MRO Magazine

Yulong Releases CEO’s Letter to Shareholders


November 3, 2015
By Business Wire News

PINGDINGSHAN, China

Yulong Eco-Materials Limited (NasdaqCM:YECO), an eco-friendly building products and construction waste recycling company, today released its first Letter to Shareholders from Yulong Zhu, Chief Executive Officer, addressing the Company’s achievements in fiscal 2015, recent developments, expectations for fiscal 2016 and its outlook over the longer-term.

Dear Fellow Shareholders,

Fiscal 2015 was a highly successful and productive year for Yulong Eco-Materials. I am proud to report that during the year we achieved many key goals and laid the groundwork for becoming one of the leading companies of its kind in all of China.

Founded in 2004 in the City of Pingdingshan, Henan Province, Yulong processes and recycles solid waste into construction materials that are eco-friendly, efficient and highly profitable; and currently we are Pingdingshan’s leading manufacturer of fly-ash bricks and ready-mixed concrete.

In early 2010, we made the strategic decision to focus on expanding our recycling business to take advantage of the tremendous new business opportunities created by the strong demand for waste collection and recycling services, and to address critical environmental issues created by China’s ongoing modernization.

In 2012, we received a 20-year exclusive license to deploy construction waste management services in the built-up area of Pingdingshan. That same year, we started construction of a waste processing center that became operational in April 2015 and today we are an exclusive hauler and processor of construction waste for the city of Pingdingshan and Shangqiu. Our hauling and recycling operations now offer both local and provincial governments a cost-effective and technically advanced solution to manage and reduce their construction waste and related pollution.

In conjunction with our recycling center, we constructed a new brick production line in the city to convert the recycled material into bricks used in many industrial and commercial applications. Heated by a solar panel system and built to sharply reduce the pollution caused from burning coal, this production line opened this year and is currently cited as one of the ten most important projects in Henan Province.

Additionally, we recently completed a state-of-the-art research center that will be instrumental in developing new eco-friendly products and increase the efficiency of our existing construction waste products.

Profitably Growing our Business -Well Positioned to Support Future Growth

  • For fiscal 2015 we reported revenue of $46.2 million and net profit of $8.7 million, or $1.08 per diluted share.
  • With the commencement of the recycling operations in April 2015, fiscal 2015 results included some revenue from that business. Although the contribution from recycling to fiscal 2015’s performance was not significant, this business segment is expected to become a material contributor to both top and bottom lines in fiscal 2016.
  • We closed fiscal 2015 with $16.5 million in cash, and the IPO then contributed an additional $10.9 million in early July. Our cash position is now sufficient to support our R&D and marketing initiatives and other expansion efforts.
  • Additionally, our short-term debt was significantly reduced by converting roughly $10 million of this debt into about 1.6 million shares at our IPO price of $6.25.

Recent Contracts

With a strong base established in Pingdingshan, in mid-July we began to expand our recycling business to other cities in Henan Province. Recently, we won several contracts as follows:

  • An agreement worth up to $3.9 million, over 18-months, to clean and process construction waste at a section of a new high-speed railway in the Lingyuan District of the City of Shangqiu.
  • An agreement potentially worth up to $35 million, over the next four years, to recycle construction waste for the Zheng Dong New District of Zhengzhou City.
  • An agreement potentially worth up to $55 million for a period of five years to provide recycling services to the Zhengzhou City Airport Zone.
  • A 25-year exclusive waste hauling and recycling contract, with potential revenue of $7 million annually or $170 million over the life of the contract, for the city of Shangqiu.

To service our hauling contracts in Pingdingshan and other cities in Henan Province, we currently use our fleet of 50 trucks, while for our recycling contracts we are utilize our newly built recycling center in Pingdingshan and five portable recycling stations deployed in Zhengzhou and Shangqiu.

Expanding Our Capabilities

Our business plan calls for significant investments to increase our fleet to over 300 hauling trucks in fiscal 2016 through the purchase of additional trucks (70 already contracted) or the acquisition of local hauling companies. We also plan to purchase six new portable recycling stations and build a new recycling center in Shangqiu, to service our 25-year exclusive recycling contract in this city.

Most recently, we announced the signing of two cooperation agreements with a leading scientific institute in Henan Province. This will help us produce a technical code governing the use of recycled construction waste materials in the production of roadbed — a road’s surface — in the Province. This government-approved code will enable us to sell our recycled waste materials to contractors constructing major roads and highways in Henan Province.

Expectations for Fiscal 2016

Based on these recent developments, contracts already in place, and new contracts in the pipeline, we expect our hauling and recycling business to be the catalyst for our top and bottom line growth for fiscal 2016 and beyond. Supported by our solid fly ash brick and concrete business segments, we expect our waste management operations to generate approximately 20% of our total revenue for fiscal 2016 and over 30% in subsequent years.

Looking Ahead: Well Positioned for a Bright Future

As a public company cognizant of maximizing value for our shareholders, we have also been stepping up efforts to secure the attention of major media across the globe. Since going public this past summer, Yulong has thus far received excellent media coverage from BusinessWeek, U.S. China Daily and South China Morning Post. Most recently, the company was featured in a video news-story on Bloomberg TV: http://www.bloomberg.com/news/videos/2015-10-22/turning-china-s-demolition-trash-to-treasure.

Going forward, I am highly optimistic that, as we continue to expand our business into new cities both in and out of Henan Province, our successes of fiscal 2015 will multiply during this current fiscal year. Due to our sound strategy and solid business plan, Yulong is well-positioned to further grow its business and increase shareholder value.

Longer-term, as our resources and capabilities grow, I couldn’t be more optimistic about the company’s future. I believe we can and will achieve full nationwide expansion over the next decade.

In conclusion, on behalf of our management and Board, I extend our heartfelt thanks to you, our Shareholders, for your support and contributions to helping make our company a success. Together, I believe that our vision, hard work and ongoing commitment to excellence will bring on an increasingly bright and prosperous future. Our best days are still ahead of us.

Thank you

Yulong Zhu
Chief Executive Officer
Yulong Eco-Materials

About Yulong Eco-Materials

Yulong is a vertically integrated manufacturer of eco-friendly building products and a construction waste recycling company located in the city of Pingdingshan in Henan Province, China. The company is currently the city’s leading producer of fly-ash bricks and concrete, and in April 2015 became Pingdingshan’s exclusive hauling and construction waste recycling operations provider.

Forward-Looking Statements

This press release contains forward-looking statements, particularly as related to, among other things, the business plans of the Company, statements relating to goals, plans and projections regarding the Company’s financial position and business strategy. The words or phrases “plans,” “would be,” “will allow,” “intends to,” “may result,” “are expected to,” “will continue,” “anticipates,” “expects,” “estimate,” “project,” “indicate,” “could,” “potentially,” “should,” “believe,” “think,” “considers” or similar expressions are intended to identify “forward-looking statements.” These forward-looking statements fall within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and are subject to the safe harbor created by these sections. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. Such forward-looking statements are based on current expectations, involve known and unknown risks, a reliance on third parties for information, transactions or orders that may be cancelled, and other factors that may cause our actual results, performance or achievements, or developments in our industry, to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties related to the fluctuation of local, regional, and global economic conditions, the performance of management and our employees, our ability to obtain financing, competition, general economic conditions and other factors that are detailed in our periodic reports and on documents we file from time to time with the Securities and Exchange Commission. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date, and the Company specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

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