China XD Plastics Announces Third Quarter 2014 Financial Results

HARBIN, China, Nov. 13, 2014 /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 third quarter ended September 30, 2014.

Third Quarter 2014 Financial Highlights:

• Revenue was $315.7 million, an increase of 7.7% YoY and 19.5% sequentially
• Gross profit was $65.4 million, a decrease of 0.5% YoY but up 25.4% sequentially
• Gross margin of 20.7% declined YoY but was up 100 basis points sequentially
• Net income was $43.2 million, an increase of 5.1% YoY and 126% sequentially
• Total volume shipped was 95,204 metric tons, up 4.1% YoY

"Strong sequential growth confirms our view that business would accelerate over the course of the year," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer of China XD Plastics. "Revenue growth was fueled by strong domestic demand, success in our geographic diversification efforts outside of China, and improved average selling prices resulting from our strategic shift to higher-end products."

Mr. Han continued, "Looking forward, we continue to see numerous opportunities to grow our business, and are acting accordingly. With the future contribution from the Southwest Campus, we will be able to effectively cover all major markets in China, while products from our Dubai plant will cover overseas markets including Asia, the Middle East, Russia and Europe. Our success in product development this year has broadened our product portfolio from six to now eleven categories. Through our R&D efforts, we have added 3D printing and biodegradable materials to our portfolio. With automobile applications continuing to be our core business, we plan to gradually diversify our product offering to include products for applications in high-speed rail, ships, aircrafts as well as biodegradable and electronics applications."

Third Quarter 2014 Results

Revenues for the third quarter of 2014 were $315.7 million, representing a year-over-year increase of 7.7% from $293.1 million in the third quarter of 2013. The increase in revenues was due to a 4.1% increase in sales volume and 3.9% increase in the average RMB selling price.

The greater sales volume was driven by strong demand for polymer composite materials in the China and Asian markets, higher penetration in the East China and Southeast China markets, as well as marketing efforts to develop new customers. Market demand in general is the result of an increasing appetite for middle and high-end automobiles by Chinese consumers, continuing substitution of imported polymer composite materials by domestic suppliers, and an increase in per-vehicle plastic content. The adoption rate of advanced polymer parts is highest in luxury automobile models, which is a rapidly expanding segment. The increase in average RMB selling price was mainly due to the shift of product mix toward higher-end products.

Gross profit was $65.4 million, down slightly from $65.7 million in the third quarter of 2013. The slight decrease in gross profit was primarily due to higher cost of sales, as the Company utilized some raw materials in the production of PA6 and PA66 that were originally purchased for R&D projects and were left over after the projects were completed. The increased cost of sales was offset by a shift in product mix, with higher-end products (mainly PA6, PA66, POM, PPO and plastic alloy) accounting for 75.5% of total revenue in the third quarter, as compared to 70.7% during the prior year period. Additionally, the average sales discount lower-end products (PP and ABS) in the quarter was 1.2%, as compared to 6.5% during the third quarter of 2013. Gross margin was 20.7%, compared to 22.4% in the same period of the prior year and 19.8% in the second quarter of 2014.

General and administrative (G&A) expenses were $5.4 million in the quarter, compared to $4.4 million in the same period in 2013, representing an increase of 22.7%, or $1.0 million. The increase is primarily due to a $1.0 million increase in non-income taxation due to the expansion of the business.

R&D expenses were $5.1 million during the quarter, unchanged from the same period in 2013, reflecting the Company's consistent R&D activities. R&D expense is primarily a result of consumption of raw materials for various experiments to develop both new automotive and non-automotive applications. The consumption of raw materials for these projects accounted for 90% of total R&D expenses for the quarter. As of September 30, 2014, the number of ongoing research and development projects was 128.

Operating income for the third quarter of 2014 was $54.7 million, or 17.3% of revenue, a decrease of 2.1% from $55.9 million, or 19.1% of revenue, in the same period a year ago.

Net interest expenses was $8.8 million for the quarter, compared to net interest expenses of $2.8 million in the same period of 2013, primarily due to (i) an increase of $4.6 million in interest payments resulting from the Notes issued on February 4, 2014; and (ii) an increase of $1.8 million in interest payments resulting from the bank loans used to fund capacity expansions in Southwest China and Dubai. The average balance of short-term and long-term bank loans during the quarter was $107.8 million as compared to $63.6 million during the third quarter of 2013.

Net income for the third quarter of 2014 was $43.2 million, compared to a net income of $41.1 million for the same period of the prior year. Basic and diluted earnings per share were $0.66 and $0.62, respectively, compared to $0.64 per basic and diluted share in the third quarter of 2013.

Average number of shares used in computation of basic and diluted earnings per share for the three months ended September 30, 2014 were 49.1 million and 49.2 million, respectively, compared to 47.8 million in the same period of the prior year.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the third quarter of 2014 was $64.3 million, an increase of 0.2% from EBITDA of $64.2 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 September 30, 2014, the Company had $62.7 million in cash and cash equivalents, $222.4 million in time deposits with commercial banks, $445.3 million in working capital (current assets minus current liabilities) and a current ratio (current assets divided by current liabilities) of 2.5. Stockholders' equity as of September 30, 2014 was $492.8 million, compared to $412.3 million as of December 31, 2013.

Compared to December 31, 2013, Inventories increased by 70.6% due to raw materials stock-up at attractive prices and the anticipation of the increase of customer demand in the following quarters. Long-term prepayments to equipment suppliers increased by 16,300.0% due to the advance for equipments to be used in Dubai and Southwest China facilities. Other non-current assets increased by 1,238.9% due to a long-term restricted time deposit to secure a three-year loan.

The Company paid down short-term loans as it utilized more long-term bank loans to support future capacity expansion in Southwest China and Dubai. As a result, short-term bank loans decreased by 56.6% while long-term bank loans increased by US$167.8 million. The aggregate short-term and long-term bank loans decreased by 3.2% due to the overall consideration of existing lines of credit and maintaining a healthy asset to liability ratio. The Company has been improving its capital structure by replacing its short-term debts with longer tenures in order to maintain its operation stability and support its capacity expansion. Recognized by leading financial institutions for its creditworthiness, the Company has obtained long-term credits from the largest state-owned banks in China as well as well known international banks. Bills payable increased by 68.0% due to the increase of purchases from our domestic raw material suppliers. As of September 30, 2014, notes payable was US$148.6 million due to the issuance of 11.75% guaranteed senior notes due in 2019, net of discount.

Business Outlook and Guidance

Based on the Company's strong performance during the quarter and positive outlook for growing customer demand in the fourth quarter, the Company reiterates its revenue guidance for 2014. The Company expects full-year sales to range between $950 million and $1.05 billion and net income to range between $100 million to $120 million. This forecast is based on constant exchange rates and the anticipated interest expense associated with both its long and short-term debt, and reflects the Company's current and preliminary view, which is subject to change.

Conference Call

China XD Plastics' management will host a conference call at 8:30 a.m. ET on Thursday, November 13, 2014, to discuss its third quarter 2014 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 6910713.

A recording of the conference call will be available through November 20, 2014, by calling +1 (866) 846-0868 (for callers in the U.S.) and entering pass code 6910713.

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, 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 25 automobile brands manufactured in China, including without limitation, AUDI, BMW, Toyota, Buick, Mazda, and VW Passat, Golf, and Jetta. 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 September 30, 2014, 311 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 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 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; legal and regulatory risks; 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

Mr. Gary Dvorchak, CFA 
Senior Vice President
US Phone: +1 (310) 954-1123
China Phone: +86 (138) 1079-1408
Email: [email protected]

-Financial Tables Follow-

SOURCE China XD Plastics Company Limited

Related Links

http://www.chinaxd.net

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