China XD Plastics (CXDC) Reports Q2 EPS of $0.26 on Revenues of $283.2M

China XD Plastics (NASDAQ: CXDC) reported Q2 EPS of $0.26, versus $0.60 reported last year. Revenue for the quarter came in at $283.2 million, versus $463.07 million reported last year.

Second Quarter 2020 Financial Highlights

• Revenue was $283.2 million, a decrease of 38.8% YoY and an increase of 95.6% sequentially
• Gross profit was $39.9 million, a decrease of 38.9% YoY and an increase of 667.3% sequentially
• Gross margin was 14.1%, consistent YoY and an increase of10.5%sequentially
• Net income was $17.6 million, compared to net income of$40.1million in the same period last year and net loss of $11.0 million sequentially
• EBITDA was $44.9 million, a decrease of 35.9% YoY and an increase of 106.9% sequentially. A description of the adjustments from GAAP net income to EBITDA is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.
• Total volume shipped was 56,510 metric tons, down 47.0% YoY and an increase of 99.5% sequentially

"We are pleased with our quarterly results with recovery in both top and bottom lines," said Jie Han, Chairman of the Board of Directors and Chief Executive Officer. "During the first half of this year, we have witnessed severe disruption in both production and sales of China's auto industry, and the production and sales in the first half of this year showed a year-on-year decline, as the result of the COVID-19 pandemic. Amid the negative economic and industry environment, during the three-month period ended June 30, 2020,China XD proactively fine-tuned its marketing strategy to promote sales of new categories of higher-end products of PA66 and PA6 produced with high-priced raw materials with higher selling price in domestic market. This was evidenced by sales growth in Southwest China, East China and South China, and average RMB sales price increased by 19.7%,partially offset the decreased sales volume of 47.0%."

"Along the Chinese government recently issued supportive policies toward enterprises reopening, we will continue to focus on our customers' need, synchronize our production and sales to pursuestable sales increase. At the same time, we will continue to complete our infrastructure projects in Heilongjiang and Sichuan campus as planned, thus bringing the production capacity in Heilongjiang Campus back to 390,000 metric tons and bringing the total capacity of Sichuan base to 300,000 metric tons by the end of 2020. 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 major banks to successfully execute our expansion strategy in multiple regions and sectors, and confident with our core market positioning."Mr. Han concluded.

Financial Condition

As of June 30, 2020, the Company had US$290.8 million in the total amount of cash and cash equivalents, restricted cash and time deposits, representing an increase of US$62.4 million or 27.3% as compared to US$228.4 million as of December 31, 2019, mainly due to the financing activity cash inflows. As of June 30, 2020, working capital was US$276.8 million (current assets minus current liabilities) and the current ratio (current assets divided by current liabilities) was 1.2, as compared to the current ratio of 1.0 as of December 31, 2019. Stockholders' equity as of June 30, 2020 was US$876.6 million, increased by 4.8% as compared to US$836.4 million as of December 31, 2019, primarily due to the increase of US$45.9 million non controlling interests.

Prepaid expenses and other current assets increased by US$233.6 million or 136.0% primarily due to (i) an increase of US$308.5 million in receivables due from third parties, partially offset by (ii) a decrease of US$42.6 million in trade receivables, and (iii)a decrease of US$26.6 million advances to suppliers for purchasing raw materials. The aggregate short-term and long-term bank loans increased by 34.3% 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. LinyuanZhai, 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 16.8% and 16.9% for the first half year 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 an ongoing 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.

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