China Shengda Packaging Group Reports Second Quarter 2013 Results

HANGZHOU, China, Aug. 14, 2013 /PRNewswire-FirstCall/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) (the "Company"), a leading Chinese paper packaging company, today reported its second quarter financial results for the three months ended June 30, 2013. 

Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging Group commented, "Our revenues for the three months ended June 30, 2013 declined to $33.5 million from $36.7 million for the same period of last year, mainly due to the decline in paper cartons sales volume and partially offset by $0.7 million in revenues from the newly completed paper mill which went into production on June 17, 2013. The decline in paper cartons sales volume was mainly a result of continued challenges in light of China's slowing GDP growth trend. Looking ahead, we expect our continued ramp-up of the paper mill to contribute meaningfully to our revenues and to partially offset the weakness in our packaging business."

Second Quarter 2013 Financial Highlights:

• Revenues decreased by 8.6% year-over-year to $33.5 million for the second quarter of 2013 with revenues for paper cartons and other paper products decreasing 10.4% to $32.8 million and revenues for raw paper contributing $0.7 million. The decline in revenues from paper cartons and other paper products are mainly due to lower sales volume.
• Gross profit decreased by 17.5% to $4.8 million for the second quarter of 2013 from $5.9 million for the same period of 2012. Gross margin decreased by 155 basis points to 14.4% for the second quarter of 2013.
• Net income attributable to the Company's stockholders decreased by $0.9 million, or 54.2%, to $0.8 million for the second quarter of 2013 from $1.7 million for the same period of last year.
• Basic and diluted earnings per share were $0.02 for the second quarter of 2013, as compared to $0.04 for the same period of last year.

Second Quarter 2013 Results

Total revenues for the second quarter of 2013 decreased by $3.2 million, or 8.6%, to $33.5 million from $36.7 million for the same period of 2012. Revenues of paper cartons and other paper products decreased by $3.9 million, or 10.4%, to $32.8 million for the second quarter of 2013 from $36.7 million for the same period of last year. Our paper mill went into production in June 2013 and contributed $0.7 million, or 2.0% of total revenues, with sales volume of 1,900 tons. The decrease in revenues of paper cartons was mainly because continued challenges in domestic and foreign economic environment drove sales volume of paper cartons to decrease by 9.9% to 82.9 million square meters for the second quarter of 2013 from 91.9 million square meters for the same period of last year. The average sales price of paper cartons was $0.40 per square meter for the second quarter of 2013, essentially unchanged from the same period of last year. Average sales price of raw paper was $356 per ton for the second quarter of 2013.

Color cartons and flexo cartons accounted for 29.1% and 70.9% of revenues of paper cartons for the second quarter of 2013, compared to 30.3% and 69.7%, respectively, for the same period of 2012. Average sales prices per square meter for color cartons and flexo cartons were $0.39 and $0.40, respectively, for the second quarter of 2013, as compared to $0.41 and $0.39, respectively, for the same period of 2012.

Consumer and industrial goods manufacturing sectors remained the Company's principal markets. Major customers remained home appliances & electronics manufacturers, and food, beverage & cigarette manufacturers in the Yangtze River Delta Region, which accounted for 25.0% and 24.7%, respectively, of revenues for the second quarter of 2013, as compared to 25.7% and 32.1%, respectively, for the same period of 2012.

Gross profit decreased by $1.1 million, or 17.5%, to $4.8 million for the second quarter of 2013, from $5.9 million for the same period of 2012. The decrease in gross profit was mainly due to decline in paper cartons sales volume and negative gross profit of ($0.7) million for raw paper. Gross margin decreased by 155 basis points to 14.4% for the second quarter of 2013 from 16.0% for the same period of 2012.

Selling expenses decreased by approximately $0.2 million, or 19.1%, to $1.1 million for the second quarter of 2013, from $1.3 million for the same period of 2012. The decrease was mainly related to decrease in freight expenses and staff cost. As a percentage of revenues, selling expenses for the second quarter of 2013 decreased to 3.2% from 3.6% for the same period of 2012.

General and administrative expenses increased by $ 0.4 million, or 14.6%, to $3.0 million for the second quarter of 2013, from $2.6 million for the same period of 2012. This increase was mainly from the operation of the paper mill of Jiangsu Shuangsheng Paper Technology Development Co., Ltd. ("Shuangsheng") in 2013. As a percentage of revenues, general and administrative expenses for the second quarter of 2013 increased to 8.9% from 7.1% for the same period of 2012.

Income tax expense decreased to $0.2 million for the second quarter of 2013, as compared to $0.4 million for the same period of 2012. The decrease in income tax expense was mainly attributable to the decrease in income before income tax expense and non controlling interest.

Net income attributable to the Company's stockholders decreased by $0.9 million, or 54.2%, to approximately $0.8 million for the second quarter of 2013 from $1.7 million for the same period of 2012. Basic and diluted earnings per share were $0.02 for the second quarter of 2013, as compared to $0.04 for the same period of 2012.

Total revenues for the six months ended June 30, 2013 decreased by $4.5 million, or 7.0%, to $60.6 million from $65.1 million for the same period of 2012. Revenues of paper cartons and other paper products decreased by $5.2 million, or 8.0%, to $59.9 million for the six months ended June 30, 2013 from $65.1 million for the same period of last year. Our paper mill went into production in June 2013 and contributed $0.7 million, or 1.1% of total revenues for the six months ended June 30, 2013. The decrease in revenues of paper cartons was mainly because continued challenges in domestic and foreign economic environment drove sales volume of paper cartons to decrease by 7.5% to 152.1 million square meters for the six months ended June 30, 2013 from 164.5 million square meters for the same period of last year. The average sales price of paper cartons was $0.39 per square meter for the six months ended June 30, 2013, which was approximately the same as in the same period of 2012. Average sales price of raw paper was $356 per ton for the six months ended June 30, 2013.

Color cartons and flexo cartons accounted for 28.7% and 71.3% of revenues of paper cartons, respectively, for the six months ended June 30, 2013, as compared to 28.9% and 71.1%, respectively, for the same period of 2012. Average sales prices per square meter for color cartons and flexo cartons were $0.40 and $0.39, respectively, for the six months ended June 30, 2013, as compared to $0.42 and $0.39, respectively, for the same period of 2012.

Consumer and industrial goods manufacturing sectors remained the Company's principal markets. Major customers remained home appliances & electronics manufacturers, and food, beverage & cigarette manufacturers in the Yangtze River Delta Region, which accounted for 26.5% and 27.0%, respectively, of revenues for the six months ended June 30, 2013, as compared to 27.3% and 31.0% respectively, for the same period of 2012.

Gross profit decreased by $1.2 million, or 10.6%, to $10.1 million for the six months ended June 30, 2013, from $11.3 million for the same period of 2012. The decrease in gross profit was mainly due to decline in paper cartons sales volume and negative gross profit of ($0.7) million for raw paper. Gross margin dropped by 67 basis points to 16.7% for the six months ended June 30, 2013 from 17.4% for the same period of 2012.

Selling expenses decreased by approximately $0.4 million, or 13.6%, to $2.2 million for the six months ended June 30, 2013, from $2.6 million for the same period of 2012. The decrease was mainly related to decrease in freight expenses and staff cost. As a percentage of revenues, selling expenses for the six months ended June 30, 2013 decreased to 3.7% from 4.0% for the same period of 2012.

General and administrative expenses increased by $ 0.9 million, or 18.1%, to $5.8 million for the six months ended June 30, 2013, from $4.9 million for the same period of 2012. This increase was mainly from the operation of Shuangsheng in 2013. As a percentage of revenues, general and administrative expenses for the six months ended June 30, 2013 increased to 9.6% from 7.5% for the same period of 2012.

Income tax expense decreased to $0.5 million for the six months ended June 30, 2013 from $0.7 million for the same period of 2012. The decrease in income tax expense was mainly attributable to the decrease in income before income tax expense and non controlling interest.

Net income attributable to the Company's common stockholders decreased by $1.6 million, or 49.0%, to $1.6 million for the six months ended June 30, 2013, from $3.2 million for the same period of 2012. Basic and diluted earnings per share were $0.04 for the six months ended June 30, 2013, as compared to $0.08 for the same period of 2012.

Financial Condition

As of June 30, 2013, the Company had cash and cash equivalents of $7.3 million and restricted cash of $19.3 million. Shareholders' equity was $108.7 million, compared to $105.0 million at December 31, 2012. Net cash used in operating activities was $4.8 million for the six months ended June 30, 2013, as compared to $8.6 million net cash provided by operating activities for the same period of 2012. This was attributable to net income of $1.6 million, adjusted by depreciation and amortization expenses of $2.5 million, and a net decrease in cash from working capital items of $8.9 million. Net cash used in investing activities was $3.3 million for the six months ended June 30, 2013, as compared to $11.7 million for the same period of 2012. The $3.3 million was used for purchases of property, plant and equipment and prepayment for construction, primarily related to machinery purchases and plant construction of our paper mill which was completed in June 2013. Net cash provided by financing activities was $3.2 million for the six months ended June 30, 2013, as compared to $2.0 million net cash used in financing activities for the same period of 2012. During the second quarter of 2013, we received loan proceeds amounting to $3.2 million.

Recent Development

On June 17, 2013, Shuangsheng completed the construction of the paper mill and officially commenced the production of raw paper. The paper mill is located in Sheyang County, Jiangsu Province with an annual raw paper production capacity of 150,000 tons.

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in China. It is principally engaged in design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures raw paper and corrugated paperboards, which are used for the production of 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.

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 reach full production capacity of the new paper mill, 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.

Company Contact:        

China Shengda Packaging Group Inc.  
Cindy Hu, Board Secretary     
Tel: +86-571 8283 8770    
E-mail:  [email protected]        
Website: http://www.cnpti.com     

Investor Relations Contact:
Weitian Group LLC
Tina Xiao
Tel: +1-917-609-0333
Email: [email protected]
Website: http://www.weitian-ir.com    

SOURCE China Shengda Packaging Group Inc.

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