CXDC

China XD Plastics Company Limited (CXDC)

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China XD Plastics Co. Ltd. (CXDC)

Q3 2012 Earnings Call

November 13, 2012 09:00 AM ET

Executives

James Mu – IR

Taylor Zhang – CFO

Jie Han – Chairman & CEO

Analysts

Raj Maheshwari – Charlestown Capital

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to CXDC 3Q FY 2012 earnings conference call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions). I must advice you that this conference is being recorded today, Tuesday the 13th of November, 2012. I would now like to hand the conference over to your first speaker today, Mr. James Mu. Thank you, please go ahead.

James Mu

Thank you operator. Good morning and good evening to those in China and thank you for joining us for the China XD Plastics third quarter 2012 financial results conference call. Joining the call today are Mr. Jie Han, Chairman and CEO, Mr. Qingwei Ma, Chief Operating Officer and Mr. Taylor Zhang, Chief Financial Officer and Mr. Junjie Ma, Chief Technology Officer. Earlier today, China XD Plastic issued a press release announcing its third quarter of 2012 financial results.

Before management’s presentation, I will like to refer to the safe harbor statements in connection with today's conference call and remind our listeners that management’s prepared remarks and the questions and answer session during this call may contain forward-looking statements such as statements reflecting management’s current believes regarding anticipated completion and deployment of additional production lines and capacity, market trends, expansion into different geographic areas and market segments outside automotive sector, revenue and net income guidance and our future growth prospects and market position. These statements by their nature are subject to risk and uncertainties. The company therefore claims the protection of the safe harbor for forward-looking statements that is contained in the Private Security Litigation Reform Act of 1995. Actual results may differ from those discussed today and we refer you to a more detailed discussion of the risk and uncertainties in the company’s filing with the Securities and Exchange Commission also known as the SEC. A more comprehensive description of risk and uncertainties that may impact the company’s forward-looking statements is contained in the company’s filing with SEC. in addition, any projection as to the company’s future performance represents management’s estimates as of today November 13, 2012. China XD Plastic assumes no obligation to update projections in the future as market conditions change. To supplement its financial results, present in the quarter with the US GAAP. Management will make reference to certain non-GAAP financial measures which the company believes provide meaningful additional information to better understand its operating performance. A table reconciling non-GAAP measures to mirrors GAAP equivalent can be found on earnings press release issued today.

I will now like to turn the call over to Mr. Han. Mr. Han will be speaking in Chinese and I will translate his presentation into English. Mr. Han, please go ahead.

Jie Han

[Interpreted]

Thank you James and welcome to all of you who have joined us today. I am pleased to report another quarter of record revenues and profit growth especially during the changing and challenging macro environment affecting different industries in China. The performance of this quarter speaks volume of our proactive of future penetrating our less entrench the north east China markets with a focus on higher end applications used in more luxury car models an increase from 17.8% to 21.1% and 19.5%, 22.28% as a percentage of total revenues as compared to the same period of fiscal year 2011 offsetting the slower growth in our traditional north east china market. In addition, the number of sales distributors was increased by one from second quarter of fiscal 2012 bringing our total number of sales distributors to eight.

Our overall business performance remains very solid and as evidenced by 57.7% increase in volumes shipped to 61,589 metric tons in this quarter up from 39,057 metric tons I the third quarter of 2011. We continue to ship our product mix towards higher value item products which tend to have stronger and increasing market demand. Average selling price increased by 3.6% in the third quarter compared to the same period last year partially resulting from the set factor. We are very pleased with this progress and believe this positive results reflect our ability to take advantage of the growth prospects in our market.

As part of our long term growth strategies, we have continued to increase R&D in developing high value add products and obtaining new certifications from automotive manufacturers. By the end of third quarter 2012, 236 of our product has been certified by automobile manufacturers also known as AM. As many of you know, product certifications are an important part of our business and are leading number of certifications gives us a significant competitive advantage as we continue to expand our customer base in China’s growing high quality modified plastic sector.

Meanwhile with our schedule, the 20 new production lines in our third quarter production base launched in December 2011 contribute a promisedly (ph) 22,825 tons of production during the third quarter of 2012. In addition, the construction of the third additional workshop of three additional workshops has been completed and most of the 30 additional production lines were delivered to our site on schedule for us to complete the installation and trial run in December of 2012 which will further expand our annual capacity potential by promisedly (ph) 135,000 metric tons and support our future growth in 2013.

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