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GULF RESOURCES, INC. (GURE)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 was sharply weaker: revenue fell 74% to $5.87M, net loss was $1.78M, and EPS was ($0.17), driven by a 57% drop in bromine average selling price (ASP) to $3,237/ton and a 43% reduction in tons sold .
  • Bromine revenues declined 75% to $4.91M; gross profit for the quarter turned to a loss of $0.51M vs a $14.46M profit in Q3 2022, with operating loss of $2.29M .
  • Management reiterated a cautious posture—delaying approvals for bromine factories #2 and #10 and postponing final chemical plant equipment—yet expressed confidence in a return to profitability as bromine prices slowly improve and new end-markets (e.g., zinc/bromine batteries) emerge .
  • Wall Street consensus via S&P Global was unavailable; comparisons to estimates cannot be made. Expect model resets lower near term given the magnitude of the ASP and volume declines (note unavailability explicitly) .
  • Flood-protection investment was a focus ($15.20M in 9M), while liquidity remained strong: cash $103.77M, net-net cash $85.61M, working capital $105.07M; the company highlighted these as strategic buffers and potential catalysts as pricing recovers .

What Went Well and What Went Wrong

What Went Well

  • Liquidity and balance sheet remained robust: cash $103.77M, net-net cash $85.61M, shareholders’ equity $260.72M; working capital $105.07M supported strategic flexibility in a downturn .
  • Crude salt recorded positive gross profit of $0.51M, partially offsetting bromine weakness; management avoided destructive pricing competition to preserve resource value .
  • Management highlighted medium-term demand catalysts (zinc/bromine batteries and new medical products) and constrained global supply (major production concentrated in conflict-prone regions), supporting an eventual pricing recovery .

What Went Wrong

  • Severe pricing and volume pressure: bromine ASP fell 57% YoY to $3,237/ton and volumes sold declined 43% YoY; revenue down 74% with bromine revenue down 75% YoY .
  • Profitability deteriorated: gross profit swung to a loss of $0.51M (vs +$14.46M LY), operating loss was $2.29M (vs +$11.94M LY), and net loss was $1.78M (vs +$8.97M LY); EPS fell to ($0.17) from $0.86 .
  • The chemicals segment generated no revenue, and approvals for additional bromine capacity (#2 and #10) were delayed pending pricing recovery; final equipment procurement for the chemical factory was postponed .

Financial Results

Income Statement Summary (quarterly)

MetricQ1 2023Q2 2023Q3 2023
Revenue ($USD)$9,302,007 $8,005,782 $5,865,615
Net Income ($USD)($557,747) ($681,816) ($1,775,797)
EPS Basic & Diluted ($USD)($0.05) ($0.07) ($0.17)
Operating Income ($USD)($799,558) ($919,098) ($2,293,288)
Gross Profit ($USD)$2,532,933 N/A($508,287)

YoY Comparison (Q3 2023 vs Q3 2022)

MetricQ3 2022Q3 2023
Revenue ($USD)$22,862,795 $5,865,615
Net Income ($USD)$8,967,380 ($1,775,797)
EPS Basic & Diluted ($USD)$0.86 ($0.17)
Gross Profit ($USD)$14,457,101 ($508,287)

Segment Breakdown (Q3 2023)

SegmentRevenue ($USD)Gross Profit ($USD)
Bromine$4,908,152 ($1,087,344)
Crude SaltDeclined 70% YoY (value not separately stated) $511,456
Chemicals$0 $0 (no revenue)
Natural Gas (equipment leasing)$67,907 N/A

KPIs (Q3 2023)

KPIValue
Bromine ASP ($/ton)$3,237
Bromine ASP YoY change−57%
Bromine volume YoY change−43%
Bromine price (Nov 16, 2023)$3,477 (+7.4% vs Q3 ASP)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidance (revenue, margins, EPS)Q4 2023+None provided None provided; management “envisions returning to profitability in forthcoming quarters” N/A (qualitative outlook)
Bromine factory approvals (#2 & #10)2023–2024Working with local government; timing dependent on market Held back seeking approvals pending improved pricing Maintained cautious stance
Chemical factory equipment2023Remaining equipment expected Q2–Q3 2023 Procurement postponed until product focus clarified Delayed
Flood protection capex9M 2023N/AInvested $15,197,648 New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2023)Previous Mentions (Q2 2023)Current Period (Q3 2023)Trend
Bromine pricing/macroPrices believed to have bottomed; cautious optimism Prices up ~34–37% from Q2 lows; breakeven at modest price increase; macro weak ASP still low; slight recent uptick; demand weak due to construction and post-COVID inventory Stabilizing to modest improvement
Capacity/approvalsAim to open one closed factory in 2023; limited capex Slowed approvals for remaining factories; capital preservation Held back approvals for #2 and #10 pending pricing Cautious/Deferred
Chemicals segmentEquipment delivery expected Q2–Q3; 3–4 months install, then testing Postponed delivery; reassessing products/equipment Procurement postponed; waiting for clarity on derivative products Delayed
Export strategy/FXTask force to identify export opportunities; USD flexibility Pursuing exports to retain USD offshore for buybacks/dividends Strategy reiterated; no near-term execution detail Exploration phase
Regulatory/legal (Sichuan JV)Proceed post provincial planning; JV discussions JV discussions ongoing; timeline uncertain Aim to resume natural gas and brine exploration in Sichuan Uncertain timing
Risk managementStrong liquidity; limited capex for bromine/salt Capital preservation; conservative cash management Flood-protection investment; monitoring Middle East risks Proactive risk mitigation

Management Commentary

  • “Our results were adversely impacted by the diminished price of bromine… sluggish state of the construction market in China… waning impact of the COVID pandemic resulted in decreased demand… for sterilization” .
  • “We have held back seeking approval to open factories #2 and #10… postponed the procurement of the final equipment for our chemical factory until we gain clearer insights into opportunities for derivative bromine products” .
  • “We have observed a gradual but consistent uptick in the market price of bromine… envision returning to profitability in the forthcoming quarters… aim to progress with the opening of our chemical factory… and ideally resuming our natural gas and brine exploration in Sichuan Province” .

Q&A Highlights

  • Investor focus on shareholder value actions (IR/investment bankers, potential M&A): management emphasized waiting for clearer project visibility before engaging external advisors; no unsolicited offers received .
  • Cash deployment and yield: management reiterated a conservative cash policy to avoid capital market product risks, explaining low interest income .
  • Sichuan JV timeline and profitability potential: discussions continue with local government; no specific timeline provided .
  • Export strategy: intention to build USD offshore through high-margin export products to enable buybacks/dividends when feasible .

Note: The company hosted its Q3 2023 earnings call on November 20–21, 2023; public transcripts mirror press release themes (pricing, approvals, flood-protection, liquidity) .

Estimates Context

  • S&P Global consensus for Q1–Q3 2023 (EPS and revenue) was unavailable at time of analysis; therefore, no beat/miss determination can be made for Q3 2023. Explicitly note unavailability and avoid inference .
  • Given the 74% revenue decline and bromine ASP compression, Street models likely require downward revisions for near-term quarters unless pricing recovers faster than management’s cautious stance suggests .

Key Takeaways for Investors

  • Near-term results hinge on bromine pricing normalization; small recent uptick is positive, but ASP and volumes remain well below prior-year levels, keeping earnings leverage muted until demand returns .
  • Strategic restraint (delayed factory approvals and chemical equipment procurement) reduces the risk of uneconomic production and preserves cash for deployment when pricing improves—supportive for downside protection .
  • Liquidity is a material asset: $103.77M cash, $85.61M net-net cash, and $105.07M working capital provide optionality (capex, JV, potential shareholder returns post-export USD generation) .
  • Operational mix: crude salt contributed positive gross profit, but bromine drove the quarter; absent chemicals revenue, earnings depend heavily on bromine ASP/tonnage trends .
  • Watch catalysts: bromine price trajectory, approvals for factories #2 and #10, chemical plant equipment decisions/product selection, and progress on Sichuan JV/natural gas; any formal guidance or export wins would be stock-moving .
  • Risk factors: China construction weakness, post-COVID antiseptic inventory overhang, and geopolitical risks affecting global bromine supply (Middle East/Dead Sea region) can alter supply-demand dynamics and pricing volatility .
  • Tactical stance: In the short term, avoid assuming an immediate profitability rebound; in the medium term, improving ASPs, capacity approvals, and chemicals restart could re-rate the equity if execution aligns with management’s outlook .