Guanwei Recycling Corp. reports increased revenues

Guanwei Recycling Corp., China’s leading clean tech manufacturer of recycled low density polyethylene (LDPE), reported that a second quarter plant expansion and refurbishment, and lower gross margins, produced lower than planned revenue and profit comparisons in its second quarter ended June 30, 2010. Revenues in the 2010 second quarter grew 16.59 percent to $9,116,737, from $7,819,356 in the same period last year. As gross margins declined from 48.52 percent in last year’s second quarter to 31.01 percent in the 2010 second quarter, net income declined 32.17 percent to $1,670,985, compared with $2,463,329 in the same period last year. EPS in the 2010 second quarter was $0.09.

In the second quarter ended June 30, 2010, the Company sold 8,501 tons of recycled LDPE – an increase of 10.55 percent from 7,690 tons sold in the corresponding period of 2009. This gain was much lower than anticipated due to the decision to expand and upgrade the company’s washing and smashing plant, a project that was completed in July. Nevertheless, the volume gain in the quarter was accompanied by price increases. The average selling price of recycled LDPE increased 4.61 percent from approximately $996 per ton in the three months ended June 30, 2009 to approximately $1,042 per ton in the same period in 2010. In fact, average selling prices of recycled LDPE have been steadily increasing and in July and August have been above $1,100 per ton. Coupled with strong demand for the company’s products and anticipated sales gains, this is expected to positively impact revenues going forward.

During the 2010 second quarter, the company’s cost of revenues – consisting of imported plastic waste, transportation, custom tax and labor – increased substantially. The increase was primarily due to the fact that in early 2009, the company took advantage of its strong financial position to stockpile raw materials at abnormally lower prices immediately following the global financial crisis and, accordingly, material costs in the three months ended June 30, 2009 were comparatively lower. Average manufacturing costs of recycled LDPE and sorted non-LDPE materials increased from approximately $467 per ton in the 2009 second quarter to an average cost of $647 per ton for the same period of 2010.