Yulong Reports 10.4% Increase in Revenue and 32.5% Increase in Net Income for 9M of Fiscal 2016

PINGDINGSHAN, China, May 16, 2016 /PRNewswire/ -- Yulong Eco-Materials Limited (NasdaqCM: YECO), an eco-friendly building products and construction waste management company, today announced its financial results for fiscal 2016 Q3 and 9M periods ended March 31, 2016.

Financial Snapshot ($ million)

For fiscal 2016 9M, as compared to the same period of fiscal 2015, the Company reported 10.4% increase in revenue to a record of $37.1 million and 32.5% increase in net income to $8.2 million, mainly due to approximately $5.5 million incremental high margin revenue generated by construction waste management (CWM) segment. 

Total gross margin for fiscal 2016 9M improved to 39.2% vs. 36.4% for the same period of fiscal 2015, mainly due to the 58.3% gross margin generated by the construction waste management, or CWM, business, offset by lower gross margin for the brick business which was a result of lower average selling price per unit.  Although total SG&A expenses increased by 9% to $3.1 million mainly due expenses associated with costs related to our public company status (which were not incurred in the same period of fiscal 2015), as a percent of total revenue they decreased to 8.5% vs. 8.6% for the same period of fiscal 2015.  As a result, we reported substantial improvement to our bottom line as income from operations for fiscal 2016 9M period improved by 21.9%, and net income increased by 32.5%, as compared to the same period of fiscal 2015.

Cash and cash equivalents at March 31, 2016 increased to approximately $31.8 million, as compared to $16.5 million at June 30, 2015; total liabilities decreased to $23.0 million as compared to $30.9 million at June 30, 2015.  

Announces Guidance for Fiscal 2016

Fiscal 2016 Q4 is expected to be another strong quarter in terms of revenue and net income, thus for fiscal 2016, the Company expects:

• Revenue of between $49 million and $52 million, representing an increase of 7% to 12% vs. fiscal 2015.  The CWM segment, which commenced operations in April 2015, has become the catalyst of top and bottom line growth.   For fiscal 2016, we expect this segment to continue to grow and to represent over 15% of Yulong's total revenue, while our brick and cement businesses are expected to remain stable.
• Net income to continue to grow at a faster rate than revenue, due to revenue from our high margin CWM business.  Thus, we expect net income to be between $11 million and $12 million, representing an increase of approximately 27% to 38% vs. fiscal 2015.

CWM Business

Henan province, located in central part of China, is a major transportation, logistics, industrial, and resource distribution hub of the country. China's central government has budgeted several billion dollars to further expand and upgrade the province's infrastructure and develop new financial and industrial zones.  To make way for these  new developments, hundreds of thousands of older residential and commercial buildings need to be demolished, generating hundreds of millions metric tons of construction waste that need to be recycled, processed and reutilized. Thus, we believe the need for CWM services throughout Henan, will continue to grow for the next 10 years, which we believe Yulong is well positioned to take advantage of going forward.  Current and future opportunities to grow our CMW business include:

• Zhengzhou City
  • Zhengdong New District: Currently, the Company has completed three assignments and expects to receive new assignments soon.  
  • Zhengzhou Airport Zone: To date, the Company has signed contracts with five out of 13 administrative offices in the zone, and is processing waste from approximately 3,300 demolished homesteads.  The Company is negotiating with the other administrative offices.
  • Of the total $5.5 million CWM revenue generated during the first nine months of fiscal 2016, approximately $3.7 million were generated from Zhengzhou projects.
• Shangqiu City:
  • The Company, being the exclusive CWM service provider in the city, is currently providing waste hauling services for the proposed high-speed rail line connecting the cities of Zhengzhou in Henan, and Xuzhou in Jiangsu Province. 
  • The Company is continuing to evaluate request from local government to consolidate local unlicensed construction waste hauling businesses.
• Provincial Technical Code
  • The publication of the provincial technical code for using recycled construction waste in roadbed construction allows the Company to begin selling its recycled aggregates in Henan.  With Yulong's current mobile processing capacity in Zhengzhou, we estimate that sales of recycled aggregates accumulated at several processing sites throughout the city can generate at least $6 million in annual revenue starting in fiscal 2017.  In that regard, the Company is preparing to increase its processing capacity in anticipation of the government's plan to build new roads and improve existing ones, which has the potential to generate approximately $100 million in sales within the next five years.
  • The Company is actively negotiating with several large local road and highway builders, and expects to announce the signing of contracts to sell its recycled aggregates to these builders in the near future.

About Yulong Eco-Materials

Yulong is a vertically integrated manufacturer of eco-friendly building products and a construction waste management company located in the city of Pingdingshan in Henan Province, China. The Company is currently Pingdingshan's leading producer of fly-ash bricks and concrete as well as exclusive provider of CWM services in Pingdingshan and Shangqiu.

Forward-Looking Statements

This press release contains forward-looking statements, particularly as related to, among other things, the business plans of the Company, statements relating to goals, plans and projections regarding the Company's financial position and business strategy. The words or phrases "plans," "would be," "will allow," "intends to," "may result," "are expected to," "will continue," "anticipates," "expects," "estimate," "project," "indicate," "could," "potentially," "should," "believe," "think," "considers" or similar expressions are intended to identify "forward-looking statements." These forward-looking statements fall within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and are subject to the safe harbor created by these sections. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. Such forward-looking statements are based on current expectations, involve known and unknown risks, a reliance on third parties for information, transactions or orders that may be cancelled, and other factors that may cause our actual results, performance or achievements, or developments in our industry, to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties related to the fluctuation of local, regional, and global economic conditions, the performance of management and our employees, our ability to obtain financing, competition, general economic conditions and other factors that are detailed in our periodic reports and on documents we file from time to time with the Securities and Exchange Commission. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date, and the Company specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

Contact:

Investor Relations Counsel:

The Equity Group Inc.
Lena Cati, 212-836-9611
Vice President
[email protected]
www.theequitygroup.com

SOURCE Yulong Eco-Materials Limited