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spk03: 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.
spk00: 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.
spk02: 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.
spk00: Thank you, Helen. I'm Xiaobin Liu, the CEO of the company. First of all, I'd like to welcome all of you to the Gulf Southeast Earnings Call for third quarter of 2021. The huge increase in pricing of bromine August well for our short-term profits. You can see how well we did in the third quarter. Prices, however, are now exploiting to the record highs. As Helen noted, the current prices are almost 82% higher than the average selling price in the third quarter of year 2021. Since the raw material prices increases are lower than the blooming price increase, If the prices remain at elevated levels, we should have a profitable business. While prices of bromine could decline, but we do not believe the supply chain issue will disappear. Some bromine facilities shutting down, which will reduce market supply. Transportation issues will continue to impact imports. We believe we are entering a period of outstanding profitability for our booming business segment. Director Liu, please continue.
spk02: The company believes that it will obtain the opening permit for the remaining three embroidery factories. At the same time, the company will continue to have an optimistic attitude towards the flower factory. The flower factory is located in a flower factory area approved by the government. The company complied with all the government regulations and purchased new equipment. In addition, the chemical factory will focus on medical intermediaries and other subsidiary products. These products are very important to health and have a higher profit margin. Finally, the company is still optimistic about the opportunity for the Sichuan natural gas project. The company is waiting for the Sichuan provincial government to complete its national land space plan. The company will continue to cooperate closely with the Danyin County and Tianbaozhen government. According to the exchange, the company understands that China currently needs natural gas. The government has approved that private companies can open natural gas. The company has been the first to install the equipment and do short-term production. When the Sichuan provincial government completes the national land space plan, the company will continue to Now I'd like to take this opportunity
spk00: So we believe we will receive permission. Yes, thank you. We believe we will receive permission to open our rest three plumbing plants. We continue to be optimistic about our chemical factory. We have located in a government-approved chemical park. We have followed all government regulations. and we have purchased most of the new equipment. In addition, our end products are focused on the pharmaceuticals intermediates and the byproducts, which are important for health reasons with higher growth margin, profit margin. Finally, we remain optimistic about the opportunities in Sichuan for our natural gas and brine projects. We are waiting for Sichuan Province to complete it. We continue to work closely with the government for Danyin County and Tianbaotang. Based on our communication, we know that China urgently needs natural gas now. The national government has approved that private Privately owned enterprises are allowed to participate in the natural gas production. We have installed our equipment for our first natural gas well and did a period of trial production. As soon as the land and resource planning for Sichuan Province has been completed, the company plans to proceed with its application for the natural gas and brine project approvals. In addition, we have found very high concentration of brine in our well. Given the current brine prices and the shortage of supply, we are also very optimistic about this opportunity. We'd like to thank you, all our shareholders, for their patience and would like to state that with our new compensation policy, the interest of the company management and the shareholders are completely aligned. So before we open the call for questions, I'd like to remind all our shareholders that the company have a new website. As you have requested, we have worked hard to update the design and the information. We still have something to add like our five years plan and the PVT and some new updated pictures. We will continue to be active in issuing PR and we'll post pictures and videos of putting new facilities. I believe our previous discussion have covered most of the questions we received from our shareholders. I would like to respond to several questions we received after the last week's call. So the first question from one investor who asked about what restrictions do executive officers have regarding those shares? The response, there are very strict rules for company officers to follow regarding the SEC requirements. based on our knowledge to sell under the rule 144, there are five conditions that must be met. Firstly, the shares they hold must be held for at least six months. Secondly, there must be a trading window where a company management does not have material non-pocket information. At this point in time, it is likely the trading window will be extremely small. Third, trading volume. As an athlete, the maximum an insider can sell in a three-month period is limited to the greater of 1% of the outstanding shares or the average reported weekly trading volume during the four weeks. Fourth, in addition, the executives must be able to open accounts with brokers or dealers. This could be completed as Now it's difficult for Chinese companies. Fifth, if the executive officers wants to sell $5 shares or more, they must be filed a notice to sell with the SEC. The second question from our investors, investors also asked about why we have not been able to increase utilization. The answer, We are pleased with the performance of our four operating facilities. Some of the new rules for the treatment of wastewater limit the increase in utilization. Third question, dividends and buybacks, answers. We received a question on dividends and buybacks. We'd like to once again explain this issue. China has placed controls on the export of Chinese currency, all of our business in China. We like to be able to buy back shares or pay a dividend, but until we can figure a way of getting money out of the country, we will be unable to do so. Question, the acquisition. Answer, we are not considering any acquisition at this time. The last question, an investor asks if executive officers wanted to sell their shares, could the company buy them back? The answer, the company may need cash on hand to support its further operation and investment. By the way, there might be another idea that the company may reimburse the manager in RMB. The manager would then transfer the U.S. dollar to the company, which could use it to buy back stock. But this is a good idea, but the Chinese government might not like it and might think the company was trying to get around the rules. And this idea is based on if the company operations are back in normal and it may have good cash flow then. So operator, can we open up the QA section?
spk03: Certainly. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Once again, ladies and gentlemen, please press star 1 on your phone if you have a question at this time. Please hold while we poll for questions. And once again, ladies and gentlemen, please press star one on your phone at this time if you wish to enter the queue to ask a question. And we did have a question come from Max Sircala. Max, your line is live.
spk01: Hello, Helen. Thanks a lot for your communication that has a lot improved in the last month. and the compliments for the very good results that GULF Resources has reported. I have only one more question. That is, what do you want to do to improve the liquidity like the day volume of the shares traded on the Nasdaq? Because one of the main concerns is that GULF Resources has just 10,000, 20,000, 30,000 shares traded every day. that is very low. So according to me, you should focus on improving this parameter.
spk00: Okay, thank you. Next. Liu Zong, the first question is from Max. He also thinks that the company has been communicating with investors recently. And his only problem is that he has been communicating with the company before. The only question he wants to know is, what is the company's plan to improve the liquidity of his current company's stock? Because the daily trading volume is 12,000 to 13,000. How to increase this liquidity? We are talking to some IR companies.
spk02: I hope to find a better IR company to help the company recommend investors and thus improve the company's liquidity.
spk00: Okay, thank you. And next, so here is a response from Mr. Liu that the company currently is in discussion with the IR companies. So it's trying to find a better IR firm which can
spk01: help the company to introduce itself to the public and in order to increase the liquidity in the future okay thanks a lot and i have also a second question that is very similar to the first one but partially you have already responded it's also very important that some financial analysis start to coverage wolf resources and give a price target because it will increase the visibility of the firm So for me, it's very important that management has this one as objective to get some financial analyst coverage and to get some price target.
spk00: OK, thank you. Okay, thank you. We will consider about it. Okay.
spk03: Thank you. And once again, ladies and gentlemen, if you wish to ask a question, please press star 1 on your phone at this time. And there were no other questions in queue at this time. I would now like to hand the call back to Helen Zhu for any closing remarks.
spk00: Hi, Paul. Do you mind ask one more time if there is any questions? Otherwise, can we close your call for today?
spk03: Certainly, no problem. Ladies and gentlemen, once again, if you wish to enter the queue to ask a question, please press star 1 on your phone at this time. That's star 1 if you wish to ask a question. And no other questions came in, Helen.
spk00: Okay, thank you.
spk02: Okay.
spk00: So thank you. If there is no more questions, thank you all for attending today's conference call. Any questions, you may email me further. Thank you very much. Have a good day. Bye-bye. Bye, Paul. Thank you. It's a pleasure.
spk03: Thank you, ladies and gentlemen. This concludes today's conference. You may disconnect at this time. Have a wonderful day. Thank you for your participation.
spk00: Bye-bye and have a good day.
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