Tantech Holdings Ltd. Announces Fiscal Year 2018 Financial Results

LISHUI, China, May 15, 2019 /PRNewswire/ -- Tantech Holdings Ltd. (NASDAQ: TANH), ("Tantech" or the "Company"), an alternative energy company with diversified operations, including the manufacturing of bamboo-based charcoal products and Electric Vehicles (EVs), today announced its financial results for its fiscal year ended December 31, 2018.

Financial Highlights (All Figures Approximated)

    --  Total revenues decreased by approximately $12.7 million, or 30.1%, to
        approximately $29.6 million



    --  Total gross profit from the following segments decreased by 23.9%, or
        approximately $2.5 million, to $8.0 million  - Gross profit from the
        Company's consumer products segment decreased by 1.9%, or $0.15 million,
        to $8.04 million - Gross profit from the Company's trading segment
        increased by 17.0%, or $0.1 million, to $0.5million - Gross profit from
        the Company's electronic vehicle segment decreased by 126%, or $2.4
        million, to $0.50 million
    --  Despite the overall decline in revenues and gross profit, the Company
        was still able to achieve net income attributable to common stockholders
        of $2.0 million, or $0.07 per share, for fiscal year 2018.

Mr. Zhengyu Wang, Chairman and CEO of Tantech said: "Tantech's overall performance in 2018 did not meet our expectations due to a much more competitive business environment, which led to lower sales of certain products. However, as the Company further streamlined its business lines in 2018, we have reduced the supply chain risks and made some breakthroughs in business, laying down a solid foundation for future growth. As such, we expect that both revenue and earnings growth will be improved this year compared with 2018."

"This year and beyond, the company will focus on manufacturing and selling bamboo charcoal-based consumer products and environment-friendly electric motor vehicles. Since 2019, the Chinese government has further reduced its subsidy for electric motor vehicles. As a result, we expect to receive fewer subsidies from the government going forward. In the past years, during which the Company's sales of electric motor vehicles were subsidized by the government, it took the Company two to three years to recover the subsidies, which contributed to a large accounts receivable balance. As a specialist in the electric logistics vehicle market, the Company expects to continue to improve its competitiveness so as to reach more customers and improve the Company's cash management. Also, the Company expects to expand into the auto parts sector, capitalizing on its rich customer resources in the automotive industry to build a strong brand image in the industry. In addition, assuming sufficient cash flow, the Company expects to increase investment in the mining sector. In 2018, the Company's 18% equity interest in Libo Haokun, a marble mining company, saw an increase in book value, which to some extent improved shareholder returns. " Mr. Wang concluded.

Full Year 2018 Financial Results

Revenues

Revenues decreased by approximately $12.7 million, or 30.1%, to approximately $29.6 million in fiscal 2018 from approximately $42.3 million in fiscal 2017. The decrease was mainly attributable to the significant decrease of our consumer products and electronic vehicle ("EV") segments due to a change of our business strategy and less customer demand. The revenue from our trading segment increased due to higher demands.


                              
       
     For the Twelve Months Ended December 31,



                             2018                                            2017


                        Revenues                          Gross              Gross    
        
       Revenues             Gross            Gross
                          ($'000)                         Profit             Margin              ($'000)             Profit           Margin
                                                          ($'000)              (%)                              ($'000)            (%)




     Consumer product     22,388                            8,040              35.9%   31,889            8,196              25.7%



     Trading               3,777                              487              12.9%    1,829              417              22.8%



     Electric Vehicles     3,396                            (498)           (14.7)%    8,579            1,943              22.6%





     
              Total     29,561                            8,029              27.2%   40,297           10,556                25%

Revenues from the Company's consumer product segment decreased by $9.5 million, or 29.8%, to $22.4 million for fiscal 2018 from $31.9 million for the prior fiscal year. The gross margin of the Company's consumer product segment increased from 25.7% in fiscal 2017 to 35.9% in fiscal 2018. The decrease in revenue from the consumer product segment in 2018 was due to the following reasons. First, as a result of increasing competition from E-commerce retailers and the change of shopping habits among younger consumers, potential customers are increasingly buying consumer products online with unknown brands in order to save money. Therefore, orders from the Company's customers for its consumer products decreased considerably. Second, in 2018, the Company reduced its cooperation with certain supermarket customers with low selling prices and unfavorable profit margins. And third, in response to market competition, the Company also reduced sales of less popular products with lower gross margin. The overall decrease in the Company's revenue from its consumer product segments reflected the above factors.

Revenue from the Company's trading segment was approximately $3.8 million in fiscal 2018, an increase of 106% from $1.9 million in fiscal 2017. Starting in fiscal 2017, the Company focused on promoting its "Charcoal Doctor" products in the market. As a result, domestic sales of "Charcoal Doctor" products have increased significantly. The decline in gross margin in fiscal 2018 compared to fiscal 2017 was due to the fact that almost all the Company's sales were made to the Chinese domestic market which have lower margins.

In July 2017, the Company completed the acquisition of a 70% equity interest of Suzhou E-Motors Co., Ltd, which became known as Shangchi Automobile in 2019 ("Shangchi Automobile"), a specialty electric vehicles and power batteries manufacturer based in Jiangsu Province, China. The revenue for this EV segment was approximately $3.4 million in fiscal 2018 with negative gross margin of 14.7%. The Company sold 110 types of logistic electronic cars in fiscal 2018 with average price of approximately $15,000, and the Company expects sales growth in fiscal 2019.

Cost of revenues

Cost of revenues decreased by approximately $10.2 million, or 32.2%, to approximately $21.5 million in fiscal 2018 from approximately $31.7 million in fiscal 2017. As a percentage of revenues, the cost of revenue decreased to 73% in fiscal 2018 from 75% in fiscal 2017. The decrease in cost of revenues as a percentage of revenues in fiscal 2018 was mainly attributable to the lower cost of revenues from the consumer products and EV segments due to lower sales. On the other hand, the cost of revenue for trading segment increased to in line with the increased sales.

Gross profit

Gross profit decreased by approximately $2.5 million, or 23.9%, to approximately $8.0 million in fiscal 2018 from approximately $10.5 million in fiscal 2017. The gross profit margin was 27.2% in fiscal 2018, as compared to 25.0% in fiscal 2017. On a segment-by-segment basis, gross margins for consumer product, trading and EV were 35.9%, 12.9%, and (14.7%), respectively, for fiscal 2018, compared to 25.7%, 22.8% and 22.6%, respectively, for fiscal 2017. The decrease in gross margin was primarily attributable to lower selling prices in the trading segment and EV segment in fiscal 2018.

Selling expenses

Selling expenses decreased by approximately $0.4 million to approximately $0.3 million in fiscal 2018 compared to approximately $0.7 million in fiscal 2017. As a percentage of sales, selling expenses were 1.1% of revenues in fiscal 2018, as compared to 1.7% of revenues in fiscal 2017. The decrease of the selling expenses was mainly attribute to decreased sales.

General and administrative expenses

General and administrative expenses increased by approximately $0.3 million, or 7.5%, to approximately $4.9 million in fiscal 2018 from approximately $4.6 million in fiscal 2017. As a percentage of revenues, general and administrative expenses increased to 16.8% in fiscal 2018, compared to 10.9% in fiscal 2017. The slight increase was primarily attributable to the fact that $0.2 million more bad debt and inventory impairment provision was recorded in fiscal 2018.

Research and development expenses

Research and development expenses decreased by $0.2 million, or 38.4%, to $0.4 million in fiscal 2018 from $0.6 million in fiscal 2017. The decrease was primarily due to less R&D activity during fiscal 2018 due to a change of business strategies. We intend to spend more resources on R&D for our electric vehicle segment going forward.

Provision for income taxes

Provision for income taxes was approximately $1.0 million in fiscal 2018, a decrease of approximately $0.5 million or 32.5%, from approximately $1.5 million in fiscal 2017. The decrease was mainly due to lower income before income taxes from continuing operations in fiscal 2018 compared to fiscal 2017. The Company provided full valuation allowance in fiscal 2018 on bad debt reserves due to uncertainties in realizing those tax benefits in the future.

Net income attributable to common stockholders

Net income attributable to common stockholders was approximately $2.0 million in fiscal 2018, a decrease of approximately $1.8 million from approximately $3.8 million in fiscal 2017. The decrease was attributable to a general overall decline of revenue and gross profits. As of December 31, 2018, the Company ceased operating Tantech Babiku and Lishui Zhongzhu, and it is planning to sell the remaining operations of Tantech Energy because of a business strategy change. The net income for these discontinued operations was approximately $0.08 million in fiscal 2018 compared to $0.07 million in fiscal 2017.

Recent Updates

On February 26, 2019, Tantech Charcoal entered into a short term loan agreement with Bank of China (Lishui Branch) to borrow approximately $1.5 million (RMB 10 million) for one year with an annual interest rate of 4.35%. The purpose of the loan was for working capital needs. The loan was guaranteed by Tantech Bamboo, two individual related parties, Zhengyu Wang and Yefang Zhang and a third party, Zhejiang Meifeng Tea Industry Co., Ltd. The loan was also collateralized by two properties owned by Zhengyu Wang and Yefang Zhang.

On March 18, 2019, Tantech Bamboo entered into a short-term loan agreement with Bank of China (Lishui Branch) to borrow approximately $2.8 million (RMB 18.78 million) with an annual interest rate of 6.05%. Repayment of principal of approximately $150,000 (RMB 1 million) will be due on January 14, 2020 and the repayment of the remaining principal of approximately $2.7 million (RMB17,780,000) will be due on March 17, 2020. The purpose of the loan was to fund working capital needs. The loan was collateralized by building and land use right of Tantech Bamboo with maximum guaranteed amount up to approximately $3.9 million (RMB25,960,000). The loan was also guaranteed by three related parties, Zhengyu Wang, CEO of the Company and his wife, Yefang Zhang and Lishui Jiuanju Trading Co., Ltd., the president of which was also the COO of the Company.

About Tantech Holdings Ltd.

Established in 2001 and headquartered in Lishui City, Zhejiang Province, China, Tantech Holdings Ltd., together with its subsidiaries, develops and manufactures bamboo-based charcoal products in China and internationally. It operates through three segments: Consumer Products, Trading, and electronic vehicle. The Company provides its products for industrial energy applications, as well as household cooking, heating, purification, agricultural, and cleaning uses. The company also exports its bamboo vinegar, bamboo charcoal purification, and EDLC carbon products. For more information about Tantech Holdings Ltd., please visit: http://www.tantech.cn/en/index.asp

Forward-Looking Statements

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulations, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by this cautionary statement and any other cautionary statements which may accompany the forward-looking statements. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information please contact:

Tantech Holdings Ltd.
Ms. Ye Ren
IR Manager
+86-578-261-2869
ir@tantech.cn


                                                       
         
       Tantech Holdings Ltd and Subsidiaries

                                                           
       
          Consolidated Balance Sheets




                                                                     December 31,                           December 31,


                                                                             2018                                    2017

                                                                                                                     ---


     
                Assets



     
                Current Assets


      Cash and cash equivalents                                                       $
              7,748,416                           $
          9,717,909



     Restricted cash                                                                           2,121,377                                   3,901,526



     Notes receivable                                                                                                       15,370



     Accounts receivable, net                                                                 32,495,361                                  44,832,946



     Inventories, net                                                                          1,957,058                                   2,572,558



     Advances to suppliers, net                                                               14,387,228                                  11,217,764



     Prepaid value-added taxes                                                                 2,136,988                                   2,969,656


      Prepaid expenses and other receivables,
       net                                                                                        954,362                                   1,685,120


      Current assets from discontinued
       operations                                                                               8,513,154                                  12,332,035



                   Total current assets                                                        70,313,944                                  89,244,884


                   Property, plant and equipment, net                                           3,240,620                                   3,374,879





     
                Other Assets



     Advances to suppliers                                                                                               2,109,005


      Manufacturing rebate receivable                                                           9,795,512                                   9,269,118



     Intangible assets, net                                                                   15,268,062                                  15,976,144



     Long-term Investment                                                                     18,156,000



     Goodwill                                                                                  8,861,361                                   9,001,924


      Non-current assets from discontinued
       operations                                                                               8,558,515                                   9,511,772



                   Total Assets                                                     $
              134,194,014                         $
          138,487,726

                                                                                                                                                   ===



                   Liabilities and Stockholders' Equity


                   Current Liabilities


      Short-term bank loans                                                           $
              7,683,014                           $
          5,208,893



     Bank acceptance notes payable                                                             2,121,377                                   6,975,526



     Accounts payable                                                                          2,524,462                                   5,335,363



     Due to related parties                                                                    2,102,175                                   2,995,228



     Customer deposits                                                                           865,615                                   1,001,726



     Taxes payable                                                                               344,563                                     542,392



     Due to third parties                                                                      3,253,253                                     708,864


      Accrued liabilities and other payables                                                    1,598,104                                   1,564,336


      Liabilities from discontinued operations                                                  1,662,252                                   2,456,934



                   Total Current Liabilities                                                   22,154,815                                  26,789,262



     Deferred tax liability                                                                    2,053,512                                   2,086,086




     
                Total Liabilities                                                           24,208,327                                  28,875,348





                   Stockholders' Equity


      Common stock, $0.001 par value,
       50,000,000 shares authorized,


      28,853,242 and 28,703,242 shares issued
       and outstanding as of December 31, 2018
       and 2017, respectively                                                                      28,853                                      28,703



     Additional paid-in capital                                                               39,310,178                                  39,067,328



     Statutory reserves                                                                        6,461,788                                   6,461,788



     Retained earnings                                                                        58,333,136                                  56,356,369


      Accumulated other comprehensive loss                                                    (2,066,364)                                (1,101,270)



                   Total Stockholders' Equity attributable
                    to the Company                                                            102,067,591                                 100,812,918



     Noncontrolling interest                                                                   7,918,096                                   8,799,460



                   Total Stockholders' Equity                                                 109,985,687                                 109,612,378



                   Total Liabilities and
                    Stockholders' Equity                                            $
              134,194,014                         $
          138,487,726

                                                                                                                                                   ===


                                                  
              
                Tantech Holdings Ltd and Subsidiaries

                                         
              
                Consolidated Statements of Comprehensive Income (Loss)




                                                                  
              
                For the Years Ended December 31,


                                                        2018                                              2017                                  2016

                                                                                                                                               ---



                   Revenues                                    $
              29,561,399                                      $
           42,297,612              $
              39,902,342




                   Cost of revenues                                      21,532,319                                               31,741,753                          26,879,316






     
                Gross Profit                                           8,029,080                                               10,555,859                          13,023,026





                   Operating expenses



     Selling expenses                                                      320,479                                                  730,834                             621,818


      General and administrative expenses                                 4,971,804                                                4,625,563                           3,613,289


      Research and development expenses                                     386,628                                                  627,577                             136,626




     Total operating expenses                                            5,678,911                                                5,983,974                           4,371,733





                   Income from operations                                 2,350,169                                                4,571,885                           8,651,293





                   Other income (expenses)



     Interest income                                                        56,894                                                   18,648                                 571



     Interest expense                                                    (626,343)                                               (551,044)                          (470,656)



     Government subsidy income                                                                                                                      52,597



     Other income, net                                                     247,069                                                  436,095                              99,025



      Total other income (expenses)                                       (322,380)                                                (96,301)                          (318,463)





                   Income before provision for income
                    taxes                                                 2,027,789                                                4,475,584                           8,332,830


                   Provision for income taxes                             1,031,158                                                1,528,003                           1,367,270



                   Net income from continuing operations                    996,631                                                2,947,581                           6,965,560




                   Discontinued operation:


      Net income (loss) from discontinued
       operations, net of tax                                                83,367                                                   65,550                         (2,357,867)




     
                Net income                                             1,079,998                                                3,013,131                           4,607,693




      Less: net income (loss) attributable
       to the noncontrolling interest from
       continuing operations                                              (896,769)                                               (754,084)                            308,442



                   Net income attributable to
                    common stockholders of
                    Tantech Holdings Ltd.                       $
              1,976,767                                       $
           3,767,215               $
              4,299,251

                                                                                                                                                                             ===




     
                Net income                                             1,079,998                                                3,013,131                           4,607,693


      Other comprehensive income (loss):


      Foreign currency translation
       adjustment                                                         (949,689)                                               4,341,324                         (5,448,209)



                   Comprehensive income (loss)                              130,309                                                7,354,455                           (840,516)


      Less: Comprehensive income (loss)
       attributable to noncontrolling
       interest                                                           (881,364)                                               (784,186)                             70,029



                   Comprehensive income (loss)
                    attributable to common
                    stockholders of Tantech
                    Holdings Ltd.                               $
              1,011,673                                       $
           8,138,641               $
              (910,545)

                                                                                                                                                                             ===



      Earnings (loss) per share -Basic and
       Diluted


      Continuing operations                                          $
              0.07                                          $
             0.15                    $
              0.19

                                                                                                                                                                             ===

      Discontinued operations                                        $
              0.00                                          $
             0.00                  $
              (0.10)

                                                                                                                                                                             ===

      Weighted Average Shares Outstanding -
       Basic and diluted


      Continuing operations and
       discontinued operations                                           28,745,571                                               25,971,912                          23,019,185


                                                        
              
                Tantech Holdings Ltd and Subsidiaries

                                                        
              
                Consolidated Statements of Cash Flows




                                                                         
              
                For the Years Ended December 31,


                                                                           2018                                             2017                                   2016

                                                                                                                                                                  ---

                   Cash flows from operating activities



     Net income                                                                  $
              1,079,998                                           $
             3,013,131                 $
             4,607,693


      Net (income) loss from discontinued operations                                         (83,367)                                                      (65,550)                           2,357,867




     Net income from continuing operations                                                   996,631                                                      2,947,581                            6,965,560


      Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:


      Allowance for doubtful accounts -accounts
       receivable                                                                             910,811                                                      2,632,813                              239,487


      Allowance for doubtful accounts -advance to
       suppliers                                                                              777,848                                                       (45,507)                             927,218


      Allowance for doubtful accounts - other receivables                                      66,305                                                       (16,827)                              59,742


      Allowance for doubtful accounts -due from related
       party                                                            364,288



     Inventory reserve (recovery)                                                            700,379                                                         13,908                             (84,414)



     Depreciation expense                                                                    628,144                                                        576,953                              497,970



     Amortization of intangible asset                                                        443,318                                                        201,647                                6,842


      Amortization of prepaid consulting expense                        102,263


      Gain from disposal of property, plant and equipment                                    (44,814)                                                   (1,875,493)


      Changes in operating assets and liabilities:



     Accounts receivable - non-related party                                               7,023,546                                                    (1,001,613)                         (6,272,566)



     Accounts receivable - related party                             3,249,359



     Advances to suppliers                                                               (3,555,851)                                                     2,826,316                          (7,354,381)



     Advances to supplier non current                                                      1,558,916                                                      6,839,953                            (451,731)



     Inventory                                                                             (147,485)                                                       804,763                            (317,545)



     Other receivables                                                                       767,849                                                      (829,716)                               9,424



     Government rebate receivable                                                          (644,959)                                                   (2,942,190)



     Accounts payable                                                                    (2,621,226)                                                     (532,039)                           (893,016)



     Accrued liabilities and other payables                                                   49,492                                                    (1,489,128)                             362,212



     Customer deposits                                                                     (115,771)                                                     (247,059)                              58,122



     Taxes payable                                                                           573,660                                                    (1,927,737)                             174,817



     Deferred tax liability                                                                                                                                               (98,473)



                   Net cash provided by (used in) continuing
                    operations                                                             11,082,703                                                      5,936,625                          (6,170,732)


                   Net cash provided by (used in) discontinued
                    operations                                                              3,582,177                                                    (3,785,614)                           (898,699)



                   Net cash provided by (used in) operating activities                     14,664,880                                                      2,151,011                          (7,069,431)





                   Cash flows from investing activities


      Acquisition of property, plant and equipment                                          (559,038)                                                   (1,302,721)                             (8,282)


      Proceeds from disposal of property, plant and
       equipment                                                                               54,089                                                        662,144



     Additions to intangible assets                                    (2,585)



     Payment for business acquisition                                                                                             (4,552,240)                          (3,372,925)



     Payment for investment                                       (17,448,000)



     Cash acquired from business acquisition                                                                                           35,707



     Changes in deposit for asset acquisition                                                                                         443,400



                   Net cash used in continuing operations                                (17,955,534)                                                   (4,713,710)                         (3,381,207)


                   Net cash provided by (used in) discontinued
                    operations                                                               (39,976)                                                     1,220,458                            1,503,233



                   Net cash used in investing activities                                 (17,995,510)                                                   (3,493,252)                         (1,877,974)





                   Cash flows from financing activities


      Proceeds from (repayment of) loans from third party                                   2,455,806                                                      (187,706)                             885,694



     Note receivable                                                                          14,540                                                       (14,780)


                   Bank acceptance notes payable, net of repayment                        (4,560,185)                                                     4,911,990                            1,806,924



     Proceeds from bank loans                                                             10,291,412                                                     10,093,262                            7,001,831



     Repayments of bank loans                                                            (7,835,606)                                                  (11,957,020)                         (8,251,620)



     Repayment of loans from related parties                                             (1,175,971)                                                     (477,565)



     Proceeds from issuance of common stocks                                                                                        5,968,208                             7,957,100



                   Net cash provided by (used in) continuing
                    operations                                                              (810,004)                                                     8,336,389                            9,399,929


                   Net cash provided by discontinued operations



                   Net cash provided by (used in) financing activities                      (810,004)                                                     8,336,389                            9,399,929





      Effect of exchange rate changes on cash, restricted
       cash and cash equivalents                                                              390,992                                                        424,298                            (491,196)





                   Net increase (decrease) in cash, restricted cash
                    and cash equivalents                                                  (3,749,642)                                                     7,418,446                             (38,672)




                   Cash, restricted cash and cash equivalents,
                    beginning of year                                                      13,619,435                                                      6,200,989                            6,239,661





                   Cash, restricted cash and cash
                    equivalents, end of year                                      $
              9,869,793                                          $
             13,619,435                 $
             6,200,989

                                                                                                                                                                                                      ===



                   Supplemental disclosure information:



     Income taxes paid                                                           $
              1,044,480                                           $
             1,156,976                   $
             696,435

                                                                                                                                                                                                      ===


     Interest paid                                                                 $
              608,048                                             $
             479,358                   $
             261,625

                                                                                                                                                                                                      ===



                   Supplemental non-cash activities:


      Common shares issued for service                                              $
              243,000                            
              $                         
              $                     -


      Common shares issued for Minority
       interest buyback                                            
              $                                                   
              $                                       $
             2,160,142



      Common shares issued for acquisition of
       Shangchi Automobile                                         
              $                                                                  $
             6,500,000   
              $                     -



      Net book value of assets and liabilities
       of Shangchi Automobile acquired                             
              $                                                                 $
             11,122,410   
              $                     -

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SOURCE Tantech Holdings Ltd.