ZIBO CITY, China, May 17, 2011 (GLOBE NEWSWIRE) -- China Chemical Corp. (OTCBB:CHCC) ("China Chemical" or the "Company"), a manufacturer of organic chemicals, today announced its financial results for the first quarter ended March 31, 2011. The Company's primary products are Phthalic Anhydride ("PA") and Maleic Anhydride ("MAH"), which have a wide variety of applications in the construction, automotive, aviation, marine, and consumer goods industries.
First Quarter Financial Highlights
- Revenues for the three months ended March 31, 2011 increased by 9.8% year-over-year to $18.4 million, up from $16.8 million in the first quarter of 2010.
- Gross profit for the first quarter was $3.8 million, a decrease of 16.1% as compared to $4.5 million in 2010. Gross margin was 20.4% and 26.7% for the three months ended March 31, 2011 and 2010, respectively.
- Operating income decreased 21.7% year-over-year to $3.3 million, as compared to $4.2 million in the first quarter of 2010.
- Net income after tax for the three months ended March 31, 2011 was $3.2 million, a decrease of 18.9% as compared to $4.0 million for the same period in 2010.
- Earnings per basic and diluted share were $0.11 for the first quarter of 2011, compared with basic and diluted earnings per share of $0.20 in the first quarter of 2010.
China Chemical's Chairman and CEO, Mr. Lu Feng, stated, "Although fluctuations in raw material prices impacted our bottom line during the first quarter, sales of MAH, our most profitable product, increased nearly 48% from the same period in 2010."
Mr. Feng continued, "Going forward, we will continue to focus on ramping up production at our new MAH plant and making progress on the construction of our 50,000-ton 1,4-butanediol ("BDO") facility. Our new MAH facility became operational during the first quarter, doubling our MAH production capacity to 60,000 tons per year and providing us with a significant regional competitive advantage. We are continually purchasing equipment to support the construction of the BDO facility, which is due to begin operations at the beginning of 2013. BDO is used in a wide variety of consumer goods, and by moving into the production of this higher-margin product, we will be well-positioned to expand our customer base and benefit from the continued robust demand for chemical products in China. We remain very optimistic about our long-term growth prospects."
First Quarter 2011 Results of Operations
Revenues for the first quarter ended March 31, 2011 were $18.4 million, compared to $16.8 million in 2010. The increase of 9.8%, or $1.6 million, was primarily due to price increases and strong MAH sales performance. Sales of PA decreased 9.5% year-over-year to $6.9 million, or 37.3% of total first quarter revenues, while sales of MAH increased 47.8% year-over-year to $9.0 million, or 49.0% of total first quarter revenues.
Gross profit for the three months ended March 31, 2011 was $3.8 million or 20.4% of total revenues, as compared to $4.5 million or 26.7% of total revenues for the quarter ended March 31, 2010. The decrease of 16.1%, or $0.7 million, was primarily attributable to an increase in raw material prices as compared to the same period in 2010.
Income from Operations
Operating income totaled $3.3 million for the three months ended March 31, 2011 as compared to operating income of $4.2 million for the same period a year ago. The decrease of 21.7%, or $0.9 million, was due to an increase in raw material prices as compared to the same period in 2010. General and administrative expenses grew 66.7% due to consulting fees related to the Company's entrance into the U.S. capital market.
Net income after tax for the three months ended March 31, 2011 was $3.2 million, a decrease of 18.9% as compared to $4.0 million for the three months ended March 31, 2010, due to an increase in the cost of goods sold as compared to the same period in 2010. Earnings per basic and diluted share were $0.11 for the first quarter, compared with basic and diluted earnings per share of $0.20 for the same period last year.
Liquidity and Capital Resources
As of March 31, 2011, the Company's current assets were $116.2 million and current liabilities were $158.5 million. Cash and cash equivalents totaled $2.7 million as of March 31, 2011. The Company's shareholders' equity at March 31, 2011 was $84.4 million. The Company generated $5.9 million in cash from operating activities during the first quarter of 2011, compared to $0.7 million in cash used for operating activities during the first quarter of 2010. The Company used $5.1 million in net cash for investing activities during the first quarter of 2011, compared to $5.5 million in the first quarter of 2010. Net cash used in financing activities during the first quarter of 2011 was $1.8 million, compared to $5.8 million provided by financing activities in 2010.
First Quarter Business Highlights
- China Chemical's new 30,000-ton MAH plant became fully operational in January 2011. The Company has also begun site development for its 50,000-ton BDO co-generation plant, which is expected to be completed in 2013.
- On January 12, 2011, China Chemical began trading on the OTC Bulletin Board. The Company's shares are also quoted on the OTCQB, a newly created marketplace of companies that are registered and reporting to the SEC.
- The Company received certification from the PRC government as a high-tech enterprise, which will grant it a 15% corporate income tax rate through fiscal 2013, as compared to the 25% statutory corporate income tax rate.
- The Company received three patents for proprietary technologies its employees use in daily operations. The patents relate to the Company's integrated wastewater treatment unit, tail gas absorber, and improved dust and gas protection mask, all of which were developed internally by the Company's staff.
Conference Call and Webcast
Management will host a conference call to discuss these financial results on Wednesday, May 18, 2011 at 10:00 a.m. Eastern time (7:00 a.m. Pacific).
To participate in the call, please dial (877) 941-1427, or (480) 629-9664 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found at .
A replay of the call will be available for two weeks from 1:00 p.m. EDT on May 18, 2011, until 11:59 p.m. EDT on June 1, 2011. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4441684.
About China Chemical Corp.
China Chemical Corp. is a Zibo City, China-based manufacturer of organic chemical compounds used in high-performance plastics, PVC, elastic fibers, paints, tires, insulation, flooring, adhesives, medicines, food processing, ink, and paper. The Company's primary products are Phthalic Anhydride (PA) and Maleic Anhydride (MAH), which have a wide variety of applications in the construction, automotive, aviation, marine, and consumer goods industries. China Chemical currently has the capacity to produce 60,000 tons of MAH and 50,000 tons of PA annually. The Company began site development in October 2010 for a 50,000-ton-capacity 1,4 butanediol (BDO) co-generation plant.
For more information about China Chemical Corp., please visit the Company's website at .
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Because such statements involve risks and uncertainties, the actual results and performance of the Company may differ materially from the results expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. For additional information, readers should carefully review reports or documents the Company files periodically with the Securities and Exchange Commission.
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