China XD Plastics Announces First Quarter 2015 Financial Results

HARBIN, China, May 11, 2015 /PRNewswire/ -- China XD Plastics Company Limited (NASDAQ: CXDC) ("China XD Plastics" or the "Company"), one of China's leading specialty chemical companies engaged in the development, manufacture and sale of polymer composite materials primarily for automotive applications, today announced its financial results for the first quarter ended March 31, 2015.

First Quarter 2015 Financial Highlights    

• Revenue was $221.9 million, a decrease of 0.8% YoY and 27.7% sequentially
• Gross profit was $48.6 million, an increase of 4.3% YoY and decrease of  16.3% sequentially
• Gross margin of 21.9% increased 105 basis points YoY and 299 basis points sequentially
• Net income was $25.4 million, an increase of 15.5% YoY and decrease of 29.0% sequentially
• Total volume shipped was 69,355 metric tons, up 0.6% YoY but down 27.8% sequentially

"Our first quarter 2015 results were consistent with our expectations," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer.  "The automotive industry in China continues to experience a slower growth rate than it has in recent years which has increased pricing pressure on upstream businesses. We have quickly adjusted to these changing market dynamics by offering new more cost-efficient formulations of our Polyamide (PA) products. Our responsiveness to market conditions and ability to adapt to customer needs and to maintain stable gross margin are critical points of differentiation for China XD Plastics among our peers."

Mr. Han continued, "We remain focused on maintaining our position as an industry leader in China's auto market while also strategically expanding our business into new markets. We are pleased to announce that our new facility in Dubai will be operational as of this quarter. Presence in Dubai will provide numerous advantages including international business environment, access to low-cost raw materials and tax exemptions. We are confident in the resilience of our business model and our ability to capitalize on exciting growth opportunities."

First Quarter 2015 Results

Revenues for the first quarter of 2015 were $221.9 million, representing a year-over-year decrease of 0.8% from $223.6 million in the first quarter of 2014. The slight year-over-year decline was due to a 1.0% decrease in the average selling price of the Company's products, partially offset by approximately a 0.6% increase in sales volume.

Gross profit for the first quarter of 2015 was $48.6 million, representing a 4.3% increase from $46.6 million in the prior year period.  Gross margin was 21.9%, compared to 20.9% in the first quarter of 2014. The increase in gross margin was primarily due to higher-end product sales accounting for 78.4% of the Company's total revenues for the first quarter ended March 31, 2015, compared to 73.7% in the same period of the prior year, and lower raw material costs as the Company benefited from raw materials procured at lower prices due to the decreased crude oil price since late 2014.

Premium products (POM, PPO, PA6, PA66 and plastic alloy) in total accounted for 78.4% of revenues, compared to 73.7% in the prior year period. Sales to the Korean market accounted for 15.7% of total revenue.  Sales to the Korean market primarily consisted of long carbon chain PA plastic alloy and high-performance modified PA66.

General and administrative (G&A) expenses were $5.0 million in the quarter, compared to $3.8 million in the same period of 2014, representing an increase of 31.6%, or $1.2 million. The growth was primarily due to increases of $0.4 million in payroll expenses resulting from headcount and salary increases, $0.3 million of stamp duties in connection with the Company's business expansion, and $0.5 million in other miscellaneous expenses.

Research and development (R&D) expenses were $5.8 million during the quarter ended March 31, 2015, compared to $8.6 million during the same period in 2014, a decrease of 32.6%, or $2.8 million. The decrease reflects the Company's efforts to adjust R&D activities to new products primarily for industrialized applications from automotive to other advanced fields such as ships, airplanes, high-speed rail, electronics, medical devices, bio-based plastics, food packaging, 3D printing materials, et al. As of March 31, 2015, the number of ongoing research and development projects was 126.

Total operating income was $37.6 million in the first quarter ended March 31, 2015, compared to $34.1 million in the same period of 2014, representing an increase of 10.3%, or $3.5 million. The increase in operating income was primarily due to higher gross profit and lower R&D expenses, partially offset by higher selling expenses and G&A expenses.

Net interest expense was $8.2 million for the quarter, compared to net interest expense of $5.6 million in the same period of 2014, primarily due to interest expense increases of $1.8 million resulting from the Notes issued on February 4, 2014 and $ 0.2 million resulting from the increase of bank loans to meet the Company's needs for its capacity expansion in Southwest China and Dubai.

Income tax expense was $4.2 million, representing an effective income tax rate of 14.3%, compared to an effective income tax rate of 24.7% in the first quarter of 2014.  The decrease was primarily due to Sichuan Xinda Group's preferential income tax rate and exemption of income tax for the income earned by the Company's Dubai subsidiary, which generated a greater proportion of the Company's net income in the first quarter of 2015 compared to the first quarter of 2014.

Net income for the first quarter of 2015 was $25.4 million, compared to $22.0 million for the same period of the prior year. Basic and diluted earnings per share were $0.39, compared to $0.34 per basic and diluted share in the first quarter of 2014. 

Average number of shares used in the computation of basic and diluted earnings per share for the three months ended March 31, 2015 was 49.2 million, compared to 48.3 million in the prior year period.

EBITDA for the first quarter of 2015 was $46.3 million, an increase of 6.4% from EBITDA of $43.5 million in the prior year period.  For a detailed reconciliation of EBITDA, a non-GAAP measure, to its nearest GAAP equivalent, please see the financial tables at the end of this release.

Financial Condition

As of March 31, 2015, the Company had $31.2 million in cash and cash equivalents, $269.2 million in time deposits with commercial banks, $409.3 million in working capital (current assets minus current liabilities) and a current ratio (current assets divided by current liabilities) of 1.9.  Stockholders' equity as of March 31, 2015 was $550.8 million, compared to $525.3 million as of December 31, 2014.

Inventories increased by 19.7% to meet anticipated demand in the coming quarters, especially from customers located in more distant regions as well as to stock up on raw materials at low price level. 

Short-term loans, including the current portion of long-term loans, increased by $61.3 million, or 61.5%, during the first quarter, primarily due to loans guaranteed by Investment Company affiliated with the local Government and overseas bank loans borrowed by the Company's Dubai subsidiary. The Company took on additional long-term bank loans of $31.2 million to support its expansion in Southwest China and Dubai.  Accounts payable increased by 43.8% as a result of more purchases made by the Company because of the lower purchase price of raw materials and the Company's strategy to stock up on inventory.  As of March 31, 2015, notes payable was $148.7 million, due to the issuance of 11.75% guaranteed senior notes due in 2019.

Business Outlook and Guidance

Based on the Company's consideration for slowing demand throughout the Chinese automotive supply chain and uncertainty of the impact of volatile crude oil prices on polymer composite materials in 2015, the Company reiterates its guidance for 2015. The Company full-year sales to range between $960 million and $1.06 billion and net income to range between $100 million to $120 million.  This forecast assumes constant exchange rates and anticipated interest expense associated with both its long and short-term debt, and reflects the Company's current and preliminary view of its business outlook in fiscal 2015, which is subject to change based on then actual circumstances.

Conference Call

China XD Plastics' management will host a conference call at 8:00 a.m. ET on Monday, May 11, 2015, to discuss its first quarter of 2015 financial results. The conference call can be accessed by dialing +1 (855) 298-3404 (for callers in the U.S.), +86-4001-200-539 (for Mainland China callers) or +852 5808 3202 (for Hong Kong callers) and entering pass code 6865785.

A recording of the conference call will be available through May 18, 2015, by calling +1 (866) 846-0868 (for callers in the U.S.) and entering pass code 6865785.

A live webcast and replay of the conference call will be available on the investor relations page of the Company's website at http://www.chinaxd.net.

About China XD Plastics Company Limited

China XD Plastics Company Limited, one of China's leading specialty chemical companies, through its wholly-owned subsidiaries, develops, manufactures and sells polymer composites materials, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 27 automobile brands manufactured in China, including without limitation, AUDI, BMW, Volkswagen, Buick, Mazda, and Toyota. The Company's wholly-owned research center is dedicated to the research and development of polymer composites materials and benefits from its cooperation with well-known scientists from prestigious universities in China. As of March 31, 2015, 329 of the Company's products have been certified for use by one or more of the automobile manufacturers in China. For more information please visit http://www.chinaxd.net.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's growth potential in international markets; the effectiveness and profitability of the Company's product diversification strategy; the impact of the Company's product mix shift to more advanced products and related pricing policies; the volatility of the Company's operating results and financial condition; the Company's ability to raise additional capital to finance the Company's activities; the Company's and its subsidiaries' ability to fully perform all of their obligations under the guaranteed senior notes transaction and other contractual obligations applicable to them; the effectiveness, profitability, and the marketability of its the ongoing mix shift to more advanced products; the prospect of the Company's Dubai facility, and the associated expansion into Middle East, Europe and other parts of Asia; the prospect of the Company's Southwest China facility, and its penetration into Southwest China; the impact of volatile crude oil prices on the Company's efforts to diversify its product offers; market for plastic resins; legal and regulatory risks; the Company's projections of its revenues for performance in fiscal in 2015; the Company's ability to execute its growth strategy and the effectiveness of its marketing strategy; the future trading of the common stock of the Company; the Company's ability to operate as a public company; the period of time for which its current liquidity will enable the Company to fund its operations; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

Contacts:

China XD Plastics
Mr. Taylor Zhang
CFO (New York)
US Phone: +1 (212) 747-1118 
Email: [email protected]

ICR
William Zima
Partner
US Phone: +1-(203) 682-8233
Email: [email protected]

-Financial Tables Follow-

SOURCE China XD Plastics Company Limited

Related Links

http://www.chinaxd.net

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