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spk01: Hello, ladies and gentlemen, and welcome to participate in IT Tech Packaging's fourth quarter and fiscal year 2020 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen on the road. Joining us today are Mr. Zhengzheng Liu, IT Tech Packaging's chairman and chief executive officer, and Ms. Jing Hao, the company's chief financial officer. Remarks from both Mr. Wu and Ms. Hao will be delivered in English by interpreters. IP Tech Packaging announced its fourth quarter and fiscal year 2020 financial results via press release yesterday, which can be found on the company's website at www.ippackaging.cn. First, Mr. Lue will brief you on the company's key operational highlights over the fourth quarter and fiscal year 2020, and then Ms. Howe will review the company's financial results. Before we start, I would like to draw your attention to our safe harbor statement. Management's prepared remarks contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements are then statements of historical fact in its announcement or forward-looking statements, including but not limited to anticipated revenues from the corrugating medium paper, tissue paper, offset printing paper, and face mask business segments. The actions and initiatives of current and potential competitors, the company's ability to introduce new products the company's ability to implement capacity expansion, market acceptance of new products, general economic and business conditions, the 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. 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 companies undertake no obligation to update forward-looking statements to reflect subsequent or current 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 this expectation will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results. There is a presentation document featuring management's prepared remarks. and it is now available for download for the company's website at www.itpackaging.cn. Please note that there will be discussions on non-GAAP financial measures or EBITDA or earnings before interest, taxes, depreciation, and amortization. Please refer to our press release for a complete reconciliation of EBITDA to net income. As a kind reminder, All numbers in our presentation are coded in US dollars, and all comparisons refer to year over year comparisons, unless otherwise stated. I would now like to turn the call over to Mr. Liu. His comments will be delivered in English by Don Cal from Evergreen Investor Relations. Ms. Cal, please go ahead.
spk00: Thank you, operator, and good morning, everyone. Thanks for joining our fourth quarter and fiscal year 2020 earnings conference call. During the fourth quarter, we continued to make improvements in the sales volume of tissue paper products and posted a slight decrease in sales of CMP products for this quarter. Our total revenue had a slight decline of 3.4% to $32.5 million U.S. dollars. but we managed to grow sales from tissue paper products by 51.3%, so a total volume of 3,165 pounds for this quarter. The average selling prices of our products for this quarter increased by 5.6% from the third quarter 2020, or a minor growth compared to the same period last year. We took a quick recovery from the impact caused by global outbreaks of COVID-19 pandemic. been growing revenues from sales of tissue paper, regular and lightweight SMP products. Our production and sales of tissue paper products have been growing up steadily since the launch of PM8 and PM9 in December 2018 and November 2019. Currently, we are in the process to apply for surgical face masks production license, which we expect to boost both our sales and margins in the very near future. So onset inspection Our production facilities by the authorities was delayed by the pandemic. We're expecting final review results by local food and drug administration in Hebei province. We anticipate to obtain the license once the relevant review works are finished. Now I will turn the call over to our CFO, Ms. Jin Hao, who will review and comment on the fourth quarter financial results. Her comments will be delivered in English by my colleague, Janice Wang. Janice, please go ahead.
spk01: Thanks, Dylan. Thanks, everyone, for being on the call. Next, on behalf of the management team, I will summarize some of the financial results for the fourth quarter of 2020. Also, I will occasionally refer to specific production lines associated with various products. I will make clear which products I'm referring to. For reference, the number system for our production line is provided as slide number 18. Now let's look at financial performance for the fourth quarter of 2020. Please turn to slide number seven. For the fourth quarter of 2020, total revenue decreased 3.4% to $32.5 million due to the decrease in sales volume of SMP and offset printing paper. Turning to slide eight, for the fourth quarter of 2020, The SMP segment, including both regular SMP and lightweight SMP, generated a revenue of $24.9 million, representing 76.7% of the total revenue. $90.7 million of revenue was from our regular SMP products, and $5.2 million was from lightweight SMP. SMP segment volume slightly decreased by 3.4% to 157,627 towns of which 45,210 towns were regular CMP and 12,417 towns were lightweight CMP. Average selling price or ASP for regular CMP increased by 4.3% to 435 per town and ASP for lightweight CMP were equal to 422 per town. Turning to slide 9, for the fourth quarter of 2020, the offset printing paper generated a revenue of 4.9 million, decreased by 2.3 million, or 31.9% from December last year. The offset printing paper volume decreased by 24.4% to 7,895 pounds. ASP for offset printing paper decreased by 9.8% to $618 per pound. Turning to slide 10, tissue paper products generated a revenue of $2.6 million, increased by $0.9 million, or 51.3%. This resulted from sales of 3,165 ton tissue paper products with a 51.3% increase. An ASP of 837 per ton with an increase of 22.4%. Turning to slide 11, results 445,000 pieces of face masks and generated a revenue of $1.14 million from selling face masks for the fourth quarter 2020. Slide number 12 summarizes the changes in our revenue mix. For the fourth quarter of 2020, total cost of sales increased by $3.7 million to $31.7 million, leading to total gross profit of 0.7 million as compared to the gross profit of 5.6 million for the same period last year and overall gross margin of 2.3% for the fourth quarter of 2020. For the fourth quarter of 2020, as G&A expenses increased by 14.6% to 2.7 million and the loss from operations were compared to income from operations of $3.2 million for the same period last year. Operating margin was negative 6.1% compared to operating margin of 9.5% for the same period last year. For the quarter of 2020, net loss was $2.7 million, resulting in a net loss of $0.06 per billion diluted share. This compared to a net income of $2.2 million, a net income of $0.10 per basic and diluted share for the same period last year. For the quarter of 2020, earnings before interest, taxes, depreciation, and amortization decreased by $5.4 million to $1.6 million from $7 million for the same period last year. Now I'll shift the gear to year-to-date financial results. For the fiscal year 2020, total revenue decreased 14.2% to $100.9 million as a result of decrease in sales volume of regular CNP offset printing paper combined with decrease in ASPs over all paper products categories. For fiscal year 2020, The SMP segment, including both regular and lightweight SMP, generated a revenue of $79.2 million, representing 78.4% of total revenue. $52.3 million in revenue was from our regular SMP products, and $16.8 million was from lightweight SMP. SMP segments decreased by 8.1% to 196,885 towns, of which 154,084 towns were regular SMP, and 42,801 towns were light-weight SMP. As a result, regular SMP decreased by 5.2% to 404 per town, while ASPE for light week 70 decreased by 5.1% to 393 per town. For the fiscal year 2020, our offset printing paper segment generated a revenue of $12.3 million, which shipped 20,358 pounds of offset printing paper. For the fiscal year 2020, a decrease of 30.3% for the same period last year. ASPs for offset printing paper decreased by 13.9% to 603%. For fiscal year 2020, feature paper products generated a revenue of $8.4 million, increased by $2.1 million, or 32.5%. This resulted from sales of 10,088 town's tissue paper products with a 48.6% increase. An amnesty of 834 per town with a decrease of 10.8%. For fiscal year 2020, Face masks generated revenue of $1.1 million with sales volume of 10.3 million pieces of face masks. For fiscal year 2020, total cost of sales decreased by $8.7 million to $95.2 million, leading to total gross profit of $5.7 million and a decrease of 58.3% from last year. A workforce margin of 5.6% reflects a decrease of 6 percentage points from last year. For fiscal year 2020, SG&A expenses were $11.2 million compared to $9.8 million for the same period of last year. For fiscal year 2020, income from operations decreased from $3.9 million to negative $5.5 million operating loss margin was 5.4% compared to operating margin 3.3% for the same period last year. For fiscal year 2020, net loss was $5.6 million of $0.21 loss per BISCAN diluted share compared to net income of $2.2 million, earnings of $0.10 per BISCAN diluted share for same period last year. For fiscal year 2020, earnings before interest, taxes, depreciation, and amortization decreased from $19.3 million to $10.2 million for the same year last year. Moving to slide 25 and 26, let's look at balance sheet and liquidity. As of December 31, 2020, the company had cash and bank balances, short-term debt including bank loans, current portion of long-term loans from credit union and the related party loans, and the long-term debt, including loans from credit union of 4.1 million, 20.2 million, and 4.6 million, respectively, compared to 5.8 million, 8.3 million, and 7.4 million, respectively, at the end of 2019. Net accounts receivable were 2.4 million as of December 31, 2020, compared to 3.1 million as of December 31, 2019. Net inventory were 1.2 million as of December 31, 2020, compared to 1.6 million at the end of 2019. As of December 31, 2020, The company had current assets of $14.9 million and current liabilities of $18.3 million, resulting in a working capital deficit of $3.4 million. This was compared to current assets of $24 million and current liabilities of $16.8 million, resulting in a working capital of $10.2 million at the end of 2019. Net cash provided by operating activities was $16.1 million for the year ended December 31, 2020 compared to net cash provided by operating activities of $7.5 million for 2019. Net cash used in investing activities was $20.5 million for the year ended December 31, 2020 compared to $7.9 million for 2019. Net cash provided by financing activities was $2.1 million for the year ended December 31, 2020, compared to net cash used in financing activities of $5.8 million for 2019. We received some questions about our operations and fourth quarter results from our investors. Now the management is answering these questions as follows. Number one, what does ITB plan to do with all the funds raised from capital market recently? The company plans to invest the new capital raised from the market into, number one, biomass conjunction project, number two, PM10 production line for tissue paper, and number three, we plan to use partial of the funds pay the consideration to complete the acquisition of the pension paper, which were announced previously. Now, if you have any questions, please contact us through email at ir.itpackaging.cn. Management will respond to your questions through the emails as soon as possible. Operator? Thank you for attending IT Tech Packaging's fourth quarter and fiscal year 2020 earnings conference call. This concludes our call today, and we thank you all for listening.
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