IT Tech Packaging, Inc. Announces First Quarter 2023 Unaudited Financial Results

BAODING, China, May 11, 2023 /PRNewswire/ -- IT Tech Packaging, Inc. (NYSE American: ITP) ("IT Tech Packaging" or the "Company"), a leading manufacturer and distributor of diversified paper products in North China, today announced its unaudited financial results for the first quarter ended March 31, 2023.

Mr. Zhenyong Liu, Chairman and Chief Executive Officer of the Company, commented, "In the first quarter of 2023, we had the revenue increased by 27.83% to approximately $19.79 million. As the Chinese government carried out a serious economic stimulus and support policies, this will definitely improve the demand and overall operating environment for paper-making industry. We will seize the chance by taking management measures, such as optimizing raw material procurement, diversifying the product structure and reducing cost to improve the profitability and prepare for the market recovery."

• Revenue increased by 27.83% to approximately $19.79 million, mainly due to the increase in sales volume of corrugating medium paper ("CMP"), partially offset by the decrease of average selling prices of CMP. 
• Gross loss was approximately $0.28 million, compared with gross profit of $0.31 for the same period of last year. Total gross loss margin decreased by 3.41 percentage point to negative 1.40%. 
• Loss from operations was approximately $2.77 million, compared to approximately$2.99 million for the same period of last year.
• Net loss was approximately $2.73 million, or loss per share of $0.27, compared to approximately$2.49 million, or loss per share of $0.25, for the same period of last year.
• Earnings before interest, taxes, depreciation and amortization ("EBITDA") was approximately $1.21 million, compared to$1.20 million for the same period of last year.

Revenue

For the first quarter of 2023, total revenue increased by 27.83%, to approximately $19.79 million from approximately $15.48 million for the same period of last year. This was mainly due to the increase in sales volume of corrugating medium paper ("CMP"), partially offset by the decrease of average selling prices of CMP. 

The following table summarizes revenue, volume and ASP by product for the first quarter of 2023 and 2022, respectively:

Revenue from CMP, including both regular CMP and light-Weight CMP, increased by 29.96%, to approximately $19.53 million and accounted for 98.67% of total revenue for the first quarter of 2023, compared to approximately $15.03 million, or 97.06% of total revenue for the same period of last year. The Company sold 49,682 tonnes of CMP at an ASP of $393/tonne in the first quarter of 2023, compared to 29,086 tonnes at an ASP of $517/tonne in the same period of last year.

Of the total CMP sales, revenue from regular CMP increased by 25.72%, to approximately $16.47 million for the first quarter of 2023, compared to revenue of approximately $13.10 million for the same period of last year. The Company sold 41,663 tonnes of regular CMPat an ASP of $395/tonne during the first quarter of 2023, compared to 25,245 tonnes at an ASP of $519/tonne for the same period of last year. Revenue from light-weight CMP increased by 58.77%, to approximately $3.06 million for the first quarter of 2023, compared to revenue of approximately $1.93  million for the same period of last year. The Company sold 8,019 tonnes of light-weight CMP at an ASP of $382/tonne for the first quarter of 2023, compared to3,841 tonnes at an ASP of $502/tonne for the same period of last year.

Revenue from offset printing paper was $nil for the first quarter of 2023 and 2022.

Revenue from tissue paper products decreased by 44.04%, to approximately $0.22 million for the first quarter of 2023, from approximately $0.40 million for the same period of last year. The Company sold 191 tonnes of tissue paper products at an ASP of $1,167/tonne for the first quarter of 2023, compared to 397 tonnes at an ASP of $1,003/tonne for the same period of last year.

Revenue from face masks decreased by 37.03%, to approximately $35,637 for the first quarter ended March 31, 2023, from $56,596 for the same period of last year. The Company sold 1,105 thousand pieces of face masks for the first quarter of 2023, compared to1,160 thousand pieces of face masks for the same period of last year.

Gross Profit (Loss) and Gross Margin

Total cost of sales increased by 32.30%, to approximately $20.02 million for the first quarter of 2023 from approximately $15.13 million for the same period of last year. The increase in overall cost of sales was mainly due to the increase in sales quantity of CMP, partially offset by the decrease in material costs of CMP. Costs of sales per tonne for regular CMP, light-weight CMP, offset printing paper, and tissue paper products were $388, $367, $nil and $4,865, respectively, for the first quarter of 2023, compared to $491, $461, $nil and $2,424, respectively, for the same period of last year.

Total gross loss was approximately $0.28 million for the first quarter of 2023, compared to the gross profit of approximately $0.31 million for the same period of last year as a result of factors described above. Overall gross loss margin was 1.40% for the first quarter of 2023, compared to gross profit margin that was 2.01% for the same period of last year. Gross profit (loss) margins for regular CMP, light-weight CMP, offset printing paper, tissue paper products and face mask products were 1.93%, 3.96%, nil%, -316.80% and -7.97%, respectively, for the first quarter of 2023, compared to 5.35%, 8.15%, nil%, -141.51% and 29.47%, respectively, for the same period of last year.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") decreased by 24.40%, to approximately $2.50 million for the first quarter of 2023 from approximately $3.30 million for the same period of last year.

Loss from Operations

Loss from operations was approximately $2.77 million for the first quarter of 2023, a decrease of 7.29%, from $2.99 million for the same period of last year. Operating loss margin was 14.01% for the first quarter of 2023, compared to 19.32% for the same period of last year.

Net Loss

Net loss was approximately $2.73 million, or loss per share of $0.27 for the first quarter of 2023, compared to $2.49 million, or loss per share of $0.25 for the same period of last year.

EBITDA

EBITDA was approximately $1.21 million for the first quarter of 2023, compared to $1.20 million for the same period of last year.

Note 1: Non-GAAP Financial Measures

In addition to our U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure as defined by the Securities and Exchange Commission ("SEC"). The Company defines EBITDA as net income before interest, income taxes, depreciation and amortization. EBITDA is a key measure used by management to evaluate our results and make strategic decisions. Management believes this measure is useful to investors because it is an indicator of operational performance. Because not all companies use identical calculations, the Company's presentation of EBITDA may not be comparable to similarly titled measures of other companies, and should not be viewed as an alternative to measures of financial performance or changes in cash flows calculated in accordance with the U.S. GAAP.

Cash, Liquidity and Financial Position

As of March 31, 2023, the Company had cash and bank balances, short-term debt (including bank loans, current portion of long-term loans from credit union and related party loans), and long-term debt (including related party loans) of approximately $16.75 million, $11.67 million and $6.51 million, respectively, compared to approximately $9.52 million, $11.16 million and $4.20 million, respectively, as of December 31, 2022.

Net accounts receivable was approximately $2.23 million as of March 31, 2023, compared to approximately $nil million as of December 31, 2022. Net inventory was approximately $5.97 million as of March 31, 2023, compared to approximately $2.87 million as of December 31, 2022. As of March 31, 2023, the Company had current assets of approximately $51.48 million and current liabilities of approximately $18.13 million, resulting in a working capital of approximately $33.35 million. This was compared to current assets of approximately $47.17 million and current liabilities of approximately $17.64 million, resulting in a working capital of approximately $29.53 million as of December 31, 2022.

Net cash provided by operating activities was approximately $4.81million for the first quarter of 2023, compared to approximately $4.41 million for the same period of last year. Net cash used in investing activities was approximately $0.30 million for the first quarter of 2023, compared to approximately $7.18 million for the same period of last year. Net cash provided by financing activities was approximately $2.56 million for the first quarter of 2023, compared to approximately $6.89 for the same period of last year.

About IT Tech Packaging, Inc.

Founded in 1996, IT Tech Packaging, Inc. is a leading manufacturer and distributor of diversified paper products and single-use face masks in North China. Using recycled paper as its primary raw material (with the exception of its tissue paper products), ITP produces and distributes three categories of paper products: corrugating medium paper, offset printing paper and tissue paper products. With production based in Baoding and Xingtai in North China's Hebei Province, ITP is located strategically close to the Beijing and Tianjin region, home to a growing base of industrial and manufacturing activities and one of the largest markets for paper products consumption in the country. ITP has been listed on the NYSE American since December 2009. For more information, please visit: https://www.itpackaging.cn/.

Safe Harbor Statements

This press release may contain forward-looking statements. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company's public filings with the Securities and Exchange Commission, including the Company's latest annual report on Form 10-K. All information provided in this press release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements.

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