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Keyuan Petrochemicals Inc. Announces Full Year 2012 Financial Results And Capacity Expansion Plans
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PR Newswire
NINGBO, China, June 5, 2013
NINGBO, China, June 5, 2013 /PRNewswire-FirstCall/--Keyuan Petrochemicals Inc. (OTC: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced the Company's financial results for the twelve months ended December 31, 2012.
"Our 2012 revenues benefitted from solid customer demand and expanded production capacity," declared Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc. "Although our margins were negatively impacted by higher raw materials costs and labor cost, I believe Keyuan's core earnings potential continues to improve as a result of the operation of the SBS facility and a series of initiatives on major projects."
Financial Summary
| | FY 2012 | FY 2011 | Chg. |
| Total Revenues | $750.6M | $626.7M | 19.8% |
| Gross Profits | $29.1M | $22.0M | 32.2% |
| Net Income (loss)(a) | ($5.9M) | ($7.1M) | - |
| EPS (Diluted) | ($0.10) | ($0.14) | - |
| Diluted Shares O/S | 57,646,160 | 57,585,040 | - |
(a) Net Income (loss) attributable to KEYP common stockholders.
Full Year 2012 Financial Results
Keyuan sales for the year ended December 31, 2012 were $750.6 million compared to sales of $626.7 million for the year ended December 31, 2011, an increase of $123.9 million, or 19.8%. The substantial increase in sales was due to higher production volume of products, increased working days and the operation of our SBS facility. In 2012, Keyuan sold 675,484 MT of chemical products, including 28,730 MT of SBS products, at an average total price of $1,111 per MT, as compared to sales of 588,976 MT of chemical products at an average price of $1,064 per MT in 2011. This represents an increase of approximately 14.7% in sold products. Compared with 44 days production suspension in 2011, Keyuan lost 15 days of production for inspections during 2012. With the commencement of the second production line in August 2012, the SBS facility achieved 41% of its designed capacity (full capacity should be 70,000 tons/ year) in the first year which brought an additional 28,730 MT of finished products and sales of $71.0 million.
Keyuan did not incur any sales to related parties for the year ended December 31, 2012 as compared to approximately $92,772,000 of sales to related parties for the year ended December 31, 2011.
The breakdown of the 675,484 MT products produced is listed below.
| Product Name | MT |
| BTX Light Aromatics | 287,887 |
| BTX Heavy Aromatics | 135,694 |
| LPG | 71,017 |
| MTBE and Others | 50,661 |
| Styrene | 56,152 |
| Propylene | 45,343 |
| SBS products | 28,730 |
| Total MT Sold | 675,484 |
Cost of sales was $721.5 million for the year ended December 31, 2012, or 96% of sales, compared to cost of sales of $504.9 million, or 95% of sales for the year ended December 31, 2011, an increase of $216.6 million. Keyuan's cost of sales are primarily composed of the costs of direct raw materials (mainly heavy oil, benzene and carbinol), labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. In 2012, the average cost of finished products was $1,058 per MT, as compared to an average cost of $1,027 per MT in 2011, an increase of 3%. The increase is mainly attributable to the SBS facility. Keyuan's SBS facility produced an additional 28,730 MT of products in 2012 and an additional $63.4 million of cost of sales. Increasing labor costs also caused the higher cost of sales.
Gross profit for the year ended December 31, 2012 was $29.1 million, compared to $22.0 for the year ended December 31, 2011. Keyuan's gross profit margin increased from 3.5% for the year ended December 31, 2011 to 3.9% for the year ended December 31, 2012. The main reasons for the increase in the gross margin are the increase in sales volume, and the new SBS products which yield a higher gross profit margin of 10.7%.
Operating expenses, including selling expenses, general and administrative expenses, were $13.6 million, or 1.8% of sales for the year ended December 31, 2012 as compared to $19.1 million, or 3.0% of sales for the fiscal year 2011, a significant decrease of $5.5 million. The decrease is due to expense of $5.8 million in connection with the Independent Investigation for the year ended December 31, 2011. There were no such expenses for the year ended December 31, 2012.
For the year ended December 31, 2012, interest expense was approximately $25.1 million as compared to interest expense of approximately $15.8 million for the year ended December 31, 2011. The increase in interest expense is mainly due to the increased interest cost associated with discounting of bank acceptance notes and higher interest rates, together with the increased bank borrowings.
Net loss for the year ended December 31, 2012 was approximately $5.9 million, as compared to a net loss of approximately $7.1 million for the year ended December 31, 2011, a decrease of $1.3 million. The decrease in net loss is mainly due to a higher yield rate and decreased legal, consulting and investigation expenses.
Balance Sheet and Cash Flows
We had $23.4 million of cash at December 31, 2012 compared to $7.3 million at December 31, 2011.
As of December 31, 2012, we had an aggregate principal amount of approximately $295 million outstanding under the loan agreements, with maturity dates from January 2013 to December 2013 and interest rates from 1.27% to 6.72% per annum. Management expects all unpaid loan balances will be extended at their due date.
Net cash used in operating activities was $7.1 million for the year ended December 31, 2012 as compared to $1.7 million provided by operating activities for the same period in 2011. The decrease in cash provided by operations was primarily due to increases in accounts receivable, inventories, prepayments to suppliers and other current assets.
Net cash used in investing activities was approximately $54.4 million and $42.3 million for the years ended December 31, 2012 and 2011, respectively. Net cash used in investing activities was primarily comprised of payments for our infrastructure construction and the expansion of our facilities.
Net cash provided by financing activities amounted to $77.5 million for 2012 and $16.9 million for 2011. Cash provided by financing activities in 2012 was primarily due to the increase in short-term bank loans, offset by cash used in the settlement of bills payable, the repayment of bank loans and the increase in pledged deposits at banks.
Business Expansion Plan
In order to meet increasing customer demands, Keyuan has been working on expanding its manufacturing capacity by focusing on the following improvements to our infrastructure. In anticipation of the increase in both the market demand for the finished goods and environmental protection requirements, the Company has adjusted its original expansion plans and is currently working on refining its manufacturing capacity as follows:
| a) | An ABS production facility in Guangxi Province, which will have an annual production capacity of 400,000 MT of ABS. We began pre-construction activities in February 2012, and the first phase is expected to be completed by the fourth quarter of 2014. |
|
b) |
An oil catalytic cracking processing facility as an extension of our catalytic pyrolysis processing equipment, as well as the feed way of the main raw materials to produce synthetic rubber. This facility can reduce production costs and the market risk in the purchase of raw materials, and improve the stability and efficiency of project production to 200,000 MT of heavy oil per year. |
|
c) |
An increased annual design capacity of our ethylene-styrene facility from 80,000 MT to 200,000 MT, among which 120,000 MT can be used for producing synthetic rubber and 80,000 MT can be sold to downstream petrochemical companies. Ethylene-styrene is the main raw material (eg. Bezene) from the catalytic cracking oil processing facility to produce styrene. This facility can be considered the bridge between original products and high-value added products and will complete the integration of internal resources. |
|
d)
|
A transformer oil facility using hydrogen from the ethylene-styrene facility to complete a double hydrogenation process on original products (BTX Aromatic) for refining transformer oil, and producing high-value transformer oil, with a design capability of 100,000 MT per year. |
|
e) |
An SSBR (Solution Polymerized Styrene Butadiene Rubber) production facility with a designed annual capability of 150,000 MT, which will use its own production process technology in synthetic rubber, combining styrene and butadiene, to produce SSBR. This product can be used as raw materials for tires, instead of imported Hexakis (Methoxymethy) Melamine ("HMMM"). |
Keyuan also registered its catalytic oil processing facility and transformer oil plant with the Ningbo local government in February 2013, and expects it to be completed and operational in late 2013, at which time, the Company will be able to produce medical use and edible products, such as tubes and chewing gum.
The total estimated cost of processing equipment for product refinement and the SSBR production facility is approximately $149.3 million, including $49.8 million for processing equipment and $99.5 million for the SSBR production facility. Keyuan is currently going through the governmental approval and design phase of the ABS production facility and estimating the related costs. Upon full completion of its expansion, Keyuan's total production capacity will reach 2,443,000 MT per year including, but not limited to, its current petrochemical production of 720,000 MT, styrene of 200,000 MT, catalytic cracking oil of 200,000 MT, ABS of 400,000 MT, SSBR of 150,000 MT and transformer oil of 100,000 MT.
We are currently evaluating the timeline for our expansion projects. Our current estimates are as follows:
| Expansion Project | | Expected Completion Date |
| Oil Catalytic Processing Facility | | End of Q4, 2013 |
| Ethylene-Styrene Facility | | End of Q4, 2014 |
| Transformer Oil Facility | | End of Q4, 2014 |
| SSBR production facility | | End of Q4, 2015 |
| ABS Production Facility | | End of Q4, 2014 |
About Keyuan Petrochemicals, Inc.
Keyuan Petrochemicals, Inc., established in 2007, through its PRC operating subsidiaries, Ningbo Keyuan Plastics Co., Ltd, Ningbo Keyuan Petrochemicals Co., Ltd, Keyuan Synthetic Rubbers Co., Ltd and Guangxi Keyuan Co., Ltd, is engaged in the manufacture and sale of various petrochemical products in the PRC. Having commenced production in October 2010, Keyuan's operations include an annual petrochemical manufacturing design capacity of 720,000 MT for a variety of petrochemical products, with facilities for the storage and loading of raw materials and finished goods, and a technology that supports the manufacturing process with low raw material costs and high utilization and yields. Keyuan also completed the construction of a Styrene-Butadience-Styrene (the "SBS") production facility with an annual production capacity of 70,000 MT in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August, 2012. In order to meet increasing market demand, Keyuan adjusted its original expansion project and is currently working to refine our manufacturing capacity to include an ABS production facility, an oil catalytic cracking processing facility, an increased annual design capacity of our ethylene-styrene facility from 80,000 MT to 200,000 MT, a transformer oil facility and an SSBR (Solution Polymerized Styrene Butadiene Rubber ) production facility.
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