China XD Plastics Announces Second Quarter 2014 Financial Results

HARBIN, China, August 12, 2014 /PRNewswire/ -- China XD Plastics Company Limited (NASDAQ: 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 its financial results for the second quarter ended June 30, 2014.

Second Quarter 2014 Financial Highlights:

• Revenues were $264.2 million, an increase of 30.7% from $202.2 million in the second quarter of 2013
• Gross profit was $52.3 million, an increase of 40.6% from $37.2 million in the second quarter of 2013
• Gross margin was 19.8%, compared to 18.4% in the second quarter of 2013
• Net income was $19.8 million, compared to $20.8 million in the second quarter of 2013
• Total volume shipped was 81,284 metric tons, up 16.3% from 69,915 metric tons in the second quarter of 2013

"We are pleased to again report solid revenue growth and improved profitability this quarter," said Jie Han, Chairman of Board of Director and Chief Executive Officer of China XD. "Growth reflected our leading market share in Northeast China, accelerating penetration of the market in East China and the initiation of sales overseas. Importantly, higher-value products continue to grow in our product mix, enabling a higher average selling price reflected in the fact that revenues grew faster than tonnage volume."

Mr. Han continued, "Because of the exciting growth opportunities we see in our markets, we continue to step up our research and development spending. We take pride in being a profitable growth company, but do recognize that directing more gross profit into new product development can help us sustain, or even accelerate, our growth rate in the years to come. We continue to tightly control our selling and general expenses in line with our corporate culture."

Second Quarter 2014 Results

Revenues for the second quarter of 2014 were $264.2 million, representing a year-over-year increase of 30.7% from $202.2 million in the second quarter of 2013. The increase in revenues was due to approximately 16.3% increase in sales volume and 13.6% increase in the average RMB selling price. Revenues from East China and Northeast China increased by 45.4% and 19.0%, respectively, during the second quarter of 2014 when compared to the second quarter of 2013.

Volume growth was achieved due to strong demand from the automotive industry in China, a combination of growing sales volume of high-end automobiles to Chinese consumers, the increased advanced plastics in automotive parts, and the continuing replacement of imported polymer composite materials with domestic supply. The increase of our average selling price was mainly due to the shift of product mix toward more advanced polymers.

During the quarter, the Company sold US$20.0 million to Korean market high-end standardized products. This accounted for 7.6% of total revenues.

Gross profit was $52.3 million, up 40.6% from $37.2 million in the second quarter of 2013. Gross margin was 19.8%, compared to 18.4% in the same period of the prior year primarily due to the ongoing mix shift to more advanced products, mainly including modified PA66 and plastic alloys, which grew to 75.3% of our revenues, as compared to 65.1% in the same period of the prior year. Gross margin also benefitted from reduced sales discounts for lower-end products such as modified PP and ABS.

General and administrative (G&A) expenses were US$4.5 million in the quarter ended June 30, 2014, compared to US$2.9 million in the same period in 2013, representing an increase of 55.2%, or US$1.6 million. The increase consisted of US$1 million of additional payroll expense resulting from new hires and salary increases, US$0.2 million of additional office and communication expense, and US$0.3 million of new rental costs associated with growth of the business.

Research and development ("R&D") expenses were US$13.4 million during the quarter ended June 30, 2014, compared with US$5.8 million during the same period in 2013, an increase of US$7.6 million, or 131.0%, reflecting increased research and development activities on new products. The expense consisted primarily of consumption of raw materials for various experiments for both automotive and non-automotive applications. As of June 30, 2014, the Company was performing 151 ongoing research and development projects. The consumption of raw materials for these projects accounted for 93% of total R&D expenses for the quarter.

Net interest expense was US$8.2 million for the three-month period ended June 30, 2014, compared to net interest expense of US$1.9 million in the same period of 2013. The increase of net interest expense was due to (i) an increase of US$4.7 million interest expenses resulting from the guaranteed senior notes issued on February 4, 2014 (the "Notes"), (ii) an increase of US$ 3.5 million associated with bank loans used to fund future capacity expansion in Southwest China and Dubai, and (iii) partially offset by the increase of interest income of US$2.0 million because of increase of time deposits.

Operating income for the second quarter of 2014 was $34.3 million, or 13.0% of revenues, an increase of 20.4% over operating income from $28.5 million, or 14.1% of revenues in the same period a year ago.

Net income for the second quarter of 2014 was $19.8 million, compared to a net income of $20.8 million for the same period of the prior year. Basic and diluted earnings per share were both $0.30, when compared to last year's results, which was at $0.32, respectively.

Basic average numbers of shares used in computation of basic and diluted earnings per share for the three months ended June 30, 2014 were 48.8 million, compared to 47.8 million in the same period of the prior year.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) for the second quarter of 2014 was $41.8 million, an increase of 14.2% from EBITDA of $36.6 million in the same period of the prior year. For a detailed reconciliation of EBITDA, a non-GAAP measure, to its nearest GAAP equivalent, please see the financial tables at the end of this release.

Financial Condition

As of June 30, 2014, China XD Plastics had $132.8 million in cash and cash equivalents, $376.1 million in time deposits with commercial banks, $576.8 million in working capital (current assets minus current liabilities) and a current ratio (current assets divided by current liabilities) of 2.5. Stockholders' equity as of June 30, 2014 was $442.4 million, compared to $412.3 million as of December 31, 2013.

Restricted cash increased by 47.4% as a result of short-term bank deposits that are pledged as collateral for letter of credit and bills payable relating to purchase of raw materials. Inventories increased by 57.3% during the quarter as the Company purchased raw materials in anticipation of growing sales. Other non-current assets increased by 1,418.8% due to prepayments for equipment to be purchased for the Dubai plant. The Company paid down short-term loans as it utilized more long-term bank loans to support upcoming capacity expansion in Southwest China and Dubai. As a result, short-term loans decreased by 41.5% while long-term bank loans increased by US$162.4 million. Bills payable increased by 52.0% due to purchases from our domestic raw material suppliers. As of June 30, 2014, notes payable was US$148.5 million due to the issuance of US$150 million, 11.75% guaranteed senior notes due in 2019, net of discount.

Business Outlook and Guidance

Based on the Company's strong performance during the quarter and positive outlook for growing customer demand in the second half of the year, the Company reiterates its revenue guidance for 2014. The Company expects full-year sales to range between $950 million and $1.05 billion and net income to range between $100 million to $120 million. This forecast is based on constant exchange rates and the anticipated interest expense associated with both its long and short-term debt, and reflects the Company's current and preliminary view, which is subject to change.

Conference Call

China XD Plastics' management will host a conference call at 8:30 a.m. ET on Tuesday, August 12, 2014, to discuss its second quarter 2014 financial results. The conference call may be accessed by calling +1 (855) 298-3404 (for callers in the U.S.), +86-4001-200-539 (for mainland China callers) or +852-5808-3202 (for Hong Kong callers) and entering pass code 2535066.

A recording of the conference call will be available through August 19, 2014, by calling +1 (866) 846-0868 (for callers in the U.S.) and entering pass code 2535066.

A live webcast and replay of the conference call will be available on the investor relations page of the Company's website at http://www.chinaxd.net.

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 24 automobile brands manufactured in China, including without limitation, AUDI, BMW, Toyota, Buick, Mazda, and VW Passat, Golf, and Jetta. 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 June 30, 2014, 300 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 http://www.chinaxd.net.

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 ability to raise additional capital to finance the Company's activities; the Company's and its subsidiaries' ability to fully perform all of their obligations under the Notes transaction and other contractual obligations applicable to them; the effectiveness, profitability, and the marketability of its the ongoing mix shift to more advanced products; legal and regulatory risks; the Company's ability to execute its growth strategy and the effectiveness of its increased research and development spending; the future trading of the common stock of the Company; the Company's ability to operate as a public company; the period of time for which its current liquidity will enable the Company to fund its operations; general economic and business conditions; the volatility of the Company's operating results and financial condition; the Company's ability to attract or retain qualified senior management personnel and research and development staff; 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. These 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 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.

Contacts:

China XD Plastics

Mr. Taylor Zhang
CFO (New York)
US Phone: +1 (212) 747-1118
Email: cxdc-ir@chinaxd.net

ICR

Mr. Gary Dvorchak, CFA
Gary Dvorchak, CFA
Senior Vice President
US Phone: +1 (310) 954-1123
China Phone: +86 138 1079 1408
Email: Gary.Dvorchak@icrinc.com