China Resources Reports Second Quarter Earnings; Conducting Due Diligence Review on Strategic Investment.HONG n. 1. A mercantile establishment or factory for foreign trade in China, as formerly at Canton; a succession of offices connected by a common passage and used for business or storage. KONG--(BUSINESS WIRE)--Aug. 15, 1997--China Resources Development, Inc. (Nasdaq: CHRB CHRB California Horse Racing Board CHRB Community Housing Resource Board (Montana) CHRB Commonwealth Health Research Board , www.chrb.com), a leading natural rubber distributor based in the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China (PRC), today announced operating results for the second quarter and six months ended June June: see month. 30, 1997. Results have been converted from Renminbi (the lawful Licit; legally warranted or authorized. The terms lawful and legal differ in that the former contemplates the substance of law, whereas the latter alludes to the form of law. A lawful act is authorized, sanctioned, or not forbidden by law. currency of the PRC) to U.S. dollars (for information purposes), at the prevailing exchange rate as quoted by the People's Bank of China The People's Bank of China (PBC or PBOC) (Simplified Chinese: 中国人民银行; Traditional Chinese: on June 30, 1997 (U.S.$1.00=Rmb8.30). The Company also reported that it is in the final stages of a comprehensive due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. review of a potential strategic investment. Since the Company is proceeding with the proposed strategic investment, China Resources' Board of Directors has elected against proceeding with a previously announced letter of intent to form a wood processing Wood processing is an engineering discipline comprising the production of forest products, such as pulp and paper, construction materials, and tall oil. Paper engineering is a subfield of wood processing. Many countries, notably Sweden also produce tar from pine trees. joint venture with the Hainan Hainan (hī`nän`), island and province (1994 est. pop. 6,910,000), c.13,100 sq mi (33,940 sq km), China, in the South China Sea. The province, created in 1988, is coextensive with Hainan Island; Haikou is its capital, largest city, and major , PRC-based Sanya Timber Factory. After a lengthy due diligence review conducted by Ernst & Young, it was determined that the factory's profitability and future prospects did not meet the Company's criteria for a net profit contribution. For the three month period ended June 30, 1997, sales were $44.0 million, compared to $65.0 million in the year-earlier period. The second quarter sales decline was primarily due to the reduction in the trading of other agricultural products. The Company recorded sales from its core natural rubber distribution business during the quarter of $42.5 million, approximately equal to the sales in the year-ago three-month period. Net income during the 1997 second quarter was $811,000, or $0.13 per share, versus net income of $1.3 million, or $0.58 per share, due primarily to significantly lower margin contributions from the trading of agricultural products, than in the comparable 1996 period. The lower margins were partially offset by a 46% year-over-year reduction in selling, general and administrative expenses following the 1996 fourth quarter Company- wide restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , and approximately $1.2 million of other income derived from the Company's efforts to hedge the weakness in domestic natural rubber prices. Per share results are based on 6,029,004 and 2,219,300 weighted average shares outstanding for the 1997 and 1996 three month periods, respectively. The weighted average share count increase for both the three and six month periods ended June 30, 1997 reflects the conversions into common stock of the Company's Series B Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". , which were sold in the Company's 1996 private placements and of which no shares remain unconverted or outstanding. Per share results and weighted average shares are adjusted for a one-for-ten reverse stock split of the Company's outstanding common stock that was effective on December 31, 1996. For the first six months of 1997, sales were $57.1 million, compared to $95.9 million in the 1996 period. The first half sales decline is primarily a result of the first quarter sales decline due to the strategic agency arrangement with the Hainan Farming Bureau in order to reduce the Company's exposure to lower natural rubber prices (the price declined a further 13% on average during the second quarter), as well as the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. reduction in the trading of other agricultural products during the second quarter because of unfavorable market conditions. Net income for the first half of 1997 was $1.2 million, or $0.20 per share, versus net income of $1.6 million, or $0.71 per share, in the comparable 1996 period. Per share results are based on 5,945,671 and 2,219,300 weighted average shares outstanding for the 1997 and 1996 six month periods, respectively. China Resources China Resources (Chinese: 華潤; HKSE: 0291 ) is a group of companies in wide variety of business in Hong Kong and mainland China. Some of its companies use the name the acronym CRC. Development, Inc. President Li Shunxing, commented on the results, "In comparison to last year's first half sales and profitability, our results have declined as a direct result of the unfavorable market conditions and the downward pressure on margins that we have been facing in our core natural rubber business and our materials and supply procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. operations. The 1996 second quarter was a period in which we were able to command unusually high margins for certain tropical products, such as coffee beans coffee bean see sesbania. . Our 1997 second quarter procurement sales are more typical of our historical normalized results, and are similar to our 1995 second quarter numbers. "The second quarter reflects the cost reductions and benefits of last year's restructuring and streamlining. Specifically, we have been experiencing dramatic S,G & A reductions and have lowered our bank interest expenses following our agreement to assign outstanding bank loans to our joint venture partner, the Hainan Farming Bureau." Mr. Li continued, "We look forward to the expeditious ex·pe·di·tious adj. Acting or done with speed and efficiency. See Synonyms at fast1. ex completion of our due diligence review, as we believe this proposed investment meets the stringent criteria for return on investment that we have set for all transactions under consideration. We have been actively searching for an investment in a profitable going concern, and given the strategic fit with our Company and its core operations, we believe this investment, if consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. , would be accretive to our future earnings." China Resources Development, Inc., with offices in Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. and the Hainan Province in the PRC, through a subsidiary, owns a 56% interest in Hainan Zhongwei Agricultural Resources Co. Ltd. (HARC). HARC markets and distributes dry, natural rubber, liquid latex latex, emulsion of a polymer (e.g., rubber) in water (see colloid). Natural latexes are produced by a number of plants, are usually white in color, and often contain, in addition to rubber, various gums, oils, and waxes. and other agricultural products, and procures production materials and supplies for major customers. The Hainan Province supplies over 60% of the PRC's natural rubber production. Additional corporate information is available at the Company's web site - www.chrb.com. Except for the historical information in this press release, it includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties, including, but not limited to the outcome of the Company's due diligence process on its proposed strategic investment, the impact of weather, competitive pressures from within the natural rubber industry, quarterly fluctuations in results, the management of growth, market dynamics and other risks detailed from time to time in the Company's Securities and Exchange Commission filings. Actual results may differ materially from management expectations. -0-
CHINA RESOURCES DEVELOPMENT, INC., AND SUBSIDIARIES
Condensed Consolidated Income Statements
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1997 1996 1997
RMB RMB US$(a) RMB RMB US$(a)
Sales 365,069 540,599 43,984 474,467 795,719 57,165
Cost of Sales (348,557)(478,773)(41,995)(449,675)(719,794)(54,178)
Gross Profit 16,512 61,826 1,989 24,792 75,925 2,987
Depreciation of
fixed assets (510) (613) (61) (844) (1,208) (102)
Selling and
administrative
expenses (8,258) (15,187) (995) (15,717) (25,173) (1,893)
Operating income 7,744 46,026 933 8,231 49,544 992
Financial expenses,
net 243 (16,487) 29 890 (21,676) 107
Other income 9,936 (5,095) 1,197 18,745 4,243 2,258
Income before
income taxes 17,923 24,444 2,159 27,866 32,111 3,357
Income taxes (4,027) (3,586) (485) (6,153) (5,577) (741)
Net income before
minority
interests 13,896 20,858 1,674 21,713 26,534 2,616
Minority interests (7,161) (10,221) (863) (11,598) (13,401) (1,397)
Net income for the
period 6,735 10,637 811 10,115 13,133 1,219
Earnings per share(b) 1.12 4.79 0.13 1.70 5.92 0.20
Weighted average
number of common and
common equivalent
shares
outstanding(b) 6,029,004 2,219,300 6,029,004 5,945,671 2,219,300 5,945,671
(a) Based on an exchange rate of U.S. $1.00=Rmb8.30 on June 30,
1997. Amounts have been converted from Renminbi to U.S. dollars for
convenience, and no representation is made that Rmb amounts could
have been, or could be, converted into U.S. dollars at the stated
rate or any other rate.
(b) Adjusted for a one-for-ten reverse stock split of the Company's
outstanding common stock that was effective on December 31, 1996.
CONTACT: Edward Wong Edward Wong (born 14 November, 1972 in Washington, D.C.) is an American journalist and a foreign correspondent for The New York Times. He started out as an intern in 1998 and eventually worked at the Metro, Sports, and Business desks. Financial Controller 011/852/28107205 or fc@chrb.com or Joseph N. Jaffoni, Robert L. Rinderman Jaffoni & Collins Incorporated 212/505-3015 or jci ir@aol.com |
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