IT Tech Packaging Inc (ITP) 2021 Q3 法說會逐字稿

Hello, ladies and gentlemen, and welcome to IT Tech Packaging's Third Quarter of 2021 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 the company's Chairman and Chief Executive Officer, Mr. Zhenyong Liu; and the company's Chief Financial Officer, Ms. Jing Hao. Remarks from both Mr. Liu and Ms. Hao will be delivered in English by interpreters.

IT Tech Packaging announced its third quarter of 2021 financial results via press release on November 10, 2021. This can be found on the company's website at www.itpackaging.cn. (Operator Instructions)

Mr. Liu will start today's presentation with an overview of the third quarter 2021 performance. Then Ms. Hao will share more details about 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 portions of the Private Securities Litigation Reform Act of 1995. All statements are the statements of historical facts in the announcement are forward-looking statements, including but not limited to anticipated revenues from the corrugating medium paper, tissue paper, offset printing paper and the face mask 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 professionals and research and development staff; and other risks detailed in the company's filings with the Securities and Exchange Commission.

These forward-looking statements involve known and unknown risks and uncertainties; and are based on current expectations, assumptions, estimates and projections about the company and the 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 be assured that this 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 the management's prepared remarks, and it is now available for download from the company's website at www.itpackaging.cn.

Please note that there will be discussions of 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 remainder, all numbers in the presentation are quoted in U.S. dollars and all comparisons refer to year-over-year comparisons unless otherwise stated.

At this time, I would like to turn the call over to Mr. Zhenyong Liu, Chairman and Chief Executive Officer of IT Tech Packaging. His overview will be delivered in English by [Connie Teng]. [Connie], please go ahead.

[Interpreted] Thank you, operator. And good morning, everyone. Thanks for joining IT Tech Packaging's Third Quarter 2021 Earnings Conference Call today.

I will provide an overview of the company's performance for the third quarter of 2021.

For the first 9 months of this year, we continued to make improvements in the sales of corrugating medium paper or CMP, offset printing paper and tissue paper products. Our total revenue had an increase of 69.2% to $115.8 million, resulting from 36.3% growth of overall sales volume and a 25.6% increase in average selling prices over all categories of products. We recorded 34.8% increase of gross profit.

Despite the demand of paper products is impacted by factors such as resurgence of COVID-l9, double reduction policy and the trend for paperless offices, we expect the earnings per ton will be significantly improved by the uprising price. Also, many leading paper manufacturers adjusted their production according to the dual control of energy consumption policy, which will cause a shortage of supply. We have confidence and we will continue to provide high-quality products. We expect the performance in upcoming quarters will be significantly better.

Thank you again for all your support and attention.

Now I will turn the call over to Mrs. Jing Hao, our CFO, who will review our financial results for the third quarter of 2021. Her review will be delivered in English by [Connie Teng].

[Interpreted] Thanks, everyone, for being on the call.

Next, on behalf of the management team, I will summarize some key financial results for the third quarter and first 9 months of 2021. Also I will occasionally refer to the specific production line associated with the products. I will make clear which products I'm referring to. For reference, the numbering system of our production line is provided on Slide #18.

Now let's look at financial performance for third quarter of 2021. Please turn to Slide #7.

For the third quarter of 2021, total revenue increased by 35.2% to $45.1 million due to the increase in sales volume of regular corrugating medium paper and increase in average selling price of CMP and tissue paper products. Then turn to Slide 8. For the third quarter of 2021, the CMP segment, including both regular CMP and lightweight CMP, generated revenue of $37.3 million, representing 80 -- 82.8% of total revenue. $31.2 million of revenue was from our regular CMP products and $6.1 million was from lightweight CMP. CMP segment volume increased by 22.1% to 74,444 tonnes, of which 61,947 tonnes were regular CMP and 12,497 tonnes were lightweight CMP. Average selling price or ASP for regular CMP increased by 24.1% to $504 per tonne. And ASP for lightweight CMP increased by 24.4% to $490 per tonne.

Let's turn to next page. For the third quarter of 2021, the offset printing paper generated revenue of $4.8 million, decreased by $1.3 million or 21.7% from the same period of last year. The offset printing paper volume decreased by 31.5% to 7,045 tonnes. ASP for offsetting printing paper increased by 14.3% to $681 per tonne.

Then turning to Slide 10. For the third quarter of 2021, tissue paper products generated revenue of $2.8 million, increased by $0.4 million or 18.1%. This resulted from the sales of 2,646 tonnes tissue paper products, with a 7.3% decrease, at an ASP of $1,063 per tonne with an increase of 27.5%.

Move to Slide 11. We sold 3,180,000 pieces of face masks and generated revenue of $0.2 million from selling face masks for the third quarter 2021.

Slide #12 summarizes the change in our revenue mix. For the third quarter 2021, total cost of sales increased by $12.5 million to $43.3 million, leading to the total gross profit of $1.8 million, 29.1% decrease from the gross profit of $2.6 million for the same period of last year. And overall gross margin was 4.0% for the third quarter of 2021.

For the third quarter of 2021, SG&A expenses decreased by 13.5% (sic) [15.53%] to $2.0 million. And operating loss was $0.2 million compared to income from operations of $0.2 million for the same period of last year. Operating loss margin was 0.4% compared to operating margin of 0.5% for the same period of last year.

For the third quarter of 2021, net income was $1.5 million, resulting in a net income of $0.03 per basic and diluted share. This compared to a net loss of $0.5 million or the net loss of $0.02 per basic and diluted share for the same period of last year.

For the third quarter of 2021, earnings before interest, taxes, depreciation and amortization increased by $1.7 million to $5.3 million from $3.6 million for the same period of last year.

Now shifting gear to year-to-date financial results. For the 9 months ended September 30, 2021, total revenue increased by 69.2% to $115.8 million as a result of increase in sales volume and ASPs over all paper product categories.

For the 9 months ended September 30, 2021, the CMP segment, including both regular and lightweight CMP, generated revenue of $94.8 million, representing a 91.8 -- 81.9% of total revenue. 78% -- $78.4 million in revenue was from our regular CMP products and $16.4 million was from lightweight CMP. Volume for the CMP segment increased by 36.3% to 189,738 tonnes, of which 156,080 tonnes were regular CMP and 33,658 tonnes were lightweight CMP. ASP for regular CMP increased by 28.1% to $502 per tonne, while ASP for lightweight CMP increased by 27.8% to $488 per tonne.

For the 9 months ended September 30, 2021, our offset printing paper segment generated revenue of $14.1 million. We shipped 20,602 tonnes of offset printing paper for 9 months ended September 30, 2021, an increase of 65.3% from the same period of last year. ASP of offset printing paper increased by 13.4% to $684 per tonne.

For the 9 months ended September 30, 2021, tissue paper products generated revenue of $6.5 million, increased by $0.7 million or 12.6%. We shipped 5,963 tonnes tissue paper products, with a 13.9% decrease, at an ASP of $1,089 per tonne, with an increase of 30.7%.

For the 9 months ended September 30, 2021, face masks generated revenue of $0.4 million with sales volume of 9.7 million paces of face masks.

For the 9 months ended September 30, 2021, total cost of sales increased by $45.9 million to $108.8 million, leading to a total gross profit of $6.7 million and an increase of 34.8% from last year. Overall gross margin of 5.8% reflects a decrease of 1.5 percentage points from last year.

For the 9 months ended September 30, 2021, SG&A expenses were $7.2 million compared to $8.4 million for the same period last year.

For the 9 months ended September 30, 2021, operating loss decreased from $3.5 million to $0.5 million. Operating loss margin was 0.04 million (sic) [0.4%] compared to operating loss margin of 5.1% for the same period of last year. For the 9 months ended September 30, 2021, net loss was $3.2 million or $0.06 loss per basic and diluted share compared to net loss of $3.9 million or $0.15 loss per basic and diluted share for the same period of last year.

For the 9 months ended September 30, 2021, earnings before interest, taxes, depreciation and amortization decreased from $7.2 million to $2.7 million for the same period of last year.

Now moving to Slide 19 and 20. Let's look at the balance sheet and the liquidity. As of September 30, 2021, the company has cash and bank balances, short-term debt, including bank loans, current portion of long-term loans from credit union and related party loans, and long-term debt, including loans from credit units, of $26.6 million, $12.2 million and $4.5 million, respectively, compared to $4.1 million, $12.2 million and $4.6 million, respectively, at the end of 2020.

Net accounts receivable was $4.1 million as of September 30, 2021, compared to $2.4 million as of December 31, 2020. Net inventory was $7.6 million as of September 30, 2021, compared to $1.2 million at the end of 2020. As of September 20 -- September 30, 2021, the company has current assets of $62.2 million and current liabilities of $18.7 million, resulting in working capital of $43.5 million. This was compared to current assets of $14.9 million and current liabilities of $18.3 million, resulting in a working capital deficit of $3.4 million at the end of 2020.

Net cash used in operating activities was $6.4 million for the first 9 months of 2021 compared to net cash provided by operating activities of $2.4 million for the same period of last year. Net cash used in investing activities was $12.8 million for the first 9 months of 2021 compared to $2.6 million for the same period of last year. Net cash provided by financing activities was $41.5 million for the first 9 months of 2021 compared to net cash used in financing activities of $2.2 million for the same period of last year.

That's all for IT packaging third quarter of 2021 earnings conference call. I would like to thank everyone for joining us today. If you have any questions, please contact us with e-mail at ir@itpackaging.cn. We appreciate your interest and support in IT Tech Packaging and look forward to speaking with you again next time.

Operator, please go ahead.

Thank you again for attending IT Tech Packaging's Third Quarter of 2021 Earnings Conference Call. This concludes our call today, and we thank you all for listening in. Goodbye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]