China XD Plastics (CXDC) Reports Q1 Loss of $0.16 on Revenues of $144.8M

China XD Plastics (NASDAQ: CXDC) reported Q1 EPS of ($0.16), versus $0.16 reported last year. Revenue for the quarter came in at $144.8 million, versus $301.47 million reported last year.

First Quarter 2020 Financial Highlights

• Revenue was $144.8 million, a decrease of 52.0% YoY and a decrease of 53.4% sequentially
• Gross profit was $5.2 million, a decrease of 89.7% YoY and a decrease of 88.1% sequentially
• Gross margin of 3.6%, a decrease of 13.1% YoY and a decrease of 10.5% sequentially
• Net loss was $11.0 million, compared to net income of $11.0 million in the same period last year and net loss of $65.0 million sequentially
• EBITDA was $21.7 million, a decrease of 54.4% YoY and an increase of 179.5% sequentially. A description of the adjustments from GAAP net loss to EBITDA is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.
• Total volume shipped was 28,326 metric tons, down 70.0% YoY and a decrease of 57.7% sequentially

"Due to the COVID-19 pandemic, China's auto industry was hit hard with production and sales decreased by 45.2% and 42.4%, respectively for the first quarter of 2020. The Company's manufacturing facilities in Harbin and Sichuan were temporarily shut down in February and March 2020 while our Dubai facilities' operation has been suspended since early February 2020, pursuant to the local government directives. During the first quarter of 2020, the Company's revenue decreased by 52.0%, and our domestic sales decreased by 51.1% in all regions, as compared to the same period of the last year. The Company has taken proactive measures to respond to these changes from the supply disruption and the decreased orders of auto industry. We continued to promote sales of high-priced semi-finished goods in domestic market during the first quarter of 2020. We are pleased to see an overall increase of 65.6% in the average RMB selling price of our products, to partially offset the decreased sales volume of 70.0%. "

"Meanwhile, China XD has responded to the COVID-19 pandemic by producing raw materials for PPE such as goggles and masks, to help alleviate the pandemic to our communities and mitigate the negative impact of world pandemic on Chinese auto industry."

"We also resumed our commitment to completing our industrial project for upgrading existing equipment for 100,000 metric tons of engineering plastics by the end of third quarter of this year, and our Qinling Road Project and Jiangnan Road Project for equipment upgrade and factory revamping by the end of the fourth quarter of 2020, thus bringing the production capacity in Heilongjiang Campus back to 390,000 metric tons. At the same time, we expect to complete additional 10 production lines in our Sichuan plant by the end of the fourth quarter of this year, thus to bring the total capacity of Sichuan base to 300,000 metric tons. Together with the production capacity ramp up in Dubai, we are confident in our ability to make further inroads into more specialized high-end products for various applications in more other markets"

"We will continue to optimize our management structure and enhance our operating efficiency. We are confident, through our cooperation with Chinese big banks to successfully execute our expansion strategy in multiple regions and sectors, and to be confident with our core market positioning and expanded platform for growth," Mr. Han concluded.

Financial Condition

As of March 31, 2020, the Company had US$190.4 million in the total amount of cash and cash equivalents and restricted cash, a decrease of US$38.0 million or 16.6% as compared to US$228.4 million as of December 31, 2019，mainly due to the operating cash outflows. As of March 31, 2020, working capital was US$34.1 million (current assets minus current liabilities) and the current ratio (current assets divided by current liabilities) was 1.0, as compared to the current ratio of 1.0 as of December 31, 2019. Stockholders' equity as of March 31, 2020 was US$812.8 million, decreased by 2.8% as compared to US$836.4 million of December 31, 2019 primarily due to the net loss incurred during the three-month period ended March 31, 2020 due to the negative impact of COVID-19 pandemic.

Prepaid expenses and other current assets increased by 40.7% or US$69.9 million primarily because (i) advances to suppliers for purchasing raw materials increased by US$111.9 million; partially offset by (ii) a decrease of US$42.6 million of receivables from Hong Kong Grand Royal Trading Co., Ltd. Accrued expenses and other current liabilities increased by 40.5% mainly due to the increase of US$28.0 million of contract liabilities and the increase of US$6.1 million accrued freight expenses. The aggregate short-term and long-term bank loans increased by 1.5% due to using the line of credits to support operating and investing activities in HLJ Xinda Group and Sichuan Xinda. We define the manageable debt level as the sum of aggregate short-term and long-term loans over total assets.

Recent Development

On May 8, 2020, the Board of Directors of the Company received a preliminary nonbinding proposal letter from Mr. Han, our Chairman and Chief Executive Officer, XD. Engineering Plastics Company Limited (together with Mr. Han, the "Buyer Group"), a company incorporated in the British Virgin Islands and wholly owned by Mr. Han, proposing to acquire all of the outstanding shares of common stock of the Company not already beneficially owned by the Buyer Group in a "going-private" transaction. The Board of Directors has established a special committee (the "Special Committee"), consisting of the following independent directors of the Company: Mr. Linyuan Zhai, Mr. Huiyi Chen and Mr. Guanbao Huang, with Mr. Huiyi Chen serving as chairperson of the Special Committee. The Special Committee is responsible for evaluating, negotiating and recommending to the Board any proposals involving a strategic transaction by the Company with one or more third parties. On June 15, 2020, the Company entered into an agreement and plan of merger in connection with the proposed going-private transaction. For details, please refer to the Company's Form 8-K filed on June 15, 2020. There can be no assurance that the merger agreement or the transactions contemplated thereunder or any alternative transactions will be approved by our stockholders or consummated.

Financial Guidance and Business Outlook

As a result of the outbreak of COVID-19 in the PRC, China Auto Industry production and sales drastically decreased by 33.4% and 31.14% for the first four months of 2020, according to the China Association of Automobile Manufacturers. It has a ripple effect and impact throughout China auto supply chain, including the Company.

Due to the fact that the Company had temporarily closed some of its manufacturing facilities and offices in the PRC in accordance with the requirement of the PRC government, the ongoing COVID-19 pandemic has had a material adverse effect on our business operations. In light of these circumstances and continuing uncertainties, the Company will not be able to forecast its financial guidance for fiscal 2020 until further notice.

For earnings history and earnings-related data on China XD Plastics (CXDC) click here.

You May Also Be Interested In

• Z Squared outlines AI power strategy and Paradox Data acquisition
• SpaceX completes record $60 billion acquisition of AI coding platform Cursor
• Sphere 3D posts $13.8M Q2 loss after Cathedra merger