China XD Plastics Company Limited (CXDC)

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China XD Plastics Company Limited (CXDC)

Q4 2012 Earnings Conference Call

March 25, 2013 09:00 ET


Jie Han - Chairman and Chief Executive Officer

Taylor Zhang - Chief Financial Officer

Qingwei Ma - Chief Operating Officer

Mr. Junjie Ma - Chief Technology Officer


Peter Siris - Hua-Mei



Welcome to the China XD Plastics’ Fourth Quarter and Fiscal Year 2012 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, there will be a Q&A session. As a reminder, this conference is being recorded and a replay is going to be available shortly after the call. I would now like to hand the call over to your host for today’s call, (Tom Zhou). Please go ahead.

Unidentified Company Speaker

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

Before management’s presentation, I would like to refer to the Safe Harbor statement in connection with today’s conference call and remind our listeners that management’s prepared remarks during this call may contain forward-looking statements, which are subject to risks and uncertainties. And then management may make additional forward-looking statements in response to your questions. The company therefore claims the protection of the Safe Harbor of forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today and we refer you to the more detailed discussion of the risks and uncertainties in the company’s filing with the Securities and Exchange Commission. A more comprehensive description of the company’s forward-looking statements is contained in the company’s filing with SEC. In addition, any projection as of company’s future performance represents management’s estimates as of today, March 25, 2013. China XD Plastics assume no obligation to update those projections in the future as market conditions change.

To supplement its financial results present to accordance with the U.S. GAAP, management will make reference to the EBITDA, a non-GAAP financial measure reconciled from net income, which the company believes, provide meaningful additional information to better understand its operating performance. A table reconciling net income to EBITDA can be found on the earning press release issued today.

I would 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

Thank you, Tom, and welcome to all of you who have joined us today. I am pleased to report another year of record revenues and profit. Performance of this year speaks volume of our proactive effort, especially during the changing and challenging macro environment affecting different industries in China. As our traditional Northeast China market phased into slower growth mode, we promptly adjusted our marketing strategy, including offering more relaxed pricing and margin and reducing our post-sales service fees to our distributors in 2012 in order to sustain our long-term growth as well as develop and cultivate our customer base.

Although our ASP increased less than the price of raw materials, our newly implemented marketing strategy yields further penetration to our less entrenched north and east China markets, an increase from 18.4% and 19.2% to 21.1% and 21.9% as a percentage of total revenues compared to the same period in fiscal 2011, offsetting the slower growth in our traditional Northeast China market. As a result, we have achieved our overall business objectives in 2012.

In addition, we added one more sales distributor in 2012, bringing our total number of sales distributors to eight. And as evidenced by the higher volumes shipped, we continue to experience strong demand for our product across our portfolio. The increase in average selling price was partially due to our continued shift in sales mix to non-modified PP, higher value-added products, which are typically sold at higher prices. As market demand grow in higher value-added products, as part of our long-term growth strategy, we remain committed to our investment in research and development. We believe this commitment is the key to future strengthening our market position and will help us deliver long-term value for our stockholders.

In 20 new production lines in our third production base launched in December 2011 contributed approximately 81,350 tons of production during the year ended December 31, 2012. In addition, the construction of the three additional workshops has been completed in our third production base and of the 30 additional production lines were delivered, installed and trial-run completed as scheduled in December of 2012 to further expand our annual capacity potential by approximately 135,000 metric tons to support our future growth in 2013.

Now, moving on to our recent financial results, revenues for the fourth quarter reached $168.6 million, an increase of 48% year-over-year. Annual revenue of fiscal ‘12 were $599.8 million, up 57.2% from 2011. Net income of fourth quarter was $17.3 million, down 6.7% year-over-year. And our net income of fiscal 2012 was $85.9 million, up 41.9% from 2011. Also annual revenues and net income in 2012 are within our guided range. In addition, stockholders to equity increased significantly to $264.4 million as of December 31, 2012, compared with $173.9 million of December 31, 2011. The increase of stockholders’ equity is mainly because the increase in retained earning amounted to $86 million.

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