Liuyang Fireworks Reports Year End Financial Results for Fiscal 2014

Stronger international sales offset by continuing softness in domestic market

October 30, 2014 6:00 PM EDT | Source: Liuyang Fireworks Limited

Toronto, Ontario--(Newsfile Corp. - October 30, 2014) - Liuyang Fireworks Limited (TSXV: FWK) ("Liuyang" or "the Company") today reported its financial results for the three- and 12-month periods ended June 30, 2014. All amounts are in Canadian dollars unless otherwise indicated.

Fiscal 2014 Highlights:

  • Despite international sales growth of 12.9%, total revenue declined 15.8% to $15.27 million;

  • Gross margin decreased to 35.5% of sales from 37.25% of sales revenue in fiscal 2013;

  • Net loss increased to nearly $2.5 million, which included a $1.6 million asset impairment charge arising from losses incurred by the Company's China-based subsidiaries;

  • More environmentally-friendly product line developed in response to environmental concerns and fireworks regulatory changes in China.

"Stronger international sales helped limit the impact that continued softness in the domestic market had on our fiscal 2014 financial results," said Mr. Hu, Liuyang's president and CEO. "The weaker demand we began to experience in the Chinese domestic market in the latter half of fiscal 2013 continued throughout fiscal 2014 as concerns over large volume fireworks usage contributing to increased levels of air pollution persisted. Nevertheless, we look to get back on track with our growth plans, looking to leverage our strong international sales distribution and continuing to promote our new, more environmentally-friendly fireworks."

Income Statement Highlights

In thousands except per share and % data 3 months
ended
June 30
12 months
ended
June 30
      2014     2013     2014     2013  
Revenue   $ 3,650   $ 2,354   $ 15,266   $ 18,126  
Gross profit     1,254   $ 850   $ 5,422   $ 6,792  
Gross margins     34.4%     36.1%     35.5%     37.5%  
EBITDA   $ (1,614)   $ (757)   $ (1,928)   $ 456  
Net income   $ (1,757)   $ (859)   $ (2,471)   $ (126)  
Net income per share Basic   (0.032)     (0.016)   $ (0.027)   $ (0.003)  
Diluted   (0.032)     (0.013)   $ (0.027)   $ (0.003)  

 

Balance Sheet Highlights

In thousands except ratio data   As at June 30  
    2014     2013  
Cash $ 1,539   $ 1,505  
Current ratio   2.03:1     1.85:1  
Working capital $ 7,234   $ 7,695  
Total assets $ 16,783   $ 20,791  
Debt to equity ratio   0.78:1     0.78:1  

 

Review of Fiscal 2014 Results

Revenue for fiscal 2014 declined 15.8% to $15.27 million from $18.13 million in fiscal 2013. Stronger international sales, including growth of 65.0% for the fourth quarter and 12.9% for the year, were not enough to offset the effect of the continued softness in the domestic market. Domestic sales were down 7.6% for the fourth quarter and 58.7% for the year. The domestic market continues to be impacted by concerns over the correlation between large volume fireworks usage and increased levels of air pollution in China.

The Company earned 80% and 20% of its revenue during the fiscal year 2014 from the international market and domestic market respectively. The Company receives most of its international orders in U.S. dollars; and it incurs most of its expenses in Chinese RMB and reports in Canadian dollars.

Gross profit for the year fell to $5.42 million from $6.79 million a year earlier. Gross margin as a percentage of sales decreased by 2 percentage points to 35.5% as a higher proportion of lower margin products were sold during fiscal 2014.

EBITDA for the year was a loss of $1.9 million compared with EBITDA of $456 thousand in fiscal 2013. The decrease was mainly attributable to the lower revenue achieved and increases in selling, general and administrative expenses as percentages of revenue in fiscal 2014.

The Company had a net loss of nearly $2.5 million compared with a loss of $126 thousand a year earlier. The net loss in fiscal 2014 included a $1.6 million asset impairment charge in the fourth quarter arising from losses incurred by the Company's China-based subsidiaries.

Cash and cash equivalents totaled $1.5 million as of June 30, 2014, representing an increase of 2.3% compared with $1.5 million as of June 30, 2013. Working capital was $7.2 million as of June 30, 2014, representing a decrease of almost $0.5 million compared with approximately $7.7 million as of June 30, 2013. During fiscal 2014, the Company funded its higher levels of supplier advances, and capital expenditures primarily using bank loans.

Liuyang's consolidated financial statements for the year ended June 30, 2014 and related management's discussion and analysis (MD&A) have been filed with securities regulatory authorities and are available via SEDAR at www.sedar.com.

About Liuyang Fireworks Limited

Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks distributed both domestically and within more than 15 countries in North America, South America and Europe. The Company has more than 18 years of experience in the fireworks industry and is a supplier to the world's top five fireworks wholesalers and retailers. Liuyang's ISO9001-certified manufacturing facilities are located in the Liuyang area of Hunan, China, where more than half of the world's fireworks are produced.

For further information please contact:
Jacky Long
Chief Financial Officer
Liuyang Fireworks Limited
Tel : 647 350 8818
jackylong@farocean.com

Forward-Looking Statements

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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