Gulf Resources, Inc.

Good morning everyone and welcome to Golf Resources first quarter 2023 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host Helen Chu Director of Investor Relations. Helen, over to you.

Thank you, Jenny. Good morning, ladies and gentlemen, and good evening to all those of you who are joining us from China. And we'd like to welcome all of you to Global Resources' first quarter 2023 conference call. I'm Helen Xu, the Air Director. Our CEO of the company, Mr. Xiaobin Liu, will also join this quarter then. I'd like to remind you, to all our listeners, that in this call, certain amendment statements during the call will be contained for looking for information about Scope Resources Incorporation and its subsidiaries, business, and products within the meaning of Rule 175 of the Securities Act of 1933. and the U3B-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 China. The risks 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 roaming and other oil field and the power production chemicals, changing technology, the ability to make future bombing assets and the various other factors beyond its control. All forelooking statements expressly qualify in their entirety by this cautionary statement and the risk factors detailed with the company's report filed with the SEC. Golf Resources assumes 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 reflected 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 management's estimates as of today, the 16th of May, 2023. For those of you unable to listen to the 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 accessible through our website. So please locate our press list issued earlier for the details. So first of all, we will review the results for this quarter. And then I'd like to turn the call over to Mr. Liu for his comments. So it would be easy for shareholders to look at our results and think this was a bad quarter. But we believe this quarter actually showed the strength of our business model and the significant opportunities for our company. In this quarter, our chemical factory and natural gas facilities were still closed. Because of the winter shutdown, we lost one month of production. Roaming prices plunged by the highest percentage we can remember. Crucial prices were also down sharply. Things could not get much worse. Yet, despite these problems, we only lost $558,000 if we exclude the cost of our clothes factory. and cost during the shutdown of $2.4 million, we would have actually earned a profit. We generated almost $5 million in cash and ended up with a cash position of almost $160 million, or 11.1% per share. When brownie prices go back up, which we expect they will, when our new chemical factory opens, and when we begin to produce natural gas and brine, Sichuan, which we believe will happen. We believe investors will be very pleased with the type of returns we generate. With our plans to develop export businesses in chemicals, we will have the financial flexibility to take actions to increase our shareholder value. So we look for this exciting future to the revenues for this quarter, which is almost approximately $9.3 million, representing an increase of 4% over the same period of year 2022. The net loss was approximately $557,000 as compared to a net loss of $119.9 thousand for the same period of last year. Earnings per share were a loss of 5 cents versus a loss of 1 cent for same period last year. Cash flow was approximately $4.8 million. Ending cash was $116.8 million. Cash per share was $11.10. Magnetic cash was $9.09 per share. and shareholders' equity worth $26.35 per share. So now let's look at our business by segment. So first of all, let's look at our booming and crucial segment. For the three-month period ended by March 31, 2023, The net revenue for the bromine segment was approximately $8.5 million compared to $8.1 million for the same period in the same previous year. These increases were due to the 101% increase in tons sold and a 48% decrease in average selling price. The gross profit margin of 27% compared to 52% for the same period last year. The decrease in the gross profit margin was primarily achieved due to the lower average selling price of bromine. As compared for the same period last year, cost of net revenue were approximately $6.1 million compared to $3.9 million. The loss from operation was $409.7 thousand compared to a profit of approximately $1.3 million for the same period last year. The net revenue for the crude salt was $748.7 thousand and $754.0 thousand for the same period of 2003 and 2022 respectively. This increase in the net revenue for the coastal was due to the 32% increase in tons sold and a 25% decrease in the average selling price. The cost of net revenue was approximately $620,000 compared to $629,600 for the same period last year. CoolSort earned a profit of $42,930 compared to a loss of $521,921 for the period in the previous year. In May 2022, we separated Bromine and CoolSort business to confirm its government regulation. This separation required different allocation of costs. The net impact was to increase the cost allocation to bromine and between the crude salts. So now let's look at the chemical segments. There was no revenue in chemicals. Loss from operation from our chemical products segment was approximately $417.9 thousand for the three-month period ended March 31st, 2023, compared to loss from operation of approximately $513,000 in the same period. Natural gas. Our natural gas segment had no revenue from production because we did leave some of our equipment. So as a result, income from operation from our natural gas segment was approximately $12.7 for the same period for the first quarter of 2023. compared to a loss of approximately $26.7 million in the same period of year 2022. So now let's look at our business and strategic plan outlook for this year. First look at the Bromine and Cruzot. The price of bromine had dropped substantially this quarter. We believe there are three major reasons. Firstly, because the economy closed. there was a sharp downturn in domestic demand and a sharp drop in export sales of downstream products as well. So in addition, because more people were home and not working during the COVID-19 pandemic, there was less need for disinfectants. We believe that companies manufacturing disinfectants did not expect the economy to close and thus had too much inventory. We believe prices of bromine have bottomed and may rise from current levels, but supply and demand in caution is still very advantageous. Some factories have been permanently closed. The economy is improving and exports are starting to return to normal. At this time, we are not in a position to project the timing or extent of the rebound in prices. However, the company believes that lack of broadening mind will offer it with stronger opportunities. The company remains optimistic about the ability to try to open one of its two closed factories in year 2023. The company is currently working with local governments on the related issues. For the existing operating factories, the company has completed Substantial office capital expenditures. Capital expenditures for the Bromium Crusoe 10 in year 2023 will be limited to basic maintenance. So for chemical segments, the company is still waiting for the customized machinery, majorly included that related to the environmental issues, such as the waste gas treatment equipment, solid waste treatment equipment, and the wastewater treatment equipment. The remaining equipment will be delivered as soon as the environment equipment is available. This equipment is expected to be delivered by the second quarter or third quarter of year 2023. Once this equipment is delivered, the company will inform shareholders and post photos on its website. The company believes that once all of the equipment is delivered, it will take three to four months to get them installed. and then take another two to three months for testing, which will be in a position to apply for the environmental and safety approval. After the approval, it will take four months to conduct trial production, and then we may start commercial production. So for this chemical export project, Mr. Nanhui Miao, our COO and director, has been named as the chairman of this task force to explore export opportunities for chemicals. Management team began to research which products in the market offer the best opportunities to export. The company will try to find these export opportunities so we can gain the possible and greater financial flexibility to enhance shareholder value. Before selecting the specific products and markets, we will also have to consider which of the products can be produced in the high quality by this new chemical factory. So for Sichuan Province project, As we have disclosed, the company plans to proceed with its applications for the natural gas and brine project approvals with related government departments until after government planning has been finalized, land and resource planning for the Sichuan Province. Because of these complexities, We are discussing the possibility of a joint venture with the government of Dian County for the extraction of broming water and related products. We believe such a joint venture could help us to overcome some of the government-related issues. We will keep investors informed of our progress. So now let me turn the call back to Mr. Liu for his comments. on this quarter. President Liu, hello.

Hello.

President Liu, hello.

Hello, everyone. I am the company's CEO, Liu Xiaobin. First of all, I would like to welcome everyone to participate in the first quarter of the Taiwan Dialogue Conference in 2023. The rapid decline in the price of embroidery has seriously affected the company's revenue in this quarter. We expect that the price of embroidery has reached the bottom and may start to rise from now on. Despite this, the company still has a positive cash flow, which has increased our cash inflow. By the end of May 12, the company's cash is almost four times its market value, and the value of each stock is almost nine times its market value. The company believes that the price of embroidery will rebound. This year, we will also try to open another embroidery factory. At the same time, the company's business memory of the chemical version is also very optimistic. In 2015 and 2016, our chemical business income was $33 million and $25.5 million. The company believes that our new chemical factory will also make a profit. Thank you, President Nian.

So hi, everyone. So just now, this was the comment from the company CEO, Xiaobin Liu. So I will do a translation for his comment. First of all, welcome, all of you, to attend the first quarter 2023 earnings conference call. The sharp decline in the price of brownies significantly impacted our earnings this quarter. We expect these prices have hit bottom and may rise from here. Despite the decline, we generated free cash flow and increased our cash precision. As for the close of business on May 12, 2023, our cash was almost four times of our market capitalization, and our book value per share was almost nine times our market capitalization. We believe Browning Price will rebound, and we will try to open one more facility this year. We are very optimistic about the opportunities for our chemical business. In year 2015 and year 2016, our chemical business had income from operations of $33 million and $25.5 million, respectively. We believe our new chemical facility will be profitable, and we also believe that we will get permission to drill for natural gas and brines from provinces. While there is no certainty yet, but our discussions with the local government are going on well. So finally, the company has established our task force this year, led by Mr. Naihui Miao, the company's COO. That will identify the opportunities for the export of chemical business, so we can make the possible financial flexibility to undertake critical action and to enhance our shareholder value. So now operator, can we start our QA section for today?

No problem, Helen. At this time, we're opening the floor for questions. If you would like to ask a question, please press star 1 on your phone keypad. A confirmation tone will indicate your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it may be necessary to pick up your handset before pressing any keys. Please hold a moment whilst we poll for any questions. Just a reminder, if you do have any questions, please press star 1 on your phone keypad now. We don't appear to have anyone in queue at the moment, Helen. I can let you know if someone comes in.

OK. Thank you, operator. Hi, operator. Do you mind just ask one more time if there is no more question, we can close the call for today? No problem.

Ladies and gentlemen, if anyone does have any questions from the audience, please press star one on your phone keypad now. We don't appear to have anyone in queue, Helen.

Okay, I think that's all for today. Thank you very much, Jenny, and thank you all for attending the call today. You have a good night and a good day. Wish you all. Thank you. Bye-bye.

Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.