MRO Magazine

Plastec Technologies Reports 2016 First Quarter Financial Results


May 10, 2016
By Business Wire News

HONG KONG

Plastec Technologies, Ltd. – (OTCBB: PLTYF (ordinary shares), PLTEF (units)) (“Plastec” or the “Company”), an integrated plastic manufacturing services provider that operates in the People’s Republic of China and Thailand, today reported unaudited financial results for fiscal 2016 first quarter ended March 31, 2016. See financial tables at the end of this release in Hong Kong dollars (HKD). All other amounts in this press release are presented in U.S. dollars (USD) with a conversion rate of US$1.0: HK$7.8.

Financial and Operating Highlights for the Three Months Ended March 31, 2016

(all comparisons to prior year)

  • Sales of $39.6 million, an increase of 5.5% compared to $37.6 million, as a result of increasing local sales in China.
  • Gross margin of 29.5%, compared to 25.3%, resulting primarily from effective execution of cost-containment strategies
  • Adjusted EBITDA of $9.7 million, compared to $8.5 million
  • Net income of $7.2 million, or $0.56 per diluted share based on 12.9 million diluted shares outstanding, compared to $4.5 million, or $0.35 per diluted share based on 12.9 million diluted shares outstanding
  • $10.8 million in cash generated from operations for the period ended March 31, 2016, compared to $5.6 million

Balance Sheet Highlights

  • $78.0 million in working capital at March 31, 2016, compared to $73.4 million at December 31, 2015. Working capital increased despite the Company having incurred $2.6 million in dividend expense during the period.
  • Book value per share of $9.59 at March 31, 2016, compared to $9.32 at December 31, 2015

Dividends Distribution

  • In May 2015, the Company’s Board of Directors declared a special one-time cash dividend of $0.90 on each outstanding ordinary share. The special cash dividend was paid on or about June 2, 2015 to shareholders of record as of May 26, 2015.
  • In August 2015, the Company’s Board of Directors declared an interim cash dividend of $0.10 per ordinary share for the fiscal 2015 second quarter ended June 30, 2015. The interim cash dividend was paid on or about August 27, 2015 to shareholders of record as of August 20, 2015.
  • In March 2016, the Company’s Board of Directors also declared a final cash dividend for the fiscal year ended December 31, 2015 of $0.20 per ordinary share. The dividend was paid on or about April 12, 2016 to shareholders of record as of April 5, 2016.

Update on Share Transfer Agreement

In December 2015, the Company’s shareholders voted to approve the previously announced Share Transfer Agreement with Shanghai Yongli Belting Co., Ltd. (“SYB”) and its wholly-owned subsidiary, Shanghai Yongjing Investment Management Co., Ltd. (“SYIM”), pursuant to which SYIM will purchase, through a to-be-formed wholly-owned Hong Kong subsidiary, the entirety of the Company’s shareholding interests in its wholly-owned subsidiary, Plastec International Holdings Limited.

Closing is expected in 2016 and is contingent on certain closing conditions including SYB’s receipt of external financing.

Management Comments

Mr. Kin Sun Sze-To, Chairman of Plastec, stated, “The first quarter was a strong start to 2016, as Plastec achieved higher sales, significant improvements in gross margin as a result of capturing more first-run product lines, and continued progression in maintaining costs that allowed our Company to achieve a 61.3% increase in net income in comparison with same quarter in the prior year. We are benefitting from the investments made into our operations over the past few years, which has increased our capabilities to adjust robustly to the needs of our long-term clients. We generated $10.8 million in cash from operations during the period, which is the highest quarterly total since the Company became public, and expect to continue reinvesting in our facilities in the years ahead.”

Selected Financial Highlights

(USD in millions, except number of shares and per share data)

(Results and percentages rounded to the nearest tenth)

 
     3 months ended
March 31, 2016
     3 months ended
March 31, 2015
   Percentage Change
Sales $39.6 $37.65.5%
Cost of Revenues $27.9 $28.1(0.5%)
Gross Profit $11.7 $9.523.3%
Gross Profit Ratio29.5%25.3%4.2 pts
 
Income from Operations $7.1 $5.332.2%
Operating Margin17.8%14.2%3.6 pts
 
Net Income $7.2 $4.561.3%
Net Margin18.3%11.9%6.4 pts
 
Weighted Average Number of Diluted Shares Outstanding 12,938,128 12,938,128
Diluted EPS $0.56 $0.3563.0%
Adjusted EBITDA* $9.7 $8.513.3%

* Reconciliation table at end of release

Balance Sheet Highlights (USD in Millions)
 

3/31/2016

     

12/31/2015

   Percentage Change
 
Cash and Cash Equivalents $70.9 $60.916.4%
Total Current Assets $127.2 $119.86.2%
Total Assets$173.3$167.03.7%
Working Capital $78.0 $73.46.3%
Total Liabilities $49.2 $46.46.0%
Shareholders’ Equity $124.1 $120.62.9%
Total Liabilities and Shareholders’ Equity$173.3 $167.03.7%

Financial Review

  • Total sales for three months ended March 31, 2016 increased to $39.6 million from $37.6 million in the prior-year period. The increase was due to the Company’s focused on soliciting new orders from existing and new customers along with increased local sales in China.
  • The Company’s gross profit increased by 23.3% to $11.7 million during the period ended March 31, 2016, with gross margin improving to 29.5% from 25.3% for the prior prior-year period. The increase in gross profit and margin was due to the continued progression of the Company towards targeting new product orders, which typically generate a greater margin.
  • Income from operations was $7.1 million, or 17.8% of revenues, during the period ended March 31, 2016, compared to $5.3 million, or 14.2% of revenues, in the prior-year period. The improved operating margin was largely due to the higher new product orders cited above, along with decreased selling, general and administrative expenses as a percentage of revenues.
  • Similarly, net income for the period ended March 31, 2016 was $7.2 million or $0.56 per share based on approximately 12.9 million weighted average diluted shares outstanding, compared to $4.5 million or $0.35 per share based on approximately 12.9 million weighted average diluted shares, in the prior-year period.

Adjusted EBITDA for the three months ended March 31, 2016 was $9.7 million, compared to $8.5 million in the prior-year period.

Update on Securities Repurchase Plan

The Company has a repurchase plan in place, expanded and extended through September 25, 2016, allowing it to purchase up to $5 million of its securities in both open market and privately negotiated transactions at the discretion of the Company’s management and as market conditions allow; which repurchase plan may be suspended, modified or discontinued without any notice at any time. The plan has currently been suspended due to the proposed transaction with SYB. As of the date of this press release, the Company had repurchased 586,010 ordinary shares, 547,600 warrants and no units under the current plan.

About Plastec

Originally founded in 1993 by Chairman and CEO, Mr. Kin Sun Sze-To, Plastec is an integrated plastic manufacturing services provider that operates in the People’s Republic of China and Thailand through its wholly owned subsidiaries. With around 4,400 employees, Plastec provides precision plastic manufacturing services from mold design and fabrication, plastic injection manufacturing to secondary-process finishing, as well as parts assembly.

Forward Looking Statements

This press release contains “forward-looking statements.” These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

 
   For the 3-month

period ended March 31,

2016  2015
HK$  HK$
 
 
Revenues 308,901 292,892
Cost of revenues (217,732)   (218,926)
Gross profit 91,169 73,966
 
Operating income/(expenses), net
Selling, general and administrative expenses (38,214) (32,361)
Other income 2,053 297
Written-off of property, plant and equipment (433)
Gain on disposal of property, plant and equipment

14

 

137

Total operating expenses, net (36,147)   (32,360)
 
Income from operations 55,022 41,606
 
Interest income 485 651
Interest expense (152)   (313)
Income before income tax expense 55,355 41,944
 
Income tax credit/(expense) 1,096   (6,949)
Net income 56,451 34,995
 
Other comprehensive (expenses)/ income
Foreign currency translation adjustment (9,291)   4,844
Comprehensive income attributable to

Plastec Technologies, Ltd.

47,160

 

39,839

 
Net income per share:
 
Weighted average number of ordinary shares 12,938,128   12,938,128
 
Weighted average number of diluted

ordinary shares

12,938,128

 

12,938,128

 
Basic income per share

attributable to Plastec Technologies, Ltd.

HK$4.4

 

HK$2.7

 
Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$4.4

 

HK$2.7

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED BALANCE SHEETS

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

   

(Unaudited)

(Audited)

March 31,

December 31,

2016

 

2015

HK$

HK$

ASSETS

Current assets
Cash and cash equivalents 553,117 475,361

Trade receivables, net of allowances for doubtful accounts of

HK$ nil, and HK$ nil as of March 31, 2016 and December

31, 2015, respectively

288,060

303,681

Inventories 97,843 105,221
Bills receivable 17,259 5,782
Deposits, prepayment and other receivables   36,099   44,473
Total current assets 992,378 934,518
 
Property, plant and equipment, net 322,414 336,491
Prepaid lease payments, net 17,783 18,165
Deferred tax assets 18,539 13,260
Intangible assets   459   438
Total assets   1,351,573   1,302,872

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Bank borrowings 45,899 29,223
Trade payables 94,681 111,658
Other payables and accruals 154,110 152,095
Dividend payables 20,183
Tax payable   69,037   69,210
Total current liabilities 383,910 362,186
 
Bank borrowings    
Total liabilities   383,910   362,186
 
Commitments and contingencies
 
Shareholders’ equity

Ordinary shares (US$0.001 par value; 100,000,000

authorized 12,938,128 and 12,938,128 shares issued and

outstanding as of March 31, 2016 and December 31,

2015, respectively)

 

101

 

101

Additional paid-in capital 26,049 26,049
Accumulated other comprehensive income (1,692) 7,599
Retained earnings   943,205   906,937
Total shareholders’ equity   967,663   940,686
       
Total liabilities and shareholders’ equity   1,351,573   1,302,872

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

 
     For the 3-month

period ended March 31,

 2016  2015
 HK$  HK$
Operating activities
Net income 56,451 34,995
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,353 24,862
Loss on written-off of property, plant and equipment 433
Gain on disposal of property, plant and equipment (14) (137)
Deferred tax charge (5,438) (1,335)
Changes in operating assets and liabilities:
Trade receivables 19,951 2,705
Inventories 7,378 7,859
Deposits, prepayment and other receivables (3,103) (15,431)
Trade payables (16,977) (15,315)
Other payables and accruals 3,341 1,530
Tax payables   76   3,397
Net cash provided by operating activities   84,018   43,563
 
Investing activities
Purchase of property, plant and equipment (13,642) (27,882)
Purchase of intangible asset (21)
Proceeds from disposal of property, plant and equipment   17   1,269
Net cash used in investing activities   (13,646)   (26,613)
 
Financing activities
Net repayment of bank borrowings   16,675  
Net cash provided by financing activities   16,675  
 
Effect of exchange rate changes on cash and cash equivalents (9,291) 4,844
 
Net increase in cash and cash equivalents 87,047 16,950
Cash and cash equivalents, beginning of period   475,361   528,527
Cash and cash equivalents, end of period   553,117   550,321
 
Supplementary disclosures of cash flow information:
Interest received, net   333   338
Income taxes paid   4,266   4,888

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)

 
Three Months Ended
March 31,
2016  2015
HKDHKD
Net Income (note)54,38434,994
 
Plus Interest expenses 152 313
Minus Interest income (485) (651)
Plus Income tax (credit)/expenses (1,096) 6,949
   
Income from operations 52,955 41,605
 
Plus Depreciation and Amortization 22,353 24,862
     
Adjusted EBITDA75,308  66,467
 
Note: Excl. other income and gain/(loss) on disposals/written-off

This press release includes financial information (EBITDA) not derived in accordance with generally accepted accounting principles or international financial reporting standards. Plastec believes that the presentation of such financial information provides more useful information to investors as it indicates more clearly Plastec’s future performance. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization

Plastec Technologies, Ltd.
HL Ning, Chief Financial Officer
ning@plastec.com.hk
or
Eli D. Scher, Director
eli@plastec.com.hk
or
INVESTOR RELATIONS:
The Equity Group Inc.
Adam Prior, 212-836-9606
Senior Vice President
aprior@equityny.com
or
In China
Katherine Yao, +86 10 6587 6435
Senior Associate
kyao@equityny.com