IT Tech Packaging, Inc.

Q1 2021 Earnings Conference Call

5/12/2021

spk00: Hello, ladies and gentlemen, and welcome to participate in IT Tech Packaging's first quarter 2021 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-only mode. Joining us today are Mr. Zhang Yanglu, IT Tech Packaging's chairman and chief executive officer, and Ms. Jing Hao, the company's chief financial officer. Remarks from both Mr. Liu and Ms. Hao will be delivered in English by interpreters. IT Tech Packaging announced its first quarter 2021 financial results via press release yesterday, which can be found on the company's website at www.itpackaging.cn. First, Mr. Liu will brief you on the company's key operational highlights over the first quarter 2021, and then Ms. Powell 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 other than statements of historical fact in its announcement are forward-looking statements. including but not limited to anticipated revenues from the corrugating medium paper, tissue paper, and offset printing paper business segments. The actions and initiatives of current and potential competitors, a 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 company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expansion 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's now available for download from 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 and 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. Gao, please go ahead.
spk01: Thank you, operator, and good morning, everyone. Thanks for joining our first quarter 2021 earnings conference call. We continue to make improvements in the sales volume of CMP products for this quarter. Our total revenue has increased of 176.9% to 24.2 million, resulting from a 129.4% growth of overall sales volume, and a 20.7% increase in average selling prices over all categories of products. The average selling prices over all categories of products for this quarter increased 11.9% from the fourth quarter of 2020. We took a quick recovery from the impact of global outbreaks of COVID-19 pandemic, posting growing revenues from sales of tissue paper, offset printing paper, and CMP 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 have completed fundamental constructions on its new tissue paper production line, the TM-10, and is working on the installation of affiliated equipment Amid robust domestic market demand for tissue paper products and improved production efficiency, we will continue to expand our capacity as we expect to see strong growth from tissue paper business segments that will greatly boost our overall performance. In addition, we are also expanding the business to high-end new technology business, such as combined heat and power generation projects, utilizing biomass technology projects, biomass CHD projects, and expect to diversify our sources of revenue and ensure our stable modes of profit-making. Now I will turn the call over to our CFO, Ms. Jean 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.
spk00: Thanks, Ms. Tao, and thanks, everyone, for being on the call. Next, on behalf of the management team, I will summarize some key financial results for the first quarter of 2021. 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 membrane system for our projection lines provided on slide number 70. Now let's look at our financial performance for the first quarter of 2021. Please turn to slide number 7. For the first quarter of 2021, total revenue increased 176.9% to 24.2 million due to the increase in sales volume of Purgating medium paper, SMP, and offset printing paper, and increase in average selling prices, ASPs of SMP and tissue paper products. Turn to slide eight. For the first quarter of 2021, the SMP segment, including both regular SMP and lightweight SMP, generated a revenue of $24.7 million, representing 85.6% of the total revenue. 70 million of revenue was from our regular SMP products and 3.7 million was from light weight SMP. SMP segment volume significantly increased by 121.1% to 41,296 tons. Of which 33,626 tons were regular SMP and 7,670 tons were light weight SMP. Average selling price on ASP for regular SMP increased by 21.5% to 504 per ton, and ASP for lightweight SMP increased by 18.7% to 489 per ton. Turning to slide 9, for the first quarter of 2021, we recognized the revenue of 2.1 million from offset printing paper products. resulting from sales of 3,142 pounds and an ASP of 673 per pound. Turn to slide 10. We recognize the revenue of 1.3 million from tissue paper products for the first quarter of 2021, resulting from sales 120 tons and an ASP of 1,117 per ton. Turning to slide 11, we sold 3,836,000 pieces of face masks and generated a revenue of $0.13 million from selling face masks for the first quarter of 2021. Slide number 12 summarizes the changes in our revenue mix. For the first quarter of 2021, total cost of sales increased by $13.5 million to $22.4 million, leading to total gross profit of $1.8 million, 1,178.8% increase from gross loss of $0.2 million for the same period last year, and overall gross profit margin of 7.6%. For the first quarter of 2021, SG&A expenses decreased by 5.3% to 2.6 million and losses from operations were 0.7 million compared to loss from operations of 2.9 million for same period last year. Operating loss margin was 3% compared to operating loss margin of 32.8% for same period last year. For the first quarter of 2021, NAV loss was 4.3 million, resulting in a NAV loss of 12 cents per basic and diluted share. This compared to a NAV loss of 2.4 million, a NAV loss of 11 cents per basic and diluted share for the same period last year. For the quarter of 2021, earnings before interest, taxes, depreciation, and amortization decreased by 1.11 million to negative 0.07 million from 1.04 million for the same period of last year. Moving to slide 19 and 20, let's look at the balance sheet and the liquidity. As of March 31, 2021, the company had cash and bank balances, short-term debt, including bank loans, current portion of long-term loans from credit union and related party loans, and long-term debt, including related party loans of $37.4 million. 12.1 million and 4.6 million, respectively, compared to 4.1 million, 12.2 million, and 4.6 million, respectively, at the end of 2020. Now the accounts receivable was 5.2 million as of March 31st, 2021, compared to 2.4 million as of December 31st, 2020. Now the inventory was 7.4 million as of March 31st, 2021, compared to 1.2 million at the end of 2020. As of March 31st, 2021, the company had the current assets of 61.1 million and the current liabilities of 20.2 million, resulting in a working capital of 40.9 million. This was compared to current assets of $14.9 million and current liabilities of $18.3 million, resulting in a working capital deficit of $3.4 million at the end of 2020. Net cash used in operating activities was $8.3 million for the third quarter of 2021 compared to net cash provided by operating activities of $6.9 million for the same period last year. Net cash used in investing activities was $0.04 million for the first quarter of 2021, compared to $0.76 million for the same period last year. Net cash provided by financing activities was $41.8 million for the first quarter of 2021, compared to net cash from financing activities of zero for the same period of last year. If you have any questions, please contact us through email at ir.itpackaging.cn. Management will respond to your questions through emails as soon as possible. Operator, please go ahead. Thank you for attending IT Tech Packaging's first quarter 2021 earnings conference call. This concludes our call today, and we thank you for listening in. Goodbye.
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