year because of the temperature, Gulf Resources was still able to record the first profitable quarter in the past three years since the initiation of the original shutdown for rectification and environmental improvement.

(A)   Information represents are audited by company auditor
(B)   “The 9 months” represents the financial results for the nine months ended September 30, 2020 as filed in the 10-Q on November 16, 2020.
(C)    C=A-B

These results also include $1,284,175 of direct labor and factory overheads incurred during the plant shutdowns in 4^th quarter. If this total is added back to our income, our operating businesses would earned $2,164,370 during the fourth quarter.

During the 4^th quarter, our bromine business, despite the early closure for Chinese New Year, recorded income from operations before corporate costs of almost $4 million. Our chemical business, which is under construction, recorded loss from operations before corporate costs of $706,359. Our natural gas business recorded loss from operations before corporate costs of $53,848, and our crude salt business recorded loss from operations before corporate costs of $980,162. As we have noted, the winter season is always a weak season for our crude salt business. It is difficult to process and mine crude salt when temperatures are too low.

We believe we reached good profitability in our bromine business during this quarter.

In the 4th Quarter, we generated cash from operations of $6,047,617 compared to cash used in operations of $2,988,472 in the previous year, an improvement of $9,036,089 over the results from the previous year.

As the Chinese economy continues to recover and production has resumed after the Chinese New Year, the price of bromine has continued to increase. Based on monthly prices from CEIC Data Group (ceicdata.com) and spot prices from Sunsirs Commodity Data Group (sunsirs.com), the price of bromine on April 5, 2021 was RMB 36,222 per ton. This is an increase of 23.5% from Q2 2020, 29.3% from Q3 2020, and 11.4% from Q4 2020.

With the current level of bromine prices, we are optimistic about the future in our bromine segment.

We are working with the local authorities in Shandong Province to finalize the issues related to our three remaining bromine and crude salt factories. While we may have to build additional aqueducts, wells and secure additional land for our salt ponds, we remain optimistic that we will receive approvals to reopen these facilities in 2021.

We are also making progress in the construction of our Yuxin Chemical factory. We expect to have construction completed around June 2021. We will install the machinery and test the equipment during the remainder of the year and expect to begin trial production by the start of 2022. While this new factory will be smaller than the combined two old factories, the Company expects it to make higher net profit margin as we plan to focus more on the higher margin pharmaceutical intermediate products. We are optimistic by the progress we are making on constructing our new factories. Management expects to continue to post photos on its website so investors can track the progress of the construction of the chemical factories.

We also remain optimistic about the opportunities for our natural gas and brine business in Sichuan Province. We are working with the governments of Tianbao Town, Daying County, and Sichuan Province in China closely, and plan to proceed with its applications for the natural gas and brine project approvals with related government departments after the government has finalized the land and resources planning for Sichuan Province.

Full Year 2020 Financial Results

In 2020, net revenues increased 166% to $28,207,024. Gross profits increased 70% to $8,791,990. This loss included $8,170,390 of direct labor and factory overheads incurred during the plant shutdown. G&A expenses declined 23% to $10,239,943. Our loss from operations declined 58% to $9,683,392. Our net loss declined 67% to $8,420,044. We lost $0.87 per share compared to $2.73 per share in 2019.

Cash Flow
Our cash flow showed significant improvement. We generated net cash from operations of $9,305,627 compared to net cash used in operations of $15,309,112 in 2019.

During 2020, we purchased $21,719,369 of property, plant, and equipment. Of this total, $17,914,948 was for our new Yuxin Chemical factory, $3,157,669 was for our bromine business, and $646,752 was for our crude salt business.

Capital Expenditures
In 2020, we spent $21,719,369 compared to $60,611,949 in 2019 on property, plant and equipment. This includes major investments in our new Yuxin Chemical Factory, new bromine and crude salt factories, and newly drilled wells.

Balance Sheet

Our balance sheet remains strong. At Dec. 31, 2020,

• Cash equaled $94,222,538
• Cash per share equaled $9.43*
• Net cash (cash minus all liabilities) equaled $77,208,993
• Net cash per share equaled $7.72*
• Current assets equaled $107,310,965
• Current liabilities equaled $7,102,300
• Working capital equaled $100,208,665
• [Working capital per share equaled $10.02*
• Shareholders’ equity equaled $277,024,273
• Shareholders’ equity per share equaled $27.71*

With our strong balance sheet, the Company expects to be able to complete construction of its Yuxin chemical factory, open its remaining bromine and crude salt facilities, drill new wells, restore operations in Sichuan province, and acquire more bromine and downstream chemical facilities.

Commentary

Mr. Xiaobin Liu, the CEO of Gulf Resources stated. “We are very pleased to have delivered a profitable quarter to our shareholders. The last three years have been very long and painful. The process of improving the environment and protecting the people of China is extremely complex. At the time our factories were first closed, we also did not expect the destruction we saw from TyhoonLekima, the most destructive typhoon to hit China.”

“Now,” Mr. Liu further stated, “most of the problems are behind us. We have 4 bromine and crude salt factories in operation. The price of bromine is nearing historic highs. We expect the price of bromine to remain high because demand is increasing, especially with COVID, and there are lesser competitors. As we have noted, many of the smaller companies did not have the capital to complete rectification. We also expect to receive the approvals for these bromine and salt factories in the second half of 2021. However, there is no