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Gulf Resources Releases Letter to Shareholders October 31 2024 - 8:30AM
Gulf Resources, Inc. (Nasdaq: GURE) ("Gulf Resources", “we”, or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced its Letter to Shareholders as below.
“Dear Shareholders,
We want to emphasize our commitment to communicating actively with our shareholders. This letter is an integral part of our communication efforts.
On April 16, 2024, we dismissed our auditors, WWC PC, and engaged GGF CPA Limited as our new auditor when we realized our audit would not be completed on time. Transitioning to new auditors at the last minute posed significant challenges, as we had to restart every step of the process. In addition, without a completed audit and the SEC filings, we were unable to communicate financial information to our shareholders.
Accordingly, our management and our auditors focused on completing our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 10-K”), our Quarterly Report on Form 10-Q for the three months ended March 31, 2024 and our Quarterly Report on Form 10-Q for the six months ended June 30, 2024 (collectively, the “Delinquent Filings”) so that we could meet the filing requirements of the SEC and Nasdaq. We filed our 2023 10-K on September 27,2023 and our Form 10-Qs for the first and second quarter of 2024 on October 11,2024.
Normally, we prepare for conference calls and press releases alongside the filing process. However, in this case, our primary goal was to complete the Delinquent Filings and regain compliance with the Nasdaq rules. On October 15, 2024, we received written notice from the Listing Qualifications Staff of the Nasdaq Stock Market LLC that, as a result of the Company filing the Delinquent Filings with the SEC, the Staff has determined that the Company complies with the Nasdaq Rule and considers the matter to be closed.
This has been a challenging process for both the company and our new auditors. We appreciate their efforts and are grateful that we are now up to date on our filings.
Since we last communicated with investors, much has happened in China, in our industries, and to our company. The Chinese economy has been weak, especially weak in the real estate sector, which has directly impacted our business. We purposely cut back on the sale of bromine and crude salt to protect the long-term value of our resources.
At the same time, we have had major expenditures for flood prevention and for the purchase of land for salt fields. We believe the expenditures for flood prevention will provide good returns in the future as our facilities will be much better protected. We also believe the purchase of the salt fields will provide strong returns and may enable us to open our closed factories and increase our production of both crude salt and bromine.
We are now seeing signs that cause us to be more optimistic. The Chinese government is taking steps to improve the economy, especially in the housing sector. In the past month, from 9/24 to 10/30, the market price of bromine has improved 9.6%% from RMB 19,886 to RMB 21,800. (sunsirs.com) These are levels above break-even for our company.
We are in the process of preparing information for a conference call that will focus on:
Our current financial position,
Expenditures for flood prevention,
Our investment in salt fields and its impact on future sales and earnings,
Strategies for our Chemical and Natural Gas businesses,
Our medium and long-term growth strategies.
As soon as this material is completed, we will schedule a conference call with investors. So investors can understand our strategies and our plans for future growth.
We appreciate your patience and look forward to communicating with everyone on a regular basis.”
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), ShouguangYuxin Chemical Industry Co., Limited ("SYCI"), Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sell crude salt. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
Gulf Resources Announces the Signing of Agreements to Acquire Crude Salt Fields July 03 2024 - 8:30AM
Gulf Resources, Inc. (Nasdaq: GURE) (“Gulf Resources”, “we,” or the “Company”), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced that its wholly owned subsidiary, Shouguang Hengde Salt Industry Co. Ltd (“SHSI”), entered into a series of agreements to acquire crude salt fields for an aggregate price of RMB280,762,000 (approximately US$38,619,257 based on the current exchange rate on July 3, 2024). The purchase includes 5 parcels of crude salt fields with a total size of 5,141,000 square meters (approximately 1,270 acres).
80% of the transfer or RMB224,609,600.00 (approximately USD $30,895,406) will be paid in cash upon signing of the agreements. The remaining 20% will be paid in shares of common stock of the Company within three months from the date of the agreements after SHSI has inspected and accepted the crude salt fields in writing.
The acquisition of these crude salt fields may enable Gulf Resources to open bromine factories #2 and #10. In addition, with the additional crude salt fields, the Company will be able to drill more wells and achieve a higher level of utilization.
The Company estimates that it will take 6-9 months to prepare for the opening of the two factories. The company will build out the salt pans and drill new wells. Production is expected to begin in the first half of 2025.
“We are pleased to have reached these agreements with the government of Shouguang City and Yangkou Town,” stated Mr. Xiaobin Liu, the CEO of Gulf Resources. “With additional crude salt fields, we may not only be able to reopen our two remaining closed factories, but also drill new wells and achieve increased utilization, while protecting the welfare of the local population.”
“In addition,” Mr. Liu added, “with the money invested in flood protection, we expect to safeguarding the bromine facilities and other impacts we have experienced in the past.”
“While the Chinese economy continues to struggle,” Mr. Liu concluded, “we are very optimistic about the future for bromine and crude salt. Bromine is a mineral that is only produced in a few regions. Almost 75% of world-wide production comes from the Dead Sea region of Israel and Jordan, where conflicts are still ongoing. New opportunities for zinc/bromine batteries as well as sodium-ion batteries could present significant future opportunities. We are pleased to take these steps to increase our bromine and crude salt production, as we are convinced prices may rise in the future.”
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited (“SCHC”), Shouguang Yuxin Chemical Industry Co., Limited (“SYCI”), Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sells crude salt. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
Gulf Resources Announces Its Flood Prevention Plan
Fri, November 17, 2023 at 5:30 AM PST
SHOUGUANG, China, Nov. 17, 2023 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced that it has recently initiated its preventive measures for safeguarding its bromine facilities.
In 2018, Shouguang City experienced the devastating impact of Typhoon Winbiya, regarded as one of the most destructive typhoons in history, resulting in the region receiving 14.9 inches of rainfall. The overflow of three major reservoirs along the Mihe River led to extensive flooding in farmlands, residential zones, and industrial factories. All of the Company’s bromine factories, crude salt pans, and mining areas were seriously impacted. The Company incurred substantial expenses, amounting more than $40 millions of dollars, including write-offs , for road repairs, equipment replacement, salt pan reconstruction, and the re-drilling of flooded wells.
A year later, Typhoon Lekima struck Shouguang City, surpassing the destructive force of its predecessor. Once again, the Company had to spend more than $6 millions of dollars to rectify the aftermath, involving road repairs, equipment replacement, salt pan reconstruction, and the re-drilling of affected wells.
To mitigate similar damages in the future, the Company has commenced a flood prevention initiative. Our strategy involves the renovation of the channels of four major rivers within our mining area, encompassing the tributary of the Mihe River. The aim is to prevent flooding that could harm the wells, aqueducts and crude salt pans at our plant.
The projected expenditure for this initiative amounts to $50,497,652. As of the third quarter, ending on September 30, 2023, we disbursed $15,149,296 for the initial phase of this project.
Apart from reducing risk to surrounding regions, we anticipate three notable advantages from this flood prevention plan. It is expected to:
enhance the probability of obtaining approval to reopen factories #2 and #10;
enable the drilling of additional wells across our five operating factories, and
mitigate the risks and associated expenses related to future storms-induced flooding.
Given our company’s robust financial position and substantial cash resources, we believe the flood prevention program will yield favorable returns over the long-term.
In 2016, I thought one day Gulf could be a $30-$50 stock. We had ten bromine-crude salt factories, two chemical factories, had discovered natural gas and bromine in Sichuan, and had the capital to grow. At the time, I did not know the government would close our factories to improve the environment, COVID would occur, a typhoon would flood our facilities, or the government would increase financial controls on currency.
Despite these issues, in 2021, the management team and I made the decision to pay back partial or all of approximately 11 ½ years of compensation a in Gulf and get. Currently, I am working with no cash but only shares as compensation. At the time, the stock was much higher than it is now, making our decision look wrong. However, we were- and are- making a long-term bet that Gulf can still be a $30-$50 stock.
Despite the long closure of our factories and our expensive rebuilding, we currently have approximately $115 million or $11.05 per share in cash, and almost no debt. We have not wavered in our belief that our company will generate substantial earnings. The following should not be taken as our projections. They are the views that convinced me to repay almost 11 ½ years of salary and work for no compensation.
In 2022, our bromine and crude salt business had earnings of approximately $14.2 million, with factory #8 only opening late in the year. Despite the recent price decline, world-wide supplies of bromine are limited. Some former factories, including three of our own, were permanently closed. Demand should strengthen and prices should increase, especially as new uses, like zinc/bromine batteries, materialize. If we can get open our rest two closed factories, bromine and crude salt may earn $30-$40 million a year over time.
Our Yuxin chemical factory expect to be modern. We would not spend more than $60 million if we did not believe that we could earn a strong return. We have temporarily postponed the delivery of the final equipment so we can customize this equipment to the best market opportunities. Chemicals earned $33 million in 2015. While our new factory will be smaller, with our modern equipment and high margin products, we believe former profit levels may be attainable.
We also exptect try to developing an export business in chemicals to enable us to gain the financial flexibility to consider to buy back stock or pay dividends. We are also exploring the possible opportunities for zinc-bromine batteries.
In Sichuan, we continue to wait for the government’s environmental plan. Our current focus is to create a Joint Venture with the Daying county government. While we still do not know if our proposed Joint Venture in Sichuan will be approved, the potential could be greater than our original plan. If we can partner with the local government, we would expect to be able to drill more wells for both bromine and brine.. Since Petro-China has made the largest natural gas discovery in Chinese history in Daying, we think this could be a profitable endeavor. In addition, Daying has much higher concentrations of bromine than does Shandong Province.
If we may earn $30-$40 million from bromine and crude salt, $20-$30 million from chemicals, and $10-$20 million from natural gas, our operating earnings may be $60-$90 million, or $4.00-$6.00 a share after tax and corporate overhead.
Events could change these numbers. The Chinese economy could remain stay weak. We might not be able to open factories #2 and #10. Our attempts to build an export business in chemicals could fail, and the JV in Sichuan could fail to be established. However, the bet that our management and I are making is not that Gulf Resources can be a $4-$6 stock. Our bet is that we can generate high returns and may consider to use our free cash flow to enhance shareholder value. If we can accomplish these goals, our massive bets on the future of the company will have proven right.
Gulf Resources Announces it has updated the letter from Chief Executive Officer on its website September 04 2023 - 08:30AM GlobeNewswire Inc.
Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced that it has updated the letter from Chief Executive Officer on its website. The Company has recently updated the letter from its Chief Executive Officer , Mr Xiaobin liu on its website. Just simply click on the link below: http://www.gulfresourcesinc.com/about-7.html
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"), Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sell crude salt. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
Gulf Resources Updates Investors on Revenue and Earnings Projections from Bromine and Crude Salt Segments for the 3rd quarter and the full year of 2022 August 30 2022 - 08:30AM GlobeNewswire Inc.
Gulf Resources, Inc. (NASDAQ:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China today is updating investors as to its estimates for revenues and profits for the 3rd quarter and the full year of 2022 for its Bromine and Crude Salt Segments only based on Non-Generally Accepted Accounting Principle (Non-GAAP). The Company is also providing a preliminary overview of 2023 for these two segments. Before reviewing the projections, the Company advises investors that these estimates were based on its assumptions at this time, also do not include unexpected nonrecurring and non-operational factors, any impairments and write-offs which our auditors may recommend. Market conditions impacting the price and the demand for our products can change at any time. The Chinese economy has softened, which could impact demand and pricing.
COVID continues to be a serious problem in China. The Company has no visibility as to when this epidemic will abate. If COVID spreads further, the Chinese government could increase its inspections of our facilities, which also could impact our production.
In addition, China has been impacted by serious heatwaves and one of the worst droughts in a century. The drought has caused limited hydropower and the increased demand has caused the cutback in electricity and forced the closing of factories in certain parts of the country. These closures could also impact demand and pricing.
The government in Shandong Province could force us to close our operating factories, as it did last winter. In 2023, Chinese New Year falls on January 22, 2023,10 days earlier than it fell in 2022 and 21 days earlier than it fell in 2021. The seasonal closings are (not as) usually about 58 days from the end of Chinese New Year.
While the Company does not know if the government intends to have a seasonal closing in 2022-3, its projections for the 4th quarter assume that the government will force our facilities to close in early to mid December 2022. Should these closings occur, 4th quarter 2022 sales and earnings may be impacted negatively, while first quarter 2023 earnings may be impacted positively.
Further, because our crude salt business was recently split off from our bromine business, the results of these two segments in our financial statements will not be strictly comparable. Bromine is now incurring a larger share of operating costs, which have lowered its profits and raised those of crude salt in comparison with the reported results in 2021 and the first quarter of 2022.
The projections below are for the bromine and crude salt segments only in 2022. They include allocations of corporate cost but do not include public company costs, and do not include the losses from chemicals and natural gas or income taxes. All projections for the third and fourth quarters assume a currency Exchange Rate ( RMB/US$=6.8065).
The estimates also do not assume any stock grants for management in 2022. It is possible there will be some grants in 2022. If grants are awarded, they will be lower than those in 2021.
Projections for Bromine and Crude Salt Segments
Third Quarter Ending 9/30/2022 For the third quarter ending 9/30/2022, the bromine and crude salt segments are projected to generate revenues of approximately $20.0 million to $21.8 million, an increase of approximately 12.4% to 22.5% from that of the previous year. Profit before income tax is expected to be approximately $ 9.0 million to $10.3 million, an increase of approximately 20.0% to 37.3% from that in the previous year.
Q3 2022($Million) Q3 2021($ Million) % of change Revenue 20.0-21.8 17.8 12.4%-22.5% Profit Before income Tax 9.0-10.3 7.5 20.0%-37.3% Full Year Ending 12/31/2022 For the full year ending 12/31/2022, the bromine and crude salt segments are projected to generate revenues of approximately $62.0 million to $63.7 million, an increase of approximately 12.7% to 15.8% from that of the previous year. The Company estimates that there will be fewer days of operation in the fourth quarter 2022 as compared to last year due to the earlier Chinese New Year. In addition, because of the current softness in the Chinese economy and for purposes of conservatism, the Company is assuming the selling pricing in the fourth quarter of 2022 will be below the fourth quarter of 2021. Profit before income tax is projected to be approximately $20.0 million to $21.5 million, an increase of 63.9% to 76.2% from that in the previous year.
2022($Million) 2021($Million) % of change Revenue 62.0-63.7 55.0 12.7%-15.8% Profit Before income Tax 20.0-21.5 12.2 63.9-76.2% 2023 and Beyond
Based on information currently at hand, revenues and earnings in 2023 for bromine and crude salt segments are projected to increase from the estimates in 2022.
The Company currently believes that 2023 will benefit from:
The production of factory #8, which may add approximately by 20% to annual production capacity of operating factories at this time. More days of additional production. With Chinese New Year coming earlier in 2023 (Feb. 01, 2022 vs. Jan 22, 2023, there will be more production days in the first quarter, and with Chinese New Year coming later in 2024 (Jan, 24, 2023 vs. Feb. 10, 2024) there should be more production days in the 4th quarter. Fewer closings for inspections as if COVID is expected to abate somewhat. Continued strength in pricing, as the closure of many factories has lowered supply, while the decline of the RMB versus the USD and other currencies has made imports more expensive. The Company also believes it may get permission to open another factory in 2023, but this factory is not included in these projections.
6-Year Plan
The Company is currently reviewing the projections for the 6-year plan for bromine and crude salt on June 14,2022. At the present time, the Company expects revenues and profits may continue to increase on an annual basis. The capital investments made in our bromine operation should help us maintain or even slightly increase our utilization. Certain of our closed factories could be allowed to resume operations by the government. However, given the uncertainties related to COVID -19 and the economy of China, the Company is continuing the review and may revise the 6-Year Plan and will provide them to investors as the situation become clearer.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), ShouguangYuxin Chemical Industry Co., Limited ("SYCI"), Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sell crude salt. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
Gulf Resources, Inc. Announced Governmental Approval for Bromine Factory No. 8 August 24 2022 - 08:30AM GlobeNewswire Inc.
Gulf Resources, Inc. (NASDAQ:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China today announced that recently it has received oral notification from Shouguang Yangkou Town People’s Government permitting it to resume production at its Factory No. 8. With this approval, the Company can now take steps to resume production at this factory. The Company will immediately begin the preparation work including upgrading some of the facilities of this factory. The Company expects to complete test and trial production in the fourth quarter 2022. The Company believes Factory No. 8 will produce revenue in the fourth quarter 2022.
According to our Annual Report on Form 10-K for the year ending December 31, 2021, the resume of production at Factory No. 8 would result in an increase in annual production capacity of operating factories by approximately 20%.
Gulf Resources will also be providing investors with projections for its bromine business for the remainder of the year on or about the end of August 2022.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), ShouguangYuxin Chemical Industry Co., Limited ("SYCI"), Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sell crude salt. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
Gulf Resources Announces Results for the Second Quarter and Six Months Ended June 30, 2022 Gulf Resources, Inc. Mon, August 15, 2022 at 1:35 PM
SHOUGUANG, China, Aug. 15, 2022 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq: GURE) ("Gulf Resources", “we,” or the "Company"), a leading manufacturer of bromine, crude salt and specialty chemical products in China, today announced financial results for the six and three months ended June 30, 2022
Gulf Resources is pleased to report a second quarter with revenues up 41% and earnings per share of $0.37 despite the interruptions in production caused by COVID-19 circumstances, the overall weakness in the Chinese economy, the continuing fact that closures of bromine and crude salt factories No.2, No.8, and No.10 and the delay in opening the new chemical factory.
Bromine pricing has continued to be strong, the average selling price in the quarter was $7,740. As COVID abates and the Chinese economy begins to recover, the Company believes demand and pricing will continue to increase. Given the economics of our bromine business, this augers well for future profits. With the likelihood of one or more of our closed facilities maybe open and the future completion of our chemical factory, our company expects we will produce strong results in the remainder of 2022 and in future years.
Financial Highlights For the three-month period ending June 30,2022
Revenues increased 41% to $15,711,714
Gross Profit increased 80% to $7,610,594
Income from operations was $5,109,163 compared to a loss of ($2,382,809)
Net income was $3,901,794 compared to a loss of ($2,703,220).
Earnings per share were $0.37 compared to a loss of $0.26.
For the six-month period ending June 30,2022
Net revenues increased 50% to $24,642,451
Gross profit increased 126% to $11,991,363
Income from operations was $5,044,076 compared to a loss of ($5,664,233)
Net income was $3,781,848 compared to a loss of ($5,205,344)
Earnings per share were $0.36 compared with a loss per share of ($0.50).
Balance Sheet
As of June 30, we had cash of $79,115,431.
Total assets were $298,613,109. Total liabilities were $23,036,454.
Shareholders’ Equity was $275,576,655.
Based on 10,471,924 shares issued and outstanding, book value for Shareholders’ Equity per share was $26.32*.
For the Three Months Ending June 30, 2022.
Bromine Segment Bromine revenues increased 38% to $13,893,809. The primary contributor to the higher revenues was the increase in the selling price of bromine. During the quarter the average selling price was $7,740 compared to $5,556 in the same quarter of the previous year. There is always a lag in the average selling price compared to the market price as the Company fulfills orders based on when they are received.
During the quarter the Company sold 1,795 tonnes of bromine slightly below the 1,805 in the previous year. During the second quarter of 2022, in order to control COVID, the government made a series of unannounced inspections of our bromine and crude salt facilities, that caused the Company to shut and then reopen its facilities. During the second quarter of 2021, there was one full inspection. The Company believes the inspections in 2022 had a more significant impact on production than did the inspections in 2021.
The cost of revenues in bromine was $6,865,832 representing an increase of $1,312,339 from the same quarter of the previous year.
In this quarter, to comply with new government directives, the Company separated bromine and crude salt into two separate legal entities. With this separation, bromine assets increased to $172.1 million from $138.9 million, while crude salt assets shrank to $10 million from $32.8 million. This caused bromine to receive a higher allocation of expenses than in previous years.
Even with the higher allocation of costs, income from the bromine segment increased 98.5% to $5,325,541 from $2,682,233.
In the quarter, the Company spent $32,822,927mainly in bromine wells, aqueducts and the installation of high and low voltage lines for bromide Wells.
The Company continues to believe it will receive permission to open one of these factories in 2022 and perhaps try its best effort to get another in early 2023.
During the quarter, the Company incurred capital expenditures of $32,822,927 for its bromine segment, which mainly include the cost for bromine wells, aqueducts and the installation of high and low voltage lines for bromide Wells. The Company believes these expenditures may enable it to maintain or slightly increase its utilization in the bromine segment in future quarters.
Crude Salt Crude salt revenues increased 62% to $1,817,904. There was a 10% increase in production in tonnes and a 47% increase in average selling price. The cost of net revenue decreased by 9% to $1,235,288, largely as a result of the reallocation of costs. Crude salt reported income from operations of $142,968 compared to a loss of $578,435.
Chemicals Revenues in chemicals were $0. The net loss was ($475,201) vs. a net loss of ($741,312) in the same period of the previous year.
During the quarter, COVID restrictions as well as supply chain issues caused delays in receiving some of the previously ordered machinery and equipment including the waste water treatment and solid waste treatment equipment. The Company is working with its existing suppliers and may identify new suppliers so that it can complete construction of its factory based on the delivery.
To date, the Company has spent $45,584,344 on its new factory. It believes the total cost will approximate $69 million. The Company cannot currently project when construction will be completed and production will begin, but it does not believe the delays will impact the cost of the project or the long-term profitability. The Company will update investors as soon as the waste- water treatment and solid waste treatment equipment is delivered.
Natural Gas Segment The natural gas segment had $0 revenues and a net loss of ($61,699) roughly equal to the loss in the previous year. Pursuant to the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial) promulgated by the Ministry of Natural Resources of PRC on January 9, 2020, which came into effect on May 1, 2020, privately owned enterprises are allowed to participate in the natural gas production. The Company plans to proceed with its applications for the natural gas and brine project approvals with related government departments until the governmental planning has been finalized.
Other Costs Direct factory and overhead costs for closed factories were $1,927,297 vs. $1,394,717 in the same period of the previous year.
Corporate costs declined to $67,987 from $3,193,107. In the second quarter of 2021, the Company incurred $3,113,140 in charges for stock grants to management. There were no stock grants in the second quarter of 2022.
Profit & Loss Net income was $3,901,794 compared to a loss of $2,703,220 in the same quarter of the previous year.
Net income per share was $0.37 compared to a loss of ($0.26).
Foreign Currency Translation Adjustment For the quarter, the Company had a negative foreign translation adjustment of $16,393,444 versus a positive adjustment of $5,334,236 in the previous year. This adjustment was caused by an approximate 6.1% decline of the RMB vs. the USD. The adjustment impacts all balance sheet translations into U.S. dollars.
Six Months Ending June 30, 2022 Net revenues increased 50% to $24,642,451. Gross profits increased 126% to $11,991,363. General and administration expenses declined 60% to $2,799,590. A major factor impacting results in 2021 was the charge of $3,113,140 for stock grants. Income before taxes was $5,127,164 versus a loss of ($5,592,573). Net income was $3,781,848 vs. a loss of ($5,205,344). Earnings per share were $0.36 vs. a loss of ($0.50).
In Bromine, revenues increased 48% to $22,019,825. Net selling prices increased 39%. Costs increased 19% to $10,786,157. Income from operations increased 376% to $6,674,375 despite the higher allocation of costs as a result of separating salt from bromine. The loss from operations in crude salt was $378,953 vs. a loss of $1,588,020 in the same period of the previous year. Chemical products lost $988,483 and natural gas lost $88,438 as neither business had revenues in the six months.
Cash Flow We generated $18,492,397 in cash flow from operations versus $7,025,775 in the previous year. We invested $33,217,987 in our bromine business mainly for bromine wells, aqueducts and the installation of high and low voltage lines for bromide Wells. The change in the value of the RMB to the USD caused a reduction in cash and cash equivalents of ($1,642,327) versus a credit of $1,912,746 in the previous year.
Balance Sheet As of June 30,2022, we had cash of $79,115,431. Total assets were $298,613,109. Total liabilities were $23,036,454., Shareholders’ Equity was $275,576,655. Based on 10,471,924 shares issued and outstanding, book value for Shareholders’ Equity per share was $26.32* and cash per share was $7.56*.
Commentary “We are very pleased to have reported earnings of $0.37 per share in the second quarter despite the disruptions caused by COVID-19,” Mr. Liu Xiaobin, the CEO of Gulf Resources stated.
“With our new wells and other bromine facilities, we should be able to increase production in the remainder of 2022,” Mr. Miao Naihui,, the Chief Operating Officer, added, Bromine prices continue be strong. Our average selling price in the quarter was $7,740.As COVID abates, we expect increases in demand. The combination of production and higher pricing should lead to improvements in profits from operation in the third quarter and beyond.”
“In addition,” Mr. Miao continued, “we are hopeful one factory will receive approval to reopen in the near future. Because we have already made a lot of work to the factory, we expect further capital expenditures will be mainly within the factory site.
“We are disappointed that COVID and supply chain disruptions have delayed the opening of our Chemical factory,” stated Mr. Liu, the CEO, “but once the waste water and solid waste treatment equipment is delivered, we will update our investors. Based on the market for pharmaceuticals and their by-products as well as the market for other chemicals using bromine, we believe our chemical factory will perform well.”
“We also expect,” Mr. Liu continued, “that we may be able to produce natural gas and bromine in Sichuan Province.”
“We appreciate the patience of our shareholders,” Mr. Liu concluded, “While we are not making projections, based on the current price of bromine, we the expect the remainder of the year will be profitable.”
(*These calculations are based on the number of shares issued and outstanding of 10,471,924 shares as of June 30, 2022)
Conference Call Gulf Resources management will host a conference call on Monday, August 15, 2022 at 07:30 PM Eastern Time to discuss its second quarter 2022 results ended June 30, 2022.
Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the call. The Company management team will be available for investor questions following the prepared remarks.
To participate in this live conference call, please dial Toll Free +1(877)545-0320 five to ten minutes prior to the scheduled conference call time. International callers should dial +1(973)-528-0002, and please reference to “Gulf Resources” or Participant Access Code: 360812 while dial in.
A replay of the conference call will be available two hours after the call's completion and expired by Monday, August 22, 2022. To access the replay, call +1 (877) 481-4010. International callers should call +1 (919) 882-2331. The Replay Passcode is 46362.
About Gulf Resources, Inc.
Gulf Resources, Inc. operates through four wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), ShouguangYuxin Chemical Industry Co., Limited ("SYCI"), Daying County Haoyuan Chemical Company Limited (“DCHC”) and Shouguang Hengde Salt Industry Co. Ltd. (“SHSI”). The Company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the Company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. Through SHSI, the Company manufactures and sell crude salt. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.
Thanks for reminding me. I'll listen in later today. I think if China stocks catch a bid this one should also. I really like the zinc/bromine battery story.
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