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China Shengda Packaging Group Inc. Announces Fourth Quarter and Full Year 2011 Results

March 22, 2012

HANGZHOU, China, March 22, 2012 /PRNewswire-Asia-FirstCall/ — China Shengda Packaging Group Inc. (NASDAQ: CPGI), a leading Chinese paper packaging manufacturer, today announced its financial results for the three months and full year ended December 31, 2011.

“Revenues of $124 million and net income of $9.6 million were within our guidance ranges. However our markets and our financial performance are currently volatile due to cross-currents of variability affecting the global consumer who buys the final products from our manufacturing customers. We are concentrating on broadening our customer base and vertically integrating into paper manufacture in order to grow our business and at the same time reduce fluctuations in revenues and margins,” Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging, said.

                     FINANCIAL HIGHLIGHTS FOURTH QUARTER ENDED DECEMBER 31, 2011

    Sales Analysis                   Fourth Quarter              Fourth Quarter          Third Quarter
                                          Ended                       Ended                   Ended
                                    December 31, 2011           December 31, 2010      September 30, 2011

    Sales Volume (M
     sq meters)                                      80.4                        99.3                    87.6

    Color Cartons (%
     of total
     revenues)                                       24.9                        25.6                    28.3
    Flexo Cartons (%
     of total
     revenues)                                       75.1                        74.4                    71.7

    Color Cartons
     (avg price per
     sq meter)                                      $0.43                       $0.41                   $0.44
    Flexo Cartons
     (avg price per
     sq meter)                                      $0.37                       $0.38                   $0.36

    Summary Results
     (Millions)

    Revenues                                        $30.8                       $38.2                   $33.6
    Gross Profit                                     $6.4                       $10.8                    $6.0
    Gross Margin (%)                                 20.8%                       28.1%                   17.7%
    Operating
     Expenses                                        $4.4                        $6.0                    $3.5
    Operating Income                                 $2.1                        $4.8                    $2.5
    Operating Margin
     (%)                                              6.7%                       12.5%                    7.4%
    Net Income
     attributable to
     common
     stockholders                                    $1.6                        $5.3                    $2.3
    EPS Basic &
     Diluted                                        $0.05                       $0.16                   $0.06
    Wtd Avg Shares
     Outstanding
     (millions)                                      38.8                        37.6                    39.3

Fourth Quarter 2011 Results

Revenues decreased $7.4 million, or 19.4%, to $30.8 million for the three months ended December, 31, 2011, from $38.2 million during the same period of 2010. The decrease was primarily a result of lower sales volume. The sales volume decreased 18.9 million square meters, or 19.0%, to 80.4 million square meters for the three months ended December 31, 2011, from 99.3 million square meters during the same period of 2010. The decreased sales volume was mainly the result of two factors: less customer demand from the chemical industry due to challenges resulting from more restrictive financial policies by the People’s Bank of China; and significantly less demand from domestic furniture makers whose US and European customers bought less furniture.

Color cartons accounted for 24.9% of total revenues for in the fourth quarter of 2011 and flexo cartons accounted for 75.1%, compared to 25.6% and 74.4%, respectively, in the same period of 2010. Average per square meter prices for color cartons and flexo cartons during the fourth quarter of 2011 were $0.43 and $0.37, compared to $0.41 and $0.38, respectively, in the same period of 2010.

Consumer and industrial goods manufacturing sectors are the Company’s principal markets. Its major customers remained home appliances and electronics manufacturers and food, beverage and cigarette manufacturers in the YRD, which accounted for 32.7% and 33.3%, respectively, of the total revenues in the fourth quarter of 2011.

Gross profit declined 40.3% to $6.4 million from $10.8 million in the same period of 2010. Gross profit from flexo cartons declined 40.2% to $4.6 million from $7.7million in the same period of 2010. Gross profit from color cartons declined 40.7% to $1.8 million from $3.1 million in the same period of 2010. Gross margin declined to 20.8% from 28.1% in the same period of 2010. The decrease in gross margin was primarily due to an increase in the cost of raw materials compared to the same period a year ago.

Selling expenses increased from 2.7% of sales to 4.2% of sales in the fourth quarter as compared to the fourth quarter in 2010.

General and administrative (“G&A”) expenses decreased 38.1% to $3.1 million from $5.0 million in the same period of 2010. As a percentage of revenues, G&A expenses for the three months ended December 31, 2011 decreased to 10.0%, as compared to 13.0% for the same period of 2010.

Income tax expense was $0.3 million for the three months ending December 31, 2011, compared to a credit of $0.4 million for the same period of 2010. The increase in income tax expense was mainly attributable to the fact that Great Shengda was subject to the uniform income tax rate of 25% for the first nine months of 2010. In October 2010, Great Shengda qualified as a National High-Tech Enterprise, a status recognized by China’s Ministry of Science and Technology, Ministry of Finance, and State Administration of Taxation. In December 2010, the status was approved by the local tax bureau. Accordingly, under the PRC Enterprise Income Tax Law, Great Shengda is eligible for a preferential tax rate of 15% for the calendar years of 2010, 2011 and 2012, as opposed to the uniform income tax rate of 25%. The preferential tax rate of 15% was retroactively effective as of January 1, 2010, and the retroactive effect was accounted for in the fourth quarter of 2010.

Net income attributable to common stockholders decreased to $1.6 million, or $0.05 per diluted share, from $5.3 million, or $0.16 per diluted share, in the same period of 2010.

Twelve Months Ended December 31, 2011

Revenue for the full year of 2011 was $124.0 million, a decrease of $6.1 million or 4.7% from revenue of $130.1 million for the full year of 2010, mainly due to a decrease in sales volume, partially offset by the increase in average per square meter prices. The sales volume decreased 23.2 million square meters, or 6.7%, to 321.7 million square meters from 344.9 million square meters during the same period of 2010. Gross profit decreased by $10.8 million, or 29.7%, to $25.7 million for the year ended December 31, 2011, from $36.5 million for the year ended December 31, 2010. Gross profit as a percentage of revenues was 20.7% for the year ended December 31, 2011, as compared to 28.1% for the year ended December 31, 2010, mainly due to increased cost of goods sold. Net income attributable to the Company’s common stockholders decreased by $9.7 million, or 50.1%, to $9.6 million or $0.25 per diluted share for the year ended December 31, 2011, from $19.3 million or $0.63 per diluted share for the year ended December 31, 2010.

Financial Condition

As of December 31, 2011, China Shengda Packaging had cash and cash equivalents of $19.3 million and restricted cash of $7.9 million. Shareholders’ equity was $98.8 million, compared with $86.1 million as of December 31, 2010.

Net cash used in operating activities was $9.7 million for the year ended December 31, 2011, as compared to $20.0 million in net cash provided by operating activities for the same period in 2010. This was attributable to net income of $9.6 million, adjusted by depreciation and amortization expenses of $4.1 million, and a net decrease in cash from working capital items of $23.4 million. The net decrease in working capital items was mainly due to the decrease in accounts and notes payable of $27.4 million and increase in accounts and notes receivable of $4.1 million, partially offset by the decrease in restricted cash of $5.0 million. The $27.4 million decrease in accounts and notes payable is mainly due to the decrease of notes payable during the year ended December 31, 2011 amounting to $25.2 million.

Net cash used in investing activities was $9.6 million for the year ended December 31, 2011, as compared to $31.4 million for the year ended December 31, 2010. The $9.6 million net cash used in investing activities during the year ended December 31, 2011 was attributable to the purchases of property, plant and equipment and prepayment paid for construction in progress.

Net cash provided by financing activities was $1.9 million for the year ended December 31, 2011, as compared to $34.0 million net cash provided by financing activities for the year ended December 31, 2010. During the year ended December 31, 2011, the Company received proceeds from borrowings amounting to $34.5 million and repaid loans amounting to $32.1 million. The Company also purchased shares of its common stock amounting to $0.7 million.

Conference Call Information

The Company will also host a conference call at 9:00 a.m. Eastern Time on Friday, March 23, 2012.

Listeners may access the call by dialing +1 (877) 275-8968 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (706) 643-1666. The conference participant passcode is 63667717.

A replay of the conference call will be available for 14 days starting from 10:00 am ET on Friday, March 23, 2012. To access the replay, dial +1 (855) 859-2056. International callers should dial +1 (404) 537-3406. The passcode is 63667717.

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in China. It is principally engaged in the design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures corrugated paperboards, which are used for the production of its flexo-printed and color-printed cartons. The company provides paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors in China. For more information, visit http://www.cnpti.com.

Safe Harbor Statements

This press release may contain forward-looking statements. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company’s ability to develop and market new products, the ability to access capital for expansion and continued investment in R&D, the ability to acquire other companies, changes from anticipated levels of sales, changes in national or regional economic and competitive conditions, changes in relationships with customers, changes in profit margins of principal product and other factors discussed from time to time in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

    Company Contact:                   Investor Relations Contact:
    China Shengda Packaging Group Inc. CCG Investor Relations
    Daliang Teng, CEO                  Mark Collinson
    Tel: +86-571 82835778              Tel: +1-310-954-1343
    E-mail: tdl@cnpti.com              Email: mark.collinson@ccgir.com
    Website: http://www.cnpti.com      Website: http://www.ccgasiair.com

                                    CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                      (Amounts in US$)

                                               Three months ended December
                                                          31,                                 Year ended
                                                                                            December 31,
                                                                                               ------------
                                                       2011                     2010                 2011           2010
                                                       ----                     ----                 ----           ----
                                              (Unaudited)              (Unaudited)
    Revenues                                    $30,795,570              $38,230,829         $123,950,886   $130,089,290
    Cost of goods sold                           24,375,286               27,470,374           98,295,930     93,594,547
                                                 ----------               ----------           ----------     ----------
    Gross profit                                  6,420,284               10,760,455           25,654,956     36,494,743
                                                  ---------               ----------           ----------     ----------
    Operating expenses
    Selling expenses                              1,292,580                1,028,195            4,675,049      4,219,484
    General and administrative
     expenses                                     3,075,035                4,968,969           10,248,426      8,770,951
                                                  ---------                ---------           ----------      ---------
                                                  4,367,615                5,997,164           14,923,475     12,990,435
                                                  ---------                ---------           ----------     ----------
    Other income (expenses)
    Interest income                                  99,490                  178,064              400,050        667,825
    Interest expense                               (134,634)                (110,393)            (609,600)      (534,736)
    Subsidy income                                   93,771                                     1,059,423
    Other expense                                  (184,120)                                     (184,120)
                                                                                                 --------
                                                   (125,493)                  67,671              665,753        133,089
                                                   --------                   ------              -------        -------
    Income before income tax
     expense and noncontrolling
     interest                                     1,927,176                4,830,962           11,581,354     23,637,397

    Income tax expense (credit)                     302,779                 (437,880)           1,746,805      3,884,189
                                                    -------                 --------            ---------      ---------
    Net income                                    1,624,397                5,268,842            9,650,429     19,753,208
    Less: net income (expense)
     attributable to
     noncontrolling interest                          1,287                                         1,287       (415,279)
                                                                                                    -----       --------
    Net income attributable to
     Company's common
     stockholders                                $1,625,684               $5,268,842           $9,651,716    $19,337,929
                                                 ==========               ==========           ==========    ===========

    Basic and diluted earnings
     per share                                        $0.05                    $0.16                $0.25          $0.63
                                                      =====                    =====                =====          =====
    Weighted-average number of
     shares outstanding - basic
     and diluted                                 38,790,811               37,630,224           39,261,219     30,721,788
                                                 ==========               ==========           ==========     ==========

    Comprehensive income:
    Net income                                    1,624,397                5,268,842            9,650,429     19,753,208
    Foreign currency translation
     adjustment                                     527,093                  725,645            3,543,472      1,727,149
                                                    -------                  -------            ---------      ---------
    Comprehensive income                          2,151,490                5,994,487           13,193,901     21,480,357
    Less: comprehensive income
     (expense) attributable to
     noncontrolling interest                          1,308                   (3,396)               1,308       (416,977)
                                                                                                    -----       --------
                                                 $2,152,798               $5,991,091          $13,195,209    $21,063,380
                                                 ==========               ==========          ===========    ===========

                  CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS
                                    (Amounts in US$)

                                                                December 31,
                                                                ------------
    ASSETS                                                        2011               2010
                                                                  ----               ----
    Current assets
    Cash and cash
     equivalents                                           $19,294,089        $35,581,323
    Restricted cash                                          7,851,387         12,424,230
    Accounts and notes
     receivable, net                                        36,835,095         31,370,130
    Inventories                                             19,449,954         19,201,776
    Prepayments and other
     receivables                                               929,126          3,510,304
    Amount due from related
     parties                                                   133,608            166,747
                                                               -------            -------
    Total current assets                                    84,493,259        102,254,510
                                                            ----------        -----------

    Non-current assets
    Property, plant and
     equipment, net                                         34,573,246         32,690,544
    Prepayment for land use
     right to related party                                 11,805,000         11,377,500
    Prepayment for
     construction in
     progress                                                5,424,412                  -
    Customer relationships,
     net                                                       550,316            989,307
    Deferred tax assets                                        409,845            457,964
    Goodwill                                                   174,497            168,178
                                                               -------            -------
    Total assets                                          $137,430,575       $147,938,003
                                                          ============       ============

    LIABILITIES AND EQUITY
    Current liabilities
    Accounts and notes
     payable                                               $18,750,719        $44,904,679
    Amounts due to related
     party                                                     137,689            360,358
    Accrued expenses and
     other payables                                          1,651,283          1,824,539
    Taxes payable                                            3,358,902          2,770,434
    Short-term loans                                        10,073,600         11,680,900
                                                            ----------         ----------
    Total current
     liabilities                                            33,972,193         61,540,910

    Non-current liabilities
    Long-term loans                                          4,500,000                  -
    Deferred tax
     liabilities                                               137,579            247,327
                                                               -------            -------
        Total liabilities                                   38,609,772         61,788,237
                                                            ----------         ----------

    Commitment and
     contingencies                                                   -                  -
    Equity
    Stockholders' equity
    Common stock (US$0.001
     par value,
     190,000,000 shares
     authorized, 39,456,311
     shares issued at
     December 31, 2011 and
     2010,  38,790,811 and
     39,456,311 outstanding
     at December 31, 2011
     and 2010,
     respectively)                                              39,456             39,456
    Treasury stock (665,500
     shares and nil at
     December 31, 2011 and
     2010, respectively)                                      (729,444)                 -
    Additional paid-in
     capital                                                43,765,243         43,765,243
    Appropriated retained
     earnings                                                6,843,616          6,551,179
    Unappropriated retained
     earnings                                               40,438,219         31,078,940
    Accumulated other
     comprehensive income                                    8,258,441          4,714,948
                                                             ---------          ---------
    Total equity for
     stockholders of China
     Shengda  Packaging                                     98,615,531         86,149,766
    Noncontrolling interest                                    205,272                  -
                                                               -------                ---
        Total equity                                        98,820,803         86,149,766
                                                            ----------         ----------
    Total liabilities and
     equity                                               $137,430,575       $147,938,003
                                                          ============       ============

               CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Amounts in US$)

                                                    Years ended December 31,
                                                    ------------------------
                                                            2011                    2010
                                                            ----                    ----

    Cash flows from
     operating
     activities
    Net income                                        $9,650,429             $19,753,208
    Adjustments to
     reconcile net
     income to net
     cash provided by
     operating
     activities:
    Depreciation and
     amortization
     expenses                                          4,062,690               3,095,023
    Deferred tax                                         (52,861)                (37,266)
    Change in
     operating assets
     and liabilities:
    Restricted cash                                    4,959,627              (7,678,086)
    Accounts and notes
     receivable                                       (4,058,520)            (10,502,721)
    Inventories                                          465,795             (10,148,037)
    Prepayments and
     other receivables                                 2,669,982              (1,040,080)
    Accounts and notes
     payable                                         (27,399,010)             28,518,878
    Amount due  to/
     from related
     parties                                            (193,679)             (2,243,281)
    Accrued expenses
     and other
     payables                                           (237,971)                334,496
    Tax payables                                         476,677                 (75,760)
    Net cash (used in)
     provided by
     operating
     activities                                       (9,656,841)             19,976,374
                                                      ----------              ----------

    Cash flows from
     investing
     activities
    Prepayment for
     acquiring land
     use right to
     related party                                             -             (11,095,500)
    Purchase of
     property, plant
     and equipment                                    (4,238,079)             (9,620,706)
    Cash paid for
     construction in
     progress                                         (5,338,256)             (7,469,085)
    Cash paid for
     acquiring SZAA,
     net of cash
     acquired                                                  -                (210,075)
    Cash paid for
     acquiring non-
     controlling
     interests                                                 -              (3,000,000)
    Net cash used in
     investing
     activities                                       (9,576,335)            (31,395,366)
                                                      ----------             -----------

    Cash flows from
     financing
     activities
    Net proceeds from
     public offering                                           -              29,676,723
    Net proceeds from
     private placement                                         -               4,016,535
    Proceeds from
     borrowings                                       34,466,621              25,629,630
    Repayment of
     short-term loans                                (32,064,300)            (25,185,185)
    Dividend paid to
     Cheng Loong                                               -                (127,443)
    Cash paid for
     treasury stock(
     Note1&17)                                          (729,444)                      -
    Investment from
     noncontrolling
     interests                                           207,768                       -
    Net cash provided
     by financing
     activities                                        1,880,645              34,010,260
                                                       ---------              ----------
    Effect of foreign
     currency exchange
     rate fluctuation
     on cash and cash
     equivalents                                       1,065,297                 294,611
    Net changes in
     cash and cash
     equivalents                                     (16,287,234)             22,885,879
    Cash and cash
     equivalents,
     beginning of
     years                                            35,581,323              12,695,444
                                                      ----------              ----------
    Cash and cash
     equivalents, end
     of years                                        $19,294,089             $35,581,323
                                                     ===========             ===========

    Cash paid during
     the years for:
    Interest paid                                       $609,600                $508,441
                                                        ========                ========
    Income taxes paid                                 $2,731,251              $3,887,439
                                                      ==========              ==========

SOURCE China Shengda Packaging Group Inc.


Source: PR Newswire