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GR

GULF RESOURCES, INC. (GURE)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 revenue fell 61.8% year over year to $2.24M and net loss widened to $3.49M ($0.33 loss per share), driven by reduced bromine volumes and lower prices; gross margin was -82% versus +9% a year ago .
  • Bromine revenue declined 68% to $1.57M with segment operating loss of $4.03M; crude salt revenue declined 26% to $0.65M with operating loss of $0.10M .
  • Management emphasized intentional production restraint to protect finite bromine assets during a price trough and noted bromine prices have risen since quarter-end, positioning for potential utilization increases .
  • Liquidity contracted sharply: cash fell to $11.24M from $72.22M at year-end after ~$60.53M of equipment purchases and salt field acquisitions; asset retirements drove a non-recurring $29.17M loss this year-to-date, notably in Q2 2024 .
  • No formal quantitative guidance was provided; management will issue guidance via press release later. Near-term catalysts include bromine price trajectory and progress on reopening factories #2 and #10 following flood prevention works .

What Went Well and What Went Wrong

What Went Well

  • Crude salt gross margin remained resilient at 58% in Q3 2024 (57% in Q3 2023), partially offsetting bromine weakness .
  • Strategic acquisition of ~5.14M m² of salt fields (RMB 280.76M) to increase crude salt output and enable drilling of additional bromine wells; management targets cash payback in 4–5 years .
  • Post–Q3 bromine price recovery noted (RMB 22,400 on Nov 17, 2024 vs RMB 17,323 in Q3 2024), supporting management’s plan to raise utilization when economics improve .
  • Quote: “We made a decision to protect the long-term value of our assets by controlling our sales… we are now in a position to increase our utilization” — CEO Liu Xiaobin .

What Went Wrong

  • Bromine volumes collapsed: 656 tonnes in Q3 2024 vs 1,516 tonnes in Q3 2023; utilization fell to 8% (19% a year ago), inflating unit costs (cost/tonne rose to ~$5,709) and driving a -141% segment gross margin .
  • Company-wide gross margin swung from +9% in Q3 2023 to -82% in Q3 2024; operating loss doubled year over year to $4.58M .
  • Liquidity pressure intensified: cash dropped to $11.24M with substantial capex ($60.53M YTD) and asset disposal losses ($29.17M), elevating investor concerns raised on the call .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Millions)$5.87 $2.38 $2.24
Net Income ($USD Millions)$(1.78) $(33.10) (includes $29.17M asset disposal loss) $(3.49)
Diluted EPS ($USD)$(0.17) $(3.09) $(0.33)
Gross Margin %9% -115% -82%
Operating Income ($USD Millions)$(2.29) $(5.15) $(4.58)
Net Income Margin %-30% (calc: -1.78/5.87) -1,389% (calc: -33.10/2.38; driven by disposal loss) -156% (calc: -3.49/2.24)

Segment breakdown (Revenue and Operating Income/Loss):

SegmentQ3 2023 Revenue ($M)Q3 2023 Op Inc/Loss ($M)Q2 2024 Revenue ($M)Q2 2024 Op Inc/Loss ($M)Q3 2024 Revenue ($M)Q3 2024 Op Inc/Loss ($M)
Bromine$4.91 $(2.14) $1.86 $(4.66) $1.57 $(4.03)
Crude Salt$0.89 $0.50 $0.52 $0.13 $0.65 $(0.10)
Chemical$0.00 $(0.40) $0.00 $(0.34) $0.00 $(0.34)
Natural Gas$0.07 (lease) $0.00 $0.00 $(0.07) $0.02 (lease) $(0.04)

KPIs and Operating Metrics:

KPIQ3 2023Q2 2024Q3 2024
Bromine Tonnes Sold1,516 782 656
Bromine ASP ($/ton)$3,237 $2,379 $2,396
Bromine Utilization (%)19% 9% 8%
Bromine Cost/Tonne ($)$3,954 (Q3) —$5,709 (Q3)
Crude Salt Tonnes Sold30,334 24,852 24,249

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2024 / FY 2024None providedNone provided; management stated guidance will be issued later via press releaseMaintained (no formal guidance)
Production/UtilizationNear-termNot quantifiedManagement intends to increase bromine production/utilization as prices improveQualitative raise (directional)
Chemical Factory TimingMulti-yearPrior plans to complete equipment delivery/commissioningPostponed; evaluating alternative product configurations and JV optionsLowered/Deferred
Natural Gas StrategyMulti-yearPursue approvals; possible partnerSeeking JV with state-owned enterprise; timing uncertainMaintained (strategy focus)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q2 2024)Current Period (Q3 2024)Trend
Bromine pricing and productionASP and volumes declining; utilization down; COVID/flood-related closures; cautious production Price trough in Q3 2024; post–Q3 recovery noted; plan to raise utilization as price improves Improving price; potential production increase
Capital allocationFlood prevention spending in 2023; delayed chemical equipment; rising depreciation ~$60.53M equipment and salt field purchases; asset retirements driving $29.17M loss Heavy near-term cash use; strategic land acquisition
Chemical segment strategyRelocation to Bohai Park; delays due to supply chain/regulation Postponed further spend; reassessing for zinc/bromine/sodium-ion battery opportunities; JV options Strategic pivot; waiting for better market
Natural gas projectTrial production halted pending approvals; potential licenses Seeking state-owned JV partner; efficiency and timing uncertain Still delayed; exploring JV path
Regulatory/legalLand use rulings; flood prevention requirements; Nasdaq filing compliance issues Completion of flood prevention expected to support opening factories #2/#10; new Nasdaq minimum bid notice Progress on operations approvals; listing risk persists
Investor relationsLimited communication amid filing delays Commitment to renewed communication; some shareholder concerns on access and guidance transparency Improving outreach; still issues raised

Management Commentary

  • “We remain confident in China’s economic recovery, in our company’s return to profitability, and in the decisions that we are making to act in the best interests of our shareholders.” — CEO Liu Xiaobin .
  • “We postponed the final delivery of equipment for our chemical factory… to see which segments would recover most quickly and what new opportunities, such as electrical strong or flow batteries, would emerge.” — CEO Liu Xiaobin .
  • “As the price of bromine declined, we made a decision to protect the long-term value of our assets by controlling our sales… we are now in a position to increase our utilization.” — CEO Liu Xiaobin .
  • “The flood prevention project… will help prevent future flood damages and allow us to drill more wells… and may help the company to obtain approval to open our bromine factories #2 and #10.” — Management remarks .

Q&A Highlights

  • Capital deployment rationale: Investors questioned heavy spending amid revenue declines; management cited mandated flood prevention, strategic salt field acquisitions with 4–5 year payback, and intent to scale production as bromine prices improve .
  • Guidance transparency: Management declined to provide quarter/fiscal guidance on the call, stating it will be issued via a press release to ensure fairness to all shareholders .
  • Chemical/natural gas decisions: Timing contingent on market recovery and JV partner efficiency; management continues to explore zinc/bromine/sodium-ion battery opportunities and state-owned partnerships in Sichuan .
  • Governance/ownership: A caller noted concerns about management’s ownership %; management referenced Mr. Yang and family’s ~18.5% stake (as recalled on the call) and pointed to SEC filings for details .

Estimates Context

  • Wall Street consensus (S&P Global) could not be retrieved at this time due to access limits; therefore, comparison to consensus EPS/revenue is unavailable. If consensus becomes available, we would anchor comparisons to S&P Global data and reassess potential beats/misses.

Key Takeaways for Investors

  • Bromine price recovery post–Q3 is a potential catalyst for higher utilization and lower per-ton costs; watch management’s production ramp decisions and subsequent margin trajectory .
  • Near-term results remain pressured by depressed ASPs and volumes; crude salt margins provide partial offset but bromine drives earnings—expect sensitivity to commodity prices and utilization .
  • Liquidity has tightened after significant capex and asset retirements; monitor cash, working capital, and any financing or JV developments to support operations .
  • Regulatory progress (flood prevention completion, potential reopening of factories #2 and #10) could unlock capacity and improve utilization; track approvals and operational updates .
  • No formal guidance yet; expect dedicated press releases—lack of immediate visibility may sustain volatility until quantitative targets are provided .
  • Listing risk: Nasdaq minimum bid price deficiency notice underscores potential corporate actions (e.g., reverse split) if needed; monitor compliance timeline into 2025 .
  • Strategic optionality: Chemical factory reconfiguration and natural gas JV discussions introduce medium-term upside if market conditions improve; execution and timing remain key .