Liuyang Fireworks Report Solid Third Quarter Results Despite Challenging Chinese Market Conditions

TORONTO, May 31, 2013 /CNW/ - Liuyang Fireworks Limited (TSX-V: FWK) (Liuyang) today announced financial results for its third quarter and nine months ended March 31, 2013. All amounts are in Canadian dollars unless otherwise indicated.

In a year marked by industry-wide issues related to high pollution levels in Beijing and across China, Liuyang managed to maintain a profitable operation and remain competitive in the face of challenges in the domestic marketplace.

Highlights for the third quarter:

  • The Company achieved revenue of $6.1 million during the quarter compared with $7.1 million during the same period of 2012.
  • Continued growth in domestic sales was achieved which represented 58% of total revenue during the quarter;
  • Gross profit of $2.1 million was achieved during the quarter represented 34.1% gross margin compared with 37.6% during the third quarter of 2012;
  • Net income was $282,000, or $0.005 per share compared with $482,000 in the corresponding period of 2012;
  • As at March 31, 2013, the company had a cash position of $2.8 million and total bank debt of $5.7 million;
  • New product development was initiated in response to environmental concerns and fireworks regulatory changes in China;
  • Completed construction of a new warehouse for Far Ocean Youxian Company (a wholesale distribution company 70% owned by Liuyang).

"Despite unusual and adverse market circumstances related to excessive smog conditions in Beijing and other cities, we continued with our expansion plans and maintained satisfactory profitability in addition to having lower international sales revenue related to timing differences, as some of our U.S. market order shipments were pushed back to deliver in April, 2013" said Mr.Hu, Liuyang's president and CEO. "During the quarter we completed a $714,000 warehouse project for our wholesale distribution joint venture, Far Ocean Youxian Company.  We fully expect to maintain our expansion in the quarters and years ahead as we work to remain a leading fireworks manufacturer in China and around the world. Given our solid market position, quality management team, and strength in the domestic and international market, there is no reason why this cannot be achieved" states Mr. Hu.

Summary Financial Statements

 
'000 C$
(except per share and % data)
3 months ended March 31 9 months ended March 31
2013 2012 2013 2012
Revenue $6,139 $7,061 $15,772 $16,962
Gross profit $2,141 $2,658 $5,942 $6,444
Gross margins 34.9% 37.6% 37.7% 38.0%
EBITDA $535 $787 $1,241 $1,544
EBITDA before stock-based
compensation
$542 $823 $1,273 $1,880
Net income $282 $482 $670 $854
Net income per share Basic $0.005 $0.009 $0.012 $0.015
  Diluted $0.004 $0.006 $0.010 $0.011

Balance Sheet Highlights

   
'000 C$
(except ratio data)
3 months ended March 31
2013 2012
Cash $2,821 $6,055
Current ratio 1.76:1 1.75:1
Working capital $8,078 $8,180
Total assets $22,492 $21,688
Debt to equity ratio 0.89:1 1.00:1

Review of Results

Liuyang's revenue for the third quarter fell 12.8% to $6.1 million as some fireworks display shows planned for the China Spring Festival (February 8 to February 22, 2013) were cancelled and certain U.S. market shipments were rescheduled for delivery in April 2013. The fireworks display show were cancelled due to concerns over increased smog levels in Beijing and other cities in China following media reports indicating that widespread use of fireworks was a contributor to heightened levels of smog. Revenue for the third quarter was comprised of 58% domestic revenue and 42% international revenue.

Gross profit for the quarter was $2.1 million, down $500,000 or 19.5% from the corresponding quarter in 2012. The decrease in gross profit was attributable to lower product volumes for both the domestic and international markets. Gross margin as a percentage of revenue decreased by 2.7% to 34.9% as lower margin products were sold to international markets faced with an economic downturn.

EBITDA for the quarter was $536,000, representing a decrease of $252,000, or 32%, compared with the third quarter in 2012. EBITDA before stock-based compensation expense decreased by $280,000, or 34.1%, for the quarter.

Net income was $282,000 or $0.005 per share ($0.004 diluted), compared to $482,000, or $0.009 per share ($0.006 diluted) for the same period in 2012.

At March 31, 2013, Liuyang held cash of $2.8 million and working capital of $8.1 million. These figures compare to cash of $6.1 million and working capital of $8.2 million at March 31, 2012. Liuyang expects its cash flow from operations to be sufficient to continue its growth and expansion plans for the balance of fiscal 2013.

Liuyang's consolidated financial statements for the three and nine months ended March 31, 2013, and related Management's Discussion and Analysis (MD&A) are filed with securities regulatory authorities within applicable timelines and available via SEDAR at www.sedar.com.

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 over 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 Province, China, where more than half of the world's fireworks are produced.

Forward-Looking Statements

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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