Gulf Resources, Inc. Announces First Quarter 2008 Financial Results

Published May 08th, 2008

-- Revenues Increased 118% to $21.9 million
-- Net Income Increased 140% to $6.1 million
-- EPS Doubled to $0.06 per diluted share

NEW YORK & SHANDONG PROVINCE, China--(BUSINESS WIRE)--Gulf Resources, Inc. (OTCBB: GFRE - News), a leading producer of bromine, crude salt and specialty chemicals in China, today announced its operating results for the first quarter of 2008.
 

Net revenues for the first quarter of 2008 increased 118% to $21.9 million compared to $10.1 million for the first quarter of 2007. First quarter's net income was $6.1 million, compared to $2.6 million for the first quarter of 2007, with earnings per share increasing to $0.06 per diluted share compared to $0.03 per diluted share for the comparable period of 2007.
 

Ming Yang, Chief Executive Officer of Gulf Resources stated, "We are very pleased with our first quarter results. During the quarter, our growth in revenues and the increase in net income, compared to last year's results, were due to our successful integration of four bromine acquisitions completed in 2007 and an improvement in operating efficiencies across all our businesses. Additionally, during the quarter we completed our fifth acquisition of a bromine production facility, with annual production capacity of roughly 4,700 metric tons, and look forward to a significant contribution from this acquisition in future quarters due to continuing strong demand."
 

First Quarter Highlights
 

The $11.8 million increase in net revenues during the first quarter of 2008 was attributable to strong growth in sales in our bromine and crude salt segment, with its revenue more than tripling to $16.4 million from $5.3 million in the first quarter 2007. This was primarily a result of the five bromine asset purchases, production increases in our existing facilities and favorable foreign exchange rates. Another factor contributing to the Company's revenue increase was the 16% increase in chemical product sales, which reached $5.5 million, up from $4.8 million in the first quarter 2007. This increase resulted from the introduction of new products and the addition of new customers.
 

Gross profit in the quarter was $9.4 million with a gross margin of 43%, compared to $4.0 million in gross profit and a gross margin of 40% recorded during the first quarter 2007. The favorable variances resulted from the higher revenues, along with increased economies of scale achieved in large part due to the asset acquisitions while continuing to improve operational efficiencies and cost controls.
 

General, administrative, and research and development expenses in the quarter were $1.0 million, up $0.9 million from last year's first quarter level, reflecting the professional fees resulting from the Company's new corporate structure and the funding of a new research venture.
 

Net income in the first quarter was $6.1 million, an improvement of $3.5 million, or 140% from the prior year's $2.6 million. This increase reflects the higher revenues, improved cost efficiencies and a reduction in our effective tax rate in the quarter to 27%, resulting from the lowering of the Chinese corporate income tax rate.
 

Balance Sheet and Cash Flow
 

The Company had $11.0 million in cash and equivalents, and $20.9 million in notes payable as of March 31, 2008. During the quarter, the Company generated $7.1 million in cash from operations, an increase of $6.0 million over the first quarter 2007 level, largely due to the increased net income.
 

Fiscal 2008 Outlook
 

Gulf Resources reaffirms previously issued guidance for its 2008 financial results, with revenues expected to be between $84 million to $90 million, net income expected to be between $22 million to $25 million, and diluted earnings per share expected to be between $0.22 and $0.25. This guidance does not include the impact of any unusual charges or the impact of potential acquisitions.
 

Mr. Yang concluded, "Gulf will continue to leverage our leading position in the China bromine market to seek out opportunities for profitable growth, through acquisitions and operating efficiencies, in both our business segments. We are delighted about the progress our company has realized in the past and look forward to building upon that in each succeeding quarter. Our focus is, and will remain, to provide increased value to our shareholders."