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 announced financial
results for the fourth quarter and full fiscal year 2021 ended
December 31, 2021.
Highlights:
- For the year ending 12/31/2021, revenues were $55,030,586
compared to $28,207,024, an increase of 95%.
- Cost of Net Revenue was $27,132,372 compared to $19,415,034, an
increase of 40%.
- Gross profit was $27,898,214 compared to $8,791,990, an
increase of 217%.
- Gross margins were 50.7% Vs. 31.2% in the prior year.
- Direct labor increased 31% to $10,718,605. General &
Administrative expenses decreased by 7% to $9,525,235. Other
operating expenses increased $2,358,154.
- Profit before taxes improved $14,894,262 from a loss of
$9,683,392 to a profit of $5,210,870.
- Taxes increased $7,406,689 from a credit of $1,108,471 to a
charge of $6,298,218.
- The loss after taxes declined 89% to $924,718 from
$8,420,044.
Three factors contributed to the net loss: a depreciation
expenses of $4,303,266 for closed factories #2,#8, & #10,
$2,723,189 for the cancellation of deferred tax assets, and
$3,134,080 in compensation charges for shares issued to company
management.
By Segment
Bromine
- Revenues in bromine increased by 78% to $48,871,396. The
increase was due to an increase in volume of 24% and an increase in
pricing of 57%.
- For 2021, the average selling price of bromine was RMB 42,644.
The current price is RMB 55,600.
- Costs in bromine increased by 43% to $22,848,348.
- Gross profits increased by 182% to $26,023,048 from $9,233,996.
Gross profits margins were 53% compared to 37%.
- Net income in bromine increased by 727% to $13,364,649 from
$1,616,542.
Crude Salt
- Revenues in crude salt increased by 101% to $6,080,242. Volume
increased 4%. Pricing increased 93.4%. Cost of net revenues
increased by 27% to $4,284,024.
- Gross profit increased to $1,796,218 from a net loss of
($442,006).
- For the fiscal year, the crude salt segment lost $1,078,320
compared to a loss of $3,589,494 in the previous year.
Chemicals & Natural
Gas
- The Chemical products segment sustained a loss of $2,500,561
roughly in line with the loss of $2,745,297 in the previous year.
The chemical business did not operate in 2021.
- The natural gas segment sustained a loss of $167,139 in 2021.
The natural gas segment did not operate in 2021.
Cash Flow
- The Company generated $23,311,169 from operations compared to
$9,305,627 in the previous year.
- Capital expenditures were $30,093,140 compared to $21,719,369
in the previous year.
The table below reflects the capital expenditures by segment for
the full year and for the 4th quarter. (Numbers for the 9 months
are from the 10Q of Nov15. 2021).
Capital Expenditures |
|
Bromine($) |
Crude Salt ($) |
Chemicals ($) |
Total($) |
2021(A) |
18,205,560 |
2,250,126 |
9,637,454 |
30,093,140 |
9Months(B) |
188,529 |
- |
8,371,623 |
8,560,152 |
Q4 2021(C) |
18,017,031 |
2,250,126 |
1,265,831 |
21,532,988 |
(A) Information represents are audited by company auditor(B)
“The 9 months” represents the financial results for the nine months
ended September 30, 2021 as disclosed in the 10-Q filed on November
15, 2021.(C) C=A-BIn the fourth quarter, the Company spent
approximately $20.3 million on its bromine and crude salt segments,
drilling new wells and building new aqueducts.
Balance SheetFor purposes of calculations, all
per share numbers are based on 10,471,924 shares issued and
outstanding as of December 31, 2021.
- The Company ended the year with cash of $95,767,263. On a per
share basis, this equates to $9.15*.
- Net cash per share (current assets minus all liabilities) were
$81,877,727 or $7.82 per share.
- Working capital was $101,545,326 or $9.70* per share.
- Shareholders’ equity was $286,639,217 or $27.37* per
share.
Fourth Quarter
The results for the fourth quarter of 2021 are calculated by
using the reported results for the full year in the 10-K and then
subtracting the results filed in the 10-Q for the nine months ended
September 30, 2021.
|
|
2021 |
|
|
2020 |
% Change |
|
Net Revenue |
$20,869,666 |
|
$11,807,686 |
76.7 |
% |
|
COGS |
$7,837,512 |
|
$6,720,763 |
16.6 |
% |
|
Gross Margin |
$13,032,154 |
|
$5,086,923 |
156.2 |
% |
|
GP % |
|
62.4 |
% |
|
|
43.1 |
% |
Sales & Marketing |
$18,759 |
|
$13,797 |
36.0 |
% |
|
Direct Labor & Factory O.H. |
$5,481,347 |
|
$1,284,175 |
326.8 |
% |
|
G&A Expenses |
$1,374,466 |
|
$2,942,933 |
-53.3 |
% |
|
Income before taxes |
$3,822,175 |
|
$880,195 |
334.2 |
% |
|
Taxes |
$4,935,164 |
|
$603,280 |
718.1 |
% |
|
Income |
|
-$1,112,989 |
|
$276,915 |
|
|
In the 4th quarter of 2021 compared to the same period of
2020,
- Net revenue increased 76.7%
- Gross margin increased 156.2%
- Direct labor and factory overhead increased 326.8%
- Income from operations increased 350%
- Income before taxes increased 334.2%
- Taxes increased 718.1%
- The Company incurred a loss of $1,112,989 versus a profit in
the previous year.
A number of below listed unique accounting factors impacted the
fourth quarter.
As can be seen from the table below taken from the 10-K and the
10-Q for September 30, 2021. Depreciation in the fourth quarter was
more than $4 million higher than the previous year’s quarter. The
main contributory factor was that the depreciation for the three
closed factories (#2,#8, and #10) to the fourth quarter.
Depreciation Cost |
|
|
2021 |
|
2020 |
Full Year 2021 |
$20,543,425 |
$15,987,860 |
9 months |
$12,316,639 |
$11,907,702 |
Q4 |
$8,226,786 |
$4,080,158 |
Difference |
$4,146,628 |
|
The second major contributing factor was the tax rate. In the
first 9 months, the tax rate approximated the 25% statutory tax
rate. In the fourth quarter, the Company took a charge of
$2,723,189 for the offset of deferred tax assets.
Subsequent Events
On February 22, 2022, the Company announced that discussions
with the government have convinced management that the electricity
restrictions are being eased. Accordingly, the Company had
contacted its suppliers and will have most of the remainder of the
equipment produced and delivered.
2022 Outlook
The Company expects bromine prices to remain at current high
levels or even increase. The Company is encouraged by the
opportunity in zinc-bromine batteries for power and EVs.
The Company also expects to receive approval to open at least
one and potentially more of its closed factories in 2022.
The Company has now ordered most of the equipment for its
chemical factory. While some equipment may be delayed because of
COVID issues in China, the Company believes installation should be
completed near the end of the third quarter 2022. Commercial
production may begin during 2023. The Company believes the delay
could increase the cost of the project by about $5 million.
However, it remains encouraged about the opportunity. The Company
will continue to post photographs on its website showing the
progress of construction.
- Sichuan Project: Natural Gas and Brine:
The company is still waiting for the provincial government of
Sichuan to finalize the land and resource planning for Sichuan
Province. The company has no assurances on the timing of these
plans. However, since the government of China has approved that
privately owned enterprises are allowed to participate in the
natural gas production and since there is great demand for natural
gas in China, the company remains optimistic about this
project.
2022 Q1In the past several years, our
facilities have been closed for a majority of the first quarter for
environmental reasons and Chinese New Year. As a result, the first
quarter always has a lower level of sales and profitability than
other quarters. Because the price of bromine has remained high, the
company expects Q1 revenues to be higher than those of the previous
year. It also expects the loss to be significantly reduced.
However, any estimates exclude any potential nonrecurring factors
or write-offs.
“We are very encouraged about the continuing high price of
bromine,” Mr. Liu Xiaobin, CEO of Gulf Resources stated. “As we
noted in our press release, we are seeing new demand for bromine,
such as the zinc/bromine batteries and supply remains highly
constrained. At these levels, our bromine and crude salt business
should be profitable. We also believe we will be able to open at
least one of our factories this year.”
“Now that following the electricity restrictions are being
eased,” Mr. Liu continued, “we are moving as fast as we can to
finish construction and begin test and trial production in our new
chemical factory. We expect this factory, which will primarily
produce pharmaceutical intermediate products with higher margin. In
addition, despite the delays, we remain confident that we will be
able to produce natural gas and bromine in Sichuan. Natural gas
pricing continues to hit record highs. Our exploration area has
significant natural gas resources. This continues to be a
potentially very exciting project.”
“Meanwhile,” Mr. Liu concluded, “our balance sheet remains
strong and we have the capabilities of taking advantage of new
opportunities as they arise.”
(*These calculations are based on the number of shares
outstanding of 10,471,924 shares as of December
31, 2021)
Conference CallGulf Resources management will
host a conference call on Wednesday, April 13, 2022 at 08:30 AM ET
to discuss financial results for fourth quarter and full year
2021.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: 497161
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 Wednesday, April 20,
2022. To access the replay, call +1 (877) 481-4010. International
callers should call +1 (919) 882-2331. The Replay Passcode is
45205.
About Gulf Resources, Inc.Gulf Resources, Inc.
operates through three wholly-owned subsidiaries, Shouguang City
Haoyuan Chemical Company Limited ("SCHC"), ShouguangYuxin Chemical
Industry Co., Limited ("SYCI"), and Daying County Haoyuan Chemical
Company Limited (“DCHC”). 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. 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 StatementsCertain 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, INC. |
AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(Expressed in U.S. dollars) |
|
|
|
|
December 31,2021 |
|
December 31,2020 |
Current Assets |
|
|
|
|
|
|
|
|
Cash |
|
$ |
95,767,263 |
|
|
$ |
94,222,538 |
|
Accounts receivable, net |
|
|
14,525,807 |
|
|
|
6,521,798 |
|
Inventories, net |
|
|
691,111 |
|
|
|
419,609 |
|
Prepayments and deposits |
|
|
4,450,037 |
|
|
|
6,146,461 |
|
Prepaid land leases |
|
|
— |
|
|
|
— |
|
Other receivables |
|
|
644 |
|
|
|
559 |
|
Total Current Assets |
|
|
115,434,862 |
|
|
|
107,310,965 |
|
Non-Current Assets |
|
|
|
|
|
|
|
|
Property, plant and equipment,
net |
|
|
162,657,546 |
|
|
|
148,947,689 |
|
Finance lease right-of use
assets |
|
|
184,824 |
|
|
|
186,272 |
|
Operating lease right-of-use
assets |
|
|
8,311,127 |
|
|
|
8,868,661 |
|
Prepaid land leases, net of
current portion |
|
|
10,368,469 |
|
|
|
10,134,004 |
|
Deferred tax assets |
|
|
12,900,034 |
|
|
|
18,590,227 |
|
Total non-current assets |
|
|
194,422,000 |
|
|
|
186,726,853 |
|
Total Assets |
|
$ |
309,856,862 |
|
|
$ |
294,037,818 |
|
Commitment and
Contingencies |
|
|
|
|
|
|
|
|
Liabilities and Stockholders’
Equity |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Payable and accrued
expenses |
|
$ |
10,530,776 |
|
|
$ |
5,081,701 |
|
Retention payable |
|
|
— |
|
|
|
— |
|
Taxes payable-current |
|
|
775,708 |
|
|
|
1,326,179 |
|
Amount due to a related
party |
|
|
1,849,044 |
|
|
|
— |
|
Finance lease liability,
current portion |
|
|
227,429 |
|
|
|
217,070 |
|
Operating lease liabilities,
current portion |
|
|
506,579 |
|
|
|
477,350 |
|
Total Current Liabilities |
|
|
13,889,536 |
|
|
|
7,102,300 |
|
Non-Current Liabilities |
|
|
|
|
|
|
|
|
Finance lease liability, net
of current portion |
|
|
1,770,526 |
|
|
|
1,888,903 |
|
Operating lease liabilities,
net of current portion |
|
|
7,557,583 |
|
|
|
8,022,342 |
|
Total Non-Current
Liabilities |
|
|
9,328,109 |
|
|
|
9,911,245 |
|
Total Liabilities |
|
|
23,217,645 |
|
|
|
17,013,545 |
|
|
|
|
|
|
|
|
|
|
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; 10,517,754 and 10,043,307
shares issued; and 10,471,924 and 9,997,477 shares outstanding as
of December 31, 2021 and December 31, 2020 |
|
|
24,376 |
|
|
|
24,139 |
|
Treasury stock; 45,830 and
45,830 shares as of December 31, 2021 and December 31, 2020 at
cost |
|
|
(510,329 |
) |
|
|
(510,329 |
) |
Additional paid-in
capital |
|
|
100,569,159 |
|
|
|
97,435,316 |
|
Retained earnings
unappropriated |
|
|
150,463,638 |
|
|
|
151,388,356 |
|
Retained earnings
appropriated |
|
|
24,233,544 |
|
|
|
24,233,544 |
|
Accumulated other
comprehensive income (loss) |
|
|
11,858,829 |
|
|
|
4,453,247 |
|
Total Stockholders’
Equity |
|
|
286,639,217 |
|
|
|
277,024,273 |
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
309,856,862 |
|
|
$ |
294,037,818 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of
these consolidated financial statements.
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
(Expressed in U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
2021 |
|
2020 |
|
|
|
|
|
NET REVENUE |
|
$ |
55,030,586 |
|
|
$ |
28,207,024 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSE |
|
|
|
|
|
|
|
|
Cost of net revenue |
|
|
(27,132,372 |
) |
|
|
(19,415,034 |
) |
Sales, marketing and other
operating expenses |
|
|
(62,964 |
) |
|
|
(42,663 |
) |
Direct labor and factory
overheads incurred during plant shutdown |
|
|
(10,718,605 |
) |
|
|
(8,170,390 |
) |
General and administrative
expenses |
|
|
(9,525,235 |
) |
|
|
(10,239,943 |
) |
Other operating expense |
|
|
(2,380,540 |
) |
|
|
(22,386 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
(49,819,716 |
) |
|
|
(37,890,416 |
) |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
5,210,870 |
|
|
|
(9,683,392 |
) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(137,178 |
) |
|
|
(136,430 |
) |
Interest income |
|
|
295,172 |
|
|
|
291,307 |
|
Other (income) expenses |
|
|
4,636 |
|
|
|
— |
|
INCOME (LOSS) BEFORE INCOME
TAXES |
|
|
5,373,500 |
|
|
|
(9,528,515 |
) |
|
|
|
|
|
|
|
|
|
INCOME TAX (EXPENSE)
BENEFIT |
|
|
(6,298,218 |
) |
|
|
1,108,471 |
|
NET LOSS |
|
$ |
(924,718 |
) |
|
$ |
(8,420,044 |
) |
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
(LOSS): |
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(924,718 |
) |
|
$ |
(8,420,044 |
) |
OTHER COMPREHENSIVE INCOME
(LOSS) |
|
|
|
|
|
|
|
|
- Foreign currency translation
adjustments |
|
|
7,405,582 |
|
|
|
19,945,054 |
|
COMPREHENSIVE INCOME
(LOSS) |
|
$ |
6,480,864 |
|
|
$ |
11,525,010 |
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED LOSS PER
SHARE |
|
$ |
(0.09 |
) |
|
$ |
(0.87 |
) |
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED WEIGHTED
AVERAGE NUMBER OF SHARES: |
|
|
10,471,924 |
|
|
|
9,650,619 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of
these consolidated financial statements.
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Expressed in U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
2021 |
|
2020 |
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(924,718 |
) |
|
$ |
(8,420,044 |
) |
Adjustments to reconcile net
income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Interest on capital lease obligation |
|
|
135,707 |
|
|
|
135,936 |
|
Depreciation and amortization |
|
|
20,543,425 |
|
|
|
15,987,860 |
|
Unrealized translation difference |
|
|
782,660 |
|
|
|
1,832,026 |
|
Deferred tax asset |
|
|
6,298,218 |
|
|
|
(1,108,471 |
) |
Stock-based compensation expense |
|
|
3,134,080 |
|
|
|
2,392,163 |
|
Shares issued from treasury stock for services |
|
|
— |
|
|
|
— |
|
Changes in assets and
liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(7,749,127 |
) |
|
|
(1,161,704 |
) |
Inventories |
|
|
(259,999 |
) |
|
|
292,101 |
|
Prepayment and deposits |
|
|
(2,849,670 |
) |
|
|
(6,925 |
) |
Other receivables |
|
|
(85 |
) |
|
|
— |
|
Accounts and other payable and accrued expenses |
|
|
2,856,504 |
|
|
|
342,790 |
|
Amount due to a related party |
|
|
1,852,230 |
|
|
|
— |
|
Taxes payable |
|
|
(534,307 |
) |
|
|
(449,915 |
) |
Prepaid land leases |
|
|
— |
|
|
|
(372,259 |
) |
Operating lease |
|
|
26,251 |
|
|
|
(157,931 |
) |
Net cash provided by (used in) operating
activities |
|
|
23,311,169 |
|
|
|
9,305,627 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property, plant
and equipment |
|
|
(30,093,140 |
) |
|
|
(21,719,369 |
) |
Net cash used in
investing activities |
|
|
(30,093,140 |
) |
|
|
(21,719,369 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Repayment of finance lease
obligation |
|
|
(290,597 |
) |
|
|
(264,976 |
) |
Net cash used in
financing activities |
|
|
(290,597 |
) |
|
|
(264,976 |
) |
|
|
|
|
|
|
|
|
|
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS |
|
|
8,617,293 |
|
|
|
6,599,270 |
|
NET DECREASE IN CASH AND CASH
EQUIVALENTS |
|
|
1,544,725 |
|
|
|
(6,079,448 |
) |
CASH AND CASH EQUIVALENTS -
BEGINNING OF YEAR |
|
|
94,222,538 |
|
|
|
100,301,986 |
|
CASH AND CASH EQUIVALENTS -
END OF YEAR |
|
$ |
95,767,263 |
|
|
$ |
94,222,538 |
|
|
|
|
|
|
|
|
|
|
GULF RESOURCES, INC. |
AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |
(Expressed in U.S. dollars) |
|
|
|
Years Ended December 31, |
|
|
2021 |
|
2020 |
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION |
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Interest on finance lease
obligation |
|
$ |
136,709 |
|
|
$ |
136,774 |
|
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of property, plant
and equipment included in payables and accrued expenses |
|
$ |
— |
|
|
$ |
3,537,644 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of
these consolidated financial statements.
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