Fuling Global Inc. Reports First Half of 2018 Financial Results

ALLENTOWN, PA., Sept. 28, 2018 /PRNewswire/ -- Fuling Global Inc. (NASDAQ: FORK) ("Fuling Global" or the "Company"), a specialized producer and distributor of plastic serviceware, with precision manufacturing facilities in both the U.S. and China, today announced its financial results for the six months ended June 30, 2018. Revenues increased by 18.0% to $67.11 million for the first half of 2018 from $56.88 million for the same period of last year, primarily due increased sales volume.

• Total sales volume increased by 17.0% to 25,654 tons for the first half of 2018 from 21,934 tons for the same period of last year. The increase in sales volume was across all product categories. Blended average selling price ("ASP") also increased by 0.9% to $2.62 per kilogram for the first half of 2018 from $2.59 per kilogram for the same period of last year.
• Gross profit decreased by 8.3% to $10.43 million for the first half of 2018 from $11.37 million for the same period of last year. Gross margin decreased by 4.5 percentage points to 15.5% for the first half of 2018 from 20.0% for the same period of last year. The decrease in gross margin was primarily due to increase in the price of raw materials, particularly polypropylene and Polyethylene Terephthalate ("PET"), as oil prices increased significantly in the first half of 2018. 
• Net income attributable to Fuling Global was $0.37 million, or $0.02 per basic and diluted share, for the first half of 2018, compared to $2.90 million, or $0.18 per basic and diluted share, for the same period of last year. The decrease in net income attributable to Fuling Global was mainly due to decreased gross profit as well as increased operating expenses and interest expenses.

Mr. Xinfu Hu, Chief Executive Officer of the Company, commented, "We continued to see solid growth in sales volume across all product categories that led to an 18% year-over-year increase in total revenues, highlighting continuing order strength for our business. However, margins and profitability decreased due to increase in unit cost of materials, which we were not able to fully pass over to our customers."

Ms. Guilan Jiang, Chairwoman of the Company, further commented, "We have a strategic plan for 2018 and beyond that includes continuing investment for capacity expansion, stringent cost control, and heightened marketing effort in key markets including the U.S. and China. Despite uncertainties in marketing factors such as price volatilities for both raw materials and our products that may affect our short-term financial performance, we believe that our market position is stronger than ever and well positioned for delivering long-term returns for our shareholders."

First Half of 2018 Financial Results

Revenues

For the first half of 2018, total revenues increased by $10.23 million, or 18.0%, to $67.11 million from $56.88 million for the same period of last year. The increase in total revenues was primarily due to increase in overall sales volume.  

Overall sales volume increased by 3,720 tons, or 17.0%, to 25,654 tons for the first half of 2018 from 21,934 tons for the same period of last year. The increase in sales volume was across all product categories. Sales volume of cutlery increased by 1,344 tons, or 10.5%, to 14,116 tons for the first half of 2018 from 12,772 tons for the same period of last year. Sales volume of straws increased by 1,538 tons, or 54.6%, to 4,355 tons for the first half of 2018 from 2,817 tons for same period of last year. Sales volume of cups and plates increased by 364 tons, or 7.6%, to 5,133 tons for the first half of 2018 from 4,769 tons for the same period of prior year. Sales volume of other products increased by 474 tons, or 30.1%, to 2,050 tons for the first half of 2018 from 1,576 tons for the same period of last year.

Blended ASP increased by $0.02 per kilogram, or 0.9%, to $2.62 per kilogram for the first half of 2018 from $2.59 per kilogram for the same period of last year. The increase in blended ASP was mainly related to cutlery and cups and plates and partially offset by decrease in ASP for straws and other products. ASP of cutlery increased by $0.21 per kilogram, or 9.9%, to $2.35 per kilogram for the first half of 2018 from $2.14 per kilogram for the same period of last year. ASP of straws decreased by $0.71 per kilogram, or 22.1%, to $2.51 per kilogram for the first half of 2018 from $3.22 per kilogram for the same period of last year. ASP of cups and plates increased by $0.20 per kilogram, or 6.0%, to $3.49 per kilogram for the first half of 2018 from $3.29 per kilogram for the same period of last year. ASP of other products decreased by $0.56 per kilogram, or 18.5%, to $2.47 per kilogram for the first half of 2018 from $3.03 per kilogram for the same period of last year.

The increase in revenues was across all product categories. Revenues from cutlery sales increased by $5.88 million, or 21.5%, to $33.22 million for the first half of 2018 from $27.34 million for the same period of last year. Revenues from straws sales increased by $1.85 million, or 20.4%, to $10.92 million for the first half of 2018 from $9.06 million for the same period of last year. Revenues from cups and plates sales increased by $2.21 million, or 14.1%, to $17.91 million for the first half of 2018 from $15.70 million for the same period of last year. Revenues from other products sales increased by $0.29 million, or 6.0%, to $5.07 million for the first half of 2018 from $4.78 million for the same period of last year. Cutlery, straws, cups and plates, and other products accounted for 49.5%, 16.3%, 26.7%, and 7.5% of total revenues for the first half of 2018, compared to 48.1%, 15.9%, 27.6%, and 8.4% for the same period of last year, respectively.

On a geographical basis, sales in the U.S., Fuling Global's largest market, increased by $7.40 million, or 14.9%, to $57.02 million for the first half of 2018 from $49.63 million for the same period of last year. Sales in China, our second largest market, increased by $1.69 million, or 47.4%, to $5.26 million for the first half of 2018 from $3.57 million for the same period of last year. Sales in Europe decreased by $0.15 million, or 7.5%, to $1.89 million for the first half of 2018 from $2.05 million for the same period of last year. Sales in other countries increased by $1.29 million, or 78.8%, to $2.94 million for the first half of 2018 from $1.64 million for the same period of last year.

Gross profit

Total cost of goods sold increased by $11.17 million, or 24.5%, to $56.68 million for the first half of 2018 from $45.51 million for the same period of last year. The increase was mainly due to increased sale volume as well as higher unit price of raw materials, particularly Polypropylene and polyethylene terephthalate.

Gross profit decreased by $0.94 million, or 8.3%, to $10.43 million for the first half of 2018 from $11.37 million for the same period of last year. Gross margin was 15.5% the first half of 2018, compared to 20.0% for the same period of last year.

Operating income

Selling expenses increased by $0.89 million, or 28.4%, to $4.02 million for the first half of 2018 from $3.13 million for the same period of last year. As a percentage of sales, selling expenses were 6.0% in the first half of 2018, compared to 5.5% in the same period of last year. General and administrative expenses increased by $0.12 million, or 3.3%, to $3.80 million for the first half of 2018 from $3.68 million for the same period of last year. As a percentage of sales, general and administrative expenses were 5.7% in the first half of 2018, compared to 6.5% in the same period of last year. Research and development expenses increased by $0.31 million, or 27.2%, to $1.45 million for the first half of 2018 from $1.14 million for the same period of last year. As a percentage of sales, research and development expenses were 2.2% in the first half of 2018, compared to 2.0% in the same period of last year. We expect research and development expenses in the second half of 2018 to stay at the current levels as we continue to conduct research and development activities, especially seeking to increase the use of environmentally-friendly materials, develop biodegradable materials and reduce reliance on fossil-based raw materials. 

As a result, total operating expenses increased by $1.32 million, or 16.6%, to $9.27 million for the first half of 2018 from $7.95 million for the same period of last year.

Operating income decreased by $2.26 million, or 66.0%, to $1.17 million for the first half of 2018 from $3.42 million for the same period of last year. Operating margin was 1.7% for the first half of 2018, compared to 6.0% for the same period of last year. The decrease in operating margin was primarily due to decrease in gross margin as well as increase in operating expenses as a percentage of sales.

Income before income taxes

Total net other expense, which includes interest income and expenses, subsidy income and other non-operating income and expenses, was $0.71 million for the first half of 2018, compared to total net other income of $0.16 million for the same period of last year. The difference was mainly due to decreased subsidy income as well as increased interest expense in the first half of 2018.  

Income before income taxes decreased by $3.13 million, or 87.2%, to $0.46 million for the first half of 2018 from $3.59 million for the same period of last year. The decrease was a result of decreased gross profit as well as increased operating expenses and other expenses in the first half of 2018.

Provision for income taxes was $0.07 million for the first half of 2018, compared to $0.64 million for the same period of last year.  

Net income

Net income decreased by $2.56 million, or 87.1%, to $0.38 million for the first half of 2018 from $2.94 million for the same period of last year. After deduction of non-controlling interest, net income attributable to Fuling Global decreased by $2.53 million, or 87.3%, to $0.37 million for the first half of 2018 from $2.90 million for the same period of last year.

Basic and diluted earnings per share were $0.02 for the first half of 2018, compared to $0.18 for the same period of last year. The decrease in earnings per share was mainly due to decrease in net income as results of increased operating expenses and other expenses as well as decreased gross profit in the first half of 2018.

Financial Condition

As of June 30, 2018, the Company had cash and cash equivalents and restricted cash of $3.82 million and $1.77 million, respectively, compared to $4.12 million and $4.37 million, respectively, at the end of 2017. Short-term borrowing and bank notes payable were $30.15 million and $2.95 million, respectively, as of June 30, 2018, compared to $29.70 million and $5.04 million, respectively, at the end of 2017. Long-term borrowing was $4.10 million as of June 30, 2018, compared to $1.80 million at the end of 2017.

Net cash provided by operating activities was $0.71 million for the first half of 2018, compared to $1.47 million for the same period of last year. Net cash used in investing activities was $8.26 million for the first half of 2018, compared to $4.69 million for the same period of last year. Net cash provided by financing activities was $7.13 million for the first half of 2018, compared to $1.18 million for the same period of last year.  

About Fuling Global Inc.

Fuling Global Inc. ("Fuling Global") is a specialized producer and distributor of plastic serviceware, with precision manufacturing facilities in both the U.S. and China. The Company's plastic serviceware products include disposable cutlery, drinking straws, cups, plates and other plastic products and are used by more than one hundred customers primarily from the U.S. and Europe, including Subway, Wendy's, Burger King, Taco Bell, KFC (China only), Walmart, and McKesson. More information about the Company can be found at: http://ir.fulingglobal.com/.

Forward-Looking Statements

This press release contains information about Fuling Global's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of software and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. Fuling Global encourages you to review other factors that may affect its future results in Fuling Global's annual report and in its other filings with the Securities and Exchange Commission.

For more information, please contact:

At the Company:
Gilbert Lee, CFO
Email: [email protected]
Phone: +1-610-366-8070 x1835
Web: http://ir.fulingglobal.com/

Investor Relations:
Tony Tian, CFA
Weitian Group LLC
Email: [email protected]  
Phone: +1-732-910-9692

SOURCE Fuling Global Inc.

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