Transcript
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 which can be found on the company's website at www.itpackaging.cn. Mr. Liu will start today's presentation with an overview for the third quarter of 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 provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact 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 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 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 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 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 to net income. As a kind reminder, 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 an interpreter. Please go ahead.
Thank you, operator and good morning everyone. Thanks for joining IT Tech Packaging's third quarter 2021 earnings conference call today. I'll provide an overview of the company's performance for the third quarter of 2021. For the first nine months of this year, we continue to make improvements in the sales of Corrugating Medium Paper or CMP, offset printing paper, and tissue paper products. Our total revenue increased by 59.2% to $114.8 million resulting from a 36.3% growth in overall sales volume and a 25.6% increase in average selling prices across all categories of products. We recorded a 34.8% increase in gross profits. The demand for paper products is impacted by factors such as the resurgence of COVID-19, the double reduction policy, and the trend towards paperless offices. We expect earnings per ton will significantly improve by operating price as many paper manufacturers adjusted production based on the dual control of energy consumption policy, which will cause a shortage of slots. We have confidence and will continue to provide high-quality products. We expect the performance in the upcoming quarter to be significantly better. Thank you again for all your support and attention. Now, I will turn the call over to Ms. Jing Hao, our CFO who will review our financial results for the third quarter of 2021. Her review will be delivered in English by an interpreter.
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 the first nine months of 2021. I will occasionally refer to the specific production line associated with their products. I will make it clear which products I'm referring to. Now let's look at the financial performance for the third quarter of 2021. 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 the increase in average selling price of CMP and tissue paper products. The CMP segments including Regular CMP and Light-Weight CMP generated revenue of $37.3 million, representing 82.8% of total revenue. $31.2 million of revenue was from our Regular CMP products, and $6.1 million was from Light-Weight 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 Light-Weight CMP. Average selling price for Regular CMP increased by 24.1% to $504 per tonne, and for Light-Weight CMP, it increased by 24.4% to $490 per tonne. 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 volumes decreased by 31.5% to 7,045 tonnes, however, ASP for offset printing paper increased by 14.3% to $681 per tonne. Tissue paper products generated revenue of $2.8 million, increased by $0.4 million or 18.1%. This was due to the sales of 2,646 tonnes of tissue paper products with a 7.6% decrease at an ASP of $1,063 per tonne, reflecting an increase of 27.5%. We sold 3,180 thousand pieces of face masks and generated revenue of $0.2 million from selling face masks for the third quarter of 2021. Total cost of sales increased by $12.5 million to $43.3 million, leading to a total gross profit of $1.8 million, a 29.1% decrease from the gross profit of $2.6 million for the same period of last year. Overall gross margin was 4.0% for the third quarter of 2021. SG&A expenses decreased by 13.5% 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% from the same period last year. For the third quarter of 2021, net income was $1.5 million resulting in net income of $0.03 per basic and diluted share, compared to a net loss of $0.5 million or $0.02 for the basic and diluted share for the same period last year. Earnings before interest, taxes, depreciation, and amortization increased by $1.7 million to $5.3 million from $3.6 million for the same period last year. For the nine months ended September 30, 2021, total revenue increased by 69.2% to $113.8 million due to the increasing sales volume and ASPs of all our paper product categories. 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. SG&A expenses were $7.2 million, compared to $8.4 million for the same period last year. Net loss was $3.2 million, or $0.06 loss per basic and diluted share, compared to a net loss of $3.9 million or $0.15 loss per basic and diluted share for the same period last year.
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.