Guanwei Recycling Corp. First Quarter Results

Investor Conference Call to Be Held Wednesday, May 16th at 8:00am EDT

Marketwired

FUQING CITY, CHINA--(Marketwire -05/15/12)- Guanwei Recycling Corp. (GPRC), China's leading clean tech manufacturer of recycled low density polyethylene (LDPE), reported today that while revenues in the first quarter ended March 31, 2012 increased 14.35%, decreases in gross profit and gross profit margin led to an approximately 24% year over year decline in net income. The Company explained that sales of manufactured recycled LDPE in the quarter increased less than 1.0%, which it attributed to an atypical increase in purchases by customers during the last quarter of 2011 due to the fact that the Chinese Spring Festival was celebrated earlier than usual this year in the third week of January instead of February. At the same time, margins declined as costs of raw material, labor and manufacturing continued to rise and were not sufficiently offset by price increases.

Revenues

Revenues in the three months ended March 31, 2012 increased 14.35% to $16,171,490, compared with $14,142,612 in the same period last year. In the first quarter of 2012, the contribution to revenues from sales of manufactured recycled LDPE was $14,044,642, up 0.84% from last year's first quarter. Tonnage sales declined 5.17% to 11,600 tons compared with 12,233 tons a year earlier, as many customers purchased increased amounts of product during the last quarter of 2011 when sales reached 13,657 tons. Average selling prices in the first quarter of 2012 for recycled LDPE rose 6.76% to approximately $1,216 per ton.

Also contributing to the revenue increase in the quarter was $437,767 in sales of sorted non-LDPE material, up 103.38% from the prior year. Additionally, certain raw materials which could not be stored by the Company due to limited space availability were sold for $1,689,081. There were no comparable raw material sales in the prior year.

Net Income

In the first three months of 2012, net income was $2,065,256 or $0.10 per share, compared with $2,715,282 or $0.14 per share a year earlier.

Decreased sales volume of manufactured recycled LDPE, only partially offset by the slight increase in the selling price in the first quarter of 2012, resulted in a reduction in gross profits. The decline in gross profit margin for manufactured recycled LDPE and sorted non-LDPE to 24.20% in the first quarter of 2012, compared with 29.95% a year earlier, was a consequence of a 10.81% increase year over year in raw material costs to $761 per ton, reflecting the sustained strong demand for LDPE.

The Company also noted that G&A expenses increased 21.17% to $658,863 which was primarily due to higher professional expense and higher depreciation expense as a result of a significant amount of acquisitions of machinery and equipment in mid-2011.

Continuing Financial Strength, Increased Capacity and Improved Import Quotas

In January, 2012, the Chinese government confirmed the previously announced combined increase in the Company's import quota to 115,000 tons of plastic waste.

The Company entered 2012 with a production capacity of 80,000 tons, an increase from 65,000 tons a year earlier, which was achieved through continuous improvements in the Company's production facility and equipment with its cash flow.

As of March 31, 2012, the Company had no long or short term bank borrowings. Working capital as of the end of the first quarter was $26.24 million, an increase of approximately $2.44 million from year end 2011, and this was primarily due to higher accounts receivable in order to expand credit sales to long term customers with good credit history, an increase in inventories and a decrease in accounts payable.

Management Comment

Mr. Chen Min, CEO of the Company, stated, "We remain very confident about continuing long term growth in our business, given continuing demand for lower cost recycled LDPE, which perhaps could increase in tougher economic periods as companies seek to lower costs by all means possible. We believe that sales of recycled LDPE will normalize over the remainder of the year and exceed prior year sales unless there is further worsening in the Chinese and world economies. At the moment, our key concern is maintaining growth on our bottom line in the face of continuing cost inflation, combined with the clear downtrend in economic activity in China and the slow recovery in the West which could impede our ability to match cost increases with pricing increases. As such, we are doing everything possible to reduce manufacturing and labor costs, and to improve our purchasing power with our European suppliers. We also believe we are well positioned with upgraded facilities, a strong balance sheet and a well diversified customer base in more than ten different industries."

Conference Call Invitation

To participate in the call, interested participants should call 1-877-941-1427 when calling within the United States or 1-480-629-9664 when calling internationally. Please ask for the Guanwei Recycling Corp. 2012 First Quarter Conference Call, Conference ID: 4539030. There will be a playback available until 05/23/12. To listen to the playback, please call 1-877-870-5176 when calling within the United States or 1-858-384-5517 when calling internationally. Use the Replay Pin Number: 4539030.

This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link http://public.viavid.com/index.php?id=100527 or at ViaVid's website at http://public.viavid.com.

SEE ATTACHED TABLES

Description of Guanwei Recycling Corp.

Guanwei Recycling Corp. is China's largest manufacturer of recycled low density polyethylene (LDPE). Adhering to the highest "green" standards, it has generated rapid growth producing LDPE from plastic waste procured mostly in Europe for sales to more than 300 customers in more than ten different industries in China. Guanwei Recycling Corp. is one of the few plastic recyclers in China that has been issued a Compliance Certificate by Umweltagentur Erftstadt, which issues certificates of approval for certain plastics manufacturers which meet strict environmental standards in Germany. This enables the Company to procure high quality plastic waste directly from Germany and other European countries, including Spain and Holland, with no middlemen, and permits economic production of the highest grades of LDPE. Additional information regarding Guanwei Recycling Corp. is available at www.guanweirecycling.com.

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission.

 
GUANWEI RECYCLING CORP.     UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, December 31,
2012 2011
------------- -------------
ASSETS

Current assets
Cash and cash equivalents $ 10,122,109 $ 12,432,803
Accounts receivable 5,099,324 4,475,386
Inventories 19,332,603 16,858,801
Prepaid expenses and other current assets 2,468,743 2,104,349
------------- -------------
Total current assets 37,022,779 35,871,339

Property, plant and equipment, net 8,164,435 8,151,012
Construction in progress - 174,295
Land use right, net 674,190 673,762
Other assets 205,554 205,437
Total assets $ 46,066,958 $ 45,075,845
------------- -------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable $ 7,708,853 $ 8,741,822
Accrued expenses and other payables 643,229 714,072
Amount due to shareholder 1,655,814 1,468,167
Income tax payable 773,120 1,144,516
Total current liabilities 10,781,016 12,068,577
------------- -------------

Commitment and contingencies

Shareholders' equity:
Common stock, $0.001 par value, 500,000,000
shares authorized, 20,000,006 shares issued and
outstanding 20,000 20,000
Additional paid-in capital 1,290,028 1,290,028
PRC statutory reserves 805,483 805,483
Accumulated other comprehensive income 2,476,099 2,262,681
Retained earnings 30,694,332 28,629,076
------------- -------------
Total shareholders' equity 35,285,942 33,007,268
------------- -------------

Total liabilities and shareholders' equity $ 46,066,958 $ 45,075,845
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GUANWEI RECYCLING CORP.    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME

Three Months Ended
March 31,
---------------------------
2012 2011
------------- -------------

Net revenue $ 16,171,490 $ 14,142,612

Cost of revenue 12,616,104 9,907,512
------------- -------------
Gross profit 3,555,386 4,235,100


Operating expenses
Selling and marketing expenses 89,522 88,791
General and administrative expenses 658,870 543,770
------------- -------------
Total operating expenses 748,392 632,561


Income from operations 2,806,994 3,602,539


Other income (expenses):
Interest income 14,172 22,970
Interest expenses - (17,435)
Exchange gain 31,926 71,296
------------- -------------
Income before income taxes 2,853,092 3,679,370

Income taxes 787,836 964,088

Net income 2,065,256 2,715,282

Other comprehensive income
- Foreign currency translation adjustments 213,418 217,182

Comprehensive income $ 2,278,674 $ 2,932,464


Earnings per share attributable to shareholders
of Guanwei Recycling Corp.
- basic and diluted $ 0.10 $ 0.14

Weighted average number of share of common
stock used in computing
- basic and diluted earnings per share 20,000,006 20,000,006
============= =============



GUANWEI RECYCLING CORP.     UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,
--------------------------------
2012 2011
--------------- ---------------

Cash flows from operating activities
Net income $ 2,065,256 $ 2,715,282

Adjustments to reconcile net income to net
cash provided by (used in) operating
activities
Depreciation of property, plant and
equipment 201,442 129,852
Amortization of land use right 3,862 3,690

Changes in operating assets and
liabilities
Accounts receivable (596,896) 8,206
Inventories (2,372,226) 824,368
Advances to suppliers - (2,124,560)
Prepaid expenses and other current assets (326,753) (82,099)
Other assets 1,191 -
Accounts payable (1,091,044) (1,232,140)
Accrued expenses and other payables (75,454) (161,085)
Income tax payable (379,550) 67,273
Net cash (used in) provided by operating
activities (2,570,172) 148,787


Cash flows from investing activities
Purchase of property, plant and equipment (12,727) (3,877)
--------------- ---------------
Net cash used in investing activities (12,727) (3,877)


Cash flows from financing activities
Decrease in restricted cash - 698,014
Advance from shareholder 187,647 179,515
Proceeds from short-term borrowings - 1,589,467
Repayment of short-term borrowings - (3,744,359)
--------------- ---------------
Net cash provided by (used in) financing
activities 187,647 (1,277,363)


Effect of exchange rate change on cash and
cash equivalents 84,558 145,353


Net decrease in cash and cash equivalents (2,310,694) (987,100)


Cash and cash equivalents at the beginning
of period 12,432,803 14,940,236
--------------- ---------------
Cash and cash equivalents at the end of
period $ 10,122,109 $ 13,953,136

Supplemental disclosure of cash flow
information
Interest paid $ - $ 17,435
=============== ===============
Income taxes paid $ 1,167,386 $ 896,814
=============== ===============
Contact:

Richard Sun
guanweirecycling@gmail.com
Ken Donenfeld
DGI Investor Relations
kdonenfeld@dgiir.com
Tel: 212-425-5700
Fax: 646-381-9727

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