2023-08-15 05:42:08 ET
Gulf Resources, Inc. (GURE)
Q2 2023 Earnings Conference Call
August 14, 2023 20:00 ET
Company Participants
Helen Xu - Director of Investor Relations
Xiaobin Liu - Chief Executive Officer
Conference Call Participants
Presentation
Operator
Greetings. Welcome to the Gulf Resources Second Quarter 2023 Earnings Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.
I will now turn the conference over to your host, Helen Cho. You may begin.
Helen Xu
Thank you, operator. Good morning, ladies and gentlemen and the good evening proposals of you joining us from U.S. and online to welcome all of you to Gulf Resources Second Quarter 2023 Conference Call. I'm Helen Xu, IR Director. Our CEO of the company; Mr. Xiaobin Liu will also join this call today.
I'd like to remind you to all our listeners that in this call, certain management statements during the call will contain forward-looking information about of resources in corporation and its subsidiary business and products reining 125 and the Securities Act of 1933 and the Rule 3b-6 under the Securities Exchange of 1934 and are subject to the safe harbor created by those rules. Actual results may differ from those discussed today taking into account a number of risk factors, including but not limited to the general economic and business conditions in the PRC, the risks associated with the COVID outbreak. Future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from existing and new competition from the bromine and the other oilfields and power production chemicals, changing technology, the ability to make future bonding assets and the various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this cautionary statement and the risk factors detailed with the company's reports filed with the SEC. Gulf Resources assumes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Accordingly, our company believes expectations reflecting in those forward-looking statements are reasonable, and there can be no assurance of such will prove to be correct. In addition, any reference to the company's future performance represents the management's estimates as of today, the focus of August 2023, Eastern Time. For those of you are able to listen to the entire core at this time. A resin will be available on company's website because also accessible through the website, and a link is accessible through our website to so please locate our press release issued earlier for the details. So we will review the results of this quarter first. I'd like to lenten the call back to Mr. Liu for his comments. So firstly, let's look at the Chinese economy for this quarter. The Chinese economy continues to be slow down. Our products were especially impacted. The demand for bromine was weak with the control of control of 19. The demand for Santee drive up, especially since many companies had built up stock anticipating higher not a slowdown in construction of impacted sales of very targets -- as a result, roaming prices from based on sensors com, which had been 69,500 tonnes on October 16, 2021, during the heat of Comet, dropped to RMB 18 only on June 30, 2023, reprising a decline of 74 percentage. The company expects roaming prices may improve in the future. In fact, by August 10, 2023, omnitracs had increased to RMB 24,200. However, at this time, it is difficult to estimate the timing of improvement improvement in addition to the decline in the price of other decline against the U.S. dollar. Over the extent, this could be a significant benefit for our company. with a lower R&D import of chemicals using from a more expensive, meaning that domestic producers should gain share export of pharmaceuticals and other chemical products may be cheaper. In the opportunities for building and Xolbusiness may increase. Given the pricing of on the second quarter, the company believe that most companies in the bromine industry and most companies produce chemicals made from bromine have not been profitable. We have yet to see mainly bankruptcies, but we assume many may come. Given the current marketing conditions, we believe that the company currently has strong cash position and balance sheet. Accordingly, the company made 2 decisions to protect capital and plan for future operations. It has slowed seeking current approval for its rest to close from factoring. The opening of these factories may require the company to build code and do new wells is the current market for Bami. We have sufficient tacit and I'm not willing to expend additional capital until we see a stronger result in the market. We still expect to receive permission to open these factories. However, there is no point spending the capital until they can operate profitably. As previously announced, the company also postponed the delivery of the remaining equipment for scanter while it is evaluates the market opportunities. The company is committed to its Asian chemical business and believe it will be profitable. Over the long term, however, different products will request slightly disparate final equipment. For example, some products which pollute more heavily may retire more complex solution restricting repayment. During this period, the most chemical companies are doing. The company is undertaking a thorough review of the potential market. So it can ensure that it is altering the most applicable equipment. Once the review is finalized and the market has stabilized, we will have the remainder of our equipment delivered and assembled. Then we will begin trial and test production. So now let's look at the financial results. Because of the weakness of the Chinese economy and a huge decline in the broad roaming price company reported an after-tax loss of approximately RMB 68,800 for the second quarter and approximately $1.2 million for the 6 months ended June 30, 2013. However, during the 6-month period, the company generated cash from operations of approximately $11 million. These numbers reflected the potential strength of our business model. At the end of the second quarter, our balance sheet was strong. We have approximately cash of $15 million and approximately representing $11.05 per share. The net net cash, which is cash minus all liabilities, approximately $97 million, representing $9.32 per share, working capital, which is approximately $12.6 million, which represented $179 per ship, shareholder equity, approximately $260 million and representing $24.95 per share, were very pleased to have rather shut downturn while generating strong free cash flow and strengthening our balance sheet. So for the coming future goals and objectives, the company expects that the economy in general and the booming market in particular to improve. As of August 8, from imply bromine market prices had increased 34% since the end of the second quarter and 11% from the average selling price during the second quarter. during second quarter roaming revenues were approximately $7.4 million. If the study prices have been 11% higher roaming revenues would have been approximately $8.2 million is which have provided us with the additional gross profit of approximately $80 billion -- in the quarter, our loss before taxes was approximately $874.5,m0l, meaning that the price increase was slightly more than 11% may have taken us to breakeven. At August 14, you can see that market price for forming was RMB 2460, which is representing an increase of 37% since the end of the second quarter and from average selling price during the second quarter. This would bring more extra profit based on our previous projection. So when bromine prices improve further, we will push ahead and to get approval for the company's rest remaining for minutes. The company is still pacing to its ixichemical business. At the present time, many chemical factories are still struggling. Altececonomic in general and broad products, in particular, improved will be in a position to identify the best products for our new factory has a remaining equipment tailored to our needs and delivered complete and assembled anterican begin trial and test production. The company is continuing to explore opportunities for exports so that it can gain financial flexibility. At the present time, the export market is quite suppressed. The company is looking for products that it can produce and profitably export so company can obtain capital, which we may consider to use to repurchase shares and all players divided. The company is still continuing in the discussion with the government of valent. I'm creating a joint venture for the exploration and production of natural gas and roaming product is true. While there is no guarantee that the joint venture will be created, but if the company is successful in parting with the local government. Substantial opportunities could be open to us. In financial results, which included you will see in our income statement, balance sheet and cash flow statements for the 3 and 6 months ended June 30, 2023. Our 10-K, which has been sold with the SEC, will present a full description of the segments of our business and the factors contributing to our lower sales and profits.
Xiaobin Liu
I will do the translation for Mr. Liu's comments. Hi, everyone. I'm Xiaobin Li, the CEO of the company. First of all, welcome all of you to Gulf’s 2023 second quarter earnings conference call. So we can see there has been a difficult time for the company. of our industries and the Chinese economy. We have focused on peering capital on our long-term strategy and preparing for opportunities we see ahead of us. We believe the economy will improve and bromine and crude source profit will increase as well. We are carefully refining our plans for our is chemical plant, so we can produce products that generate the higher level of profit.
We also continue to focus on identifying products that can be exported. So the company can gain financial flexibility to consider to support initiatives supporting shareholder value. While the company still do not know if the proposed joint venture in site will be approved a contention could be significant -- greater than is all into the plan. If the company can partner with the local government, the company should be able to drill more wells for both bromine and bromine and natural gas. Currently, the company has approximately $15 million in cash. 8 could have moved ahead is our efforts to support the rest 2 remaining performing and cutofactories. It could also have taken delivery of equipment for our chemical factory, but we are committed to retaining our capital from the opportunities we see ahead of us. The company's investors have asked about action it will take to increase shareholder value. companies believe that we have very substantial opportunities in front of us.
The Chinese economy will get better roaming prices will rise. Mechanic factory will open, and it will find product to export if company can get. Our joint venture established the opps in strong will be higher than we had originally anticipated. And the company management has an remained our investors that management has traded more than 115 years of compensation for shares in gold resources, Noone wants to see the price of the shares appreciate more than we do. We are committed to generating cash from exports. When our business improves. The company will take other steps such as hiring investment bankers or IR firm and consider mergers or acquisitions so that it can produce strong financial returns for you and for us.
So now we are open for the Q&A section.
Question-and-Answer Session
Operator
Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Jay Bhullar [ph], Private Investor.
Unidentified Analyst
I have a question for Mr. Liu. I wanted to ask, are you guys in to repurchase shares?
Helen Xu
Repurchase shares?
Unidentified Analyst
Yes, because that would be the best use of cash rather than speculating on a factory or exporting goods, you could just repurchase shares and increase the value for shareholders containment. When we go through a anthromatic Midwest just go in terms of timing that focusing alternate call it for?
Helen Xu
Okay. So this question has been asked previously by investors as well and as company explained before, because due to the China government restrictions on the Mogo overseas and because the company does not have your dollar in overseas pensions. So the company is trying to find a way to maintain dollar in overseas. Then it's trying -- that's why we explained that the company is trying to find products with higher profit margin and which can be exported. Then we can retain dollar in overseas account and then to consider do any like improve our shareholders' value, including share purchase and all share paid dividends like the way which can initiate our shareholders' value.
Operator
Okay. The next question comes from Alan Parka [ph], Private Investor.
Unidentified Analyst
Yes. I don't call offense. The question I have is, of course, I mean, regarding share price, you will hear certainly what the investors calling are really concerned since you announced the delay in clinical factory, the share price went down the drain and now we are at the lower level and really close price compared to the book value of the company. So if we wait an additional time for the chemical factory to be the solution to shareholder value, I don't know whether the share price will be because investors are living patients. So my question is, is the company looking in particular, I would say the CEO and the CFO must get a lot of pressure from the Chairman. Are they looking at other ways of creating shareholder value or pushing the share price up. I have heard you talk to investment bankers. You mentioned that, which I was happy to hear. But is there a kind of a task force like you have in for the chemical factory is there a taskforce looking at the possibility of taking action to add the share price?
Helen Xu
Sorry, Alan, maybe my understanding is not -- can you just -- let [indiscernible].
Unidentified Analyst
Sorry for my French accent to -- so I'm just asking, is there any kind of action taken by the CEO and the CFO, which would be the main people to look at ways of improving the share price until we have a chemical factory that will create some export business to provide dollars. So is there -- and you said you mentioned you talked to investment banks. So I mean, is there an action or is there a firm action some people being in charge of looking at that?
Helen Xu
Okay. Okay. I got it -- the so like land can can alter your it, you should take a tonne. Havana to make niacin Hanna, Kostanian Consilio Banorte. So will be forgotten -- should pursue to the Hannigan Pohang UDC. So say so that this year in June -- intraoral CEO CFO Surana sugar to has a year make to alone. Wwe cannot at that those onsetting.
So as we know, this year in recent years, the company has been discussion few discussion. But we did not sign any like formal agreements with any bankers, investment bank or air from yet because like we all know that due to 2 major reasons, the calling '19 for this year, which is just have like happened for the past few years. And the company's current projects, which did not performed and completed well yet. So when all these projects, we have a more clear view, then we can talk to investment bank or IR firm to see how we can go, and we will have more bugging power in this discussion.
Unidentified Analyst
Okay. So -- but is somebody is in charge of looking at helping the share price? I mean, the CEO or the CFO, is there somebody who has been appointed to do that to really focus on this. I mean we need somebody to be looking at it and having that as a priority, okay, for sure. We did the CFO.
Helen Xu
Yes. And you will do something before the chemical factory and you will do something before the chemical factory is ready because it could take a year or 2 before we get that? So are you going to do something or you're going to let the stock price keep falling like it has fallen for the last several months now?
Unidentified Analyst
Edition was we soaked and Linda we did and test. So you just refer to what you Ingleton and also as a colleague, Setana Fanta services at mine Senegalese we didn't unfold or food at -- so I mean in no you need is impingement holdco to see if I know maybe a ago.
Helen Xu
Alan, for the share price, the company management always been looking at it, including the sales and OP attention. We see the price of the share dropped -- the major reason is due to -- if we're looking at a bromine price, which dropped from RMB 6 more than RMB 60 the highest and to recently more than RMB 18,000. There is more than 70% drop in the broming price. And it looks like the roaming price has been reflected to our share price. The company management also quite worried about our share price. So we think we have -- that's why we had 2 major ways to do.
Firstly, if we look at our chemical business and our technical products. because this area, the product is now with very low, very low profit margin. So the company that might stop its rest equipment to be delivered because the companies want to find news with other products, which can have higher margin in order to bring the company with more net profit. Again this way, we increase our share price and the company's profit.
Secondly, Conti is in deep discussion with Citronen with its best company best to improve this process and to get it done as soon as it can. By doing this, it will provide a company with much higher opportunities in this area in exploring and producing bromine, halogen and natural gas and try to bring the company with more opportunities and more possible net profit.
Unidentified Analyst
Okay. I let other people ask questions. I'll write to you a little bit more because the price of amine has been coming back up and the share price has kept going down, so it's more than that. But I'll do it in writing to you later on, and I'll let other people ask questions. Okay and thank you for the team Okay.
Operator
The next question comes from Frank Manning [ph], private investor.
Unidentified Analyst
Your balance shows cash of $115 million at the end of Q2. Your income statement shows interest income of $72,500 approximately for Q2. That's under 0.3% annual interest for average cash. Why is that interest so low? And is there a conservative way to increase the interest?
Helen Xu
Okay. This one to give Potential issue come and you -- thank you. Thank you. Thank you. We may center share just sort Mangloor that you talked is -- you saw on his Bain just for a strong voice of cost into good situation and also told you the front dotation to us on to the team Houston furthering channel or that. So the 2 women on a college bannered tire company -- the CP issue.
So because the company is more like a conservative on its cash. So like that's why it did not do any like finance production event, but we just put the money there for its safety and even we did not put money that in trust or any other finance products. For example, last trust, which had a big problem and because it's put the money to vet industry, and now they have very sound in risks and cannot be back. So based on the company's way of doing this is always conservative to make sure it's cash in a safe position and but not only looking for higher interest of return. That's why we have now, like you said, interest rate.
Operator
Okay. The next question comes from Kuni from Doral Capital Corporation [ph].
Unidentified Analyst
I have a few questions. Question number one, from the last quarter report Mr. Liu, the CEO talk about exploring the export of your chemical products. And can you share some light on what concrete plan? Or have you hired people with knowledge to explore the export opportunities for your chemical products.
Helen Xu
Catoosa like you or capital. Yanchunis on Shantiniketan to the Sonora Yoontae ago. there and Samantha month ago on conservation. Mutant you're going -- you just sort of mention Sanand. If you person is key to survey that many to. I will mention as sentiment to me. just to how Tarantino sooner just BeiGene the joint asserted a mathematical...
Unidentified Analyst
Okay. My next question is that the Permian price has fluctuated and then declined dramatically from $69,500 per ton in October 2021 and then went down to approximately $18,000 per ton in October 23. My question is that what are the driving forces will that -- for this dramatic price fluctuation...
Helen Xu
Okay. Lundin Dealer shareholder and Yangon Sean but can okay Lara on order Fontana just a web footers Societe. So maybe for fares to other shareholders, I think I will transfer translate Mr. Li's comment. The reason for the drop in this price of Rome because of the real estate industry, the fritter products, which are first reason. Second reason is because of CMI-19 before the demand was implied for Bominbut after like a past then the demand for -- which drives up the roaming price. The third reason because the export of pharmaceuticals from China to overseas
So another reason for the very high price like almost THB 70,000 tonne because of the market reason. Normally, the market speculation tonne roaming price wouldn't be that much high if results makes calculation...
Unidentified Analyst
Okay. Do you anticipate from your perspective or experience that the Permian price is going to be kind of stabilized in short term or maybe in the long term? Is that really the driving force of the revenue and the -- and also related to the shareholder price.
Helen Xu
Okay. In investing antisocial Johan, Hoiana Canada to the sort in isolation to the -- just as to the athena to down to your hand just in. So answer is photolitho the athenas go to the out 1 whole Moneta go to the Total -- the dollar whole year actually on big one, on Kanuma you don't do here. Taposh target you've got you adjusted mine to a something like a deeper cater booming Chuck, I want to push you on how you go to the glory Bevan Cancon de...
Unidentified Analyst
Are you very optimistic in terms of the price stake stabilization -- the gross to tackle.
Helen Xu
Okay. So losing that because Brom resources is a funding -- a major fundamental chemical raw material, and this result is limited. So as the the -- it's more than THB 600 their however reason for the market titration. But if there's too low price like below like RMB 10,000 or about approximately RMB 10,000. This is realistic to the market reflection as well. So misting the price for going will be stabilized and go up slowly. And this is what the company be happy to see as well because we are in this industry, and we do not want to do not want to see the big castration in the pricing of the bone.
Unidentified Analyst
Okay. My last question is the -- for your petroleum and natural gas product, you're working out a partnership with the government. Also, do you anticipate the approval and then start the production of the petroleum and natural gas product. And then what is the expected revenue and a profit margin if the production starts, have you've done any consulting to do an estimate on this future revenue and profit or margin, et cetera.
Helen Xu
On to share the cleaning the Horne -- why are you going to? You may go to a Santanrosa wondering Sohu to the Camino should have a lentil leadership in tendon how costly Gandangara module titin.
Unidentified Analyst
So can I saw just part way like transition phone for the tenants that will force the cash don't see obviously very tasty wet factor judge face on one thing that you Lines Tatarstan, Mondo Santong Part but you institutional to -- that's one you're selling down the toltax -- you heard on that too. So you mention that the donor the chart another kind of symptoms and. So just also -- back at Gamaho for ventral because this is a discussion with the government. So we do not have the time line yet.
Unidentified Analyst
Okay.
Operator
The next question comes from Randy Liggett [ph], private investor. Randy?
Unidentified Analyst
Sorry for all my e-mails, by the way. But obviously, everybody shareholders are frustrated. We've gone through this for several years, no matter what the price of bromine was, why are we being so turbine about hiring investment bankers and the PR firm I just don't understand. We've been talking about it for quarter after quarter. And the price of bromine was $70,000, and the stock really did not reflect the value of the company. And I would think management, including yourself and the Board of Directors would want the stock to go up. My second question is, and I'll make this very short and sweet. Have you all received any unsolicited offers to purchase the company or take a private or anything like that? Thank you, Helen.
Helen Xu
Okay. Thank you -- the in tissue like an antimony should have a amalgamate a at a onesie joint malaria they want a -- so thinsets innovation major on the company's total on to Dentons like in other winter the year in the amount just on the decremental estimate. I mean the first Tantaline -- that goes to a intensions Jana. So first question, like as we previously -- we explained that we want to have like a discussion with investment bank or a but still no breadth yet because if we go to discuss with Investment Bank, and they will want to see where your company's development value and how we want to discuss with you to improve your value, right? But based on the current currency position, our projects, which did not on the status of position to perform our development value yet. So until our projects, which become more clear, then we can see how we're going to do this discussion with investment bank.
Unidentified Analyst
How about my second question. Have you received any offers on solicited?
Helen Xu
Okay. So for your second question, because the company never think about to sell it because even though now we have a low share price, but we think we really have big potential, and we are confident in each. So you all have not had any interest from outside parties.
Unidentified Analyst
Okay. One last thing. Thank you again, Helen. I appreciate all your help. Please update the website, and please continue the communications update. Sometimes, I feel like we're going back to the old days. And I think it's good for shareholders to hear from you all and just kind of let us know what's going on, not asking much there. So, thank you again.
Helen Xu
Okay, just for information. The website will be updated right after the quarter, recruiting the CEO letter and CFO matter. And because sometimes for the fairness of public information to all shareholders, so we want to make sure it's fair and transparent to all our investors. Thank you, Randy.
Operator
Okay. We have a question coming from Bill Bender [ph], private investor. Bill?
Unidentified Analyst
This question is in general, but I've been an investor for over 10 years and shared many of the thoughts that previous callers has. But if you look back over the last 5 years, we discovered natural gas. Then you had a sunami,and we replenished and really made state-of-the-art bromide factories, even though there's a few not open yet. And then we were really banking on this new chemical factory for 2023 that was to open in January -- it's now August. And to binder were delays in equipment that was for COVID. There's no more delays. You can get anything in the world today. And the frustration is building and building because we keep going quarter-to-quarter with the same story. And I'm sorry, but the bromide price is not the problem, Helen. The problem is we are losing investor confidence. And I think the management and Mr. Louis and the Board have put their own money on the line, I know they did. They want the share price to go higher.
You hear all the callers here who are just investors. I've been an investor for 40 years. it really doesn't take much in 3 months to make a promise of something and we have a brand-new state-of-the-art chemical factory that should be making something and making money and delivering product that's 8 months of sitting there. I saw the pictures. So the confidence from an investor when every quarter tells us something else, we have not done anything with natural gas. And I don't even hear a reason why. We discovered we have natural gas, and we can't sell it. It's one of the most largest demand items in the world. So my question is this simple. If I remain an investor, I've been in this 10 years, if I want to remain an investor for the next 3 months I would like Mr. Lu to tell me why I should remain an investor and not finally sell my shares at $2 a share.
Maybe I explain first because for our chemical factory, going prices have dropped from almost RMB 70,000 to RMB 180, more than 70 percentage decrease, and then similar to chemical industries as well. Chemical products also dropped a lot. So the country even though it's chemical in a factory is a most completed for the CV completion, but equipment, which can be customerized for example, the fare talents, which have much lower profit margin now have different equipment requirements than paper-making chemicals because papermaking chemical is more polluted and which require more strict equipment. So that company stopped based on current market condition, stopped the delivery of the rest equipment because companies now cannot see clearly where it will go in this industry, which capacity products want to produce and which can push and bring more value to our company and our shareholders. That's why for this chemical factory. Secondly, if we look at our natural gas project in San province. Firstly, because the site whole province was doing the land and the resourcing planning and should the government finish the plan the company continue its further application with government. That's why this process has been delayed and now company because there is a huge opportunity in this industry, et cetera. And the company wants to bring governments to join us, maybe we establish a joint venture company then can bring the company with more opportunities in this industry in different area overall see companies still are conservative view of company and which is not very aggressive we can see...
The conservative view, quite honestly, I was an investor when bromide was $2,000, and you were very profitable. But the bromide prices are going to go up and are going to go down for the next 10 years. We're building a company here that is going to be in the bromine business, and we can adapt -- accordingly, we can't put off and wait for Romit's never going to go to 70,000 again. So the delays of the chemical factory are very concerning to me, an investor the -- at the time it takes to make any decision to partner to do anything, the patients just look at the volume of your shares without earnings, the shares have been going down because people are selling. It's that simple and they're losing hope and there's not one quarter that we get on this call and hear really good. Last year, we were profitable and the stock went to 3. We need to know that there are actions being taken to keep your investors who've been with you for many, many years, keep us engaged and I've been on the call for 1 hour, and it seems to me, I'm hearing the same story of delays and why and the 6-year plan is becoming a 10-year plan. And in the meantime, the markets are recovering. Interest rates are high. I agree with the gentlemen that having $115 million in cash earning $70,000. In America, you would earn $570,000. So I just would like some action from the Board to take this call tonight from all your investors seriously because it seems like we all have the same concerns, Helen. And I know you've been here for the 10 years with I know that. So we're all frustrated, but we have to take this serious to make some progress in the next 3 to 6 months.
Unidentified Analyst
Thank you.
Helen Xu
Okay, thank you. Thank you for your comment.
Operator
Okay. I would like to turn the floor back to Helen. For any closing remarks, like we've reached the end of the top of the hour.
Helen Xu
I think that's all for today, and it's been our time in closing. Thank you.
Operator
Ladies and gentlemen, this does complete the question-and-answer session. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your question.
For further details see:
Gulf Resources, Inc. (GURE) Q2 2023 Earnings Call Transcript