China Shengda Packaging (NASDAQ:CPGI)

Fourth Quarter 2011 Results

• Revenues decreased $7.4 million, or 19.4%, to $30.8 million for the three months ended December, 31, 2011, from $38.2 million during the same period of 2010
• Gross profit declined 40.3% to $6.4 million from $10.8 million in the same period of 2010. Gross profit from flexo cartons declined 40.2% to $4.6 million from $7.7million in the same period of 2010.
• Net income attributable to common stockholders decreased to $1.6 million, or $0.05 per diluted share, from $5.3 million, or $0.16 per diluted share, in the same period of 2010.

"Revenues of $124 million and net income of $9.6 million were within our guidance ranges for full year 2011. However our markets and our financial performance are currently volatile due to cross-currents of variability affecting the global consumer who buys the final products from our manufacturing customers. We are concentrating on broadening our customer base and vertically integrating into paper manufacture in order to grow our business and at the same time reduce fluctuations in revenues and margins," Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging, said.

HANGZHOU, China, Dec. 23, 2011 /PRNewswire-Asia-FirstCall/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) ("China Shengda Packaging" or the "Company"), a leading Chinese paper packaging manufacturer, is revising its financial guidance for the year ending December 31, 2011 as follows:

    $ millions            Revised guidance        Previous Guidance            Actual 2010  

Net Income           $120 to $130            $115 to $125                        $130
Revenues              $9.5 to $10.5            $11.5 to $12.5                      $19.3
 
As was pointed out in the earnings press release for the third quarter of 2011, lower raw materials cost trends that were appearing in October might not persist during the remainder of the fourth quarter, and this has proven to be the case. Higher than anticipated raw materials costs are the main reason why gross profits are expected to be lower in the fourth quarter than was previously expected. Those additional costs are not being entirely passed on to customers. If these conditions persist, the Company also expects to enter 2012 with gross margins under pressure from raw materials costs.

Third Quarter 2011 Results

Revenues increased $2.7 million, or 8.7%, to $33.6 million for the three months ended September, 2011, from $30.9 million during the same period of 2010.

Net income attributable to common stockholders decreased 51.5% to $2.3 million, or $0.06 per diluted share, from $4.8 million, or $0.15 per diluted share, in the same period of 2010.

"Volumes were 8% ahead of the same quarter last year and revenues 9% higher. Average selling prices were marginally higher overall. We are pleased that we increased our presence in the market place through higher levels of shipments," Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging, commented. "Despite the growth in revenues, labor and raw material cost pressures persisted and our margins were lower as we absorbed some of those higher costs. Even so, early in the fourth quarter, raw materials prices appear to be softening and we expect to meet our full year guidance for both sales and EPS."

HANGZHOU, China, July 18, 2011 /PRNewswire-Asia-FirstCall/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) ("China Shengda Packaging" or the "Company"), a leading Chinese paper packaging manufacturer, today announced that its board of directors has approved a share repurchase program for up to $5 million of its common stock over the next twelve months, subject to market and other conditions.

HANGZHOU, China, June 16, 2011 /PRNewswire-Asia/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) ("China Shengda Packaging" or the "Company"), a leading Chinese paper packaging manufacturer, today announced that the Company's Chairman, Mr. Nengbin Fang, has purchased 500,000 shares of China Shengda Packaging stock on the open market for approximately $0.6 million.

Upon the completion of this share purchase, Mr. Fang beneficially owned approximately 5.2 million shares of common stock of the Company, representing an ownership stake of 13.2%.

Mr. Fang commented, "I believe that our Company's shares are currently undervalued. This share purchase demonstrates my confidence in China Shengda Packaging and reflects my commitment to increasing shareholder value. I will consider purchasing additional shares if our share price continues to trade at these levels."

First Quarter Results:

• Revenues declined 2.4% to $26.9 million from $27.6 million in the prior year period.

Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging, commented, "We did not lose any customers in the first quarter, but our orders from existing customers declined.  Manufacturing enterprises in the YRD, many of whom are our largest customers, felt the impact of more restrictive financial policies implemented by the PBOC during the first quarter of 2011.  In addition, after the Chinese New Year holiday, we experienced an unexpected shortage of workers.  While there are always some percentage of workers that delay or do not return following the Chinese New Year, this phenomenon was more pronounced this year in the YRD region.  As a result of these shortages, we were unable to fulfill certain orders.  Our furniture packaging business saw the greatest impact given that the December to April timeframe is the peak season for the furniture manufacturing industry."

• Net income attributable to common stockholders decreased 20.1% to $3.4 million, or $0.09 per diluted share, from $4.3 million, or $0.16 per diluted share, in the same period of 2010.

The Company expects fiscal 2011 revenues of between $115 million and $125 million, net income of between $11.5 million and $12.5 million, and diluted earnings per share of between $0.29 and $0.32.

The Company currently generates its cash flow through operations which it believes will be sufficient to sustain the current level of operations for at least the next twelve months.

We attempted to estimate our funding requirements in order to implement our growth plans. Our growth plans include growth through acquisitions. Although the proceeds from the public offering closed on December 10, 2010 (the “Public Offering”) should be sufficient for us to implement our near term acquisition strategy, we may require additional capital in order to successfully operate businesses that we acquire.

Fourth Quarter Earnings:

• Revenue increased 54.1% to $38.2 million from $24.8 million in the same period last year
• Gross profit increased 55.7% to $10.8 million from $6.9 million in the same period last year
• Gross margin increased 20 basis points to 28.1% from 27.9% in the same period last year
• Net income attributable to common stockholders increased 55.4% to $5.3 million from $3.3 million in the same period last year
• Diluted earnings per share increased 33.3% to $0.16 from $0.12 in the same period last year

Full Year 2010 Highlights

• Revenue increased 37.4% to $130.1 million from $94.7 million last year
• Gross profit increased 43.5% to $36.5 million from $25.4 million last year
• Gross margin increased 120 basis points to 28.1% from 26.9% last year
• Net income attributable to common stockholders increased 59.1% to $19.3 million from $12.2 million last year
• Diluted earnings per share increased 43.2% to $0.63 from $0.44 last year
• Cash flow from operations increased 18.7% to $20.0 million from $16.8 million last year

"We are very pleased to announce strong sales, earnings, EPS, and operating cash flow growth in 2010," said Mr. Daliang Teng, Chief Executive Officer of China Shengda Packaging. "We have a leading market position and strong reputation in China's paper packaging market and were able to command higher prices for our products as well as achieve higher sales volumes in 2010. The strength of the paper packaging market in China, from which we also benefited, was driven by rising consumer purchasing power and the growth of the Chinese economy. We also increased our margin performance by passing on some of the cost increase of our raw materials to our customers, improving our equipment utilization, reducing waste and processing times, and adding higher margin packaging products to our product portfolio.  The year 2010 was an important one for China Shengda Packaging as our shares began trading on The NASDAQ Global Market in December. We are proud of this accomplishment and look forward to continuing to deliver strong financial results to our shareholders in the years ahead."

Mr. Teng concluded, "We believe we are well positioned to benefit from a number of favorable trends in our market.  China's packaging market is the second largest in the world only after the U.S. Despite China's huge packaging market, per capita paper packaging consumption in China is only a fraction of that in the United States, Japan, and Europe. This suggests a large market potential for paper packaging in China. With environmental concerns becoming an increasingly important topic around the world, packaging materials are expected to be energy saving, toxic-free, reusable, degradable and multi-functional. Government mandates as well as consumer preferences make paper a more environmentally-friendly substitute for metal, plastic or glass as a packaging material. All of the foregoing translates into significant growth potential for the corrugated paper packaging industry in the China. Furthermore, as the standard of living rises, consumers are becoming more discerning about product image and presentation. This increased consumer sophistication translates into growing demand for high-quality and aesthetically pleasing packaging. We are well positioned to take advantage of these market trends as we expand our capacity for color-printed cartons." 

HANGZHOU, China, March 7, 2011 /PRNewswire-Asia/ -- China Shengda Packaging Group Inc.  today announced that on March 7, 2011, the Company signed a Letter of Intent (“LOI”) to purchase the land use rights for a 166,533 square meter plot of land in Yancheng City, Jiangsu Province, China for $11.4 million in order to build a paper manufacturing plant.

The following are some financial highlights for the third quarter of 2010:

• Sales Revenue: Sales revenue increased $6.1 million, or 24.6%, to $30.9 million for the third quarter of 2010 from $24.8 million for the same period of last year.

• Gross Profit: Gross profit of $8.4 million represented 27.2% of sales revenue for the third quarter of 2010, compared with gross profit of $6.7 million that represented 27.0% of sales revenue for the same period in 2009.

• Net Income attributable to China Packaging common stockholders: Net income attributed to our stockholders increased $1.5 million, or 45.9%, to $4.8 million for the third quarter of 2010, from $3.3 million for the same period of last year.

• Basic and fully diluted net income per share: Basic and fully diluted net income per share was $0.15 for the third quarter of 2010, compared with $0.12 for the same period last year.

During the third quarter of 2010, we continued to see strong demand for our products and growth in our revenues. The packaging industry continued to expand during the third quarter of 2010 in large part, we believe, due to Chinese government policies designed to stimulate the economy, and improve infrastructure throughout China and encourage domestic consumption, and growth in urbanization and industrialization throughout China.

We benefited from the economic recovery of the region since the financial crisis in 2008. According to the Development Research Center of the State Council of China, the economy in the YRD region experienced significant growth in 2009 and 2010, representing a GDP growth rate of 7.3% from 2008 to 2009 and 20.6% from the first half of 2009 to the same period of 2010. We expect the economy of the YRD region to continue to grow into the rest of 2010 and 2011, which we believe will provide a favorable macroeconomic environment for our business.

Fiscal 2010 Guidance

We expect that revenues for the fiscal full year of 2010 will be in the range of $122 to $126 million, compared with $94.7 million in 2009.

In October 2010, one of our wholly-owned subsidiary, Zhejiang Great Shengda Packaging Co., Ltd. ("Great Shengda") was qualified as a high-tech company, as a result of which Great Shengda will be entitled to a preferential tax rate of 15% for three years beginning in 2010 and the preferential tax rate will be applied retroactively from January 1, 2010. The preferential tax rate is subject to completion of registration with PRC Ministry of Science and Technology and approval by the local tax bureau. Great Shengda is in the process of registering its high-tech status with the competent authorities.

Subject to the above preferential tax rate, we expect to generate net income attributable to China Shengda Packaging Group Inc. common stockholders in the range of $20 million to $21 million for the full fiscal year of 2010, compared with $12.2 million in 2009. The guidance represents the Company's current view, and is subject to change.

China Packaging Group seeks to raise money

In conjunction with this proposed raise:

"We have applied to list our common stock on The NASDAQ Global Market under the symbol "CGPI."

Update:

• On April 29, 2010, China Packaging Group Inc. entered into a securities purchase agreement  with certain accredited investors. Under the Securities Purchase Agreement, the Company agreed to issue and sell to the Investors 1,456,311 shares of the Company’s common stock, representing approximately 4.63% of the issued and outstanding capital stock of the Company on a fully-diluted basis as of and immediately after consummation of the transactions contemplated by the Securities Purchase Agreement, for an aggregate purchase price of approximately $5 million or $3.433 per share.
  
• The Company agreed to issue to Hangzhou Xin Shengda Investment Co., Ltd. 3,750,000 shares of the Company’s common stock in exchange for the transfer of certain real estate if the lead investor makes a written request on or before the 180th day following the Company’s next underwritten public offering.

Updated share count: 31,453,801 to 35,844,311

China Packaging Group Inc became a public company via a reverse merger transaction on April 8, 2010.

Company Snapshot:

The design, manufacture and sale of paper cartons.We believe we are among the leading paper packaging manufacturers in the PRC in terms of production capacity and have the capacity to take large orders for our customers, many of whom are amongst PRC’s Top 500 Enterprises or Fortune 500 companies.

Industry Snapshot:

The Chinese packaging industry has been growing steadily since the mid-1980s with one of the highest growth rates in the international packaging market. The country's packaging industry remains the world's third largest packaging market since 2006, employing over three million people and worth over $81 billion. The packaging industry became China's 14th largest industry sector and contributes to about 2.5% of the country's GDP.

The domestic packaging industry has evolved greatly with China’s robust economic growth. Since the 1980s, China has established 13,000 packaging companies with a production value of over RMB 400 billion in 2009. It boasts over 4,000 corrugation production lines, greater than the aggregate number in America, Japan and Europe combined. According to the Euromonitor International’s Report of Packaging Industry in China, the total annual output value of the packaging industry is expected to exceed RMB 600 billion at an annual growth rate of 16% by 2015.

Competitive Landscape:

The packaging market in China is highly segmented and competitive. There are over 13,000 paper board manufacturers in China, most of which are relatively small in size. The top 30 manufacturers only have an aggregate of 11% of the Chinese market. The primary barriers to enter the market include obtaining a printing license and significant capital investment in large-scale production facilities. The total sales of paper cartons was 30 billion square meters in 2008.  Great Shengda’s current annual capacity is 310 million square meters, accounting for over 1% of the Chinese market. We believe our competitive advantages are: cost-effectiveness, large production capacity, advanced technologies and equipments deployed in our manufacture process, and our well-known brand name.

Strategy:

We plan to increase our production capacity to meet the expected increase in demand for our products. Further, as consumers place greater emphasis on image and packaging of products, manufacturers of consumer products have increasingly sought to differentiate their products by focusing on the aesthetics of the packaging design and utilizing their product packaging as a medium for advertisement. We plan to focus on the development of our color printing capabilities to cater to this market segment of customers.

We believe that the paper packaging industry has a substantial growth potential. We plan to increase our market share and develop new customers by increasing our existing sales and marketing activities and strengthening our customer service support in regions beyond the Yangtze River Delta Economic District.

Currently, we do not manufacture raw paper, a key raw material for the production of our paper boards and paper cartons. Instead, we have been purchasing raw paper from suppliers based in the PRC. We plan to explore opportunities for acquiring paper manufacturing companies so as to achieve vertical integration of our production process. We expect that such vertical integration will enable us to effectively manage our costs and become a self-sufficient one-stop paper packaging manufacturer that is equipped to manufacture upstream products such as paper as well as downstream products. In addition, to increase vertical integration of our operations, we plan to establish a manufacturing facility in Jiangsu. The manufacturing facility will engage in the production of high-strength raw paper that can be used in the manufacture of our paper cartons.

In order to penetrate into key markets within the Yangtze River Delta Economic District, we plan to set up a processing factory and warehouse in Suzhou. In addition, we plan to strengthen our customer service network by establishing two customer service centers in Nanjing and Wuhu which will be in close proximity to us.

Post Merger Share Calculation:

• 3,038,000 : Pre reverse merger outstanding shares  
• 27,600,000: Newly issued shares of Common Stock

GeoTeam® best effort calculation of total post reverse merger outstanding shares assuming full conversions:  30,638,000

Financial Snapshot: