Toronto, Ontario, March 3, 2014 – 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, 2013. All amounts are in Canadian dollars unless otherwise indicated.
Highlights for the second quarter:
“Our financial results for the quarter were negatively affected by the ongoing poor economic conditions as well as poor smog conditions in China,” said Mr. Hu, Liuyang’s president and CEO. “The Chinese government issued a circular in November 2013, urging officials not to buy fireworks with public funds during the holidays. As a result of this decree and heightened concerns over smog, many local governments and enterprises cancelled their planned fireworks shows for the Lunar New Year holiday. The good news is that our lower domestic sales were partially offset by a 32.8% increase in sales to international markets. To address environmental concerns and satisfy regulatory bodies in China, we have completed development of our new environmentally-friendly fireworks products, which have started selling as of the second quarter.”
Summary Financial Statements
In thousands except per share and % data |
3 months ended Dec. 31 |
6 months ended Dec. 31 |
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2013 |
2012 |
2013 |
2012 |
||
Revenue |
$4,565 |
$5,565 |
$7,687 |
$9,634 |
|
Gross profit |
$1,624 |
$2,413 |
$2,633 |
$3,801 |
|
Gross margins |
35.6% |
43.4% |
34.3% |
39.5% |
|
EBITDA |
$(232) |
$404 |
$(443) |
$8707 |
|
Net income |
$(410) |
$216 |
$(787) |
$308 |
|
Net income per share |
Basic |
$(0.007) |
$0.004 |
$(0.014) |
$0.007 |
|
Diluted |
$(0.007) |
$0.004 |
$(0.014) |
$0.006 |
In thousands except ratio data |
3 months ended Dec. 31 |
|
2013 |
2012 |
|
Cash |
$1,750 |
$2,848 |
Current ratio |
1.82:1 |
1.65:1 |
Working capital |
$7,194 |
$7,630 |
Total assets |
$19,900 |
$22,931 |
Debt to equity ratio |
0.78:1 |
1.05:1 |
Review of Second Quarter Results
Revenue for the second quarter was $4.57 million, representing a decline of $1 million or 18% compared to the second quarter of the previous year. A $1.98 million decrease in China domestic market fireworks revenue was partially offset by a $0.98 million improvement in international revenues during the quarter. Weaker domestic fireworks revenue for the quarter was a result of the weak Chinese economy and heightened concerns over air quality issues in China.
Gross profit for the quarter was $1.6 million, or 35.6% of revenue, compared with $2.4 million, or 43.4% of revenue, for the same quarter last year. The decrease in gross margin was attributable to higher international sales of lower margin products as well as a more competitive domestic business environment.
EBITDA for the quarter was negative $231,968, representing a decrease of $635,974, or 157%, compared with the second quarter of fiscal 2013. The decrease in EBITDA was mostly attributable to the lower revenue and gross margins experienced during the quarter.
The Company had a net loss of $410,423, or $0.007 per share, compared to net income of $215,987, or $0.004 per share, for the second quarter of last year.
At December 31, 2013, the Company had cash of $1.75 million and working capital of $7.19 million. These figures compare to cash of $2.85 million and working capital of $7.63 million at December 31, 2012.
Liuyang’s consolidated financial statements for the three and six months ended December 31, 2013 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.
For further information, contact:
Jacky Long Chief Financial Officer Liuyang Fireworks Limited Tel : 647 350 8818
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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.