Keyuan Petrochemicals Inc. Announces Third Quarter 2013 Financial Results

NINGBO, China, Nov. 18, 2013 /PRNewswire-FirstCall/ -- Keyuan Petrochemicals Inc. (OTCQB: KEYP), ("Keyuan" or "the Company"), an independent manufacturer and supplier of various petrochemical products in China, today announced the Company's financial results for the quarter ended September 30^th, 2013.

"Although our sales volume in the last quarter was continued to be negatively impacted by the 40-day facilities shutdown in the second quarter of this year for the thorough routine inspection and maintenance that generally occurs every two years, there has been significant improvement of our sales during the last quarter comparing $94 million in the second quarter with $150.3 million in the third quarter. I believe that with our healthy backlog of sales and a clear growth strategy, Keyuan's core earnings potential will continue to improve in the next quarter and going forward," commented Mr. Chunfeng Tao, Chairman and Chief Executive Officer of Keyuan Petrochemicals Inc.

Financial Summary

(a) Net Income/(Loss) attributable to KEYP stockholders.

Sales for the three months ended September 30, 2013 were approximately $150.3 million, compared to $164.3 million for the three months ended September 30, 2012, a decrease of $14 million, or 8.5%. The decrease was mainly due to lower sales quantities as a result of the 40-day production interruption in the quarter ended June 30, 2013. Normally it takes a short period of time for the facilities and equipment to reach to their optimum conditions after routine maintenance. The Company sold 129,066 tons of petrochemical and rubber products at an average price of $1,094 and $1,888 per metric ton, respectively, in the three months ended September 30, 2013, compared to 155,249 metric tons of petrochemical products and rubber products at an average price of $982 and $2,423 per metric ton, respectively, in the three months ended September 30, 2012. The average sales price for petrochemical products for the three months ended September 30, 2013 increased by approximately 11% compared to the same period of 2012. Petrochemical segment revenues for three months ended September 30, 2013 account for 86% of the total revenue. Although the average selling price during the three months ended September 30, 2013 was higher than that at the same period of 2012, the overall quantity of sold products decreased by 15%, which caused total sales for the three months ended September 30, 2013 to decline.

Sales for the nine months ended September 30, 2013 were approximately $453.8 million, compared to $532.1 million for the nine months ended September 30, 2012, a decrease of $78 million, or 14.7%.

Overall cost of sales was approximately $140.0 million for the three months ended September 30, 2013, or 93% of sales, as compared to the cost of approximately $160.5 million, or 98% of sales for the three months ended September 30, 2012. The decrease in the cost of sales was mainly due to the lower sales quantities due to the routine inspection and maintenance of the facilities in the quarter ended June 30, 2013 and the higher average selling price of $1,151 per metric ton for the three months ended September 30, 2013, as compared to $1,059 per ton for the three months ended September 30, 2012.

Overall cost of sales was approximately $432.4 million for the nine months ended September 30, 2013, or 95% of sales, as compared to approximately $512.3 million, or 96% of sales for the nine months ended September, 30, 2012.

Gross profit for the three months ended September 30, 2013 was approximately $10.3 million as compared to $3.9 million for the comparable period in 2012, an increase of approximately $6.4 million, or 164.7%. The increase was mainly due to the 9% of increase of average selling prices per metric ton to $1,151 for the three months ended September 30, 2013 from $1,059 per metric ton in the comparable period ended September 30, 2012.

Gross profit for the nine months ended September 30, 2013 for petrochemical segment and rubber segment was approximately $12.1 million and $ 9.3 million respectively, as compared to $15.6 million and $4.2 million, respectively, for the comparable period in 2012. The total combined gross margin increased from 3.7% for the nine months ended September 30, 2012 to 4.7 % for the nine months ended September 30, 2013.  The main reason for the increase in the gross margin is the higher average selling prices as discussed above.

Net Income was approximately $2.8 million for the three months ended September 30, 2013, as compared to net loss of approximately $6.9 million in the same period in 2012, an increase of $9.7 million. This increase was mainly due to the higher gross profit for the three months ended September 30, 2013, compared to the same period in 2012.

Net income was approximately $5.2 million for the nine months ended September 30, 2013, as compared to a net loss of approximately $4.0 million in the same period in 2012, an increase of $ 9.2 million.

Business updates

On August 9, 2013, the Company received approval for the Guangxi Project from the local government of Fangchengang City and announced the commencement of engineering and building construction for the project. The preliminary investigation for foundation piling was completed at the end of October, and the land leveling is expected to be completed by the end of 2013. The facility construction and piping lines installation are expected to be completed by the end of 2014.

As a part of the expansion plan, the Company intends to add 50,000 MT of new storage capacity in 2013, after which the total storage capacity will be 150,000 MT. Approximately 34,000 MT of new capacity has been completed through June 2013. The installation of pilings and pumps for storage tanks was completed at the end of October 2013. The project is currently in the anti-rust treatment and heating insulation stage.

About Keyuan Petrochemicals, Inc.

Keyuan Petrochemicals, Inc., established in 2007, through its PRC operating subsidiaries, Ningbo Keyuan Plastics Co., Ltd, Ningbo Keyuan Petrochemicals Co., Ltd, Keyuan Synthetic Rubbers Co., Ltd and Guangxi Keyuan Co., Ltd, is engaged in the manufacture and sale of various petrochemical products in the PRC. Having commenced production in October 2010, Keyuan's operations include an annual petrochemical manufacturing design capacity of 720,000 MT for a variety of petrochemical products, with facilities for the storage and loading of raw materials and finished goods, and a technology that supports the manufacturing process with low raw material costs and high utilization and yields. Keyuan also completed the construction of a Styrene-Butadience-Styrene (the "SBS") production facility with an annual production capacity of 70,000 MT in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August 2012. In order to meet increasing market demand, Keyuan adjusted its original expansion project and is currently working to refine its manufacturing capacity to include an ABS production facility, an oil catalytic cracking processing facility, an increased annual design capacity of its ethylene-styrene facility from 80,000 MT to 200,000 MT, a transformer oil facility and an SSBR (Solution Polymerized Styrene Butadiene Rubber) production facility.

Cautionary Statement Regarding Forward-Looking Information

This press release may contain certain "forward-looking statements" relating to the business of Keyuan Petrochemicals, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the impact of the proceeds from the private placement on the Company's short term business and operations, the general ability of the Company to achieve its commercial objectives, including the ability of the Company to sustain growth; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf months are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

SOURCE Keyuan Petrochemicals, Inc.