Specialty Chemical Company China XD Plastics Announces First Quarter 2019 Financial Results

HARBIN,China,May 15,2019 -- China XD Plastics Company Limited (NASDAQ: CXDC) ("China XD Plastics" or the "Company"),one of China's leading specialty chemical companies engaged in the development,manufacture and sale of polymer composite materials primarily for automotive applications,today announced its financial results for the first quarter ended March 31,2019.

First Quarter 2019 Financial Summary

Revenue was$301.5 million,a decrease of 2.9% YoY

Gross profit was$50.3million,a decrease of 6.7% YoY

Gross margin of 16.7%,a decrease of 700 basis points YoY

Net income was$11.0 million,a decrease of 42.4% YoY

EBITDA was $47.6million,a decrease of 4.0% YoY

Total volume shipped was 94,444 metric tons,down 11.1% YoY

"Our first quarter 2019 results are consistent with the declining trend of the Chinese auto industry though the declining trend becomes narrower during the first quarter of 2019. Besides increased sales of higher-end products such as modified POM and PPO,the Company started salesof new categories of higher-end products of PA66 and PA6 produced with high-priced raw materials for higher selling price in China,leading to an increase of sales price in domestic market by 14.3%." said Jie Han,Chairman of the Board of Directors and Chief Executive Officer.

"Our successful trial production at our production base in Dubai has brought us prospect in international sales targeting high-end products. We are working hard to complete the equipment installation and testing of our industrial projects in Heilongjiang base for upgrading existing equipment for 100,000 metric tons of engineering plastics by the end of the third quarter of 2019. These are our strategic plans of producing specialized high-tech products for various important new markets,targeting high-end products for new markets,which will ultimately enable more active inroads into various product applications and other market regions."

"China XD continues to value our deep working relationships with our customers above all,and is committed to creating value with our culture of hard work and innovation. We anticipate that the continuing execution of our strategic plan supported by an increase in our production capacity,our entry into new markets,a diversified customer base and a diversification with international sales will help to generate business growth for years to come. For fiscal 2019,we are reiterating our financial guidance of $1.3 -$1.6 billion in revenue,$90- $110 million in net income ." Mr. Han concluded.

First Quarter 2019Results

Revenues were US$301.5 million in the first quarter ended March 31,2019,a decrease of US$9.0 million,or 2.9%,compared to US$310.5 million in the same period of last year.This was due to approximately 11.1% decrease in sales volume,and 6.5% negative impact from exchange rate due to depreciation of RMB against US dollars,and partially offset by 15.7% increase in the average RMB selling price,as compared with those of the same period of last year.

(i) Domestic market

For the three months ended March 31,revenues from domestic market decreased by US$14.7 million as a combined result of: i) a decrease of 11.8% in sales volume; ii) a depreciation of RMB against US dollars by 6.5%; and iii) partially offset by an increase of 14.3% in the average RMB selling price of our products,as compared with those of last year.

According to the China Association of Automobile Manufacturers,Automobile production and sales in China decreased by 9.8% and 11.3%,respectively,for the first quarter of 2019 as compared to the same period of 2018. A weakening in macroeconomic conditions since summer of 2018 continued to deteriorate auto business environment,our domestic sales during the first quarter of 2019 decreased by 4.9% as compared to the same period of the prior year,including 26.9% decrease in Southwest China and 22.0% decrease in East China.

Thanks to our positive efforts to expand customers' bases to meet their new requirements,the Company has achieved sales growth of 13.6% in North China and 12.0% in South China. As for the RMB selling price,the increase of 14.3% was mainly due to higher sales of higher-end products such as modified POM and PPO,and sales of new categories of higher-end products of PA66 and PA6 produced with high-priced raw materials for higher selling price in China.

(ii) Overseas market

For the three months ended March 31,revenues from overseas market was US$5.8 million as compared to US$54,854 in the same period of 2018.

After a successful trial production at our production base in Dubai in November 2018,the Company has tried to develop new overseas customers besides the existing ROK customer,establishedbusiness relationships with new customers in UAE and India,and shipped products to the end users in Europe.We are optimistic about the prospect of our business expansion overseas.

Premium products (PA66,PA6,Plastic Alloy,PLA,POM and PPO) in total accounted for 82.7% of revenues in the first quarter of 2019,compared to 81.0% for the same period of 2018. The Company continued to shift production mix from traditional lower-end products such as PP to higher-end products such as POM and PPO,primarily due to (i) greater growth potential of advanced modified plastics in luxury automobile models in China,(ii) the stronger demand as a result of promotion by theChinese government for clean energy vehicles and (iii) better quality demand from and consumer recognition of higher-end cars made by automotive manufacturers from Chinese and Germany joint ventures,Sino-U.S. and Sino-Japanese joint ventures where manufacturerstend to use more and higher-end modified plastics in quantity per vehicle in China.

Gross profit was US$50.3 million in the quarter ended March 31,compared to US$53.9 million in the same period of 2018,representing a decrease of 6.7% or US$3.6 million.Our gross margin decreased to 16.7% during the quarter ended March 31,2019 from 17.4% during the same quarter of 2018 primarily due tothe adopted lower-priced strategy as a new entrant to new categories of higher-end products of PA6 and PA66 in domestic market for the first quarter ended March 31,2019 as compared tothat of the prior year.

General and administrative (G&A) expenses were US$8.8 million in the quarter ended March 31,2019 compared to US$8.9 million in the same period in 2018,representing a decrease of 1.1%,or US$0.1 million. The decrease was primarily due to our approach on optimizing management structure and enhancing efficiency,leading to the decrease of (i)US$0.9 million in salary and welfare,and partially offset by the increase of (ii) US$0.8 million in professional fees.

R&D expenses were US$10.1 million during the quarter ended March 31,2019 compared with US$5.0 million during the same period in 2018,an increase of US$5.1 million,or 102.0%. This significant increase was primarily due to (i) elevated R&D activities to meet the new higher specification requirements from potential customers,especially overseas; and (ii) increased effortsdirected towardsapplications in new electricalequipmentand electronics,alternative energy applications,power devices,aviation equipment and ocean engineering,in addition to other new products primarily foradvancedindustrialized applicationsin the automobile sector and in new verticalssuch as ships,airplanes,high-speed rail,3D printing materials,biodegradable plastics,and medical devices.As of March 31,the number of ongoing research and development projects was355.

Total operating income was US$31.2million in the first quarter ended March 31,2019 compared to $38.9million in the same period of 2018,representing a decrease of 19.8% or US$7.7 million. This decrease is primarily due to due to the lower gross margin,higher R&D expenses,partially offset by the lower general & administration expenses and selling expenses.

Net interest expenses were US$17.1 million for the three-month period ended March 31,compared to $10.6 million in the same period of 2018,representing an increase of 61.3% or US$6.5 million,primarily due toi) the increase of average short-term and long-term loan balance in amount of US$990.1 million for the three months ended March 31,2019 compared to US$854.2 million for the same period in 2018; ii) the increase of interest expense resulting from the average loan interest rate increased to 4.91% for the three months ended March 31,2019 compared to 4.72% of the same period in 2018; iii)the decrease of average deposit balance in amount of US$242.4 million for the first quarter ended March 31,2019 compared to US$626.8 million for the same period in prior year;and iv) the decrease of interest income resulting from the average deposit interest rate decreased to 0.72% for the first quarter ended March 31,2019 compared to 1.52% of the same period in 2018.

Income tax expenses were $3.6 million for the three-month period ended March 31,compared to $6.2 million in the same period of 2018,representing a decrease of $2.6 million,or 41.9%. The effective income tax rate increased from 24.5% for the three-month period ended March 31,2018 to 24.9% for the three-month period ended March 31,primarily due to the decrease of Sichuan Xinda's profit before tax ("PBT") ratio,which enjoys 15%preferential income tax rate.

Net income of US$11.0 million in the first quarter of 2019 compared to anet income of US$19.1 million in the same quarter of 2018,representing a decrease of $8.1 million,or 42.4%. Basic and diluted earnings per share for the three-month period ended March 31,2019 were $0.16,compared to $0.29 per basic and diluted share for the same period of 2018. The average number of shares used in the computation of basic and diluted earnings per share for the three-month ended March 31,2019 was 50.9 million,compared to 49.7 million shares for the same period of 2018.

Earnings before interest,tax,depreciation and amortization (EBITDA) was $47.6 million for the first quarter of 2019,compared to $49.6 million for the same period of 2018,representing a decrease of $2.0 millionor 4.0%. For a detailed reconciliation of EBITDA,a non-GAAP measure,to its nearest GAAP equivalent,please see the financial tables at the end of this release.

Financial Condition

As of March 31,the Company had $506.2 million in cash and restricted cash,an increase of $139.2 million or 37.9% as compared to $367.0 million as of December 31,2018. As of the March 31,working capital was negative $64.7 million (current assets minus current liabilities) and the current ratio (current assets divided by current liabilities) was 1.0,as compared to the current ratio of0.9 as of December 31,2018. Stockholders' equity as of March 31,2019 was $774.6 million,an increase of $25.7 million or 3.4% as compared to $748.9 million as of December 31,2018.

Inventories increased by 27.9% as a result of more purchases of the raw materials and the Company's strategy to stock up the finished goods for the upcoming orders. Prepaid expenses and other current assets decreased by 27.2% or US$35.9 million because (i) advances to suppliers for purchasing raw materials decreased by US$57.9 million; and partially offset by (ii) HLJ Xinda Group has reclassified US$16.1 million of long-term prepayments to Green River to receivables due from Shanghai sales; (iii) others increased by US$5.9 million. The aggregate short-term and long-term bank loans increased by 8.3% due to using the line of credits to support operating and investing activities in HLJ Xinda Group and Sichuan Xinda. We define the manageable debt level as the sum of aggregate short-term and long-term loans over total assets.

Financial Guidance and Business Outlook

In light of the currentchangingmacroeconomic environment in China,Chineseauto industry market still showing certain decline though narrower,and the successful trial run in Dubai resulting in new production capacity to be added,our expansion into to new markets overseas,diversified customer base and escalation of sales categories,the Company reiterates its financial guidance for fiscal 2019 to range $1.3 and $1.6 billion in revenue,net income to range between $90 and $110 million. It also assumes the average exchange rate of the US dollar to RMB at 6.8. This financial guidance reflects the Company's current view of its business outlook for fiscal 2019 and is subject to revision based on changing market conditions at any time.

Conference Call

China XD Plastics' senior management will host a conference call at 9:00 am Eastern Time on [Wednesday May 15],to discuss its first quarter 2019 financial results. The conference call can be accessed by dialing +1- 845-675- 0437 (for callers in the U.S.),+86-4006- 208-038 (for Mainland China callers) or +852- 3018-6771 (for Hong Kong callers) and entering passcode 3827289.

A recording of the conference call will be available through May 23,by calling +1-855-452-5696(for callers in the U.S.) and entering pass code 3927289.

A live webcast and replay of the conference call will be available on the investor relations page of the Company's website at http://chinaxd.net/.

About China XD Plastics Company Limited

China XD Plastics Company Limited,through its wholly-owned subsidiaries,develops,manufactures and sells polymer composites materials,primarily for automotive applications. The Company's products are used in the exterior and interior trim and in the functional components of 31 automobile brands manufactured in China,including without limitation,Audi,Mercedes Benz,BMW,Toyota,Buick,Chevrolet,Mazda,Volvo,Ford,Citroen,Jinbei and VW Passat,Golf,Jetta,etc.The Company's wholly-owned research center is dedicated to the research and development of polymer composites materials and benefits from its cooperation with well-known scientists from prestigious universities in China. As of March 31,489 of the Company's products have been certified for use by one or more of the automobile manufacturers in China. For more information,please visit the Company's English website at http://chinaxd.irpass.com/,and the Chinese website at http://www.xdholding.com.

Safe Harbor Statement

This announcement contains 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 this announcement are forward-looking statements,including but not limited to,the Company's growth potential in international markets; the effectiveness and profitability of the Company's product diversification strategy; the impact of the Company's product mix shift to more advanced products and related pricing policies; the effectiveness,profitability,and the marketability of its the ongoing mix shift to more advanced products; the prospect of the Company's Dubai facility,and the associated expansion into Middle East,Europe and other parts of Asia; the prospect of the Company's Southwest China facility,the prospects of the Company's Harbin facility,and its penetration into Northeast China; and its penetration into Southwest China; the Company's projections of its revenues for performance in fiscal 2019. These forward-looking statements can be identified by terminology such as "will," "expect," "project," "anticipate," "forecast," "plan," "believe," "estimate" and similar statements. Forward-looking statements involve inherent risks and uncertainties and are based on current expectations,assumptions,estimates and projections about the Company and the industry. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include,but are not limited to,the global economic uncertainty could further impair the automotive industry and limit demand for our products; fluctuations in automotive sales and production could have a material adverse effect on our results of operations and liquidity; our financial performance may be affected by the prospect of our Dubai facility and the associated expansion into Middle East,Europe and other parts of Asia; the withdrawal of preferential government policies and the tightening control over the Chinese automotive industry and automobile purchase restrictions imposed in certain major cities may limit market demand for our products; the slowing of Chinese automotive industry's growth; the concentration of our distributors,customers and suppliers; and other risks detailed in the Company's filings with the Securities and Exchange Commission and available on its website at http://www.sec.gov. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring 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 expectations will turn out to be correct,and investors are cautioned that actual results may differ materially from the anticipated results.

Financial Tables Follow -

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

March 31,

December 31,

2019

2018

ASSETS

Current assets:

Cash

78,891,580

41,301,817

Restricted cash

427,321,731

325,690,023

Accounts receivable,net of

allowance for doubtful accounts

154,051,127

294,688,288

Inventories

793,243,874

620,033,195

Prepaid expenses and other

current assets

96,270,070

132,218,528

Total current assets

1,549,778,382

1,413,931,851

Property,plant and equipment,

net

770,511

775,941,280

Land use rights,net

30,213,879

29,796,795

Long-term prepayments to

equipment and construction

suppliers

524,297,914

530,636,319

Operating lease right-of-use

assets,net

15,918,647

-

Other non-current assets

3,171,583

3,212,986

Total assets

2,893,793,916

2,753,519,231

LIABILITIES,REDEEMABLE CONVERTIBLE PREFERRED

STOCK AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term bank loans,including

current portion of long-term

bankloans

723,302,348

729,666,920

Bills payable

730,318,556

618,166,453

Accounts payable

40,865,322

84,958,469

Amounts due to related parties

18,995,751

18,365,738

Income taxes payable

16,337,961

15,975,367

Operating lease liabilities,current

2,304,598

-

Accrued expenses and other

current liabilities

82,423,884

126,926,898

Total current liabilities

1,614,548,420

1,594,059,845

Long-term bank loans,excluding

current portion

188,183,909

111,808,244

Deferred income

100,255,791

99,583,477

Operating lease liabilities,non-

current

14,805

-

Other non-current liabilities

103,993,582

101,573,772

Total liabilities

2,021,648,507

1,907,025,338

Redeemable Series D

convertible preferred stock

(redemption amount of

US$290,491,100 and

US$280,650,800 as of March 31,

2019 andDecember 31,2018,

respectively)

97,576,465

97,465

Stockholders' equity:

Series B preferred stock

100

100

Common stock,US$0.0001 par

value,500,000,000 shares

authorized,50,969,841 shares

issued,948,841 shares

outstanding as ofMarch 31,2019

and December 31,

respectively

5,097

5,097

Treasury stock,21,000 shares at

cost

(92,694)

(92,694)

Additional paid-in capital

86,633,582

86,582

Retained earnings

728,084,605

717,103,890

Accumulated other

comprehensive loss

(40,061,746)

(54,732,547)

Total stockholders' equity

774,568,944

748,917,428

Commitments and contingencies

-

-

Total liabilities,redeemable

convertible preferred stock and

stockholders' equity

2,231

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three-Month Period

Ended March 31,

2019

2018

US$

US$

Revenues

301,466,007

310,453,033

Cost of revenues

(251,136,339)

(256,585,577)

Gross profit

50,329,668

53,867,456

Selling expenses

(277,820)

(1,009)

General and administrative expenses

(8,775,385)

(8,875,009)

Research and development expenses

(10,062,186)

(5,049,898)

Total operating expenses

(19,115,391)

(14,916)

Operating income

31,214,277

38,540

Interest income

435,779

2,312,623

Interest expense

(17,277)

(12,894,205)

Foreign currency exchange losses

(2,140,865)

(3,955,808)

Losses on foreign currency option contracts

-

(520,981)

Gains on disposal of a subsidiary

518,491

-

Government grant

2,094,937

1,477,559

Total non-operating expense,net

(16,591,935)

(13,580,812)

Income before income taxes

14,622,342

25,310,728

Income tax expense

(3,641,627)

(6,210,827)

Net income

10,980,715

19,099,901

Earnings per common share:

Basic and diluted

0.16

0.29

Net income

10,901

Other comprehensive income

Foreign currency translation adjustment,net of

nil income taxes

14,670,801

29,661,410

Comprehensive income

25,651,516

48,761,311

CHINA XD PLASTICS COMPANY LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three-Month Period

Ended March 31,

2019

2018

US$

US$

Cash flows from operating activities:

Net cash provided by operating activities

66,949,790

28,429,789

Cash flows from investing activities:

Purchase of time deposits

-

(163,426,937)

Proceeds from maturity of time deposits

-

119,741,660

Purchase of and deposits for property,plant and equipment

(11,471,899)

(64,469,960)

Refund of deposit from an equipment supplier

-

60,054,417

Government grant related to the industrial project for 300,000

metric tons biological composite materials

-

6,953,816

Cash disposed for sales of a subsidiary

(3,217)

-

Net cash used in investing activities

(11,475,116)

(41,147,004)

Cash flows from financing activities:

Proceeds from bank borrowings

357,291,327

251,134,403

Repayment of bank borrowings

(281,123,795)

(347,339,779)

Proceeds from interest-free advances from related parties

289,298

-

Net cash provided by(used in) financing activities

76,456,830

(96,205,376)

Effect of foreign currency exchange rate changes on cash,cash

equivalents,and restricted cash

7,289,967

10,101,313

Net increase (decrease) in cash,cash equivalents,and

restricted cash

139,221,471

(98,821,278)

Cash,and restricted cash at beginning of

period

366,991,840

320,091,665

Cash,and restricted cash at end of period

506,311

221,387

Supplemental disclosure of cash flow information:

Interest paid,net of capitalized interest

13,316,939

11,464

Income taxes paid

2,276,847

7,064,571

Non-cash investing and financing activities:

Accrual for purchase of property,plant and equipment

1,181,670

196,911

The following table shows a reconciliation of cash,cash equivalents and restricted cash on the condensed consolidated balance sheets to that presented in the above condensed consolidated statements of cash flows.

March 31,

March 31,

2019

2018

US$

US$

Cash and cash equivalents

78,580

50,814,789

Restricted cash

427,731

170,455,598

Total cash,and restricted cash shown in the

statement of cash flows

506,387

CHINA XD PLASTICS COMPANY LIMITED

Reconciliationof Net Income to EBITDA

(Amounts expressed in United States Dollars)

Three-Month Period Ended

March31,

2019

2018

Net income -GAAP

$ 10,715

$ 19,901

Interest expense

17,277

12,205

Provision for

income taxes

3,627

6,827

Depreciation and

amortization

expense

15,326,044

11,442,287

Amortization of

operating lease

right-of-use assets

156,566

-

EBITDA

47,605,229

49,647,220

View original content:/news-releases/specialty-chemical-company-china-xd-plastics-announces-first-quarter-2019-financial-results-300850664.html