Gulf Resources, Inc. Q4 FY2021 earnings call

Bromine and Crude Salt

• Bromine prices have declined from record highs but remain higher than last year; expect higher prices to continue due to shut down factories, winter shutdowns, increased demand for bromine products, and potential growth in zinc and bromine batteries.
• Factories #2, #8, and #10: Optimistic about receiving approval to open 1 or more in 2022; rectification costs depend on government requirements.

Chemical Factory

• Delays in equipment delivery due to electricity issues and COVID restrictions; expect equipment to be delivered and installed by third quarter 2022, with test and trial production taking ~6 months, leading to commercial production in 2023; delays may increase total cost by ~$5 million; strong demand for products it will produce.

Sichuan Natural Gas and Brine Projects

• Waiting for Sichuan provincial government to finalize land and resource planning; optimistic about long-term potential due to central government approval for private enterprises in natural gas production and surging natural gas and bromine prices.

Bromine segment: Revenues increased 78% to approximately $48.8 million, gross profit up 182% to ~$26 million, net income up 727% to ~$13.4 million. Crude salt segment: Revenues up 101% to ~$6.1 million, loss decreased from $3.6 million to $1.1 million. Chemicals and natural gas segments: Chemical products segment sustained a loss of ~$2.5 million, natural gas segment sustained a loss of ~$167,000.

Will provide full-year guidance when reporting first quarter in about 1 month. First quarter 2022 revenues expected to be higher than previous years, loss significantly reduced, excluding potential nonrecurring factors or write-offs.

• General economic and business conditions in China.
• Risks associated with COVID pandemic outbreak.
• Future product development and production capabilities.
• Shipments to end customers.
• Market acceptance of new and existing products.
• Additional competition from bromine and other chemicals products.
• Changing technology.
• Ability to make future bromine assets and other factors beyond control.

Q: My question relates to buybacks and dividends. Net current assets per share is around $9, share price is well below, and whether the company considers share buybacks.

A: As explained, the company needs funds for reopening bromine factories, completing chemical factory construction, and Sichuan natural gas project; will consider buybacks or dividends when operations are normal.

Q: Suggestion to sell Gulf Resources to an appropriate buyer, with a reasonable price at least $12 per share.

A: Board has discussed, but currently focused on getting operations back on track; will consider finding investment bankers to increase value when COVID situation relaxes.

Q: Suggestion to hire a good PR firm to increase share price and liquidity.

A: Company has been looking for a worldwide PR firm, but difficulties due to COVID control policy; will engage once policy relaxes