Gulf Resources, Inc.

Good day, ladies and gentlemen, and welcome to the Gulf Resources 2021 Third Quarter Earnings Conference. At this time, all participants have been placed on the listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Helen Zhu, IR Director at Gulf Resources. Helen, the floor is yours.

Thank you, Paul. Good morning, ladies and gentlemen, and good evening to all those of you joining us from China. And we'd like to welcome all of you to GovResources' third quarter 2021 earnings conference call. I'm Helen Xu, the IELTS director. Our CEO of the company, Mr. Shelby Liu, is also joining this call today. I'd like to remind you to all our listeners that in this call, 30 minutes statements during the call will contain forward-looking information about Gulf Resources Incorporation and its subsidiaries' business and products within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3D-6 under the Securities Exchange Act of 1934 and are subject to the safe harbor created by those rules. Actual results may differ from those discussed today, taking into account a number of risk factors, including, but not limited to, the general economic and business conditions in PRC, the risk associated with the COVID-19 pandemic outbreak, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products additional competition from existing and new competition from the bromine and other chemical industry and changing technology, the ability to make future bromine assets, and the various other factors beyond the company's control. Overlooking statements are expressly qualified in their entirety by this cautionary statement and the risk factors detailed with the company's reports filed with the SEC, golf resources assume no obligation to revise or update any forelooking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting in those forelooking statements are reasonable and there can be no assurance of such will prove to be correct. In addition, any reference to the company's future performance represents the company management's estimates as of today, the 16th of November, 2021. For those of you unable to listen to this entire call at this time, a replay will be available at the company's website. The call is also accessible through the webcast and the link is accessible through our website. So please locate our price list issued earlier for the details. So before we discuss the quarter, I'd like to discuss the recent developments on our three business segments and the events that have occurred after the end of quarter. Firstly, let's look at the chemical segment. The world and Chinese economies had been impacted by the supply chain issues in many industries, including the energy industry. Shipping shortages have disrupted delivery of many products throughout the world. China has also been impacted by shortage of energy. For example, in some regions of China, the government have restricted electrical usage, including Shouguang city. and some businesses under construction have been restricted from electrical usage in Shouguan City. So the supply chain issues as well as the electrical restrictions have delayed the production and delivery of some equipment to the company's new chemical factory. In addition, the company's new Yixing Chemical Factory has also been restricted from the electrical usage. This means The installation, timing of testing, and the beginning trial production at the chemical factory will be delayed. At this time, the company is not in a position to determine the extent of the delays, but it will keep shareholders advised. This new chemical factory will focus on pharmaceutical intermediary products and its byproducts. We may produce other products, but pharmaceutical intermediary products are in high demand and provide us with higher margin. So expect this factory will be profitable with commercial production. Secondly, let's look at the bombing segment. As I'm sure you know that bombing prices have risen substantially throughout the world and even more substantially in China. In the world market, Shipping issues have disrupted delivery. As a result, China has been unable to import its normal share of bromine. With a shortage in supply and demand, the prices of bromine have soared to the highest levels ever recorded. From the second quarter of 2020 to the end of the third quarter of 2021, bromine prices increased 68.1%. reaching record levels. Since the end of the third quarter, bombing prices have increased approximately 40%. Since the raw material price increases are lower than the bombing price increase, we believe this type of pricing should be good for our fourth quarter 2021 profitability. The company has no idea on how long the current shortage will last. However, we will also keep our shareholders informed if any change we have seen. If you look at the results from the third quarter, you will be able to understand the impact of bromine pricing on profitability. In the third quarter of June 21, we sold 2,511 tons of bromine. In the same quarter of previous year, we sold 2,301 tons of bromine. The average selling price was $5,939 versus $3,990, an increase of 48.8%. At the present time, market prices are $10,787 per ton, an increase of 82% over the average selling price in the third quarter. because there is a lag time between all the receipts and the shipping, except with the higher prices to impact the sales and the margins in the fourth quarter of 2021. In the third quarter, gross profit per ton worth $3,310 versus $1,569, an increase of 111%. If prices remain elevated, our browning business can be very profitable. Given current prices, we expect higher growth margins in fourth quarter 2021. At this time, we expect production in the fourth quarter to be relatively the same as in third quarter. The only potential issue is whether the government announces a winter shutdown Because Chinese New Year in 2022 is 10 days earlier than the year 2021, a small amount of production could be shifted from the first quarter of 2022. At the present time, we have not heard anything about a winter shutdown. We expect production from our four operating factories to be slightly higher in fourth quarter 2021 than in fourth quarter 2020. So for our company Bromine factories number two, number eight, and number 10, the most recent development, as we have noted, the government is completing its planning process for all mining areas due to the requirements for coal production of bromine and the cool salt. and including that for prevention of flood. From our point of view, the major issue related to the treatment and disposal of wastewater, while the plan is not yet complete, but we know we will not be able to send the wastewater to the sea or deposit it to the farmland. This could entail constructing treatment facilities and aqueducts. While we cannot control the timing of government approval, we remain optimistic about being able to reopen these three blooming facilities. Thirdly, let's look at our natural gas segment. In addition, the company also believes that the current energy issues impacting China could ultimately assist us in receiving approval for natural gas projects in Sichuan province. China badly needs new resources of natural gas. There are a large natural gas discovery in Tianbao Town, Danyin County, Sichuan Province. The government has already ruled that private companies can drill for natural gas. We believe we will receive approval to return to drilling natural gas in Sichuan. Given the current price of bromine, the company expects few and earnings in the fourth quarter to be substantially better than those of the previous year. While we are not giving specific guidance at this time, we think year 2022 will be a very good year for the company because it expects high prices for bromine for the foreseeable future. We believe our chemical factory and our three other bromine facilities will be operational, and we hope to receive approval to drill for natural gas. Now let's turn to the financial results. The third quarter income revenues in the third quarter increased 69.4 million to approximately $17.8 million versus approximately $10.5 million in the same period of 2020. Gross margins increased to 53.8% from 35.6%. Income from operations was $7.1 million compared to a loss of $2.7 million in the third quarter of 2020. Net profit was $5.4 million compared to a loss of $2.9 million in the previous quarter. Earnings per share were $0.52 compared to a loss of $0.30 in the same quarter of the previous year. Nine-month results. Revenues in the nine months increased 108.3% to $34.2 million. Gross margins improved to 43.5% from 22.6%. Income from operations was $1.4 million versus a loss of $10.5 million. Earnings per share were 2 cents versus a loss of 91 cents. So balance sheet. At the end of the third quarter, cash equaled to $98.9 million. Working capital worth $104.7 million. Shareholder's equity worth $282.2 million. Based on the shares outstanding, the cash per share worth $9.44 cents. Net net cash per share was $7.31 per share. Working capital per share was $10. Book value per share was $26.9. Cash flow. During the nine-month period ending September 30, 2021, cash flow provided by operating activities of approximately $11.1 million was mainly due to the non-cash adjustment related to the depreciation and amortization of property, plant, and equipment, and restricted stock expenses offset by a net loss of $12.32 million and an increase in accounts receivable of approximately $6.89 million. But during the year, same period of year 2020, cash flow provided by operating activities was approximately $3.26 million. So the third quarter segment reporting, Browning. Browning sales increased 62.4 million to 14.9, 62.4% to $14.9 million. Production increased only 9%. So most of the increase was due to improved pricing. Gross profit was 55.7% versus 39.3% in the same period of the previous year. Income from operations increased 232% to $6.9 million. Cool salt. Revenue in cool salt increased 118% to $2.8 million. Gross profit increased 921% to $1.2 million. Income from operations was approximately $561.4 thousand versus a loss of $484.3 thousand in the previous year. Chemicals and natural gas. Chemicals reported operating loss of approximately $535 thousand and natural gas reported operating loss of $49.3 thousand. So now let's turn the call over to Mr. Liu for some remarks. Hello, Mr. Liu. Hello.

Hello, everyone. I am the CEO of the company, Liu. First of all, I would like to welcome everyone to participate in the Taiwan Resources 2021 third quarter financial report operation meeting. The rapid increase in the price of embroidery short-term profits are very strong. As you can see, the performance in the third quarter is very good. And now the price index is rising. The high point of the record is just as Helen pointed out. The current market price is about 82% higher than the average price of the third quarter, but the company's rise in the price of many raw materials We believe Okay, I will do the translation.