China Shengda Packaging Group Inc. Announces Fourth Quarter and Full Year 2011 Results

HANGZHOU, China, March 22, 2012 /PRNewswire-Asia-FirstCall/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI), a leading Chinese paper packaging manufacturer, today announced its financial results for the three months and full year ended December 31, 2011.

"Revenues of $124 million and net income of $9.6 million were within our guidance ranges. However our markets and our financial performance are currently volatile due to cross-currents of variability affecting the global consumer who buys the final products from our manufacturing customers. We are concentrating on broadening our customer base and vertically integrating into paper manufacture in order to grow our business and at the same time reduce fluctuations in revenues and margins," Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging, said.

Fourth Quarter 2011 Results

Revenues decreased $7.4 million, or 19.4%, to $30.8 million for the three months ended December, 31, 2011, from $38.2 million during the same period of 2010. The decrease was primarily a result of lower sales volume. The sales volume decreased 18.9 million square meters, or 19.0%, to 80.4 million square meters for the three months ended December 31, 2011, from 99.3 million square meters during the same period of 2010. The decreased sales volume was mainly the result of two factors: less customer demand from the chemical industry  due to challenges resulting from more restrictive financial policies by the People's Bank of China; and significantly less demand from domestic furniture makers whose US and European customers bought less furniture.

Color cartons accounted for 24.9% of total revenues for in the fourth quarter of 2011 and flexo cartons accounted for 75.1%, compared to 25.6% and 74.4%, respectively, in the same period of 2010. Average per square meter prices for color cartons and flexo cartons during the fourth quarter of 2011 were $0.43 and $0.37, compared to $0.41 and $0.38, respectively, in the same period of 2010.

Consumer and industrial goods manufacturing sectors are the Company's principal markets. Its major customers remained home appliances and electronics manufacturers and food, beverage and cigarette manufacturers in the YRD, which accounted for 32.7% and 33.3%, respectively, of the total revenues in the fourth quarter of 2011.

Gross profit declined 40.3% to $6.4 million from $10.8 million in the same period of 2010. Gross profit from flexo cartons declined 40.2% to $4.6 million from $7.7million in the same period of 2010. Gross profit from color cartons declined 40.7% to $1.8 million from $3.1 million in the same period of 2010. Gross margin declined to 20.8% from 28.1% in the same period of 2010. The decrease in gross margin was primarily due to an increase in the cost of raw materials compared to the same period a year ago.

Selling expenses increased from 2.7% of sales to 4.2% of sales in the fourth quarter as compared to the fourth quarter in 2010. 

General and administrative ("G&A") expenses decreased 38.1% to $3.1 million from $5.0 million in the same period of 2010. As a percentage of revenues, G&A expenses for the three months ended December 31, 2011 decreased to 10.0%, as compared to 13.0% for the same period of 2010.

Income tax expense was $0.3 million for the three months ending December 31, 2011, compared to a credit of $0.4 million for the same period of 2010. The increase in income tax expense was mainly attributable to the fact that Great Shengda was subject to the uniform income tax rate of 25% for the first nine months of 2010. In October 2010, Great Shengda qualified as a National High-Tech Enterprise, a status recognized by China's Ministry of Science and Technology, Ministry of Finance, and State Administration of Taxation. In December 2010, the status was approved by the local tax bureau. Accordingly, under the PRC Enterprise Income Tax Law, Great Shengda is eligible for a preferential tax rate of 15% for the calendar years of 2010, 2011 and 2012, as opposed to the uniform income tax rate of 25%. The preferential tax rate of 15% was retroactively effective as of January 1, 2010, and the retroactive effect was accounted for in the fourth quarter of 2010.

Net income attributable to common stockholders decreased to $1.6 million, or $0.05 per diluted share, from $5.3 million, or $0.16 per diluted share, in the same period of 2010.

Twelve Months Ended December 31, 2011

Revenue for the full year of 2011 was $124.0 million, a decrease of $6.1 million or 4.7% from revenue of $130.1 million for the full year of 2010, mainly due to a decrease in sales volume, partially offset by the increase in average per square meter prices. The sales volume decreased 23.2 million square meters, or 6.7%, to 321.7 million square meters from 344.9 million square meters during the same period of 2010.  Gross profit decreased by $10.8 million, or 29.7%, to $25.7 million for the year ended December 31, 2011, from $36.5 million for the year ended December 31, 2010. Gross profit as a percentage of revenues was 20.7% for the year ended December 31, 2011, as compared to 28.1% for the year ended December 31, 2010, mainly due to increased cost of goods sold.  Net income attributable to the Company's common stockholders decreased by $9.7 million, or 50.1%, to $9.6 million or $0.25 per diluted share for the year ended December 31, 2011, from $19.3 million or $0.63 per diluted share for the year ended December 31, 2010.

Financial Condition

As of December 31, 2011, China Shengda Packaging had cash and cash equivalents of $19.3 million and restricted cash of $7.9 million. Shareholders' equity was $98.8 million, compared with $86.1 million as of December 31, 2010.

Net cash used in operating activities was $9.7 million for the year ended December 31, 2011, as compared to $20.0 million in net cash provided by operating activities for the same period in 2010. This was attributable to net income of $9.6 million, adjusted by depreciation and amortization expenses of $4.1 million, and a net decrease in cash from working capital items of $23.4 million. The net decrease in working capital items was mainly due to the decrease in accounts and notes payable of $27.4 million and increase in accounts and notes receivable of $4.1 million, partially offset by the decrease in restricted cash of $5.0 million. The $27.4 million decrease in accounts and notes payable is mainly due to the decrease of notes payable during the year ended December 31, 2011 amounting to $25.2 million.       

Net cash used in investing activities was $9.6 million for the year ended December 31, 2011, as compared to $31.4 million for the year ended December 31, 2010. The $9.6 million net cash used in investing activities during the year ended December 31, 2011 was attributable to the purchases of property, plant and equipment and prepayment paid for construction in progress.

Net cash provided by financing activities was $1.9 million for the year ended December 31, 2011, as compared to $34.0 million net cash provided by financing activities for the year ended December 31, 2010. During the year ended December 31, 2011, the Company received proceeds from borrowings amounting to $34.5 million and repaid loans amounting to $32.1 million. The Company also purchased shares of its common stock amounting to $0.7 million.

Conference Call Information

The Company will also host a conference call at 9:00 a.m. Eastern Time on Friday, March 23, 2012.

Listeners may access the call by dialing +1 (877) 275-8968 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (706) 643-1666. The conference participant passcode is 63667717.

A replay of the conference call will be available for 14 days starting from 10:00 am ET on Friday, March 23, 2012. To access the replay, dial +1 (855) 859-2056. International callers should dial +1 (404) 537-3406. The passcode is 63667717.

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in China. It is principally engaged in the design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures corrugated paperboards, which are used for the production of its flexo-printed and color-printed cartons. The company provides paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors in China. For more information, visit http://www.cnpti.com.

Safe Harbor Statements

This press release may contain forward-looking statements. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company's ability to develop and market new products, the ability to access capital for expansion and continued investment in R&D, the ability to acquire other companies, changes from anticipated levels of sales, changes in national or regional economic and competitive conditions, changes in relationships with customers, changes in profit margins of principal product and other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

SOURCE China Shengda Packaging Group Inc.