Gulf Resources, Inc. Q1 FY2022 earnings call

• Since 2017, the company dealt with government rules, closures, and typhoons. Now sharing a six-year plan to be presented by end of next month.
• First quarter 2022 revenues increased 70% to ~$8.9 million. Gross profits increased 306% to ~$4.4 million. Loss from operations decreased 98% to ~$65,100.
• Bromine factories hope to open at least one more by end of 2022.
• Cash ended the quarter at approximately $105.7 million, an increase of ~$9.9 million from prior year.

Bromine Segment

• Revenues increased 69% to approximately $8.1 million. Tonnes produced increased 5% to 1,005 tonnes. Average selling price increased 60.5% to $8,086. Gross profits were approximately $4.2 million (224% increase) with gross margins at 51.8% (vs 27% prior). Net profits were approximately $1.3 million vs a loss of $1.3 million previously. Total assets in bromine business increased to approximately $186 million from $144.7 million.

Crude Salt Segment

• Revenues increased 68% to $754,000. Cost of revenues declined 6% to $629,560. Gross profit was approximately $124,500 vs a loss of $219,100. Net loss was approximately $522,000 vs $1 million.

Chemicals Segment

• Zero revenues and an operating loss of approximately $513,000. Construction of new Yuxin chemical factory delayed by electricity restrictions and winter shutdown, but expects to complete installation and begin trial production in 2023.

Natural Gas Segment

• Revenues of approximately $57,000 from equipment rental, reported a loss of $26,739. Waiting for Sichuan provincial government to finalize land and resource planning.

• Will not provide second quarter or full year guidance for 2022 on this call.
• Positioned for profitable operations in coming quarters and for the year.
• Plan to share detailed six-year plan by end of next month, which will demonstrate earnings potential.

• General economic and business conditions in the PRC.
• Risk associated with COVID-19 pandemic outbreak.
• Future product development and production capabilities.
• Competition from existing and new players in bromine and other categories.
• Changing technology.
• Government policies affecting factory closures and approvals for projects like natural gas.

Q: Go through each business segment to discuss how many plants are currently open, closed, and when closed plants expect to reopen.

A: Currently, only bromine and crude salt segments are open. Bromine has 4 plants open, 3 closed, hopes to open at least 1 more by end of 2022. Crude salt has 4 plants open, 3 closed, hopes to open at least 1 more by end of 2022. Chemical and natural gas segments are closed.

Q: Explain why current payables went up $20 million from year end to quarter.

A: Majorly due to purchases of equipment and materials for construction projects, mainly for bromine business segments with some minor part for chemical plant.

Q: Concern about share buybacks with $105 million in cash.

A: Company wants to retain cash for future business operations, such as investments in chemical and natural gas segments.

Q: Potential for dividend or buyback to return value to shareholders.

A: Company will consider plans to reward shareholders based on business operations, major concern is continuing impact of national policies on the company.