Transcript
Hello ladies and gentlemen and welcome to participate in IT Tech Packaging's First Quarter 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 Mr. Zhenyong Liu, IT Tech Packaging'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. IT Tech Packaging announced its first quarter 2021 financial results via press release yesterday which can be found on the company's website at www.itpackaging.cn. First, Mr. Liu will brief you on the company's key operational highlights over the first quarter 2021, 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 statements of historical facts in its announcement are forward-looking statements, including but not limited to, anticipated revenues from the corrugating medium paper, tissue paper, and offset printing 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. 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 expansion 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 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 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 on non-GAAP financial measures or EBITDA or earnings before interest, taxes, depreciation, and amortization. Please refer to our press release for a complete reconciliation of EBITDA and 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 Dahong Zhou from EverGreen Investor Relations.
Thank you, operator and good morning everyone. Thanks for joining our first quarter 2021 earnings conference call. We continued to make improvements in the sales volume of CMP products for this quarter. Our total revenue increased by 176.9% to $24.2 million, resulting from 129.4% growth of overall sales volume and a 20.7% increase in average selling prices across all categories of products. The average selling prices of all categories of products for this quarter increased by 11.9% from the fourth quarter of 2020. We took a quick recovery from the impacts of the global outbreak of the COVID-19 pandemic, posting growing revenues from sales of tissue paper, offset printing paper, and CMP products. Our production and sales of tissue paper products have been growing steadily since the launch of PM8 and PM9 in December 2018 and November 2019. Currently, we have completed fundamental constructions on our new tissue paper production line, PM10, and are working on the installation of affiliated equipment. Amid robust domestic market demand for tissue paper products and improved production efficiency, we will continue expanding our capacity as we expect to see strong growth from the tissue paper business segment that will greatly boost our overall performance. In addition, we are also expanding the business to high and new technology initiatives such as the combined heat and power generation project utilizing biomass technology, Biomass CHP Project, and expect to diversify our sources of revenue and ensure our stable modes of profit-making. Now I will turn the call over to our CFO, Ms. Jing Hao, who will review and comment on the first quarter financial results. Her comments will be delivered in English by my colleague Janice Wang. Janice, please go ahead.
Thanks everyone for joining the call. Next, on behalf of the management team, I will outline some key financial results for the first quarter of 2021. I will reference specific production lines related to various products, making it clear which products I'm discussing. For your reference, the numbering system for our production line can be found on slide 17. Now, let's examine our financial performance for the first quarter of 2021. Please turn to slide 7. In the first quarter of 2021, total revenue rose by 176.9% to $24.2 million, attributed to increased sales volume of corrugating medium paper and offset printing paper, along with higher average selling prices of these products. Moving to slide 8, for the first quarter of 2020, the corrugating medium paper segment generated $20.7 million in revenue, which accounted for 85.6% of total revenue. This included $17 million from regular CMP products and $3.7 million from lightweight CMP. CMP segment volumes surged by 121.1% to 41,296 tonnes, comprising 33,626 tonnes of regular CMP and 7,670 tonnes of lightweight CMP. The average selling price for regular CMP increased by 21.5% to $504 per tonne, while the ASP for lightweight CMP rose by 18.7% to $489 per tonne. Now, let’s refer to slide 9. For the first quarter of 2021, revenue from offset printing paper products reached $2.1 million, resulting from sales of 3,142 tonnes at an ASP of $673 per tonne. Turning to slide 10, we reported $1.3 million in revenue from tissue paper products for this quarter, resulting from sales of 1,120 tonnes at an ASP of $1,117 per tonne. On slide 11, we noted the sale of 3,836 thousand pieces of face masks, generating $0.13 million in revenue from selling face masks during the first quarter of 2020. Slide 12 summarizes the changes in our revenue mix. For the first quarter of 2021, the total cost of sales increased by $13.5 million to reach $22.4 million, leading to a total gross profit of $1.8 million, which is a 1178.8% increase compared to a gross loss of $0.2 million for the same period last year, resulting in an overall profit margin of 7.6%. In this quarter, selling, general and administrative expenses decreased by 5.3% to $2.6 million. Losses from operations were $0.7 million, an improvement from a loss of $2.9 million in the same period last year, indicating an operating loss margin of 3% compared to 32.8% the previous year. For the first quarter of 2021, net loss was $4.3 million, or $0.12 per basic and diluted share, compared to a net loss of $2.4 million, or $0.11 per basic and diluted share from last year. Earnings before interest, taxes, depreciation, and amortization decreased by $1.11 million to a negative $0.07 million from $1.04 million for the same period last year. Moving to slides 19 and 20, let’s review the balance sheet and liquidity. As of March 31, 2021, the company reported cash and bank balances, short-term debt including bank loans and current portion of long-term loans from credit unions and related party loans of $37.4 million, $12.1 million, and $4.6 million respectively, compared to $4.1 million, $12.2 million, and $4.6 million at the end of 2020. Net accounts receivable stood at $5.2 million as of March 31, 2021, up from $2.4 million as of December 31, 2020. Net inventory was $7.4 million as of March 31, 2021, compared to $1.2 million at the end of December 2020. The company had current assets of $61.1 million and current liabilities of $20.2 million, resulting in working capital of $40.9 million, compared to current assets of $14.9 million and current liabilities of $18.3 million, which showed a working capital deficit of $3.4 million at the end of 2020. Net cash used in operating activities for the first quarter of 2021 was $8.3 million, compared to net cash provided of $6.9 million for the same period last year. Net cash used in investing activities was $0.04 million this quarter, down from $0.76 million last year. Net cash provided by financing activities was $41.8 million for the first quarter of 2021, compared to no cash from financing activities in the previous year.
Thank you for attending IT Tech Packaging's first quarter 2021 earnings conference call. This concludes our call today and we thank you all for listening in. Goodbye.