Liuyang Fireworks Reports Second Quarter Financial Results

 Toronto, Ontario, March 4, 2013 – Liuyang Fireworks Limited (TSX-V: FWK) (“Liuyang” or “the Company”) today announced financial results for its second quarter and first six months ended December 31, 2012. All amounts are in Canadian dollars unless otherwise indicated.

Highlights for the second quarter:

• Revenues for the Second quarter ended December 31, 2012 were $5.57 million of which 46% represented domestic Chinese sales.  This percentage of domestic sales are the highest achieved by the company during the Q2 period and represent the Company’s strengthening position in the domestic marketplace.
• Higher domestic sales coupled with improved international product mix resulted in record gross margins for the company of 43.4% during the quarter.
• The Company achieved net income of $230,000 during the second quarter, or $0.004per share ($0.003 diluted).
• The company had a cash position of $2.8 million and total bank debt of $6.7 million as at December 31, 2012.

“We continued to strengthen our profitability despite softer international sales for the quarter,” said Mr.Hu, Liuyang’s president and CEO. 
 “The decrease in our international sales was partially offset by stronger domestic market sales, highlighting the success of our ongoing 
penetration into the Chinese market.  Our strategy to focus on higher margin products within our line of firework resulted in higher gross 
profit during the quarter.  Additionally, lower general and administrative expenses contributed to our strong bottom line.”

SUMMARY FINANCIAL STATEMENTS

Review of Second Quarter Results

Revenue for the quarter was $5.57million, representing a decrease of 5.2% or $0.41 million compared to the second quarter a year ago.  The decrease was mainly attributable to a $0.82 million decrease in U.S. revenue, which was partially offset by a $0.42 million improvement in domestic revenue. 

Gross profit for the quarter was $2.41 million, representing a 5.7% increase compared to the same quarter a year ago. Gross margin as a percentage of sales increased to 43.4% compared to 38.2% in the second quarter of last year. The increase in gross profit was attributable to higher volume from the domestic China market and improved product mix as higher margin products were sold to the US market.

EBITDA for the quarter was $406,000, a decrease of $105,000, or 20.5%, compared with the second quarter of fiscal 2012.  The decrease in EBITDA is mainly due to lower net income and interest expense recognized in the second quarter of fiscal 2013.  EBITDA before stock-based compensation expense decreased by $188,000, or 31.3% for the quarter, compared with the same quarter the year before.  Net income decreased to $230,000, or $0.004 per share ($0.003 diluted), compared to $280,000, or $0.005 per share ($0.004 diluted) for the second quarter a year earlier.

At December 31, 2012, the Company had cash of $2.85 million and working capital of $7.63 million. These figures compare to cash of $7.03 million and working capital of $7.75 million at December 31, 2011. The Company anticipates having sufficient cash and working capital to continue its growth and expansion plans for the balance of fiscal 2013.

Liuyang’s consolidated financial statements for the three and six months ended December 31, 2012 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 www.sedar.com.

About Liuyang Fireworks Limited

Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks distributed both domestically and within more than 15 countries in North America, South America and Europe.  The Company has more than 17 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.

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Forward-Looking Statements

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 securities legislation.

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.