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spk00: Hello, ladies and gentlemen, and welcome to participate in IT Tech Packaging's second 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. Zhengyang Liu, IT Tech Packaging's Chairman and Chief Executive Officer, and Ms. Jing Hao, OF Company's Chief Financial Officer. Remarks from both Mr. Liu and Ms. Hao will be delivered in English by interpreters. ID Tech Packaging announced its second 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 second quarter 2021. and 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 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, 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 company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectation 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 is now available for download from the company's website at www.itpackaging.cn. Please note that there will be discussions on non-GAAP financial measure 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 quoted in U.S. 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 Cao from Evergreen Investor Relations. Ms. Cao, please go ahead.
spk02: Thank you, Operator, and good morning, everyone. Thanks for joining our second quarter 2021 earnings conference call. We continue to make improvements in the sales volume of CMP and offset printing paper products for this quarter. Our total revenue increased by 76.5% to 46.5 million, resulting from a 33.9% growth of overall sales volume. and a 36% increase in average selling prices over all categories of products. We recorded a 18.4% increase of gross profit and an operating income of 0.43 million. The average selling prices of overall categories of products for this quarter increased 1.4% for the first quarter 2021-2022. and recorded a new high since Q4 2018. Amid robust domestic market demand for tissue paper products and improved production efficiency, we continue to expand our capacity by launching a new tissue paper production line, PM10, that will greatly boost our overall performance. The company has obtained approval for surgical mask products from local Food and Drug Administration and has completed all preparation and testing works at the mask production line with an annual estimated production capacity of 45 million pieces of masks, potentially creating promising financial returns. The company obtained the first batch of new utility patents to keep its great work on technology innovation in the future. In addition, we are also expanding the business to high-end new technology business such as combined heat and power generation projecting a project utilizing biomass technology project, biomass CHP project, 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. Ding Hao, who will review and comment on the second quarter financial results. Her comments will be delivered in English by my colleague, Janice Wang. Janet, please go ahead.
spk01: Thanks, Ms. Chow, and thanks, everyone, for being on the call. Next, on behalf of the management team, I will summarize some key financial results for the second 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 numbering system for our production law is provided on slide number 17. Now let's look at our financial performance for the second quarter of 2021. Please turn to slide number seven. For the second quarter of 2021, total revenue increased 76.5% to $46.5 million. due to the increase in sales volume of CMP and offset printing paper and increase in average selling price of CMP and tissue paper products. Turning to slide eight for the second quarter of 2021, the CMP segment, including both regular CMP and lightweight CMP, generated a revenue of $36.8 million representing 79.1% of total revenue. 30.3 million of revenue was from our regular SMP products, and 66 million was from Lightweight SMP. SMP segment volume significantly increased by 24.2% to 73,998 towns. of which 60,507 tons were regular CMP and 30,491 tons were lightweight CMP. Average selling price or ASP for regular CMP increased by 35.1% to 500 per ton and ASP for lightweight CMP increased by 36.2% to 486 per ton. Turning to slide 9, for the second quarter of 2021, we recognized the revenue of $7.2 million from offset printing paper products, resulting from sales of 10,415 towns and an ASB of $690 per town. Turning to slide 10, We recognize the revenue of $2.4 million from tissue paper products for the second quarter of 2021, resulting from sales of 2,196 tons and an ASP of 1,106 per ton. Turning to slide 11, we sold 2,635,000 pieces of face masks and generated a revenue of 0.11 million from selling face masks for the second quarter of 2021. Slide number 12 summarizes the changes in our revenue mix. For the second quarter of 2021, total cost of sales increased by 19.7 million to 43.5 million, leading to total gross profit of 3 million. 18.4% increase from 2.6 million for the same period of last year and overall gross profit margin of 6.5%. For the second quarter of 2021, SG&A expenses decreased by 22.6% to 2.6 million and income from operations were 0.4 million compared to loss from operations of 0.8 million for the same period last year. Operating income margin was 0.9 percent compared to operating loss margin of 3 percent for the same period last year. For the second quarter of 2021, net loss was 0.5 million resulting in a net loss of one cent per basic and diluted share. This compared to a net loss of one million, a net loss of four cents per basic and diluted share for the same period last year. For the second quarter of 2021, earnings before interest, taxes, depreciation, and amortization increased by 6.1 million to 9.03 million from 2.9 million for the same period last year. Now shift the gear to year-to-date financial results. For six months ended June 13, 2021, total revenue increased 101.5% to $70.7 million as a result of increase in sales volume of SMP products and offset printing paper products, and increase in average selling price of SMP and tissue paper products. For six months ending June 13, 2021, the CMP segment, including both regular and lightweight CMP, generated a revenue of $57.5 million, representing 81.3% of total revenue. $47.2 million in revenue was from our regular CMP products, and $10.3 million was from lightweight CMP. Volume 4 CMP segment increased by 47.3% to 150,294 tons, of which 94,133 tons were regular CMP and 21,161 tons were lightweight CMP. In SP4, regular CMP increased by 32.1% to 502 per ton. My ASP for light with 70 increased by 30.5% to 487 per town. For six months ended the June 13, 2021 tissue paper products. Sorry, our offset printing paper segment generated the revenue of $9.3 million was shipped 30,557 tons of offset printing paper for six months ended June 13, 2021, an increase of 521% from the same year last year. ASP for offset printing paper increased by 18.7% to $686 per ton. Month ended June 13, 2021. Tissue paper products generated a revenue of $3.7 million, increased by $0.3 million, or 8.7%. This resulted from sales of 3,317 tons of tissue paper products, with an 18.5% decrease and an ASP of $1,108 per ton, with an increase of 33.3 percent. For six months ended June 13, 2021, face masks generated revenue of 0.2 million with sales volume of 6,417,000 pieces of face masks. For six months ended June 13, 2021, total cost of sales increased by 33.2 million to 75.9 million leading to total gross profit of $4.9 million and an increase of 103.5% from last year. Overall gross margin of 6.9% reflects an increase of 0.1 percentage points from last year. For six months ended June 13, 2021, as G&A expenses were $5.2 million compared to 6.1 million for the same period last year. For six months, June 13, 2021, loss from operations decreased from 3.7 million to 0.3 million. Operating loss margin was 0.4% compared to 10.5% for the period last year. For six months ending June 13, 2021, net loss was 4.8 million of 0.10 loss per basic and diluted share compared to net loss of 3.4 million of 40 cents loss per basic and diluted share for the same year last year. For six months ended June 13, 2021, EBITDA decreased from 9 million to 4 million for the same period of last year. Moving to slide 18 and 20. Let's look at the balance sheet and the liquidity. As of June 13, 2021, 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 related party loans of $30.3 million, $10.3 million, and $6.5 million. $6.6 million respectively compared to $4.1 million, $12.2 million, and $4.6 million respectively at the end of 2020. Net accounts receivable was $5.6 million as of June 30, 2021 compared to $2.4 million as of December 31, 2020. inventory was 11.7 million as of June 13, 2021, compared to 1.2 million at the end of 2020. As of June 13, 2021, the government had current assets of 63.7 million and current liabilities of 17.2 million, resulting in a working capital of 46.6 million This was compared to current assets of 40.9 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 15.6 million for the first half of 2021 compared to net cash provided by operating activities of 5.9 million for the same year last year. Net cash used in investing activities was .17 million for the first half of 2021 compared to 3.98 million for the same year last year. Net cash provided by financing activities was $41.7 million for the first half of 2021 compared to net cash from financing activities of 2.3 for the same year last year. Now if you have any questions, please contact us through email at ir.idpacting.cn. Management will respond to your questions through email as soon as possible. Operator, please go ahead.
spk00: Thank you for attending IT Tech Packaging second quarter 2021 earnings conference call. This concludes our call today and we thank you all for listening in.
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