China Resources Reports 1998 Year End and Fourth Quarter Results
12 April 1999
China Resources Reports 1998 Year End and Fourth Quarter Results
HONG KONG--April 12, 1999--China Resources Development Inc. , a leading natural rubber distributor based in the People's Republic of China (PRC), Monday announced operating results for the year and fourth quarter ended Dec. 31, 1998.Financial results are preliminary and unaudited; however, management believes that all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The company has filed an extension with the Securities and Exchange Commission and expects to file its 1998 Form 10-K report, which will include audited financial results, on or before April 15, 1999. Results have been converted from Renminbi (the lawful 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 on Dec. 31, 1998 (U.S. $1.00=Rmb8.28).
For the year ended Dec. 31, 1998, net sales were $64 million, compared to net sales of $139 million in 1997. The revenue decline in 1998 was primarily due to a drop in natural rubber price, an influx of imported natural rubber and a weak consumption market. The currency deflation in Thailand, Indonesia and Malaysia (three of the world's leading natural rubber producing countries) impacted the worldwide natural rubber market, pushing the average per-ton price down in 1998 to $850, versus $1,120 in the comparable 1997 period. Gross profit margins also fell significantly because of the drop in natural rubber price and oversupply of natural rubber in the PRC market, and because of a gross loss arising from the sale of other agricultural products.
The company also made provisions, in aggregate, of approximately $6.0 million against a long-term investment and an investment purchase deposit, due to an adverse change in the business environment in the PRC. The reduction in gross profit, coupled with the large provision made on the company's long-term investment, caused a net loss of approximately $6.4 million for the year ended Dec. 31, 1998, compared with net income of $2.2 million in 1997. Both basic and diluted loss per share for the year ended Dec. 31, 1998 were approximately $1.06, based on 5,991,504 weighted average number of common shares. Basic and diluted income per share for the year ended Dec. 31, 1997 were approximately $0.37 and $0.37, respectively, based on 5,958,171 and 5,975,622 weighted average number of common shares and dilutive potential common shares outstanding, respectively. As of April 1, 1999, the company had a total of approximately 5.93 million common shares outstanding.
For the three months ended Dec. 31, 1998, net sales were $19 million, compared with $31 million in the comparable 1997 period. Net loss in the fourth quarter of 1998 was approximately $5.9 million, compared with $0.1 million in the comparable 1997 period. Both basic and diluted loss per share for the fourth quarter of 1998 were $0.99, based on 5,929,004 weighted average number of common shares outstanding. Basic and diluted loss per share for the fourth quarter of 1997 were $0.01 and $0.01, respectively, based on 5,958,171 and 5,975,622 of weighted average number of common shares and dilutive potential common shares outstanding, respectively.
David Ching, the chairman of the board of China Resources Development Inc. commented on the results: "The company faces extremely difficult market conditions that have been impacting our operations drastically. The continuously broadening and deepening impacts of the Asian financial crisis not only eroded our sales revenue in 1998, but also reduced the value of our long-term investment in the PRC. Few companies in the region can escape the effects of the market downturn caused by the Asian financial crisis. The economic conditions in the PRC will remain challenging in 1999. Our management will continue its existing policy to manage the company's cash flow and cautiously look for opportunities to expand business operations in a prudent manner. We shall also look at ways to further improve the efficiency of the company's operations through rationalization and consolidation of our current operations."
China Resources Development Inc., with office in Hong Kong and the Hainan Province in the PRC, controls a 61% interest in Hainan Zhongwei Agricultural Resources Co. Ltd. ("HARC"). HARC markets and distributes dry, natural rubber and liquid latex, and procures production materials, supplies and other agricultural products. The Hainan Province supplies approximately 60% of the PRC's natural rubber production.
Except for the historical information in this press release, it includes forward-looking statements that involve risks and uncertainties, including, but not limited to the impact of weather, competitive pressures from within the natural rubber and motorcycle industries, quarterly fluctuations in results, dividend income receivable, 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.
CHINA RESOURCES DEVELOPMENT INC. AND SUBSIDIARIES
Consolidated Income Statement
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
Dec. 31, Dec. 31
1997 1998 1998 1997 1998 1998
Rmb Rmb U.S.$ Rmb Rmb U.S.$
(A) (A)
Net sales 255,409 159,203 19,227 1,149,171 527,692 63,731
Income/(loss)
before
income taxes 4,131 (64,815) (7,828) 52,561 (63,750) (7,699)
Income taxes (1,839) (1,802) 218 (9,798) - -
Net income/
(loss)
before
minority
interests 2,292 (63,013) (7,610) 42,763 (63,750) (7,699)
Minority
interests (2,986) 14,438 1,744 (24,563) 11,079 1,338
Net income/
(loss) (694) (48,575) (5,866) 18,200 (52,671) (6,361)
Earnings/
(loss) per
share
Basic (0.12) (8.19) (0.98) 3.05 (8.79) (1.06)
Diluted (0.12) (8.19) (0.98) 3.04 (8.79) (1.06)
(A) Based on an exchange rate of U.S. $1.00 = Rmb8.28 on
Dec. 31, 1998. 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.
Note: The above results are preliminary and unaudited.