China Shengda Packaging Group Inc. Reports Second Quarter 2015 Financial Results

HANGZHOU, China, Aug. 14, 2015 /PRNewswire-FirstCall/ -- China Shengda Packaging Group Inc. (NASDAQ: CPGI) ("Shengda" or the "Company"), a leading Chinese paper packaging company, today reported its financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 Financial Highlights:

Three Months Ended June 30, 2015 Results

Total revenues for the second quarter of 2015 increased by $2.5 million, or 6.6%, to $39.7 million from $37.2 million for the same period of last year, primarily driven by increases in sales volume of both paper cartons and other paper products and corrugating medium paper, partially offset by decreases in average selling prices of flexo cartons and corrugating medium paper. Average selling price of flexo cartons was particularly weak, decreasing from $0.38 per square meter for the second quarter of last year to $0.29 per square meter for the second quarter of 2015.

Revenues of paper cartons and other paper products decreased by $0.1 million, or 0.3%, to $29.8 million for the second quarter of 2015 from $29.9 million for the same period of last year. Sales volume of paper cartons increased by 18.1 million square meters, or 23.4%, to 95.4 million square meters for the second quarter of 2015 from 77.3 million square meters for the same period of last year while the average price of paper cartons and other paper products decreased to $0.31 per square meter for the second quarter of 2015 from $0.39 per square meter for the same period of last year. The increase in sale volume of paper cartons and other paper products was mainly contributed by Shengda Zhongtian and Shengda Concept that started their operations in the first quarter of 2015. Color and flexo cartons accounted for 22.8% and 52.2% of total revenues for the second quarter of 2015, compared to 24.3% and 56.0%, respectively, for the same period of last year. Average sales prices per square meter for color and flexo cartons were approximately $0.39 and $0.29, respectively, for the second quarter of 2015, compared to approximately $0.39 and $0.38, respectively, for the same period of last year. Consumer and industrial goods manufacturing sectors remained the Company's principal markets. Major customers remained home appliances & electronics manufacturers, and food, beverage & cigarette manufacturers in the Yangtze River Delta Region, which accounted for 18.1% and 22.3%, respectively, of total revenues for the second quarter of 2015, compared to 21.0% and 19.1%, respectively, for the same period of last year.

Revenues of corrugating medium paper increased by $2.6 million, or 23.8%, to $13.3 million for the second quarter of 2015, from $10.7 million for the same period of last year. The increase was mainly resulted from increase in sales volume and partially offset by decrease in average selling price. Sales volume and average selling price of corrugating medium paper were approximately 37.8 thousand tons and $352 per ton, respectively, for the second quarter of 2015, compared to 30.1 thousand tons and $356 per ton, respectively, for the same period of last year.

Overall gross profit decreased by $1.2 million, or $ 17.9%, to $5.3 million for the second quarter of 2015 from $6.5 million for the same period of last year, as a result of increased cost of goods sold for both paper cartons and other paper products and corrugating medium paper. Gross profit of paper cartons and other paper products decreased by $0.8 million, or 13.4%, to $5.8 million for the second quarter of 2015 from $6.6 million for the same period of last year. Gross profit of color and flexo cartons were $1.9 million and $3.9 million, respectively, for the second quarter of 2015, compared to $2.1 million and $4.5 million, respectively, for the same period of last year. Gross loss of corrugating medium paper was $0.4 million for the second quarter of 2015, compared to $0.1 million for the same period of last year. Overall gross margin decreased by 4 points to 13.4% for the second quarter of 2015 from 17.4% for the same period of last year. Gross margins for paper cartons and other paper products and corrugating medium paper were 19.3% and negative 3.2%, respectively, for the second quarter of 2015, compared to 22.2% and negative 1.4%, respectively, for the same period of last year.

Selling expenses decreased by 0.1 million, or 5.6%, to $1.5 million for the second quarter of 2015, from $1.6 million for the same period of last year. As a percentage of revenues, selling expenses decreased to 3.8% for the second quarter of 2015 from 4.3% for the same period of last year.

General and administrative expenses increased by $0.7 million, or 24.3%, to $3.9 million for the second quarter of 2015 from $3.2 million for the same period of last year. This increase was mainly due to the increase in staff costs, which include salary, benefits, social insurance and other relevant staff expenses. As a percentage of revenues, general and administrative expenses increased to 9.9% for the second quarter of 2015 from 8.5% for the same period of last year.

As a result of the forgoing, operating loss was $0.05 million for the second quarter of 2015, compared to operating income of $1.7 million for the same period of last year. Operating loss margin was 0.1% for the second quarter of 2015, compared to operating profit margin of 4.6% for the same period of last year.

Net income attributable to the Company's common stockholders decreased by approximately $1.0 million, or 88.3%, to $0.1 million for the second quarter of 2015, from $1.1 million for the same period of last year. Basic and diluted earnings per share were $0.02 for the second quarter of 2015, compared to $0.14 for the same period of last year.

Six Months Ended June 30, 2015 Results

Total revenues for the six months ended June 30, 2015 increased by $8.1million, or 11.7%, to $77.6 million from $69.5 million for the same period of last year, primarily driven by increases in sales volume of both paper cartons and other paper products and corrugating medium paper, partially offset by decreases in average selling prices of flexo cartons and corrugating medium paper.

Revenues of paper cartons and other paper products increased by $4.8 million, or 8.5%, to $60.8 million for the six months ended June 30, 2015 from $56.0 million for the same period of last year. Sales volume of paper cartons and other paper products increased by 37.8 million square meters, or 26.0%, to 183.1 million square meters for the six months ended June 30, 2015 from 145.3 million square meters for the same period of last year while the average price of paper cartons and other paper products decreased to $0.33 per square meter for the six months ended June 30, 2015 from $0.39 per square meter for the same period of last year. The increase in sale volume of paper cartons and other paper products was mainly contributed by Shengda Zhongtian and Shengda Concept that started their operations in the first quarter of 2015. Color and flexo cartons accounted for 22.5% and 55.8% of total revenues for the six months ended June 30, 2015, compared to 24.8% and 55.8%, respectively, for the same period of last year. Average sales prices per square meter for color and flexo cartons were approximately $0.39 and $0.31, respectively, for the six months ended June 30, 2015, compared to approximately $0.39 and $0.38, respectively, for the same period of last year. Consumer and industrial goods manufacturing sectors remained the Company's principal markets. Major customers remained home appliances & electronics manufacturers, and food, beverage & cigarette manufacturers in the Yangtze River Delta Region, which accounted for 18.8% and 22.0%, respectively, of total revenues for the six months ended June 30, 2015, compared to 21.5% and 20.0%, respectively, for the same period of last year.

Revenues of corrugating medium paper increased by $1.7 million, or 8.5%, to $21.8 million for the six months ended June 30, 2015, from $20.1 million for the same period of last year. The increase was mainly resulted from increase in the sales volume and partially offset by decrease in average selling prices. Sales volume and average selling price of corrugating medium paper were approximately 62.1 thousand tons and $351 per ton, respectively, for the six months ended June 30, 2015, compared to 55.5 thousand tons and $362 per ton, respectively, for the same period of last year.

Overall gross profit decreased by $0.3 million, or $ 2.8%, to $10.3 million for the six months ended June 30, 2015 from $10.6 million for the same period of last year, as a result of increased cost of goods sold for both paper cartons and other paper products and corrugating medium paper. Gross profit of paper cartons and other paper products decreased by $0.5 million, or 4.1%, to $11.6 million for the six months ended June 30, 2015 from $12.1 million for the same period of last year. Gross profit of color and flexo cartons were $3.6 million and $8.0 million, respectively, for the six months ended June 30, 2015, compared to $3.9 million and $8.2 million, respectively, for the same period of last year. Gross loss of corrugating medium paper was $1.2 million for the six months ended June 30, 2015, down from $1.4 million for the same period of last year. Overall gross margin decreased by 2 points to 13.3% for the six months ended June 30, 2015 from 15.3% for the same period of last year. Gross margins for paper cartons and other paper products and corrugating medium paper were 19.0% and negative 5.6%, respectively, for the six months ended June 30, 2015, compared to 21.5% and negative 7.1%, respectively, for the same period of last year.

Selling expenses decreased by 0.1 million, or 2.0%, to $3.4 million for the six months ended June 30, 2015, from $3.5 million for the same period of last year. As a percentage of revenues, selling expenses decreased to 4.4% for the six months ended June 30, 2015 from 5.0% for the same period of last year.

General and administrative expenses increased by $1.2 million, or 19.1%, to $7.2 million for the six months ended June 30, 2015 from $6.0 million for the same period of last year. This increase was mainly due to the increase in staff costs, which include salary, benefits, social insurance and other relevant staff expenses. As a percentage of revenues, general and administrative expenses increased to 9.2% for the second quarter of 2015 from 8.6% for the same period of last year.

As a result of the forgoing, operating loss was $0.1 million for the six months ended June 30, 2015, compared to operating income of $0.5 million for the same period of last year. Operating loss margin was 0.2% for the six months ended June 30, 2015, compared to operating income margin of 0.7% for the same period of last year.

Net income attributable to the Company's common stockholders decreased by approximately $0.4 million, or 88.5%, to $0.1 million for the six months ended June 30, 2015, from $0.5 million for the same period of last year. Basic and diluted earnings per share were $0.01 for the six months ended June 30, 2015, compared to $0.07 for the same period of last year.

Financial Condition

As of June 30, 2015, the Company had cash and cash equivalents of $10.7 million and restricted cash of $12.7 million, compared to $10.9 million and $13.8 million, respectively, at December 31, 2014. Working capital was $25.6 million as of June 30, 2015, compared to $30.7 million at December 31, 2014. Total equity for stockholders of Shengda was $114.2 million as of June 30, 2015, compared to $113.0 million at December 31, 2014.

Net cash used in operating activities was $3.8 million for the six months ended June 30, 2015, compared to net cash provided by operating activities of $7.2 million for the same period of last year. This was attributable to net loss of $0.1 million, adjusted by depreciation and amortization expenses of $3.7 million, and a net decrease in cash from accounts and notes receivable of $3.2 million and a net decrease in cash from inventories of $4.9 million, and a net increase in cash from accounts and notes payable of $7.8 million and a net increase in cash from other working capital items of $0.5 million.

Net cash used in investing activities was $4.2 million for the six months ended June 30, 2015, compared to $2.4 million for the same period of last year. The $4.2 million was mainly used for purchases of property, plant and equipment at our subsidiaries Shuangsheng, Shengda Concept and Shengda Zhongtian.

Net cash provided by financing activities was nil for the six months ended June 30, 2015, compared to $1.9 million for the same period of last year. During the six months ended June 30, 2014, we received proceeds from loans amounting to $3.5 million, and repaid loans amounting to $3.5 million.

About China Shengda Packaging Group Inc.

China Shengda Packaging Group Inc. is a leading paper packaging company in China. It is principally engaged in design, manufacturing and sale of flexo-printed and color-printed corrugated paper cartons in a variety of sizes and strengths. It also manufactures corrugating medium paper and corrugated paperboards, which are used for the production of flexo-printed and color-printed cartons. The Company provides paper packaging solutions to a wide variety of industries, including food, beverage, cigarette, household appliance, consumer electronics, pharmaceuticals, chemicals, machinery and other consumer and industrial sectors in China.

Safe Harbor Statements

This press release may contain forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company's ability to expand to new markets, the ability to grow business through vertical integration and geographical expansion, the ability to access capital for expansion and continued investment in R&D, the ability to acquire other companies, changes from anticipated levels of sales, changes in national or regional economic and competitive conditions, current or future volatility in the credit market and future market conditions, changes in relationships with customers, changes in profit margins of principal product and other factors discussed from time to time in the Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Company Contact:
China Shengda Packaging Group Inc.
Cindy Hu, Board Secretary
Tel: +86-571 8283 8770
E-mail: cindy.hu@cnpti.com
Website: http://www.cnpti.com

Investor Relations Contact:
Weitian Group LLC
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com

CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in US$)

(1) All per share amounts and shares outstanding for all periods have been retroactively restated to reflect China Shengda Packaging Group Inc.'s 1-for-5 reverse stock split, which was effect on May 18, 2015.

See notes to the consolidated financial statements

CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Amounts in US$)

(1) All per share amounts and shares outstanding for all periods have been retroactively restated to reflect China Shengda Packaging Group Inc.'s 1-for-5 reverse stock split, which was effect on May 18, 2015.

See notes to the consolidated financial statements

CHINA SHENGDA PACKAGING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in US$)