FWK

-6 month stub period with change of year-end date- TORONTO, Oct. 28, 2011 /CNW/ - Liuyang Fireworks Limited ("Liuyang" or "the Company") today reported financial performance for the six month period ended June 30, 2011. Liuyang has changed its year end to June 30(th) and therefore an audit was completed for the period from January 1, 2011 to June 30, 2011 as explanation of which is presented below. Highlights for the 6 month period ending June 30, 2011 -- Improved domestic sales and improved pricing led to a 28.7% increase in revenues during the 6 month period to June 30th, 2011 compared with the same period of 2010. -- Domestic Chinese sales have grown by 85.2% during the 6 months with record sales during the 2011 Chinese New Year season. Further, the company has had a successful marketing program for 2012 with the completion of three fireworks displays as well as organizing the 10th China (Liuyang) International Fireworks Festival -- The Company successfully passed on higher raw material and labour costs and achieved gross margin of 36.9% for the six month period compared with 35.0% during the same period in 2010. -- The Company achieved 6 month EDITDA of $0.52 million representing 1.7% growth compared with the same period of 2010. -- The Company successfully completed a private placement of 12,033,700 shares for gross proceeds of $2.17 million. This financing was used to acquire targeted fireworks wholesalers and manufacturers; -- As at June 30, 2011 the Company had cash of $5.8 million and total bank debt of $5.4 million , "We are very pleased with our progress in consolidating the domestic Chinese distribution channel while continuing to grow our international business.  said Mr.Hu, Liuyang's president and CEO.. "Over the past year, we have successfully integrated our two domestic wholesale acquisitions into our operation and have grown the domestic sales to 45% of total revenues for the six months to June 30, 2011. We expect improvement in domestic sales in 2012 spring festival sales season as we continue to expand our domestic sales network." SUMMARY FINANCIAL STATEMENTS ______________________________________________________________________________________ |In thousands except share and % data | Six| Six| | | | | months| months| | | | | ended| ended| Year| Year| | | June| June| ended| ended| | | 30,| 30,|December|December| | | 2011| 2010|31, 2010|31, 2009| |____________________________________________________|_______|_______|________|________| |Revenue | $7,288| $5,662| $14,081| $13,408| |____________________________________________________|_______|_______|________|________| |Gross profit | $2,688| $1,982| $5,289| $5,549| |____________________________________________________|_______|_______|________|________| |Gross margins | 36.9%| 35.0%| 37.6%| 41.3%| |____________________________________________________|_______|_______|________|________| |EBITDA | $522| $477| $1,343| $1,590| |____________________________________________________|_______|_______|________|________| |EBITDA before stock-based compensation | $616| $757| $1,701| $2,963| |____________________________________________________|_______|_______|________|________| |Net Income | $296| $366| $944| $637| |____________________________________________________|_______|_______|________|________| |Net Income (loss) per share Basic | 0.006| 0.008| 0.021| 0.016| | Diluted| 0.005| 0.007| 0.019| 0.015| |____________________________________________________|_______|_______|________|________| |Balance Sheet Highlight | | | | | |____________________________________________________|_______|_______|________|________| |Cash | $5,829| $1,599| $2,031| $1,999| |____________________________________________________|_______|_______|________|________| |Current ratio | 1.63:1| 1.80:1| 1.48:1| 1.88:1| |____________________________________________________|_______|_______|________|________| |Working capital | $6,406| $3,960| $3,806| $4,507| |____________________________________________________|_______|_______|________|________| |Total assets |$18,413|$10,646| $13,676| 18,324| |____________________________________________________|_______|_______|________|________| |Debt to equity ratio | 1.23:1| 0.86:1| 1.41:1| 0.39:1| |____________________________________________________|_______|_______|________|________| Review of Fiscal Year 2011 Financial Results Liuyang changed its fiscal year end to June 30 to better align the Company's financial reporting, tax planning, and business cycles with customers and suppliers. As such, Liuyang is reporting its transitional fiscal 2011 financial results for the six-month period ending June 30, 2011. The first full fiscal period will be for the twelve months ended June 30, 2012. During the six month period ended June 30. 2011, revenues were $7.29 million compared with $5.67 million for the same period of 2010.  This represented an increase of 28.7% which is mainly due to expanded production capacity at certain facilities, production improvements, and higher selling prices. Gross profit was $2.69 million for six months ended June 30, 2011, compared to $1.98 million for the period ending June 30, 2010, representing an increase of 35.6% gross margin as a percentage of sales for six months ended June 30, 2011 increased to 36.9% from 35% during the period ending June 30, 2010. The increase in gross profit was attributable to higher products volume and the higher revenue achieved as a result of the Company's increased focus on domestic China market. EBITDA for six months ended June 30, 2011 increased by 1.7% to $0.52 million from $0.51 million during the same period of 2010. Net earnings for the six months ended June 30, 2011 decreased by or 19.1% to $0.3 million compared with the six months ended June 30, 2010.   The decrease in net earnings was due to higher general & administrative expenses as well as lower government subsidies income during the period. At June 30, 2011, the Company reported cash of $5.83 million and working capital of $6.41 million. These figures compare to $2.03 million and $5.67 million respectively at June 30, 2010. Liuyang's consolidated financial statements for the year ended June 30, 2011 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities within applicable timelines and will be available via SEDAR at www.sedar.com. About Liuyang Fireworks Limited Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks distributed both domestically and within more than 15 countries in North America, South America and Europe.  The Company has more than 17 years of experience in the fireworks industry and is a supplier to the world's top five fireworks wholesalers and retailers.   Liuyang's ISO9001-certified manufacturing facilities are located in the Liuyang area of Hunan, China, where more than half of the world's fireworks are produced. The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date.  Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date.  While the Company may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.  Liuyang Fireworks Limited CONTACT: Jacky LongChief Financial OfficerLiuyang Fireworks LimitedTel : 647 350 8818jackylong@farocean.com

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