Liuyang Fireworks Announced First Quarter 2012 Financial Results and Expanded Manufacturing Capacity and Distribution Channel

TORONTO, Nov. 30, 2011 /CNW/ - Liuyang Fireworks Limited (TSX-V: FWK) ("Liuyang" or "the Company") today announced financial performance for the first quarter 2012 ended September 30, 2011 and expansion activities.

Highlights for the 3 month period ending September 30, 2011

  • Improved domestic sales led to a 14.4% increase in revenues during the 3 month period to September 30th, 2011 compared with the same period of 2010.

  • The company has had a successful marketing program for fiscal year of 2012 with the completion of three fireworks displays as well as organizing the 10th annual China (Liuyang) International Fireworks Festival

  • As at September 30, 2011 the Company had cash of $6.7 million and total bank debt of $6.0 million.

  • The company has expanded its efforts to increase its manufacturing capacity and distribution channel by setting two JVs in Hunan Province. One wholesale JV is located in Youxian city, Hunan province; the other manufacturing JV is located in Liuyang city, Hunan province.  These steps will enable the company to obtain a new wholesale license and provide more quality products to customers

The first quarter 2012 financial results represent increased sales revenue, but were offset by lower domestic sales price and higher financing costs which affected net income. The cash and working capital have increased from last year due to the Company's emphasis on working capital management in the period.

"We are excited about the progress we have made this year.  Our new manufacturing JV will improve the Far Ocean brand awareness in the Chinese domestic market.", said Mr.Hu, Liuyang's president and CEO.  "All of these initiatives will provide a strong base from which further growth developments can arise. The Company expects improvement in domestic sales both in term of volume and price in the 2012 spring festival sales season as we continue to expand our domestic sales network."

SUMMARY FINANCIAL STATEMENTS

In thousands except share and %
data
    Three months
ended September 30, 2011
    Three months
ended September 30, 2010
    Change
(%)
Revenue     $3,927     $3,433     14.4%
Gross profit     $1,501     $1,465     3.8%
Gross margins     38.2%     42.7%     (4.5%)
EBITDA     $246     $582     (57.7%)
EBITDA before stock-based compensation     $456     $630     (27.6%)
Net Income     $92     $498     (81.4%)
Net Income (loss) per share  Basic     
Diluted
    0.002
0.001
    0.011
0.010
    (81.8%)
(90.0%)
Balance Sheet Highlight                  
Cash     $6,741     $2,173     210.3%
Current ratio     1.69:1     1.75:1     (3.6%)
Working capital     $7,501     $3,952     89.8%
Total assets     $20,437     $15,037     35.9%
Debt to equity ratio     1.15:1     0.89:1     29.2%

Review of First Quarter 2012 Financial Results

During the three month period ended September 30, 2011, revenues were $3.93 million compared with $3.43 million for the same period of 2010.  This represented an increase of 14.4% which is mainly due to expanded production capacity at certain facilities, and production improvements which resulted increased China domestic sales.

Gross profit was $1.50 million for three months ended September 30, 2011, compared to $1.47 million for the period ending September 30, 2010, representing an increase of 3.8%. Gross margin as a percentage of sales for three months ended September 30, 2011 decreased to 36.2% from 43.7% during the period ending September 30, 2010 despite a revenue increase of $0.5 million. The increase in gross profit was attributable to higher products volume and the higher revenue achieved as a result of the Company's increased focus on domestic China market. The decrease of gross margin as a percentage of sales was primarily attributed to the Company increasing domestic sales market shares by lowering the sales price which produced a lower gross profit margin. The Company believes that it will gradually increase the domestic sales price once Far Ocean brand is more recognized in China domestic market.

EBITDA for three months ended September 30, 2011 decreased by 57.7% to $0.25 million from $0.58 million during the same period of 2010 which is attributed to higher interest expenses, and stock-based compensation as well as the lower net income.

Net earnings for the three months ended September 30, 2011 decreased by 81.4% to $0.01 million compared with the three months ended September 30, 2010.   The decrease in net earnings was due to decreased gross margin and higher general & administrative expenses as well as finance costs during the period.

At September 30, 2011, the Company reported cash of $6.74 million and working capital of $7.50 million. These figures compare to $2.17 million and $3.95 million respectively at September 30, 2010. The Company has sufficient cash and working capital to continue its growth and expansion plans in 2012.

Liuyang's consolidated financial statements for the period ended September 30, 2011 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities within applicable timelines and will be available via SEDAR at www.sedar.com.

About Far Ocean Youxian Fireworks Company

On July 8, 2011, Hunan Liuyang Fireworks Ltd. incorporated Far Ocean Youxian Fireworks Company ("Far Oean Youxian") under business laws of China. Hunan Liuyang Fireworks Ltd. owns 70% of Far Ocean Youxian. Far Ocean Youxian is in the process to obtain a wholesale license from local government and will start to operate in 2012 spring festival sales season.

About Far Ocean Yongxin Fireworks Company

On November 2, 2011, Hunan Liuyang Fireworks Ltd. signed a letter of intent to set up a new Joint Venture manufacturing company ("Far Ocean Yongxin"). Under the terms of this joint venture, Hunan Liuyang Fireworks Ltd will acquire 51% interest of the proposed new entity. The new company will start to operate in December 2011 and is expected to contribute significantly to the Company's future production capacity.

About Liuyang Fireworks Limited

Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks distributed both domestically and within more than 15 countries in North America, South America and Europe.  The Company has more than 17 years of experience in the fireworks industry and is a supplier to the world's top five fireworks wholesalers and retailers.   Liuyang's ISO9001-certified manufacturing facilities are located in the Liuyang area of Hunan, China, where more than half of the world's fireworks are produced.

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date.  Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date.  While the Company may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

 

 

 

 

SOURCE Liuyang Fireworks Limited

For further information:

Jacky Long
Chief Financial Officer
Liuyang Fireworks Limited
Tel : 647 350 8818
jackylong@farocean.com
 

 

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Liuyang Fireworks Limited

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