Lihua International Inc announced financial results for the Q1 ended March 31st 2012.
Q1 2012 financial highlights;
1. Sales increased 23.5% YoY to USD 169.1 million.
2. Gross profit increased 10.2% YoY to USD 18.6 million.
3. Net income was USD 11.5 million or USD 0.38 per diluted share compared with USD 12.5 million or USD 0.41 per diluted share in the Q1 of 2011.
4. Non GAAP net income was USD 11.8 million or USD 0.39 per diluted share compared with USD 11.1 million or USD 0.37 per diluted share in the Q1 of 2011.
5. Adjusted EBITDA was USD 16.7 million compared with USD 15.7 million in the Q1 of 2011.
6. Strong balance sheet with USD 108.0 million in cash and cash equivalents or USD 3.59 per diluted share as of March 31st 2012 compared with USD 105.6 million as of December 31st 2011.
7. Cash flow from operations of USD 6.7 million compared with cash flow from operations of USD 1.3 million in the Q1 of 2011.
Q1 and recent business highlights;
1. On May 3rd 2012, Lihua initiated the pre-heating phase on its two new copper anode smelters. Product shipments are expected to begin in early June 2012.
2. Paid special dividends of USD 0.03 per share to shareholders of record as of December 31st 2011 and March 31st 2012 on January 13th 2012 and April 13th 2012, respectively.
3. Received the first order of production equipment for the new CCA cable and wire products, ahead of plan.
4. Construction of the Company's 30 acre plant site continued with the eighth factory unit and related infrastructure near completion. Lihua remains on track to fully develop the site by the end of 2013.
5. Reiterated full year 2012 guidance which calls for gross profit of USD 93 million to USD 96 million and non GAAP net income of USD 61 million to USD 64 million representing 23% to 27% and 22% to 28% growth, respectively over 2011.
Q1 2012 financial results;
Sales for the Q1 of 2012 increased 23.5% to USD 169.1 million compared with sales of USD 136.9 million in the Q1 of 2011. The increase in sales resulted from an increase in volume due to continued demand across all of Lihua's product categories and the addition of copper rod sales following the Company's Q1 2011 capacity expansion, partially offset by the decrease in copper prices in the Q1 of 2012 compared with the same period of 2011. Lihua's wire products, copper anode and copper rod accounted for sales of USD 89.6 million, USD 63.0 million and USD 16.5 million respectively in the Q1 of 2012. This compares with CCA and copper wire sales of USD 70.9 million and copper anode sales of USD 66.0 million respectively in the Q1 of 2011. During the Q1 of 2012 the average selling price of Lihua's products was USD 8,362 per tonne compared with USD 9,980 per tonne in the same period last year, reflecting a decrease of 16.2% YoY.
Gross profit for the Q1 of 2012 was USD 18.6 million an increase of 10.2% from gross profit of USD 16.9 million for the Q1 of 2011. As a percentage of total sales gross margin declined to 11.0% in the Q1 of 2012 from 12.3% for the same period last year primarily due to increased sales of copper anode, copper rod and fine copper wire which carry lower margins than superfine and other wire products and a narrower average spread between scrap copper and pure copper prices in the first quarter of 2012 compared with the year ago period.
Selling, general and administrative expenses for the first quarter of 2012 were USD 2.8 million up 32.8%, compared with USD 2.1 million in the same period of 2011. The increase in SG&A was related to an increase in the Company's sales force compared with the Q1 of 2011 product distribution insurance and other costs directly related to Lihua's increased business volume and scale of operations as well as continued investment in the Company's research and development efforts.
The Company recorded no interest expense in the Q1 of 2012 compared with interest expense of USD 21,000 in the Q1 of 2011. For the three months ended March 31st 2012, provision for income tax expense was USD 4.3 million compared with USD 3.9 million for the 3 months ended March 31st 2011. The effective tax rate for the Q1 of 2012 was 27.1% compared to 23.9% for the Q1 of 2011.
Net income for the Q1 of 2012 was USD 11.5 million or USD 0.38 per share based on 30.1 million weighted average diluted shares outstanding compared with net income of USD 12.5 million or USD 0.41 per share based on 30.3 million weighted average diluted shares outstanding during the same period in 2011.
Non GAAP net income for the Q1 of 2012 was USD 11.8 million or USD 0.39 per diluted share compared with non GAAP net income of USD 11.1 million or USD 0.37 per diluted share for the Q1 of 2011. Non GAAP net income excludes the impact of losses of USD 0.4 million and a gain of related to the change in fair value of warrants in the Q1 of 2012 and 2011 respectively and gains on the extinguishment of warrant liabilities of and in the Q1 of 2012 and 2011 respectively. Adjusted EBITDA for the 3 months ended March 31st 2012 was USD 16.7 million compared with USD 15.7 million for the same period in the prior year.
Mr Jianhua Zhu founder, chairman and CEO of Lihua said that "Our Q1 results reflect the strength of our business, the sizeable market opportunity for our products and the success of our efforts to maximize output through innovation and efficiency improvement initiatives. We increased total sales volume nearly 50% over the Q1 of 2011 and grew revenue over 23%, despite ASP pressure caused by a decline in the average price of copper. Our ability to generate such a sizeable increase in sales volume during what is usually a slow quarter due to the Chinese New Year speaks to the significant, unmet demand for our products."
"Market response to our copper rod product which was re introduced in the Q4 following the doubling of capacity on our dedicated smelter has been enthusiastic and we expect that copper rod will be an important contributor to our revenue, gross profit and net income growth in 2012. Moreover, we further strengthened our balance sheet with operating cash inflow of $6.7 million, bringing our total cash position at the end of Q1 to approximately USD 108 million an increase of nearly USD 18 million over March 31st 2011 which will be used to accelerate investment in Lihua's longer term growth initiatives.
"In addition to our strong financial performance, we began the pre heating process on the two new smelters at our facility on May 3rd. As it normally requires one month of pre heating before we can commence volume production we expect to fully ramp production on these smelters in early June increasing copper anode production capacity to 85,000 tonnes to 95,000 tonnes and total refined copper production capacity to 135,000 tonnes to 145,000 tonnes per year. These ongoing efforts to maximize output are becoming increasingly important as we work to address the needs of China's copper consumers.
“With this new capacity on line, we are well positioned to capture additional market share in our existing businesses while accelerating the construction and development efforts for our upcoming CCA cable and wire products, which will gain us entry into the large, highly lucrative power transmission cable and wire market. We are poised for continued growth in 2012 and maintain our expectation for gross profit of USD 93 million to USD 96 million and non GAAP net income of USD 61 million to USD 64 million for the year representing an increase of 23% to 27% and 22% to 28% respectively, over 2011."
Source - Lihua International Inc
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