Keyuan Petrochemicals Inc. Announces First Half 2012 Financial Results

NINGBO, China, Aug. 21, 2012 /PRNewswire-Asia-FirstCall/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced the Company's financial results for the six months ended June 30, 2012.

"We are pleased that our first half 2012 revenue benefitted from solid customer demand and the improvement of production efficiency," declared Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our margins were negatively impacted by extreme fluctuations in international oil prices and the industry environment, I believe Keyuan's core earnings potential will continue to improve as a result of our engagement with research institutes, our initiatives on major projects, and our SBS facility ramping into commercial production."

Financial Summary

(a) Net Income (loss) attributable to KEYP common stockholders.

First Half 2012 Financial Results

(a)     Net Income attributable to KEYP common stockholders.

Sales for the six months ended June 30, 2012 were approximately $367.8 million compared to sales of $297.7 million for the six months ended June 30, 2011. The Company sold 326,961 metric tons (MT) of petrochemical products, an increase of 14.9% from 281,595 MT of products sold in the corresponding period in 2011. The average sales price per metric ton was $1,125 during the first half of 2012, a 7.5% increase from $1,046 per metric ton in the first half of 2011.

Cost of goods sold was $351.9 million in the six months ended June 30, 2012 compared to $283.1million in the first half of 2011, with a gross profit of $15.9 million, or 4.3%, in the first half of 2012, compared to a gross profit of $14.5 million, or 4.9%, in the same period a year ago. The main reason for the decrease in the gross margin is due to delays in passing raw material price increases onto our customers.

Operating expenses for the first six months of 2012 were approximately $5.9 million, consisting of $0.6 million in selling expenses and $5.3 million in general and administrative expenses compared to approximately $0.8 million and $7.8 million, respectively, in the first half of 2011. The decrease in expense was due to decreases in share-based compensation and various legal, consulting and internal expenses related to the independent investigation.  

Net income attributable to common shareholders for the six months ended June 30, 2012 was approximately $2.9 million, as compared to net income of approximately $2.8 million in the same period in 2011, an increase of $0.1 million. The diluted net income per share of $0.05 for the six months ended June 30, 2012 was relatively unchanged from the same period in 2011.

Full Year 2012 Guidance

The profits of most enterprises in Ningbo declined in the first half of 2012 due to the complex and volatile global economic environment and the slower growth in the Chinese economy. Management has adjusted our guidance and forecasts $880 million of revenues, $20 million of net income and 760,000 MT of production for 2012.

Business updates

In the first six months of 2012, the extreme fluctuation in international oil prices has caused a significant negative impact on the petrochemical industry and most petrochemical companies including Keyuan. To address this issue, Keyuan engaged research institutes in Shanghai and in Zhejiang province to study the possibility and feasibility of diversifying its products, developing high value-added products and improving the Company's production efficiency to create more stable long-term development, and to optimize product structures, which will effectively reduce the adverse effects of oil price fluctuations and the outside environment.

On June 15, 2012, Ningbo Keyuan and Ningbo Keyuan Petrochemicals established a subsidiary in the People's Republic of China ("PRC"), Ningbo Keyuan Synthetic Rubbers Co., Limited ("Keyuan Synthetic Rubbers"), which is engaged in the sales and marketing of various petrochemical products, specifically synthetic rubbers.

Other Events

On August 15, 2012, the Company received a consumption tax refund of $95,124,967 as a result of new consumption tax policies of the PRC issued in October 2011.  The Company anticipates that consumption tax claims procedures will be more efficient and less time-consuming in the future.

About Keyuan Petrochemicals, Inc.

Keyuan Petrochemicals, Inc., established in 2007 and operating through its wholly-owned subsidiary, Keyuan Plastics, Co. Ltd., is located in Ningbo, China and is a leading independent manufacturer and supplier of various petrochemical products. Having commenced production in October 2010, Keyuan's operations include an annual petrochemical manufacturing design capacity of 720,000 MT for a variety of petrochemical products, with facilities for the storage and loading of raw materials and finished goods, and a technology that supports the manufacturing process with low raw material costs and high utilization and yields. In order to meet increasing market demand, Keyuan plans to expand its manufacturing capacity to include a SBS production facility which was completed in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August, 2012.  The Company plans to add additional storage capacity, a raw material pre-treatment facility, an asphalt production facility, and an ABS production facility.

Cautionary Statement Regarding Forward-Looking Information

This press release may contain certain "forward-looking statements" relating to the business of Keyuan Petrochemicals, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf months are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

Angel Gu
Keyuan Petrochemicals, Inc
Phone: +0086-1-381-986-4827
Email: [email protected]
Web: www.keyuanpetrochemicals.com

SOURCE Keyuan Petrochemicals, Inc.

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