TORONTO, Aug. 27 /CNW/ - Liuyang Fireworks Limited (TSX-V: FWK)
("Liuyang" or "the Company") today reported its financial results for
the three- and six-month periods ended June 30, 2010. All amounts are in
Canadian dollars unless otherwise stated.
Selected Financial Highlights
(in thousands except share or % data)
Adjusted net income
Earnings per share
"Our second quarter performance was marked by a focused execution of our
strategy to grow market share and become the most vertically integrated
fireworks company in China," said Miao Hu, President and Chief Executive
Officer, Liuyang Fireworks Limited. "Our efforts resulted in revenue
growth of 37%, higher net income by 20% on a comparative basis to last
year, and most importantly, the acquisition of two wholesale licenses
that will drive our growth in the coming periods."
Second Quarter 2010 Highlights:
Entered the wholesale market by launching a joint venture named
Haining Jiale Liuyang Fireworks Co. based in China's Zhejiang
province. The joint venture brings together Liuyang's products with
Haining Jiale's wholesale experience and proximity to Shanghai,
China's leading market for fireworks.
Completed a second wholesale license acquisition and launched a new
joint venture named Hangzhou Wanjia Huasheng Fireworks Co., based in
China's Zhejiang province.
Review of Second Quarter 2010 Financial Results
Q2 2010 was $3.0 million, up 37% from $2.2 million for the corresponding
period of 2009. Excluding the impact of strengthening Canadian dollar,
Liuyang's revenue for Q2 2010 would have been $3.4 million, representing
a 56% increase over Q2 2009.
The revenue growth is due to increased product sales linked to seasonal
events and public holiday celebrations in international markets. The
growth was also attributable to increased sales in the domestic Chinese
market consistent with the Company's strategy. On a segmented basis,
Liuyang generated 72%, or $2.2 million, and 28%, or $0.8 million, from
international and domestic markets, respectively.
On a six-month basis, revenue for 2010 was $5.7 million, up 19.7% from
$4.7 million for 2009.
Gross profit for Q2 2010 was $1.0 million or 35.4% of sales, compared
with $0.9 million, or 42.2% of sales, for the corresponding period of
2009. The decline in gross margin was due to attractive pricing and the
implementation of incentive programs designed to gain market share
primarily within the domestic Chinese market.
On a year-to-date basis, gross profit and gross margins for 2010 were
$1.9 million and 35%, respectively. These compare to $1.9 million and
41.2%, respectively, for 2009.
Total operating expenses for Q2 2010 were $0.8 million, up 24% from $0.6
million for Q2 2009. The increase was attributable primarily to higher
selling expenditures and stock-based compensation expenses during the
quarter. These increased operating costs were offset by a reduction in
general and administrative and amortization expenses.
On a six-month basis, operating expenses for 2010 were $1.6 million, up
36% from $1.1 million for 2009. The growth was principally due to higher
selling and stock compensation expenses.
EBITDA for Q2 2010 was $294,000, down from $347,000, for the
corresponding period of 2009. The decline was largely due to non-cash
stock-based compensation expenses and higher selling expenses.
On a year-to-date basis, EBITDA for 2010 was $477,000, up 37.5% from
$347,000 for 2009.
Net income for Q2 2010 was $208,000 or $0.004 per fully diluted share,
compared with $174,000, or $0.004 per fully diluted share for the second
quarter of 2009.
Excluding a stock-based compensation charge of $135,503, adjusted net
income for Q2 2010 was $344,000. On a six-month basis, adjusted net
income for 2010 was $611,000. In 2009, Liuyang was a private company and
incurred no stock-based compensation charges.
At June 30, 2010, Liuyang had working capital of $4.0 million, including
cash and cash equivalents of $1.6 million. These compare to $4.5 million
and $2.0 million, respectively, at December 31, 2009.
"Our short-term focus will be to fully integrate our
two new wholesale joint ventures into our operations to drive market
share and revenue growth domestically," add Mr. Hu. "Over the longer
term, we are committed to a two-pronged strategy designed to accelerate
our growth. Internationally, we are focused on expanding our
distribution network to tap into growing demand for safe, high quality
fireworks. Domestically, we are focused on becoming the most innovative
and vertically integrated fireworks company that will combine
manufacturing, wholesale and display activities.
Liuyang's consolidated financial statements for the quarter ended June
30, 2010 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 href="www.sedar.com">www.sedar.com.
About Liuyang Fireworks Limited
Liuyang Fireworks Limited is
a leading China-based manufacturer of fireworks that are distributed
domestically and in more than 15 countries in North America, South
America and Europe. The Company has more than 16 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
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
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