Why it is profiled? The company is poised to benefit from favorable pricing environment of bromine and healthy demand of brominated and chemical products.
After reporting solid double-digit growth of net income and revenue in the third quarter ended September 30, 2010, Gulf Resources Inc. (GFRE) remains optimistic of its growth momentum to continue for the remainder of the year.
Gulf Resources is a provider of chemical products in the People's Republic of China. The company's products are used in a variety of applications, including oil & gas field exploration, fire retardants, paper-making chemical agents and inorganic chemicals.
Gulf Resources operates through its two wholly-owned subsidiaries - Shouguang City Haoyuan Chemical Co. Ltd. , which primarily produces and distributes bromine and crude salt, and Shouguang Yuxin Chemical Industry Co. Ltd., which focuses on manufacturing and selling chemical products.
A look at the company's annual financial data from 2006 through 2009 shows that revenue has grown at a CAGR (compound annual growth rate) of 36.5% while net income has improved at a CAGR of 68%.
The bromine & crude salt segment accounts for more than half of the company's total revenue and the chemical products segment account for the remaining. The company sells a substantial portion of its products to a limited number of customers. During 2009, two of the company's major customers together accounted for 30.8% of bromine and crude salt segment's revenue. Four customers accounted for more than 10% each of the chemicals segment's revenue.
Since the demand for bromine has been resilient even in turbulent economic times, the company has been devoting significant resources to increase its access to bromine and to enhance the utilization of its existing resources.
In June of this year, the company acquired manufacturing assets involved in bromine and crude salt production from two individual residents of the People's Republic of China for $13.2 million in cash and the issuance of shares of 70,650 shares of common stock at a price of $9.859 per share, bringing the total consideration to $13.9 million. The company has also begun formal production in the recently acquired bromine and crude salt production assets beginning August.
Acquisitions remain an important part of the company's growth strategy and eight acquisitions of bromine and crude salt assets have been completed to date. Going forward, the company plans to continue expansion of its assets, which will be funded through a combination of cash, debt and equity, subject to market conditions.
The bromine price has increased sharply over the months, thanks to growing demand in pharmaceutical sector. According to Gulf Resources, the average selling price of bromine in the third quarter ended September 30, 2010 increased nearly 50% to $2,708 per tonne compared to last year.
In light of the positive outlook for the bromine market for the fourth quarter of this year, the company remains confident of its financial performance in the future.
In September, the company raised its guidance for fiscal year 2010 based upon the favorable bromine pricing environment and improved production efficiency. The revised revenue guidance for 2010 ranges between $151 million and $155 million, an increase of 37% to 41% over 2009. The revised net income outlook for the year ranges between $48 million and $50 million, or between $1.38 and $1.44 per share, reflecting a year-over-year increase of 57%-63%.
As of September 30, 2010, Gulf Resources had cash of $73.4 million, current liabilities of $15.3 million, and shareholders' equity $179.0 million. The working capital at the end of September quarter was $73.6 million and current ratio was 5.8.
In September, the company's Board of Directors authorized a $10 million stock repurchase plan with a time frame of 1 year.
Earlier in the week, the company hinted that it will provide an update regarding its projected financial performance after assessing the magnitude of upside, given the favorable market conditions.
GFRE's forward P/E is just 6.3 and its PEG (price earnings-to-growth ratio) is 0.36, compared to the industry average of 1.5. The company's earnings are projected to grow by 19% per year over the next five years.
GFRE has thus far hit a 52-week low of $6.28 and a 52-week high of $14.94. The stock closed Thursday's trade at $10.58 on a volume of 330,000 shares.
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April 10, 2026 16:21 ET Inflation data from the U.S. was the main data event this week as the conflict in the Middle East continue. The minutes of the latest Fed policy session and the survey data on the services sector also made headlines. In Europe, manufacturing orders data from Germany was in focus. Price data from China drew attention in Asia.