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Edited Transcript of CXDC earnings conference call or presentation 9-Nov-18 2:00pm GMT

Q3 2018 China XD Plastics Company Ltd Earnings Call

Haerbin Heilongjiang Dec 18, 2018 (Thomson StreetEvents) -- Edited Transcript of China XD Plastics Company Ltd earnings conference call or presentation Friday, November 9, 2018 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jie Han

China XD Plastics Company Limited - Chairman, CEO & President

* Kenan Gong

* Shaojie Wen

* Zhang Dahe

China XD Plastics Company Limited - CFO, Secretary & Director

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Conference Call Participants

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* Matthew Larson

* Peter J. Siris

Guerrilla Capital Management LLC - MD and Portfolio Manager

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2018 China XD Plastics Earnings Conference Call. (Operator Instructions) I will now turn the conference over to your first speaker today, Mr. Wen Shaojie. Thank you. Please go ahead.

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Shaojie Wen, [2]

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Thank you all for joining us for the China XD Plastic Third Quarter 2018 Financial Results Conference Call. Joining me on the call today are Mr. Jie Han, Chairman and CEO; Mr. Qingwei Ma, Chief Operating Officer; Mr. Taylor Zhang, Chief Financial Officer; Mr. Junjie Ma, Chief Technology Officer; Dr. Kenan Gong, General Manager of the Dubai Subsidiary.

Earlier today, China XD Plastic issue a press release announcing the third quarter 2018 results. Before management's presentation, I would like to refer to the safe harbor statement in the connection with today's conference call and remind our listeners that management's prepared remarks during the call may contain forward-looking statements which are subject to risk and uncertainties and that management may make additional forward-looking statements in response to your questions.

All statements other than statements of historical fact contained -- are forward-looking statements, including but not limited to the company's growth potential in international market; the effectiveness and profitability of the company's product diversification; the impact of the company's product mix shift to more advanced products and related pricing policies; the volatility of the company's operating result and financial condition; the company's projection of performance in 2018 and other risks detailed in the company's filings with the SEC and available on its website at www.SEC.gov.

This is forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the company and the industry. The company, therefore, claims the protection of the safe harbor for the forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and we will refer you to a more detailed discussion for the risk and uncertainties in the company's filings with the Securities and Exchange Commission.

In addition, any projection as to the company's future performance represents management's estimate as of today, November 9, 2018. China XD Plastic assumes no obligation to update those projection in the future as market (inaudible).

To supplement the financial results present in accordance with the U.S. GAAP, management will make reference to earnings before interest expense, income tax, depreciation and amortization, which we refer to as EBITDA. EBITDA is a non-GAAP financial measure reconciled from net income, which the company believes to -- additional information to better understand its operating performance. A table reconciling net income to EBITDA can be found on the earnings press release issue earlier today.

I would now like to turn the call over to our Chairman and Chief Executive Officer, Mr. Han. Mr. Han will be [speaking in Chinese], and I will translate his opening remarks into English. Mr. Han, please go ahead. (foreign language)

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [3]

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(foreign language)

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Shaojie Wen, [4]

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Our third quarter 2018 results were consistent with the unanticipated severe downturn in the auto industry of China, the first year-over-year drop in 28 years. In addition, the reduction of duty on the import vehicles by an average of 46% is expected to have profound impact on the entire auto industry in China. Although we applaud the implementation of such supply-side reform by the policymakers for the well-being of the long-term benefit of China auto industry, it will have short-term impact on the auto market as companies throughout the supply chain adjust themselves and adapt to such change.

On overseas business development front, we are pleased with our successful trial production at our production base in Dubai and remain optimistic about the prospect of our business expansion overseas, especially after positive results and feedbacks after production trials from customers in various countries and regions overseas.

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [5]

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(foreign language)

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Shaojie Wen, [6]

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On October 31, 2018, the company signed a deleveraging investment framework agreement. We are very pleased to welcome CCB Financial as an important strategic and long-term partner of Xinda. Once materialized, the corporation, under this agreement, will not only help our company deleverage its balance sheet and improve its capital structure but assist the company to solidify its long-term position in this industry.

As the second-largest bank in the world by assets, CCB is very selective, especially to nonstate-owned enterprise in China. The signing of the agreement reflects CCB's trust to our company after decades of cooperation reaching a new high level and unwavering support to high-quality enterprise with focus on long-term innovation by the government under the leadership of President Xi.

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [7]

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(foreign language)

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Shaojie Wen, [8]

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We are pleased that the company's Dubai production base has complete trial production successfully, and official commencement is scheduled on November 11, 2018, with 11,250 metric tons annual capacity in 2019. Dubai Xinda primarily offers long chain nylon alloy and other high-end engineering plastics, and it has developed and complete product trials with a number of customers overseas from Spain, Italy, UAE, Malaysia, and India, et cetera.

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [9]

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(foreign language)

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Shaojie Wen, [10]

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With that, I will now turn the call over to Taylor Zhang, our CFO, to walk you through our financials. Taylor?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [11]

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Thank you, Mr. Han, and thank you, everyone, for joining the call today. Before I review the numbers, let me remind you that all figures I discuss are for this reporting period, the third quarter of 2018, unless I state otherwise. Additionally, any year-over-year comparison is to the third quarter of 2017. Any sequential comparison is to the second quarter of 2018.

So let's go over our third quarter results. Revenues were $297.2 million in the third quarter ended September 30, 2018, a decrease of $14.2 million or 4.6% compared to $311.4 million in the same period of last year as the combined results of, first, a decrease of 2.7% in sales volume; second, 2% negative impact from exchange rates due to weakening RMB against U.S. dollar, partially offset by an increase of 0.1% in average RMB selling price of our products.

According to China Association of Automobile Manufacturers, automobile production and sales in China increased by 0.9% and 1.5%, respectively, for the first 9 months of 2018 compared to the same period of last year, and China auto sales dropped 4%, 3.8% and 11.6% in this July, August and September, respectively, compared to the same period of 2017.

Weakening macroeconomic condition since the summer of 2018 has deteriorated business conditions. Though the company has increased growth of 208.9% in South China, 54.8% in Central China, sales decreased by 7.2% in Southwest China, 11% in North China, 13.6% in northern -- Northeast China and 0.2% in East China.

As for the increase of average RMB selling price, it was mainly driven by sales of higher-end products of modified PA66, PA6 in China. Overseas sales were $2,104 in the 3 months period ended this quarter as compared to $14.1 million in last year. The company has tried to develop new customers overseas besides existing oversea customer. The sales to this customer was suspended due to the account receivable overdue situation.

Gross profit was $47.2 million in the third quarter ended September 30, 2018, compared to $47.3 million in the same period last year. Our gross margin increased to 15.9% during the third quarter from 15.2% in the same period last year primarily due to more sales of higher-end products, 77.4% as compared to 74.9% for the same period last year.

G&A expenses were $8.1 million as compared to $10.4 million in the same period last year, decreased by 22.1% or $2.3 million. Decrease was primarily due to our approach of -- on optimizing management structure, enhancing efficiency, leading to the decrease of $2.1 million in sales and welfare -- salary and welfare; $0.6 million in miscellaneous expense, $0.1 million in rental expense and partially offset by the increase of $0.5 million in stock-based compensation.

R&D expenses were $23.3 million for the first quarter compared to $9.8 million for the same period of last year, representing an increase of $13.5 million or 137.8%. This significant increase was primarily due to our elevated R&D activities to meet the new and higher specification requirements from potential customers, especially those in -- from overseas and increased efforts directed towards application in new electrical equipments, electronics, alternative energy application, power devices, aviation equipments and ocean engineering in addition to other new products primarily for advanced application in the automobile sector and in new verticals, such as ships, airplanes, high-speed rail, 3D printing materials, biodegradable plastics and medical devices. As of September 30, 2018, the number of ongoing research and development projects was 211.

Operating income was $13 million for the third quarter of 2018 compared to $26.2 million for the same period of last year, representing a decrease of $13.2 million or 50.4%. This decrease is primarily due to higher selling expenses and R&D expenses and partially offset by lower G&A expenses.

Net interest expense was $13.1 million for the third quarter of this year compared to $9 million in the same period of 2017, an increase of 45.6% or $4.1 million due to the increase of interest expense -- the increase of average short-term and long-term loan balance in the amount of $936.2 million for the 3 months period ended September 30, 2018, compared to $808.3 million of the same period last year, partially offset by the decrease of interest expense resulting from the average loan interest rate decreased to 4.01% for the third quarter as compared to 4.57% of the same period last year; and the decrease of interest income resulting from average interest rates decreased by 1% for the third quarter of this year compared to 1.5% of the same period last year; and a decrease of average deposit balance in the amount of $240.8 million for this quarter as compared to $503.1 million for the same period last year.

Net income was $9 million for the third quarter of 2018 compared to $14.1 million for the same period of 2017, representing a decrease of $5.1 million or 36.2%. Basic and diluted earnings per share for the 3 months period ended September 30, 2018, was both $0.13 compared to $0.21 per basic and diluted share for the same period last year. The average number of shares used in the computation of basic and diluted earnings per share in the current quarter was $50.9 million (sic) [50.9 million] compared to 49.6 million shares for basic and diluted earnings per share in the prior year period.

EBITDA was $30 million for the third quarter of 2018 compared to $39 million for the same period last year, representing a decrease of $9 million or 23.1%. For a detailed reconciliation of EBITDA, a non-GAAP measure, to its nearest GAAP equivalent, please see the financial table at the end of our press release issued early today.

Now let's turn to the balance sheet. As of end of the third quarter this year, the company had $394.7 million in the total amount of cash and cash equivalents, restricted cash and time deposits, a decrease of $213.4 million or 35.1% as compared to $608.1 million as of December 31, 2017. As of September 30, 2018, working capital was negative of $185.8 million, and the current ratio was 0.9 as compared to the current ratio of 1 as of the end of 2017. Stockholders equity as of September 30, 2018, was $733.2 million, an increase of $20.4 million or 2.9% as compared to $712.8 million as of December 31, 2017.

Now moving to financial guidance and -- in light of the changing market conditions that Chairman Han mentioned previously, including slowdown of auto sales and reduction of duty on import cars as well as macroeconomic environment in China, the company is reiterating the update and previously disclosed financial guidance for fiscal 2018 to range between $1 billion to $1.2 billion in revenues and net income to range between $70 million to $80 million. It assumes the average exchange rate of U.S. dollar to RMB at 6.9. The financial guidance reflect company's current view of its business outlook for fiscal 2018 and is subject to revision based on changing market condition at any time.

Before we open the call to your question, I would like to note that for any question directed to the management in China, I will translate both their questions and their answers. If you want to ask your question in Chinese, please also ask it in English for the benefit of our listeners.

Please also note that we will only be able to respond question about financial and operating results. For other matters, including the going private offer, we refer you to our already issued press releases. We'll not be able to respond to the questions that are directed to the principles of the going private offer about the proposed transaction.

With that, we'll now open the call to your question. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from line of Peter Siris.

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Peter J. Siris, Guerrilla Capital Management LLC - MD and Portfolio Manager [2]

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Okay. My first question, I guess, is on the inventory. I'm curious why there's -- why you have so much inventory right now?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [3]

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Okay. Peter, let me translate your question. (foreign language)

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [4]

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(foreign language)

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [5]

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Peter, so here's the answer from Chairman Han. So the inventory level mostly is because the -- as you probably noticed, our production in Sichuan has been ramping up currently almost at its optimal level in terms of capacity utilization. So Sichuan factory is moving with full steam. So that's driven the inventory increase. And secondly, the oil price fluctuation also play probably a minor role. But in any event, we expect our inventory level will taper down during the current quarter and also normalized in next year. So I think if we look at this current quarter, we're probably going to trim down by [$100-plus million]. And then next year, I think, we can approach to very normal level. So it was, indeed, at high level. But then given we have factory coming online and also other situation, so we do think next year we'll be able to return to a normal level.

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Peter J. Siris, Guerrilla Capital Management LLC - MD and Portfolio Manager [6]

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Now in terms of demand, there's talk about new incentives for automobiles in China. Do you see demand picking up anytime soon? Or is this sort of terrible auto sales going to continue?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [7]

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Okay. (foreign language)

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [8]

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(foreign language)

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [9]

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So Peter, here's answer from Chairman Han. So basically his view is, first of all, because of the trade war or friction between China and U.S., the reduction of duty on import vehicles has impact domestic car sales. And secondly, because of the changing economic condition in China, consumer is taking a pause on their vehicle or car purchase decisions. But however, looking forward, we think the trade war -- we'll get more clarification on the trade war. We think a friendly resolution will be reached and then consumer confidence will come back. So next year, we think the auto sales will come back up. That's our view. Peter, does that answer your question?

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Peter J. Siris, Guerrilla Capital Management LLC - MD and Portfolio Manager [10]

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Yes. I just wanted also to ask 2 more quick questions, if there's not too long a queue, or I'll get back in queue and let the next person ask and then I'll come back. How's that?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [11]

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Yes, I think you can continue with 2 questions first and like to have some...

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Peter J. Siris, Guerrilla Capital Management LLC - MD and Portfolio Manager [12]

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Okay. Two quick questions. One is, can you bring us up-to-date on what's happening in Dubai? It looks like you finally -- you think you're going to finally be able to get Dubai off the ground doing business?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [13]

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Okay. (foreign language)

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Kenan Gong, [14]

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Peter, long time no see. I think -- thanks for your question. I'm going to answer you with regarding the status of our Dubai subsidiaries. As you probably are aware of the company information from the news release we just released 2 days ago, and we're very happy to inform everyone that our Dubai subsidiary, the first phase of the high-end plastic alloy has been successfully commissioned, and I think work beginning from September. And also now we are planning to hold the ceremony -- the commissioning ceremony -- formal commissioning ceremony on November 11. And in terms of the production capacity, the project is going to reach around 11,250 metric ton per year and the product which are the focus on very high end to high-margin plastic alloy. And the same time, as Mr. Han's already mentioned, during this phase, we have managed to develop this new customer in Italy in Malaysia and also in the European countries like in Spain, like in Italy. And so it's safe to say that we're not only have our production commissioned, but we also secure the future demand and the customer as well. So now we have pretty good customer base. So we're very confident and the high-end product from the Dubai subsidiaries is going to be sell out very smoothly. Thank you. I hope I answer your question, Peter.

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Peter J. Siris, Guerrilla Capital Management LLC - MD and Portfolio Manager [15]

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Yes, great. And finally can you -- the 2 -- what's happening with the 2 new factories? Are you continuing to ramp them up same speed? Are you slowing down, given the new financing? What's happening with them?

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Kenan Gong, [16]

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You mean the other Dubai and the other Dubai project.

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Peter J. Siris, Guerrilla Capital Management LLC - MD and Portfolio Manager [17]

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No, no. The second factory in Sichuan and the second factory in [Dull Bay].

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [18]

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Let me translate it to, Mr. Han. (foreign language)

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Jie Han, China XD Plastics Company Limited - Chairman, CEO & President [19]

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(foreign language)

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [20]

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So Peter, we have two 300k projects, one each in Heilongjiang and in Sichuan Southwest. So obviously, those 2 projects were based on other research and market demand we're still very confident and believe in. So currently -- let's start with the Southwest. So schedule-wise, timing-wise, will be pushed out by possibly a year, mostly because of the tight credit environments in China to fund the project. So we'll still do work, but we'll do it, for example, which I mentioned in Q1, we'll probably work on the foundation for the factory sites in Southwest. And in Heilongjiang, we also complete the land auction procedure, et cetera. But in general, we'll be exercising more physical responsibility. And as you can hear from our previous release, we are working to get a long-term capital so that we can minimize risk in current tight credit environment.

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Operator [21]

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Our next question comes from the line of Matthew Larson from National Securities.

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Matthew Larson, [22]

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Can you bring us up-to-date about the $75 million investment that Mr. Han's son's investment company was supposedly going to make? And we were supposed to hear in September the independent assessment of the fair value of that investment, and we've never heard anything since. So does the new agreement with China Construction Bank just supersede that?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [23]

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So basically, Matthew, thank you for the question. The parties, basically, they decided not to pursue a definitive agreements because of they cannot a reach consensus on the terms. So that's why the company returned the cap injection to junior Mr. Han. So there will be -- you will see from our quarterly -- our 10-Q, there's detailed disclosure about that as well.

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Matthew Larson, [24]

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All right. Wouldn't you think that a news release previous to the Q coming out might have been worthwhile? I mean, one of the problems is we don't get a lot of information. And I've been a long-term investor, and it obviously has not been a good investment. And I'm just kind of wondering why during the biggest boom in auto sales for many years, except for the last few months, the point that China was consuming 30 million cars a year, which is significantly greater than any other country in the world, the stock is at a all-time low, okay. So what should investors take from that? I mean, right now, you're trying to shore up the balance sheet. I mean, why wasn't that done a year ago? And finally, on this comment at least, and I'm not done with my questions, you stated that you can't comment on the going private. I mean, that's almost 2 years old. If you were an investor and you had an offer that was low at the time and still is low and you can't comment on 2-year -- in 2 years, particularly if your partner is a global financial powerhouse, Morgan Stanley, and you still can't comment on it, do you feel that not only competent on your part but fair to investors?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [25]

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Okay. Matthew, do you have any further question before I try to answer questions.

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Matthew Larson, [26]

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Yes. I mean other comments, I mean, the previous caller touched on them, maybe not in the depth I would like to. Auto sales have been weak the last few months you've stated, but a lot of things have been weak in China. But the government in the PRC has been loosening up credit and also cutting the tax on automobile purchases there. I guess, it's 50% is what I've read. These things should be very positive, I would assume, for auto sales in general. And in addition, just, I guess, last night, there was an announcement that the government is pressuring state-owned banks, the large banks, to make loans available to private companies more. And presumably, that would help not only your company but others -- private companies. And so it seems like there'll be more credit flowing around, and presumably, we might have seen the low level of auto sales because, when you make changes like that, it generally impacts the consumer very positively. So do you feel that should be the case? And finally, since you want to ask me other questions now, I mean, your book value grew. So the company is now trading -- the book value is 6x what the company is valued at. And the company's valued at less than 2x earnings. I mean, that would never occur in -- certainly in the United States. So does that bother you? Or do you find anything strange about the fact that your company could be valued at a fraction of where it would be valued anywhere else in the world. I mean, what does that say about your company and how it's been handled?

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [27]

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Okay. I'll try to answer your question in order you asked. So first of all, for the -- you suggest or imply we should have a press release on the junior Han's investment. So basically because the fact that it was a -- not a definitive -- there was never a definitive agreement in place and he did that only for the benefit of the company to shore up our balance sheets to get the bank feel comfortable about the company's financial condition. So I think it's a judgment call. But I think in the future, we'll -- even though it's not a requirement, but I think in the future, we'll exercise better judgment and also create a news flow to the market. So that's to your first question. And secondly, you asked why we do not shore up our balance sheet earlier. We actually act very early. So as you probably know, they still own banks in China, so their style, fashion of working is different from the banks in the U.S. or other developed countries. So it's very typical for the banks to work at its own pace. So as a company, the only thing we can do is to make sure there's no ball dropped from our part and moving swiftly, which we have been doing. But I think you saw the release from a couple days ago, but that was a result of a lot of work by our team. So I give credit to my team for that. So at least right now, we feel like we have seen the lights in the end of tunnel. That's why we made a release about it. And for the going private, so you said we cannot comment. That's very true. So we did -- I think, we fully understand it take too long, but I don't think we are the only situation. I think, there are some other transaction they either aborted because of financing. So typically, I think the biggest holding pole is basically financing, as Chairman Han mentioned. So I believe the buyer consortium will need to get commitment of financing before we can proceed. I think they're still working on that. And for auto sales, I think, the -- what you observed is, we also think it's very likely to happen. The credit -- the government is -- I think they're back in to supporting private companies, but I think only on a very selective basis. So I think our framework agreement signed also reflect, to some extent, of the government's efforts. So we think the -- auto industry, we think, is very vital to the economy in China. And we think -- we believe Chinese governments also realize that. So we think they will not let this industry slide. And that's why Chairman Han commented, next year we do believe it will take turn and also get into a more healthy trajectory. And lastly, for the book value and also other valuation metrics. So no matter what kind of perspective or metrics you use, I think the company is undervalued. And it does bother us, and I think I can't comment for the buyer consortium, but I think, for the management, we'll continue to work diligently. So we do have very clear priority, first of all, as to shore up the capital and getting our balance sheet steady, stable, so we are less subject to any shock from the system or from the economy or changing condition in the industry. I think that's our top 1 priorities. And secondly, we'll continue to diversify our business, both geographically and also by different sectors and applications. And I think thirdly, as you mentioned, we will be more proactive in terms of communicating with shareholder and the markets. And I think, hopefully, we'll be able to show and reflect that in the coming quarters. I hope that answer your questions.

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Matthew Larson, [28]

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You did. And listen, I'll throw -- I'll add this, too. The agreements that you're working on with China Construction Bank, I mean, seems to me quite a positive because, if liquidity is an issue, then having access to it from a major bank like China Construction is a good thing. I'm hoping, needless to say, that part of the balance sheet issues that this agreement will address, equity hopefully is not going to be part of the deal at these levels. I mean, listen, my complaint is that I've lost a lot of money here, okay, and people who I'm responsible for have lost a lot of money, all right. And it seems inconceivable that a stock would trade at a level where it's at, unless management -- and I direct this towards Morgan Stanley also, okay. I worked at Morgan Stanley for 15 years, and they're better than that. The 2 directors, Homer Sun and Jun Xu, I guess, if I'm pronouncing them properly, this is disgraceful, all right, because they invested private equity funds of their own investors, okay, in the Asia Fund IV many years ago at $6, and now it's $2 and change. I mean, I don't know what they think their job security is, but I know that there is not a lot of it on Wall Street anymore. And if this is an example of their talent, then I've got to question it. And I do so because I'm very frustrated, all right. I have a large investment, and I felt that it was a reasonably sound one, particularly with the fact that Morgan Stanley had a 24% interest in the company. And then I'll also just kind of ask why Mr. Han, he owns half the company. Owning half of a $2 -- of a small company, I mean, I just don't understand why there is not a greater effort to elevate the stock price because owning half of a company worth $100 million and change is a lot less than owning half of a company that should be worth 5 or 10x what it's valued at. And I just don't -- I just don't understand -- I can't get inside the heads of management or the Morgan Stanley people. But I do know this, and I have to get this up. You all made an offer for the company, which was a conflicted offer at $5.21 almost 2 years ago. Why make the offer, if you're not going to follow through? I mean, when I come from, if you make a good faith offer, you follow through on it, all right, or you don't bother with the offer. So there's a certain amount of ethics that I -- the unethical aspect to it is now lost on me because there's been a ceiling put on a stock, and it just -- it continued to deteriorate. So I'm hoping that we've seen the lows here. And with the banking arrangement you have should probably make investors feel a little better that this company is going to make it through whatever difficulties it presumably is having. Actually, you guys have built it out quite nicely, but the stock price doesn't reflect that. So I just wanted to say that because there's a certain -- fiduciary responsibility is a very, very important stance here in the United States these days when it comes to investments. And Morgan Stanley needs to understand that, that is not lost on investors. So I appreciate you letting me just express the frustration from long-term investors because it's been a very expensive experience so far. So I wish you luck going forward, and I'll be following your developments.

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Zhang Dahe, China XD Plastics Company Limited - CFO, Secretary & Director [29]

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Sure. Thank you, Matthew. So just a comment to your comments. I think the bad consortium is still working on the transaction. So I do believe we cannot comment until they have a commitment funding or other funds. So please understand that. But we totally understand your frustration. We are also equally, if not more, frustrated with the low valuation for years. So we'll keep our heads down and work to the best we can. Thank you.

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Operator [30]

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Thank you. There are no further questions at this time. I'll hand the call back to today's presenter. Please continue.

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Shaojie Wen, [31]

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On behalf of China XD Plastic, we want to thank you for your interest and participation in this call. If you would like to speak with us further, please call either myself or Taylor in XD's New York office. The contact numbers for all of us are listed at the end of the press release. Thank you.

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Operator [32]

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Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.