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Specialty Chemical Company China XD Plastics Announces Signing of Deleveraging Investment Framework Agreement with CCB Financial Asset Investment Co., Ltd. and China Construction Bank, Heilongjiang Branch

-Business Outlook-

HARBIN, China, Nov. 5, 2018 /PRNewswire/ -- China XD Plastics Company Limited (CXDC) ("China XD Plastics" or the "Company"), one of China's leading specialty chemical companies engaged in the development, manufacture and sale of polymer composite materials primarily for automotive applications, today announced signing of deleveraging investment framework agreement (the "Agreement") by and among its subsidiary, Heilongjiang Xinda Enterprise Group Company Limited ("Xinda Group"), CCB Financial Asset Investment Co., Ltd. ("CCB Financial"), and China Construction Bank Heilongjiang Branch ("CCB HLJ"), both of which are wholy owned subsidiaries of China Construction Bank ("CCB").

On, October 31, 2018, management from both the Company and CCB signed the Agreement at the conference center of the Company's Northeast Production Base. CCB Financial and CCB HLJ are planning to provide estimated 2 billion RMB (approximately US$289 million) capital to Xinda Group and or its affiliated entities in debt, equity or other forms, mainly to repay Xinda Group's interest bearing loans, to facilitate the Company to diversify and develop its business and to improve corporate management, subject to the parties entering into one or more definitive agreements. The definitive agreements will be subject to satisfactory due diligence by CCB Financial and CCB HLJ, business arrangement, legal viability, and completion and satisfaction of other standard and customary conditions. The Company will make its best effort to assist CCB Financial and CCB HLK but does not provide timing estimate or make promise of signing of any definitive agreement.

"We are very pleased to welcome CCB Financial as an important strategic and long-term partner of Xinda. Once materialized, the cooperation 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 its industry," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer. "As the second largest bank in the world by assets, CCB is very selective especially to non-state-owned enterprises in China. The signing of the Agreement reflects CCB's trust to our company after decades of cooperation reaching a new high level and unweavering support to high quality enterprises with focus on long term innovation by the government under the leadership of President Xi.

Business Update

Since the beginning of this third quarter, China auto market has experienced an unexpected and unprecedent turn with both numbers of car produced and sold plummeted. The results from China Auto Industry Association came drastically under its early expectation. China auto sales dropped 4%, 3.8% and 11.6% in this July, August and September, respectively, compared to the same periods in 2017. It has a ripple effect and impact throughout China auto supply chain, including the Company. In light of the foregoing changing market condition and the macro economic environment in China, the Company is updating its financial guidance for fiscal 2018 to range between $1 and $1.2 billion in revenue and net income to range between $70 and $80 million. It assumes the average exchange rate of the US dollar to RMB at 6.9. This financial guidance reflects the Company's current view of its business outlook for fiscal 2018 and is subject to revision based on changing market conditions at any time.

The Company's Dubai production base has completed trial production successfully and official commencement is scheduled on November 11, 2018 with 11.25 thousand metric tons annual capacity in 2019. Dubai Xinda primarily offers long chain nylon alloy and other high-end engineering plastics and has developed and completed product trials with a number of customers overseas from Spain, Itily, UAE, Malysia, and India etc.

About China XD Plastics Company Limited                     

China XD Plastics Company Limited, through its wholly-owned subsidiaries, develops, manufactures and sells polymer composites materials, primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 31 automobile brands manufactured in China, including without limitation, Audi, Mercedes Benz, BMW, Toyota, Buick, Chevrolet, Mazda, Volvo, Ford, Citroen, Jinbei and VW Passat, Golf, Jetta, etc. The Company's wholly-owned research center is dedicated to the research and development of polymer composites materials and benefits from its cooperation with well-known scientists from prestigious universities in China. As of September 30, 2018, 476 of the Company's products have been certified for use by one or more of the automobile manufacturers in China. For more information, please visit the Company's English website at http://chinaxd.irpass.com/, and the Chinese website at http://www.xdholding.com.

CCB Financial Financial Asset Investment Co., Ltd

CCB Financial Financial Asset Investment Co., Ltd is the first market-based debt-to-equity swap institution approved by the China Banking Regulatory Commission. It was incorporated on July 26, 2017 and is a wholly-owned subsidiary of China Construction Bank with a registered capital of RMB 12 billion. It is by far the largest registered capital of CCB Group, with a management fund of over RMB 140 billion, and its business scale is in the leading position in the industry.

About China Constructin Bank Heilongjiang Branch

China Construction Bank's main business areas include corporate banking, personal banking and treasury operations, providing customers with comprehensive financial services. China Construction Bank ranked second in the world's leading magazine, the British "Banker" in 2018 and the World's Top 1000 Banks. China Construction Bank Heilongjiang Branch was established in Harbin on July 20, 1986. It is a tier-one branch under the jurisdiction of CCB. Its main business areas include corporate banking, personal banking and treasury operations, and is dominated by China's economic strategic industries. The company maintains close cooperation with a large number of high-end customers to provide comprehensive financial services to customers.

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including but not limited to, the Company's growth potential in international markets; the effectiveness and profitability of the Company's product diversification strategy; the impact of the Company's product mix shift to more advanced products and related pricing policies;  the effectiveness, profitability, and the marketability of its the ongoing mix shift to more advanced products; the prospects of the Company's Dubai facility, and the associated expansion into Middle East, Europe and other parts of Asia; the prospects of the Company's Sichuan facility, and its penetration into Southwest China; the prospects of the Company's Harbin facility, and its penetration into Northeast China; the Company's projections of its revenues for performance in fiscal 2018.  These forward-looking statements can be identified by terminology such as "will," "expect," "project," "anticipate," "forecast," "plan," "believe," "estimate" and similar statements. Forward-looking statements involve inherent risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and the industry. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, the global economic uncertainty which could further impair the automotive industry and limit demand for our products; fluctuations in automotive sales and production which could have a material adverse effect on our results of operations and liquidity; our financial performance which may be affected by the prospect of our Dubai facility and the associated expansion into Middle East, Europe and other parts of Asia; the withdrawal of preferential government policies, the tightening control over the Chinese automotive industry, automobile purchase restrictions imposed in certain major cities which may limit market demand for our products; the slowing of Chinese automotive industry's growth; the concentration of our distributors, customers and suppliers; and other risks detailed in the Company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or to changes in its expectations, except as may be required by law.  Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that its expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

The following table shows a reconciliation of cash, cash equivalents and restricted cash on the condensed consolidated balance sheets to that presented in the above condensed consolidated statements of cash flows.

 

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS




June 30,


December 31,



2018


2017



US$


US$

ASSETS





Current assets:





Cash and cash equivalents


72,721,460


190,392,211

Restricted cash


263,254,352


129,699,454

Time deposits


113,351,268


288,023,017

Accounts receivable, net of allowance for doubtful accounts


308,622,962


298,868,984

Inventories


549,782,095


421,736,682

Prepaid expenses and other current assets


85,211,205


144,326,151

    Total current assets


1,392,943,342


1,473,046,499

Property, plant and equipment, net


813,775,162


835,561,739

Land use rights, net


31,226,580


31,943,652

Long-term prepayments to equipment and construction suppliers


507,306,748


190,627,514

Other non-current assets


16,102,868


12,924,279

    Total assets


2,761,354,700


2,544,103,683






LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY





Current liabilities:





Short-term loans, including current portion of long-term bank loans


635,504,864


775,396,929

Bills payable


519,466,191


252,768,510

Accounts payable


166,693,789


227,993,140

Amounts due to a related party


75,567,512


-

Income taxes payable


16,612,181


17,710,217

Accrued expenses and other current liabilities


153,355,737


138,605,509

    Total current liabilities


1,567,200,274


1,412,474,305

Long-term bank loans, excluding current portion


132,304,205


114,208,319

Deferred income


105,746,194


99,168,276

Other non-current liabilities


106,440,118


107,898,318

    Total liabilities


1,911,690,791


1,733,749,218






Redeemable Series D convertible preferred stock (redemption amount of US$252,601,000
and US$244,044,200 as of June 30, 2018 and December 31, 2017, respectively)


97,576,465


97,576,465






Stockholders' equity:





Series B preferred stock


100


100

Common stock, US$0.0001 par value, 500,000,000 shares authorized, 50,308,731 shares and 


5,031


4,975

    49,748,731 shares issued, 50,287,731 shares and 49,727,731 shares outstanding as of  





    June 30, 2018 and December 31, 2017, respectively





Treasury stock, 21,000 shares at cost


(92,694)


(92,694)

Additional paid-in capital


85,789,902


83,159,893

Retained earnings


695,114,448


648,790,469

Accumulated other comprehensive loss


(28,729,343)


(19,084,743)

    Total stockholders' equity


752,087,444


712,778,000

Commitments and contingencies


-


-

    Total liabilities, redeemable convertible preferred stock and stockholders' equity


2,761,354,700


2,544,103,683

 

 

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME




Three-Month Period Ended
June 30,


Six-Month Period Ended
June 30,



2018


2017


2018


2017



US$


US$


US$


US$










Revenues


317,329,520


313,555,663


627,782,553


551,395,860

Cost of revenues


(261,175,654)


(250,446,461)


(517,761,231)


(453,514,488)

    Gross profit


56,153,866


63,109,202


110,021,322


97,881,372










Selling expenses


(3,562,711)


(705,337)


(4,613,720)


(1,224,150)

General and administrative expenses


(11,348,767)


(8,844,582)


(20,223,776)


(15,898,253)

Research and development expenses


(5,288,636)


(9,546,922)


(10,338,534)


(15,398,022)

    Total operating expenses


(20,200,114)


(19,096,841)


(35,176,030)


(32,520,425)










    Operating income


35,953,752


44,012,361


74,845,292


65,360,947










Interest income


1,029,675


970,293


3,342,298


2,133,552

Interest expense


(11,274,575)


(11,951,851)


(24,168,780)


(21,973,827)

Foreign currency exchange gains (losses)


5,632,970


(1,870,977)


1,677,162


(2,347,062)

Losses on foreign currency option contracts


-


-


(520,981)


-

Government grant


1,378,484


1,023,922


2,856,043


2,463,453

    Total non-operating expense, net


(3,233,446)


(11,828,613)


(16,814,258)


(19,723,884)










    Income before income taxes


32,720,306


32,183,748


58,031,034


45,637,063










Income tax expense


(5,496,228)


(4,119,756)


(11,707,055)


(7,672,082)










    Net income


27,224,078


28,063,992


46,323,979


37,964,981










Earnings per common share:









Basic and diluted


0.41


0.43


0.70


0.58










Net Income


27,224,078


28,063,992


46,323,979


37,964,981










Other comprehensive income (loss)









Foreign currency translation adjustment, net of nil income taxes


(39,306,010)


13,751,361


(9,644,600)


17,669,664










    Comprehensive income (loss) 


(12,081,932)


41,815,353


36,679,379


55,634,645

 

 

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




Six-Month Period Ended June 30,   



2018


2017



US$


US$

Cash flows from operating activities:





Net cash provided by operating activities


228,168,429


166,636,423






Cash flows from investing activities:





Proceeds from maturity of time deposits


388,105,630


244,825,478

Purchase of time deposits


(210,380,884)


(215,714,244)

Purchase of land use rights


-


(6,214,207)

Purchase of and deposits for property, plant and equipment


(334,739,673)


(281,550,529)

Refund of deposit from an equipment supplier


60,054,417


75,197,802

Deposits for acquisition of equity


(3,640,688)


-

Government grant related to the construction projects


10,558,608


7,136,482

Net cash used in investing activities


(90,042,590)


(176,319,218)






Cash flows from financing activities:





Proceeds from bank borrowings


470,494,396


441,425,024

Repayments of bank borrowings


(587,236,484)


(311,342,509)

Net cash (used in) provided by financing activities


(116,742,088)


130,082,515






Effect of foreign currency exchange rate changes on cash, cash equivalents and restricted cash


(5,499,604)


7,995,135

Net increase in cash, cash equivalents and restricted cash


15,884,147


128,394,855






Cash, cash equivalents and restricted cash at beginning of period


320,091,665


271,575,847

Cash, cash equivalents and restricted cash at end of period


335,975,812


399,970,702






Supplemental disclosure of cash flow information:





Interest paid, net of capitalized interest


23,267,235


17,323,875

Income taxes paid


12,906,780


7,353,371

Non-cash investing and financing activities:





Accrual for purchase of equipment and construction included in accrued expenses and other
current liabilities


6,057,014


5,379,730



The following table shows a reconciliation of cash, cash equivalents and restricted cash on the condensed consolidated

balance sheets to that presented in the above condensed consolidated statements of cash flows.




June 30,   



2018


2017



US$


US$






Cash and cash equivalents


72,721,460


279,825,075

Restricted cash


263,254,352


120,145,627

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows


335,975,812


339,970,702

 

 

CHINA XD PLASTICS COMPANY LIMITED

Reconcilation of Net Income to EBITDA

(Amounts expressed in United States Dollars)








Three Months Ended



June 30,



2018


2017






Net income


$27,224,078


$28,063,992

Interest expense


11,274,575


11,951,851

Provision for income taxes


5,496,228


4,119,756

Depreciation and amortization expense


11,348,832


10,585,602

EBITDA


55,343,713


54,721,201

 

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