Sign in

You're signed outSign in or to get full access.

IT

IT TECH PACKAGING, INC. (ITP)·Q1 2024 Earnings Summary

Executive Summary

  • Revenue collapsed 65.3% YoY to $6.86M as management suspended corrugating medium paper (CMP) production in Jan–Feb and halted tissue operations in Q1; sequentially, revenue fell sharply from $20.96M in Q4 2023 and $15.77M in Q3 2023 .
  • Despite severe volume/ASP pressure, gross margin improved to 5.81% from -1.40% a year ago, aided by lower unit material costs; however, operating loss widened to -$3.50M and EPS was -$0.37 (vs -$0.27 YoY) .
  • EBITDA turned slightly negative (-$0.02M) versus +$1.21M in Q1 2023, reflecting weak demand and idled capacity; CMP volumes fell to 18,670 tonnes (vs 49,873 YoY) with ASP down to $366/tonne (vs $396) .
  • No formal guidance was disclosed in the Q1 release; management emphasized cost optimization, raw material mix, and new product/market exploration as they navigate industry overcapacity, import competition, and weak pricing .

What Went Well and What Went Wrong

  • What Went Well

    • Returned to positive gross margin (5.81%) vs -1.40% YoY, supported by lower unit material costs; total gross profit swung to +$0.40M from a -$0.28M loss YoY .
    • Positive operating cash flow of $0.62M, despite revenue collapse and production suspensions .
    • Management focused on structural cost actions and growth adjacencies: “optimize the raw material structure and minimize the purchase price,” and “explore new products and new markets…with appropriate price adjustments” to regain share .

  • What Went Wrong

    • Revenue fell 65.3% YoY to $6.86M due to CMP production suspension in January–February and tissue suspension throughout Q1; CMP volumes dropped to 18,670 tonnes (vs 49,873 YoY) and ASP fell to $366/tonne (vs $396) .
    • SG&A jumped 56.3% YoY to $3.90M, pressuring operating leverage; operating loss widened to -$3.50M (vs -$2.77M YoY) .
    • EBITDA deteriorated to -$0.02M from +$1.21M YoY; net loss increased to -$3.75M (EPS -$0.37) from -$2.73M (EPS -$0.27) YoY .

Financial Results

MetricQ1 2023Q3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$19.79 $15.77 $20.96 $6.86
Basic & Diluted EPS ($)-$0.27 -$0.20 -$0.40 -$0.37
Gross Profit Margin %-1.40% -0.97% 1.19% 5.81%
Operating Income ($USD Millions)-$2.77 -$2.48 -$3.80 -$3.50
Net Income ($USD Millions)-$2.73 -$1.98 -$3.98 -$3.75
EBITDA ($USD Millions)$1.21 $1.69 $0.11 -$0.02

Segment/product revenue and pricing

  • Revenue by product ($USD Millions)
ProductQ1 2023Q1 2024
Regular CMP$16.47 $5.75
Light-Weight CMP$3.06 $1.08
Tissue Paper Products$0.22 $0.00
Face Masks$0.04 $0.00
Total (product table)$19.75 $6.83
  • Volumes and ASP
KPIQ1 2023Q1 2024
Total CMP Volume (tonnes)49,873 18,670
Total CMP ASP ($/tonne)$396 $366
Regular CMP Volume (tonnes)41,663 15,640
Regular CMP ASP ($/tonne)$395 $368
Light-Weight CMP Volume (tonnes)8,019 3,030
Light-Weight CMP ASP ($/tonne)$382 $355
Tissue Volume (tonnes)191 — (suspended)
Tissue ASP ($/tonne)$1,167 —

Liquidity/working capital (context)

  • Working capital: $5.44M at 3/31/24 vs $6.94M at 12/31/23 .
  • Operating cash flow: $0.62M in Q1 2024 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
All metricsQ2 2024 and FY 2024Not disclosedNot disclosed in Q1 2024 releaseMaintained: No formal guidance provided

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
Demand/industry conditionsRevenue -50% YoY on lower CMP volume and ASP; gross margin -0.97% Revenue -1.9% YoY on ASP pressure, offset by volume; gross margin 1.19% “Domestic packaging paper suffered sluggish demand and prices” Persistent demand weakness; pricing under pressure
Government/policy supportExpectation for increased policy support to boost domestic demand Supportive policies and plastic-restriction orders seen as tailwinds “China is actively launching various policies to stimulate the economy” Ongoing policy support narrative
Production/capacity——CMP suspended in Jan–Feb; tissue suspended in Q1 New headwind in Q1 from idled capacity
Pricing/ASPCMP ASP decline YoY (to $347–$433 range by type) CMP ASP down YoY; Q4 ASP $360/tonne Total CMP ASP $366/tonne vs $393 YoY ASP down YoY; mixed sequential
Cost/efficiency—Emphasis on flexible pricing/inventory management Optimize raw material structure; minimize purchase price Heightened cost focus
Working capital/liquidityWorking capital $29.04M (9/30/23) Working capital $6.94M (12/31/23) Working capital $5.44M (3/31/24) Declining working capital through Q1

Management Commentary

  • Strategic focus: “We will continue to optimize the raw material structure and minimize the purchase price to ensure production efficiency and consistent quality. We also will explore new products and new markets with appropriate price adjustments to capture greater market share.” — Zhenyong Liu, CEO .
  • Macro/industry framing: The company cited “sluggish demand and prices,” rising industry capacity, import competition, and interest rate hikes as pressures; they expect government policies to improve the business environment .
  • Operational priorities: Inventory, working capital and cash flow control to stabilize operations near term .

Q&A Highlights

  • No Q&A details were included in the Q1 2024 earnings materials; the company’s 8-K furnished only the press release (Exhibit 99.1) .

Estimates Context

  • Wall Street consensus (S&P Global) was not available at the time of analysis, so estimate comparisons are not included. Management did not provide explicit quantitative guidance in the Q1 materials .

Key Takeaways for Investors

  • Severe top-line compression from production suspensions and weak demand overshadowed a modest gross margin recovery; CMP volume and ASP declines drove EBITDA to -$0.02M and EPS to -$0.37 .
  • Sequential revenue fell dramatically vs Q4 2023 ($6.86M vs $20.96M), highlighting sensitivity to utilization; restoring run-rate production is the primary catalyst for revenue normalization .
  • Cost actions matter: lower unit material costs and raw material optimization helped lift gross margin to 5.81% despite demand weakness; sustaining this amidst rising competition is key .
  • Operating leverage remains unfavorable (SG&A +56% YoY to $3.90M); aligning overhead with reduced volumes could be necessary if demand remains soft .
  • Liquidity adequate but trending down: working capital declined to $5.44M (3/31/24) from $6.94M (12/31/23); positive operating cash flow in Q1 offers some cushion .
  • Watch for policy-driven demand stimuli and management’s product/pricing moves; CEO plans to pursue “new products and new markets” and tighter inventory/working capital control .
  • Near-term trading setup hinges on evidence of production normalization and demand stabilization (sequential revenue recovery, volumes/ASP) versus further suspensions or pricing pressure .