Stock Market

IT Tech Packaging, Inc. Announces Q1 2024 Financial Results Amid China's Economic Policy Changes

BAODING, China, May 10, 2024 /PRNewswire/ -- IT Tech Packaging, Inc. (NYSE American: ITP), a prominent paper product manufacturer and distributor in North China, has released its unaudited financial statements for the first quarter that ended on March 31, 2024. The data reveals significant developments in the company's performance within a challenging economic landscape.

Zhenyong Liu, the CEO of IT Tech Packaging, elucidated a multifaceted approach aiming to navigate the company through the evident industry impediments: "In the first quarter of FY2024, we managed to garner revenue of around $6.86 million that net into profits of $0.40 million. The domestic packaging paper sector faced stagnant demand and declining prices over this period. Compounding the difficulty, the increase in production capacity among our contemporaries, combined with more intensified competition and interest rate rises, continues to persistently pressure the industry." Mr. Liu further noted the role of China's proactive policy initiatives in stimulating the economy and backing enterprises, which appears set to uplift investment and domestic consumption, therefore improving the business milieu for the packaging paper industry.

"Moving forward, we're committed to optimizing our raw material composition and pushing down procurement costs to bolster production efficiency and maintain our signature product quality. The goal is to branch out into new products and capture growing market shares through strategic pricing modifications. Moreover, we are confident that improved inventory management, working capital, and cash flow will pave the way to a financially robust operation in the near term," he added.

Q1 2024 Financial Performance Highlights

Revenue Decrease The company's revenue plummeted by 65.32% to approximately $6.86 million, principally due to a period of halted corrugating medium paper (CMP) production in January and February, as well as a cessation in tissue paper product production during the entire first quarter.

Gross Profit Improvement An approximate gross profit of $0.40 million was achieved, compared to a gross loss of $0.28 million reported in the corresponding period of the previous year. This marks a significant change, with the gross profit margin escalating by 7.21 percentage points to 5.81%.

Operating Loss IT Tech Packaging encountered an operating loss of $3.50 million, which is less severe compared to the $2.77 million loss noted for the same period last year.

Net Loss This quarter experienced a net loss of approximately $3.75 million, signifying a loss per share of $0.37, juxtaposed against a net loss of $2.73 million, or a loss per share of $0.27, for the corresponding period in the previous year.

EBITDA The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) amounted to a negative $0.02 million, retreating from a positive EBITDA of $1.21 million seen in the same period last year, highlighting fiscal challenges faced.

Exploring the Revenue Streams

Revenue from CMP, constituting both regular CMP and lightweight CMP, tumbled to approximately $6.83 million, which constituted 100% of total revenue for Q1 2024. This is a noteworthy decline from roughly $19.53 million, or 98.67% of total revenue for the same span in 2023. The significant demand decrease was met with a swift sales response, with significant sale tonnage reductions and a subsequent slight drop in the Average Selling Price (ASP).

IT Tech's regular CMP revenue conceded a 65.08% drop to about $5.75 million for Q1 2024, compared to the $16.47 million in the same timeframe of 2023. Lightweight CMP revenue also fell by 64.83% to about $1.08 million for Q1 2024.

Revenue from offset printing paper and tissue paper products, along with the sale of face masks, registered at $nil for Q1 2024, demonstrating a decisive shift in the company's operational focus and product line adjustments amid the current market conditions.

Gross Profit and Margin Fluctuations

The total cost of sales saw a 67.79% decrease to roughly $6.46 million for Q1 2024 from about $20.07 million in the previous year due to scaled-back sales volume and lower unit material costs for CMP. This adjustment contributed positively to the change in the overall gross profit margin, which increased from a gross loss margin to a gross profit margin year-over-year. The margins for specific product lines varied, with regular and lightweight CMP gross profits turning positive, while offset printing paper and tissue paper products did not generate revenue, and the face mask product line remained non-operational.

Operational and Financial Strides

Operating expenses, specifically Selling, General, and Administrative expenses (SG&A), escalated by 56.32% to approximately $3.90 million for Q1 2024. This rise was attributed to expanded efforts to stabilize and steer the company amidst the challenges.

Despite the increased operating costs, the company's operational loss decreased by 26.31%, with a loss margin of 51.02% for the quarter, when juxtaposed against the prior year's comparable period.

Tackling Net Loss

The net loss experienced by IT Tech Packaging deepened, with an adjusted loss per share that has set the company on a path of strategic reassessment.

Rigorous measures are being undertaken to rectify the negative EBITDA, demonstrating the company's resolve to face these financial difficulties cranium-on.

Comprehensive Losses and Earnings Per Share

The comprehensive losses, which factor in net loss and other comprehensive income such as foreign currency translation adjustments, culminated in a total comprehensive loss of $4.05 million for Q1 2024. This starkly contrasts the prior year's period, presenting a clearer picture of the company's efforts to mitigate financial repercussions in a volatile market.

Basic and diluted losses per share increased by approximately 37%, an indicator necessitating tighter financial control and innovative revenue strategies.

IT Tech Packaging's Strategic Response

In response to the economic climate challenges, IT Tech Packaging, Inc. is actively engaging policies to stimulate investment and consumption to improve the business environment for the packaging paper industry. With forward-looking strategies focusing on materials optimization, cost reduction, and market diversification, IT Tech aims to ensure steadfast production efficiency and product quality.

The company remains focused on exploring new product avenues and market expansion for continued growth. For a deeper insight into IT Tech Packaging, Inc., interested parties can visit their website at IT Tech Packaging's Official Site.

Safe Harbor Statement and Future Outlook

IT Tech Packaging, Inc. cautions that this press release may contain forward-looking statements that involve inherent risks and uncertainties. Despite the uncertainties projected or anticipated, commitment to strategic growth and operational efficiency remains a bedrock principle in the face of fluctuating market dynamics.

Future-ready plans for inventory control, capital management, and cash flow improvements are set to anchor the company through an evolving industry landscape. In doing so, IT Tech aligns itself not just for recovery but also for a surge in performance as the economic tide turns.

About IT Tech Packaging, Inc.

Founded in 1996 and based strategically near Beijing and Tianjin, IT Tech Packaging, Inc. leverages its geographical proximity to significant industrial and manufacturing centers. The company has successfully catered to one of the largest paper product consumption markets in China, reflecting its acumen and operational excellence.

Listed on the NYSE American since December 2009, IT Tech stands as a testament to resilience and ambition, charting a course for long-term value creation for its stakeholders.

Conclusion

As China's economic policies continue to evolve, IT Tech Packaging, Inc. remains firmly at the helm, ready to adjust sails to favorable winds. The company’s unwavering dedication to optimizing business operations and expanding its market presence is indicative of its robust strategies to safeguard against industry pressures and secure its foothold in the competitive arena of paper product manufacturing and distribution.