Gulf Resources, Inc. Announces First Quarter 2007 Financial Results

Published May 15th, 2007

First Quarter Revenues Increase 35% to $10.1 million
First Quarter Net Income Increases 50% to $2.6 million
 

LOS ANGELES and SHENZHEN, China, May 15 /Xinhua-PRNewswire-FirstCall/ -- Gulf Resources, Inc. (the "Company") (OTC Bulletin Board: GUFR - News) through its wholly-owned subsidiaries Shuoguang City Haoyuan Chemical Company Limited ("SCHC") and Shouguang Yuxin Chemical Industry Company Limited ("SYCI"), today announced its results for the first quarter ended March 31, 2007.


Net Revenues for the first quarter of 2007 increased 35% to $10.1 million compared to $7.5 million for the same quarter in 2006. Revenues from the production of bromine and crude salt increased 33% to $5.3 million during the first quarter of 2007 compared to $4 million in 2006. During the quarter, 2,868 tons of bromine were sold with an average selling price (ASP) of $1,850 per ton and 20,000 tons of crude salt with an ASP of $11 per ton. Capacity utilization for the Company's bromine production facilities was seventy-five percent. Capacity utilization for the Company's crude salt production facilities was fifty-four percent. The manufacturing of chemical products by SYCI, which was acquired on February 5, 2007, increased 37% to $4.8 million in sales for the first quarter of 2007 compared to $3.5 million for the same period in 2006.
 

Cost of net revenue for the first quarter of 2007 was $6 million, yielding a gross profit of $3.9 million and gross margins of 40.2 percent. These results compared to $4.8 million in cost of revenues during the first quarter of 2006, yielding a gross profit of $2.6 million and gross margins of 35.9 percent. The increase in gross margin was attributable to a number of factors, including increased efficiencies in production waste control and recycling; efficiencies in the use of electricity; the shifting of certain transportation costs to the customer which resulted in a decrease in transportation costs and the fact that the cost of raw material consumed in the First Quarter 2007 decreased on a per unit basis compared to the same period in 2006. The Company expects to continue realizing these efficiencies.
 

Operating income for the first quarter of 2007 totaled $3.9 million compared to $2.6 million for the same period in 2006, representing a 50% increase. Net income for the 2007 first quarter totaled $2.6 million with earnings per share of $0.06 based on 44.1 million diluted weighted shares outstanding compared to $1.7 million with earnings per share of $0.04 in 2006, utilizing 43.2 million shares and represented a 50% increase in net income.
 

"During the first quarter of 2007, Gulf Resources continued to grow both revenues and earnings through its SCHC subsidiary, one of the premier bromine producers in China," stated Mr. Ming Yang, CEO of Gulf Resources. "Business initiatives implemented for SCHC during 2006 have resulted in increased production while margins were enhanced through prudent cost controls. In addition, our recently acquired SYCI subsidiary is delivering solid organic growth which will further benefit from recent new contract wins with recognized industry players, including Huaneng Yimin Power Plant and Daqing Oilfied."
 

From a balance sheet perspective, the Company reported $14.2 million in total assets and $1.86 million in total liabilities resulting in stockholders' equity of $12.4 million at March 31, 2007, up from $8.2 million at December 31, 2006. The Company's current ratio improved significantly from 1.37 at December 31, 2006 to 4.95 at March 31, 2007.
 

Mr. Yang continued, "Our acquisition of the assets of the Shouguang City Qinshuibo Area completed on April 10, 2007 significantly increases our bromine reserves and production capacity and will benefit our second quarter financial results. This facility currently produces approximately 3,500 tons of bromine and 125,000 tons of crude salt annually, equating to $7.8 million in sales at current ASPs. We anticipate that our plans to expand production will further increase our overall bromine production yield, while SCHC benefits from further economies of scale by integrating these operations."
 

On May 10, 2007 the Company had 49.4 million shares outstanding.