IT Tech Packaging Inc (ITP) 2016 Q1 法說會逐字稿

Hello, ladies and gentlemen, and welcome to participate in Orient Paper's first-quarter 2016 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode.

Joining us today are Mr. Zhenyong Liu, Orient Paper's Chairman and Chief Executive Officer; and Ms. Jing Hao, the Company's Chief Financial Officer. Remarks from both Mr. Liu and Ms. Hao will be delivered in English by interpreters.

Orient Paper announced its first-quarter 2016 financial results via press release yesterday, which can be found on the Company's website at www.orientpaperinc.com. First, Mr. Liu will brief you on the Company's key operational highlights over the first quarter of 2016 and then Ms. Hao will review the Company's financial results.

Before we start, I would like to draw your attention to our Safe Harbor Statement. Management's prepared remarks contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than the statements of historical fact in this announcement are forward-looking statements including, but not limited to, anticipated revenues from the corrugating medium paper, tissue paper, offset printing paper and digital photo paper business segments; the actions and initiatives of current and potential competitors; the Company's ability to introduce new products; the Company's ability to implement capacity expansion; market acceptance of new products; general economic and business conditions, the ability to attract or retain qualified senior management personnel and research and development staff; and other risks detailed in the Company's filings with the Securities and Exchange Commission.

The forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company and industry.

The Company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that its expectation will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.

There is a presentation document featuring management's prepared remarks and is now available to download from the Company's website at www.orientpaperinc.com.

Please note that there will be discussions on non-GAAP financial measure or EBITDA or earnings before interest, taxes, depreciation and amortization. Please refer to our press release for a complete reconciliation of EBITDA to net income.

As a kind reminder, all numbers in our presentation are quoted in US dollars and all comparisons refer to year-over-year comparisons, unless otherwise stated.

I would now like to turn the call over to Mr. Liu. His comments will be delivered in English by Tony Tian from Weitian Investor Relations. Mr. Tian, please go ahead.

Thank you, operator, and good morning, everyone. I'm Tony Tian from Weitian Investor Relations. I will deliver prepared remarks on behalf of Mr. Liu.

(Interpreted). Thank you, everyone, for dialing in our first quarter of 2016 earnings conference call. Despite the negative impact of macro difficulties and yuan depreciation versus US dollar that led to a 5.5% year-over-year decline in overall blended ASP, we achieved double-digit growth in overall sales volume with total shipment increasing by 11.4% to over 70,000 tonnes and 5.3% increase in total revenue. Our tissue paper product line, which we launched commercial production in the third quarter of 2015, continued to ramp and contributed $1.6m or 5.7% of total revenue.

Looking ahead, we expect the macro environment to remain challenging in light of slowing trend for GDP growth and tight credit environment. This, combined with the central government's heightened efforts on environmental protection and pollution control, will continue to force some smaller players, particularly with outdated facilities, to exit the market and pose difficulties for new players to enter the market, potentially creating a benign pricing environment and benefiting established players like us. In the new term, we expect overall sales volume will continue to grow at a healthy clip with tissue paper products remaining to be the strongest segment.

Now, I will turn the call over to Shunyu who will review and comment on Q1's financial results on behalf of Ms. Hao, CFO of the Company.

Thank you, everyone, for being on the call. Next, on behalf of the management team, I will summarize some key financial results for the first quarter of 2016.

Also, I will occasionally refer to specific production lines associated with various products. I will make clear to which products I am referring to. For reference though, the numbering system for our production lines is provided in our earnings press release on slide number 21, the earnings call presentation.

Now let's look at our financial performance for the first quarter of 2016. Please turn to slide number 7. For the first quarter of 2016, total revenue increased 5.3% to $27.9m, due to sales of tissue paper products and digital photo paper, as well as increase in sales of offsetprinting paper and partially offset by a decrease in sales of CMP.

Turning to slide 8, for the first quarter of 2016, the CMP segment, including both regular CMP and lightweight CMP, generated revenue of $18.9m, representing 67.6% of total revenue. $15.9m of revenue was from our regular CMP product and $3m was from lightweight CMP. Volume for CMP shipment increased by 8.9% to 58,000 tonnes, of which 49,002 tonnes was regular CMP and 8,998 tonnes was lightweight CMP. Average selling price, or ASP, for regular CMP decreased by 12% to $324 per tonne, while ASP for lightweight CMP decreased 12% to $331 per tonne.

Turning to slide 9, for the first quarter of 2016, our offset printing paper segment generated revenue of $7.1m representing 25.6% of total revenue. We shipped 10,885 tonnes offset printing paper in the first quarter, increased 10.2% from the same period of last year. ASP for offset printing paper also decreased slightly by 4.9% to $655 per tonne.

For the first quarter of 2016, tissue paper segment generated sales of $1.6m. Volume of tissue paper was 1,267 tonnes and ASP was $1,258 per tonne.

For the first quarter of 2016, digital photo paper segment generated revenue of approximately $0.3m or 1.1% of total revenue. During the first quarter, we shipped 174 tonnes of digital photo paper. ASP for digital photo paper segment was $1,798 per tonne.

Slide number 10 summarizes the changes in our revenue mix.

For the first quarter of 2016, cost of sales increased by $2.6m to $24.1m leading to gross profit of $3.8m, decreased from last year, and gross margin of 13.5%, decreased by 5.3% from the last year.

For the first quarter of 2016, SG&A expense was $4.3m compared to $1.7m for the same period of last year. This increase was primarily due to the increase in the depreciation expense for our temporarily idle property, plant and equipment at our new tissue paper plant; and 1,133,916 shares of common stocks granted under the compensatory incentive plans at the amount of $1,417,395.

For the first quarter of 2016, loss from operations was $0.6m compared to income from operations of $3.3m for the same period of last year. Operating loss margin was 2.1% compared to operating profit margin of 12.4% for the same period of last year.

For the first quarter of 2016, net loss was $1.4m, or $0.06 per basic and diluted share, for the first quarter of 2016. This compared to net income of $2.1m or $0.10 per basic and diluted share for the same period of last year.

For the first quarter of 2016, earnings before interest, taxes, depreciation and amortization, or EBITDA, decreased by $2.5m to $3.6m from $6m for the same period of last year.

Moving to slide 19, let's look at the balance sheet and liquidity. As of March 31, 2016, the Company had cash and cash equivalents, short-term debt, including notes payable and related party loan, current capital lease obligations, long-term debt, including related party loans, and non-current capital lease obligations of $3.7m, $22.7m, $6.8m, $19.1m and $3.2m, respectively. This compared to $2.6m, $27.7m, $6.9m, $19m and $3.2m, respectively, at the end of 2015.

Net cash provided by operating activities was $0.5m for the three months ended March 31, 2016 compared to $2m for the same period of last year. Net cash used in investing activities was $0.4m for the three months ended March 31, 2016 compared to $2.7m for the same period of last year. Net cash used in financing activities was $1.9m for the three months ended March 31, 2016 compared to net cash provided by financing activities of $3.3m for the same period of last year.

If you have any questions, please contact us through email at IR@orientpaperinc.com. Management will respond to your questions through emails as soon as possible.

Operator, please go ahead.

Thank you. Thank for attending Orient Paper's first quarter 2016 earnings conference call. This concludes our call for today and we thank you all for listening in. Goodbye.