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 reports results for
fiscal year 2022 and provides updates on its business segments and
corporate strategies.
During 2022, revenues increased 20% to $66,094,486. Gross
profits increased 34% to $37,425,334. Profits from operations
increased 216% to $16,481,696. Net income per share was $1.00
versus a loss of ($0.09) per share. Despite negative foreign
currency translation adjustment of $24,886,118, which impacted all
balance sheet items, ending cash was $108,226,214 ($10.37* per
share), working capital was $107,649,606. Net net cash (cash minus
all liabilities) per share was $8.38*.
The following are the financial highlights from
2022:
Revenues and Income
- Revenue for 2022 increased 20% to $66,094,486 from
$55,030,586
- Cost of net revenues increased 6% to $28,669,152 from
$27,132,372
- Gross Profit increased 34% to $37,425,334 from
$27,898,214.
- Direct labor and factory overhead incurred during plant
shutdown increased 12% to $12,002,629.
- G&A expenses declined 37% to $6,028,079, largely because of
share grants to management in 2021.
- Profits from operations increased 216% to $16,481,696 from
$5,210,870.
- Income before taxes increased 210% to $16,646,435 from
$5,373,500.
- After Tax income was $10,059,450 compared to a loss of
($924,718).
- Net income per share was $1.00 compared to a loss of ($0.09) in
the previous year.
- Shares outstanding were 10,431,924 in 2022 versus 10,471,924 in
2021.
Cash Flow
- Cash flow provided by operating
Activities was $51,149,065 compared to $23,311,169 in in the
previous year. This was primarily due to depreciation &
amortization of approximately $26.78 million, net income of
approximately $10.06 million, a decrease in accounts receivable of
approximately $8.2 million and a decrease in deferred taxes of
$6.59 million.
- Net cash used in investing
activities was $37,560,932 compared to $30,093,140 in the previous
year.
- For the fiscal year 2022, the
Company had a negative foreign currency translation adjustment of
$24,886,118 versus a positive adjustment of $7,405,582 in the
previous year. This adjustment impacts all balance sheet
translations into U.S. dollars.
Balance Sheet
- Despite the large impact of the
foreign currency translation loss, our cash increased $12,458,951
to $108,226,214.
- Cash per share was $10.37* based on
10,431,924 shares outstanding.
- Current Assets were
$119,425,371
- Current liabilities were
$11,775,765.
- Working capital was $107,649,606.
Working capital per share was $10.32*.
- Net net cash (cash minus all
liabilities) was $87,413,077 or $8.38* per share.
Operations by Segment
Bromine
- Net revenue in bromine increased by
21% to $58,964,941.
- Volume increased 6% and the average
selling price increased 14%.
- The cost of net revenue increased
10% to $25,087,171. A significant portion of the increase was due
to the reallocation of costs between bromine and crude salt related
to the creation of our new crude salt subsidiary.
- Income from operations from our
bromine segment was $17,905,181 for the fiscal year 2022, compared
to an income of $13,364,649 in the same period in 2021. The
increase in income was primarily due to a 14% increase in average
selling price partially offset by additional cost allocations from
the new divisional structure.
Crude Salt
- Net revenue from our crude salt
increased by 15% to $6,996,552.
- Volume increased 1.5%, while the
average selling price increased by 13%.
- The cost of net revenue declined
16% to $3,581,567, largely related to the reallocation of costs
between bromine and crude salt related to the creation of our new
crude salt subsidiary.
- Income from operations was
$2,301,885 for fiscal year 2022, compared to a loss of $1,078,320
in the same period in 2021. The reason for this was due to an
increase in selling price, a small increase in volume, and a
decrease in cost allocations from the new divisional
structure.
Chemicals
- Our chemicals business had no revenues in either 2022 or
2021.
- Loss from operations from our
chemical products segment was $1,953,230 for the fiscal year 2022,
compared to a loss of $2,550,561 in the same period in 2021.
Natural Gas and Brine
- In 2022, we produced no revenue from our project in Sichuan
Province, but we did lease out some equipment for revenue of
$132,993.
- Loss from operations from our
natural gas segment was $148,099 for the fiscal year 2022, compared
to a loss of $167,139 in the same period in 2021.
Business and Strategic Plan Outlook
Bromine & Crude SaltSince the beginning of
2023, bromine prices have declined by approximately 40%. There are
several reasons for the decline. Economic conditions in China as
well as the rest of the world have slowed. Many of our customers
have had their factories closed for Chinese New Year as well as for
COVID restrictions, and demand for fire retardants for export have
decreased due to the lockdown. The export of some other bromine
downstream products have also decreased. With the lockdown in
China, many fewer people used disinfectants because they were home
instead of going to work or school. Producers of disinfectants and
retailers had geared up for continued high demand, and the lockdown
was a surprise.
The Company remains optimistic about bromine business. Some
bromine factories in China have been permanently closed. Some
others, like our factories #2 and #10, have not opened. There have
been a few new discoveries of bromine, and the decline in the
Chinese RMB against the USD has made bromine imports more
expensive. Over time, the Company expects a return to bromine
pricing.
The Company also expects and will try its best to receive
approval to reopen one of its closed factories in 2023. The Company
is continuing to work with the government on related issues.
Yuxin Chemical Factory On March 23, 2023, the
Company issued a press release detailing the delays in the opening
of our Yuxin chemical factory due to COVID and stricter government
regulations. As noted in the press release, the Company believes
that once all of the equipment is delivered, it will take 3 to
4 months to get the equipment installed. After installation, the
testing process is anticipated to take 2 to 3 months, after which
we will be in a position to apply for environmental and safety
approval. After we get the approval, it will take us 4 months to
conduct trial production, and then we may start commercial
production.
Natural GasAs we have disclosed, The Company
plans to proceed with its applications for the natural gas and
brine project approvals with related government departments until
after the governmental planning has been finalized the land and
resource planning for Sichuan Province. Because of the
complexities, we are discussing the possibility of a Joint Venture
with the government of Daying County for the extraction of bromine
water and related products. We believe such a Joint Venture could
help us overcome some of the government related issues. We will
keep investors informed of our progress.
Shareholder Value Every quarter, our
shareholders look at our balance sheet and ask why we cannot do
more to enhance shareholder value by paying a dividend or buying
back stock. Every quarter, we respond that China has significant
restrictions on the export of cash and that we cannot get
sufficient amounts of cash out of the country.
However, we are now trying to develop an alternate strategy.
Some of the products that will be produced by our chemical factory,
such as the materials for pharmaceuticals intermediaries, are
actively exported from China to countries in Asia and around the
world. We have formed a task force to analyze the potential of each
of these products and markets, identify potential customer fits,
and focus on the products these customers are interested in
purchasing. When our chemical factory is ready for full production,
we should also be ready to begin exporting some of our products.
The export of chemical products may be able to afford us the
financial flexibility to consider the type of actions our
shareholders have been requesting.
Assessments for 2023 and BeyondBecause of the
current conditions in China related to reopening after the lockdown
as well as the delays in opening the Yuxin Chemical factory, the
company will not at this time provide estimates for 2023.
However, the company does believe that the opportunities for
long-term profitability have not been impacted by short-term
issues. The company expects:
- Bromine prices will recover and that it will try to open one of
its closed factories for bromine and crude salt.
- The company expects Yuxin chemicals may provide sales and
profit once it is in full production.
- The company expects Sichuan natural gas and brine business may
be able to receive government approval.
- With the opening of the Yuxin factory, the company try to plan
and expects to be able to generate export sales which will enable
it to gain the financial flexibility to consider shareholder value
initiative programs.
(*These calculations are based on the number of shares issued
and outstanding of 10,431,924 shares as of December 31, 2022)
Conference CallGulf Resources management will
host a conference call on Monday, April 3, 2023 at 08:00 AM Eastern
Time to discuss its Fourth Quarter and Fiscal Year 2022 results
ended December 31, 2022.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the
call. The Company management team will be available for investor
questions following the prepared remarks.
To participate in this live conference call, please
dial Toll Free +1 (888) 506-0062 five to ten minutes prior to the
scheduled conference call time. International callers should dial
+1 (973)-528-0011, and please reference to “Gulf Resources” or
Participant Access Code: 351545 while dial in.
The webcasting is also available then, just simply click on the
link below:http://www.gulfresourcesinc.com/news-28.html
A replay of the conference call will be available two hours
after the call's completion and expired by Monday, April 10, 2023.
To access the replay, call +1 (877) 481-4010. International callers
should call +1 (919) 882-2331. The Replay Passcode is 47964.
GULF RESOURCES, INC.AND SUBSIDIARIESCONSOLIDATED
BALANCE SHEETS(Expressed in U.S. dollars)
|
|
December 31, 2022 |
|
December 31, 2021 |
Current Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
108,226,214 |
|
|
$ |
95,767,263 |
|
Accounts receivable, net |
|
|
5,363,166 |
|
|
|
14,525,807 |
|
Inventories, net |
|
|
1,598,572 |
|
|
|
691,111 |
|
Prepayments and deposits |
|
|
4,236,782 |
|
|
|
4,450,037 |
|
Other receivables |
|
|
637 |
|
|
|
644 |
|
Total current assets |
|
|
119,425,371 |
|
|
|
115,434,862 |
|
Non-Current Assets |
|
|
|
|
|
|
|
|
Property, plant and equipment,
net |
|
|
149,916,766 |
|
|
|
162,657,546 |
|
Finance lease right-of use
assets |
|
|
163,868 |
|
|
|
184,824 |
|
Operating lease right-of-use
assets |
|
|
8,098,427 |
|
|
|
8,311,127 |
|
Prepaid land leases, net of
current portion |
|
|
9,508,001 |
|
|
|
10,368,469 |
|
Deferred tax assets, net |
|
|
5,318,909 |
|
|
|
12,900,034 |
|
Total non-current assets |
|
|
173,005,971 |
|
|
|
194,422,000 |
|
Total Assets |
|
$ |
292,431,342 |
|
|
$ |
309,856,862 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses |
|
$ |
7,823,722 |
|
|
$ |
10,530,776 |
|
Taxes payable-current |
|
|
699,563 |
|
|
|
775,708 |
|
Amount due to a related
Party |
|
|
2,605,694 |
|
|
|
1,849,044 |
|
Finance lease liability,
current portion |
|
|
213,346 |
|
|
|
227,429 |
|
Operating lease liabilities,
current portion |
|
|
433,440 |
|
|
|
506,579 |
|
Total current liabilities |
|
|
11,775,765 |
|
|
|
13,889,536 |
|
Non-Current Liabilities |
|
|
|
|
|
|
|
|
Finance lease liability, net
of current portion |
|
|
1,461,721 |
|
|
|
1,770,526 |
|
Operating lease liabilities,
net of current portion |
|
|
7,575,651 |
|
|
|
7,557,583 |
|
Total non-current
liabilities |
|
|
9,037,372 |
|
|
|
9,328,109 |
|
Total Liabilities |
|
|
20,813,137 |
|
|
|
23,217,645 |
|
|
|
|
|
|
|
|
|
|
Commitment and
Contingencies |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
PREFERRED STOCK;
$0.001 par value; 1,000,000 shares
authorized; none outstanding |
|
|
|
|
|
|
|
|
COMMON STOCK; $0.0005 par
value; 80,000,000 shares
authorized; 10,717,754 and 10,517,754 shares
issued; and 10,431,924 and 10,471,924 shares
outstanding as of December 31, 2022 and 2021 |
|
|
24,476 |
|
|
|
24,376 |
|
Treasury
stock; 285,830 and 45,830 shares as of
December 31, 2022 and 2021 at cost |
|
|
(1,372,673 |
) |
|
|
(510,329 |
) |
Additional paid-in
capital |
|
|
101,237,059 |
|
|
|
100,569,159 |
|
Retained earnings
unappropriated |
|
|
158,089,535 |
|
|
|
150,463,638 |
|
Retained earnings
appropriated |
|
|
26,667,097 |
|
|
|
24,233,544 |
|
Accumulated other
comprehensive income (loss) |
|
|
(13,027,289 |
) |
|
|
11,858,829 |
|
Total Stockholders’
Equity |
|
|
271,618,205 |
|
|
|
286,639,217 |
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
292,431,342 |
|
|
$ |
309,856,862 |
|
|
|
|
|
|
|
|
|
|
GULF RESOURCES, INC.AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF COMPREHENSIVE (LOSS) INCOME(Expressed in U.S.
dollars)
|
|
Years Ended December 31, |
|
|
2022 |
|
2021 |
|
|
|
|
|
NET REVENUE |
|
$ |
66,094,486 |
|
|
$ |
55,030,586 |
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND
EXPENSE |
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
(28,669,152 |
) |
|
|
(27,132,372 |
) |
Sales and marketing
expenses |
|
|
(62,871 |
) |
|
|
(62,964 |
) |
Direct labor and factory
overheads |
|
|
(12,002,629 |
) |
|
|
(10,718,605 |
) |
General and administrative
expenses |
|
|
(6,028,079 |
) |
|
|
(9,525,235 |
) |
Other operating expense |
|
|
(2,850,059 |
) |
|
|
(2,380,540 |
|
|
|
|
(49,612,790 |
) |
|
|
(49,819,716 |
) |
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS |
|
|
16,481,696 |
|
|
|
5,210,870 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(121,402 |
) |
|
|
(137,178 |
) |
Interest income |
|
|
286,141 |
|
|
|
295,172 |
|
Other (income) expenses |
|
|
— |
|
|
|
4,636 |
|
INCOME BEFORE INCOME
TAXES |
|
|
16,646,435 |
|
|
|
5,373,500 |
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE |
|
|
(6,586,985 |
) |
|
|
(6,298,218 |
) |
NET INCOME (LOSS) |
|
$ |
10,059,450 |
|
|
$ |
(924,718 |
) |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
(LOSS): |
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
10,059,450 |
|
|
$ |
(924,718 |
) |
OTHER COMPREHENSIVE (LOSS)
INCOME |
|
|
|
|
|
|
|
|
- Foreign currency translation
adjustments |
|
|
(24,886,118 |
) |
|
|
7,405,582 |
|
TOTAL COMPREHENSIVE (LOSS)
INCOME |
|
$ |
(14,826,668 |
) |
|
$ |
6,480,864 |
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE |
|
$ |
1.00 |
|
|
$ |
(0.09 |
) |
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED WEIGHTED
AVERAGE NUMBER OF SHARES: |
|
|
10,038,982 |
|
|
|
10,471,924 |
|
|
|
|
|
|
|
|
|
|
GULF RESOURCES, INC.AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF CASH FLOWS(Expressed in U.S. dollars)
|
|
Years Ended December 31, |
|
|
2022 |
|
2021 |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
10,059,450 |
|
|
$ |
(924,718 |
) |
Adjustments to reconcile net
income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Amortization on capital lease |
|
|
120,332 |
|
|
|
135,707 |
|
Depreciation and amortization |
|
|
26,775,620 |
|
|
|
20,543,425 |
|
Unrealized translation difference |
|
|
563,636 |
|
|
|
782,660 |
|
Deferred tax asset |
|
|
6,586,985 |
|
|
|
6,298,218 |
|
Stock-based compensation expense |
|
|
668,000 |
|
|
|
3,134,080 |
|
Shares issued from treasury stock for services |
|
|
— |
|
|
|
— |
|
Changes in assets and
liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
8,195,123 |
|
|
|
(7,749,127 |
) |
Inventories |
|
|
(938,923 |
) |
|
|
(259,999 |
) |
Prepayment and deposits |
|
|
40,430 |
|
|
|
(2,849,670 |
) |
Other receivables |
|
|
— |
|
|
|
(85 |
) |
Accounts and Other payable and accrued expenses |
|
|
(820,628 |
) |
|
|
2,856,504 |
|
Amount due to a related Party |
|
|
778,393 |
|
|
|
1,852,230 |
|
Taxes payable |
|
|
(288,197 |
) |
|
|
(534,307 |
) |
Prepaid land leases |
|
|
— |
|
|
|
— |
|
Operating lease |
|
|
(591,156 |
) |
|
|
26,251 |
|
Net cash provided by operating activities |
|
|
51,149,065 |
|
|
|
23,311,169 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property, plant
and equipment |
|
|
(37,560,932 |
) |
|
|
(30,093,140 |
) |
Net cash used in
investing activities |
|
|
(37,560,932 |
) |
|
|
(30,093,140 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Repayment of finance lease
obligation |
|
|
(264,863 |
) |
|
|
(290,597 |
) |
Net cash used in
financing activities |
|
|
(264,863 |
) |
|
|
(290,597 |
) |
|
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS |
|
|
(864,319 |
) |
|
|
8,617,293 |
|
NET DECREASE IN CASH AND CASH
EQUIVALENTS |
|
|
12,458,951 |
|
|
|
1,544,725 |
|
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR |
|
|
95,767,263 |
|
|
|
94,222,538 |
|
CASH AND CASH EQUIVALENTS -
END OF YEAR |
|
$ |
108,226,214 |
|
|
$ |
95,767,263 |
|
|
|
|
|
|
|
|
|
|
GULF RESOURCES, INC.AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)(Expressed in U.S. dollars)
|
|
Years Ended December 31, |
|
|
2022 |
|
2021 |
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION |
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Paid for taxes |
|
$ |
10,076,097 |
|
|
$ |
13,818,199 |
|
Interest on finance lease
obligation |
|
$ |
120,322 |
|
|
$ |
136,709 |
|
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned
subsidiaries, Shouguang City Haoyuan Chemical Company Limited
("SCHC"), Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"),
Daying County Haoyuan Chemical Company Limited (“DCHC”) and
Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). 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 and gas field explorations and
papermaking chemical agents, and materials for human and animal
antibiotics. Through SHSI, the Company manufactures and sell crude
salt. DCHC was established to further explore and develop natural
gas and brine resources (including bromine and crude salt) in
China. 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 and Rule 3b-6 under the Securities Exchange Act of 1934, 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, the risks associated with the COVID-19
pandemic outbreak, 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 forward-looking statements to reflect events or
circumstances after the date of this release.
CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com
Director of Investor Relations
Helen Xu (Haiyan Xu)
beishengrong@vip.163.com
Gulf Resources (NASDAQ:GURE)
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