China XD Plastics Announces Fourth Quarter and Full Year 2012 Financial Results

HARBIN, China , March 25, 2013 /PRNewswire/ -- China XD Plastics Company Limited (NASDAQ: CXDC, "China XD Plastics" or the "Company"), one of China's leading specialty chemical players engaged in the development, manufacture and sale of modified plastics primarily for automotive applications, today announced its financial results for the fourth quarter and the full year ended December 31, 2012.

Full Year 2012 Financial Highlights

• Revenue was $599.8 million, an increase of 57.2% from $381.6 million in 2011
• Gross profit was $143.8 million, an increase of 50.1% from $95.8 million in 2011
• Gross profit margin was 24.0%, compared to 25.1% in 2011
• Net income was $85.9 million, compared to $60.5 million in 2011
• Total volume shipped was 223,982 metric tons, up 48.1% from 151,271 metric tons in 2011

Fourth Quarter Fiscal 2012 Highlights

• Revenue was $168.6 million, an increase of 48.0% from $113.9 million in the fourth quarter of fiscal 2011
• Gross profit was $37.3 million, an increase of 27.4% from $$29.3 million in the fourth quarter of fiscal 2011
• Gross profit margin was 22.1%, compared to 25.7% in the fourth quarter of fiscal 2011
• Net income was $17.3 million, compared to $18.5 million in the fourth quarter of fiscal 2011
• Total volume shipped was 62,692 metric tons, up 51.8% from 41,289 metric tons in the fourth quarter of fiscal 2011

Mr. Jie Han, Chairman and Chief Executive Officer of China XD Plastics, commented, "I am pleased to report another year of record revenues and profit growth. The performance of this year speaks volume of our proactive effort especially during the changing and challenging macro environment affecting different industries in China. As our traditional northeast China market phased into slower growth mode, we promptly adjusted our marketing strategy, including offering more relaxed pricing and margin and reduce our post-sale service fees to our distributors in 2012 in order to sustain our long-term growth and develop and cultivate our customer base. Although our average selling price increased less than the price of raw materials, our newly implemented marketing strategy yielded further penetration in our less entrenched north and east China markets, an increase from 18.4% and 19.2% to 21.1% and 21.9% as a percentage of total revenues compared to the same period in fiscal 2011, supplementing the growth in our traditional northeast China market. As a result, we have achieved our overall business objective in 2012. In addition, we added one more distributor in 2012, bringing our total number of sales distributors to eight. As evidenced by the higher volumes shipped, we continue to experience strong demand for our products across our portfolio. The increase in average selling prices was partially due to our continued shift in sales mix to higher value-added products, which are typically sold at higher prices. As market demand continues to grow for these higher margin products and as part of our long-term growth strategy, we remain committed to our investment in research and development. We believe this commitment is the key to further strengthening our market position and will help us deliver long-term value for our stockholders. The 20 new production lines in our third production base launched in December 2011 contributed approximately 81,350 tons of production during the year ended December 31, 2012. In addition, the construction of the three additional workshops has been completed in our third production base and most of the 30 additional production lines were delivered, installed and trial-run completed as scheduled in December of 2012 to further expand our annual capacity potential by approximately 135,000 metric tons to support our future growth in 2013. We are also excited about our previously announced plan to build the fourth production base with 300,000 Metric Tons annual capacity in Southwest China. Not only does our plan follow China's 12th Five-Year Plan promoting green and environmental protection sectors and new material industries, it also presents us first-mover advantage in southwest market where several key downstream players such as automotive, aircraft, high-speed rail and ship manufacturers, recently entered. The Company will benefit from favorable tax policies under China's Western Development Program by locating the Project in Southwest China. Once our southwest production base is completed and in operation, we will be able to effectively cover the entire country geographically and reach our goal of 10% market penetration with our major products, with our southwest production base covering southwest and central China and reaching into east China and our northeast production bases covering northeast and north China and reaching into east China."

Full Year 2012 Financial Results

Revenues for fiscal year 2012 were $599.8 million, representing a year-over-year increase of 57.2% from $381.6 million in fiscal year 2011. The increase in revenues was due to a 48.1% increase in sales volume and an 7.5% increase in the average selling price of our products, driven by increasing demand for automotive modified plastics used in the plastic parts of mid- and high-end branded automobiles by the Company's major customers, and a shift in product mix to include a greater percentage of sales of non-modified Polypropylene ("PP") products. For fiscal year 2012, sales of non-modified PP products represented 52.0% of revenues, compared to 49.1% of revenues in fiscal year 2011.

Gross profit for fiscal year 2012 was $143.8 million, up 50.1% from $95.8 million in fiscal year 2011. Gross margin was 24.0%, compared to 25.1% in the same period of the prior year. The year-to-year decrease in gross margin was mainly attributed to the more relaxed pricing and profit margin offered to our distributors and the intentional decrease in post-sales service fees as a result of the Company's adjustment in its marketing strategy.

General and administrative ("G&A") expenses were $10.0 million, compared to $7.1 million for the same period of the prior year. This increase is primarily due to increase of $1.9 million payroll resulting from raised average salary and increased headcount, and of $0.7 million share based compensation.

Research and development ("R&D") expenses were $21.6 million, or 3.6% of revenues, compared to $11.6 million, or 3.1% of revenues, in the same period of the prior year. The increase in R&D expenses was due to the Company's ongoing efforts in research and development activities on new products primarily in consumption of raw materials for various experiments for automotive applications from automobile manufacturers as well as other non-automotive applications. During the year ended December 31, 2012, the Company successfully launched 35 new AM certified products, which increased its total number of AM certified products to 246. As of December 31, 2012, the Company had 38 products in the process of being certified by automotive and non-automotive manufacturers.

Operating income for fiscal year 2012 was $111.9 million, or 18.7% of revenues, an increase of 45.6% over operating income of $76.8 million, or 20.1% of revenues, in the same period of the prior year.

Net income for fiscal year 2012 was $85.9 million, compared to a net income of $60.5 million for the same period of the prior year.

Basic and diluted earnings per share were $1.35.

Basic average numbers of shares used in computation of basic earnings per share for fiscal year ended December 31, 2012 was 47.5 million, compared to 47.3 million in the same period of the prior year.

Weighted average numbers of shares used in computation of diluted earnings per share for the fiscal year ended December 31, 2012 was 47.5 million, compared to 47.3 million in the same period of the prior year.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the fiscal year 2012 was $130.7 million, an increase of 52.7% from EBITDA of $85.6 million for the fiscal year 2011. 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.

Fourth Quarter 2012 Results

Revenues for the fourth quarter of fiscal 2012 were $168.6 million, representing a year-over-year increase of 48.0% from $113.9 million in the fourth quarter of fiscal 2011. The increase in revenues was due to a 51.8% increase in sales volume, driven by increasing demand for automotive modified plastics used in the plastic parts of mid- and high-end branded automobiles by the Company's major customers partially offset by the decrease in the prices of Engineering Plastics, Environmentally-Friendly Plastics and Modified ABS due to the more relaxed pricing and profit margins offered to its distributors and the intentional decrease in post-sales fees from these products as a result of the Company's adjustment in its marketing strategy amid the changing macro and industry environment. For the fourth quarter of fiscal 2012, sales of non-modified PP products represented 59.2% of product revenues, compared to 56.9% of product revenues in the same period of 2011.

Gross profit for the fourth quarter of fiscal 2012 was $37.3 million, up 27.4% from $29.3 million in the fourth quarter of fiscal 2011. Gross margin was 22.1%, compared to 25.7% in the same period of the prior year. The year-to-year decrease in gross margin was mainly attributed to decrease of post-sales revenue, partially offset by our efforts in developing and selling more higher value-added automotive modified plastics towards high-end products as a percentage of total sales in the fourth quarter of 2012.

G&A expenses were $2.4 million, compared to $2.0 million for the same period of the prior year. This increase is primarily due to increase of payroll resulting from raised average salary and increased headcount.

R&D expenses were $9.0 million, or 5.5% of revenues, compared to $2.6 million, or 2.2% of revenues, in the same period of the prior year. The increase in R&D expenses was due to the Company's ongoing efforts in research and development activities on new products primarily in consumption of raw materials for various experiments for automotive applications from automobile manufacturers as well as other non-automotive applications. During the fourth quarter of 2012, the Company successfully launched ten new AM certified products, which increased its total number of AM certified products to 246 and had 38 new products in the process of being certified by automotive and non-automotive manufacturers as of December 31, 2012.

Operating income for the fourth quarter of fiscal 2012 was $25.9 million, or 15.3% of revenues, an increase of 4.8% over operating income of $24.7 million, or 21.7% of revenues, in the same period of the prior year.

Net income for the fourth quarter of fiscal 2012 was $17.3 million, compared to a net income of $18.5 million for the same period of the prior year.

Basic and diluted earnings per share were $0.36, an increase when compared to last year's results, which was at $0.29, respectively.

Basic average numbers of shares used in computation of basic earnings per share for the three months ended December 31, 2012 was 47.56 million, compared to 47.53 million for the same period of the prior year.

Weighted average numbers of shares used in computation of diluted earnings per share for the three months ended December 31, 2012 was 47.56 million, compared to 47.53 million for the same period of the prior year.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the fourth quarter of 2012 was $30.4 million, an increase of 14.2% from EBITDA of $26.2 million in the same period of the prior year. 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 December 31, 2012, China XD Plastics had $83.8 million in cash and cash equivalents, $48.0 million in time deposits with commercial banks, $149.2 million in working capital and a current ratio of 1.7. Stockholders' equity as of December 31, 2012 was $264.4 million, compared to $173.9 million as of December 31, 2011.

Recent Events

On March 8, 2013, the Company signed an agreement with the People's Government of Shunqing District, Nanchong City of Sichuan Province to construct its fourth production base with 300,000 metric tons plastics new material production capacity and the affiliated research and development center and training center (the "Project"). The Company plans to complete the Project in approximately two years, funded with its existing cash and cash equivalents, its future operating cash flows and certain debt financing.

On December 3, 2012 the Company announced the successful launch of its new production lines as part of the Company's previously announced capacity expansion plan. The new production lines are utilized primarily for the manufacture of higher value-added modified plastics products. Once fully ramped up, the lines will increase the Company's total production capacity by 135,000 metric tons to 390,000 metric tons per annum. The additional capacity has started to contribute to the Company's production capacity since the beginning of 2013.

On December 2, 2012, the Company successfully hosted the 5th Annual Seminar on the Development of the Macromolecule Materials Industry held in Harbin, China. The annual seminar gives industry experts an opportunity to discuss cutting-edge technologies and policy trends in plastics new materials at an international level under the backdrop of current macro-economic environment and future market trends. The attending experts reviewed and evaluated the Company's R&D projects to be initiated in 2013. The seminar was attended by members of Chinese Academy of Engineering, Chinese macromolecule industry academic leaders, industry analysts, economists, Company executives and the Company's research personnel.

Business Outlook and Guidance

Given the Company's strong performance during fiscal year 2012 and positive outlook on customer demand for its products for 2013, the Company now expects revenues for fiscal 2013 to range between $935 million and $1 billion and net income for fiscal 2013 to range between $100 million and $132 million, excluding any non-cash charges related to stock based compensation and change in fair value of existing derivative liabilities. The current wide net income guidance is a function of the expected sales from our subsidiary in Sichuan province, the income tax benefit received from China Western Development's favorable policies, certain local tax benefits as described in the agreement between the Company and the local government and the expected tax benefit in Heilongjiang province. This forecast based on constant exchange rates and reflects the Company's current and preliminary view, which is subject to change.

Mr. Han concluded, "Thanks to our committed practice of business strategy periodic review and timely adjustment in response to the ever-changing business environment, we continue to execute our business plan in multiple fronts. We generated strong operational and financial results and further enhanced our position in the marketplace especially amidst current challenging economic conditions both globally and nationally. During 2012, we kept growing our product portfolio to offer our customers more higher-value added products in a cost effective manner and solidified our footprint in north and east China. We are pleased with the development of our product mix and our successful progress in north and east China markets, both key areas that we believe will give us significant competitive advantages as we continue to expand our customer base and increase sales. The production contribution from capacity and product lines installed in December 2012 is on schedule, and we are making the necessary investments in R&D to ensure we are well positioned to leverage positive market dynamics both now and in the future. In light of our strong performance for the year ended December 31, 2012 and positive growth trends for the sector and our business, we remain optimistic, about our business and its growth in 2013."

Conference Call

China XD Plastics' management will host a conference call at 9:00 a.m. ET on Monday, March 25, 2013, to discuss its fourth quarter and full year 2012 financial results. The conference call may be accessed by calling +1-866-519-4004 (for callers in the U.S.) or +65-6723-9381 (for international callers) and entering pass code 23179665.

A recording of the conference call will be available through April 1, 2013, by calling +1-855-452-5696 (for callers in the U.S.) or +61-28199-0299 (for callers outside the U.S.) and entering pass code 23179665.

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

About China XD Plastics Company Limited

China XD Plastics Company Limited, through its wholly-owned subsidiaries (the "Company"), develops, manufactures and sells modified plastics, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 23 automobile brands manufactured in China, including AUDI, BMW, Toyota, Buick, Mazda, VW Golf, Jetta, and Hafei new energy vehicles. The Company's wholly-owned research center is dedicated to the research and development of modified plastics, and benefits from its cooperation with well-known scientists from prestigious universities in China. As of December 31, 2012, 246 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://cxdc.irpage.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 ability to raise additional capital to finance the Company's activities; the effectiveness, profitability, and the marketability of its products; legal and regulatory risks; the ability for the additional 30 production lines of our third production base to expand our production ability in fiscal year 2013; management's current beliefs regarding anticipated completion and launch of the fourth productions base and its production capacity; increased market penetration expected to be brought by the fourth production base; preferential tax treatment and other favorable governmental policies expected to be enjoyed by the new Project; the Company's ability to execute its growth 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; the Company's ability to protect its proprietary information; 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)
Phone: +1-212-747-1118
Email: [email protected]

- Financial Tables Follow -

SOURCE China XD Plastics Company Limited

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