Asia Packaging Group fiscal Q1 earnings slip 9.6% to C$1.8M on non-cash charge for stock-based compensation; revenues rise 10% to C$10.5M on sales increase in medical packaging, plastic packaging materials, higher prices for CPP film, plastic cups

TORONTO , September 30, 2011 (press release) – Asia Packaging Group Inc. (TSX VENTURE:APX) ("Asia Packaging" or the "Company") is pleased to announce its interim financial statements for the three-month period ending June 30, 2011.

Interim Financial Results


During the Company's first quarter it achieved 10.1% growth in revenues over the same period of 2010 to $10.5 million.

Gross profit achieved during the quarter was $2.6 million representing a 5.9% increase over the same period of 2010. Higher value products continued to support gross margins at over 24% during the quarter.

The Company achieved EBITDA before stock based compensation of $2.5 million during the first quarter representing a 7.1% improvement over the same period of last year.

The commencement of a non-cash charge for stock based compensation caused net income to fall 9.6% for the period to $1.8 million compared with $2.0 million during the same period of 2010.

On April 26, 2011, the Company closed its Qualifying Transaction together with an $8 million private placement of units. A portion of the proceeds from this financing have been used to complete an expansion of the Company's manufacturing facility and to purchase manufacturing equipment.

As a means of securing additional business, the Company is seeking acquisition opportunities. During the first quarter the Company placed a refundable deposit on one acquisition target and is in the process of conducting due diligence on this company.

As at June 30, 2011, the Company had $9.9 million in cash and no debt.

"We are pleased to report that our Yichun facility is operating smoothly and we are continuing to grow our business in the higher margin medical and plastic packaging markets," stated Mr. Wenge Hong, President and CEO of Asia Packaging. "We are very excited about our expansion and working towards equipping this facility and adding customers over the coming months."

During the first quarter, revenues increased by 10% over the same period of the previous year. This increase was primarily due to a 14.5% increase in medical packaging sales and 10.7% increase in plastic packing materials. Selling prices also contributed to the sales increase as CPP film prices increased by 13.1% and plastic cups increased by 10.4%.

During the first quarter, gross margin remained at approximately 25% as the Company continued to maintain a higher margin product mix.


  Three Months Period Ended  
  June 30  
Canadian $ (Unaudited) Change
  Q1 2011 Q1 2010
Revenue 10,463,381 9,502,066 10.1%
Gross profit 2,566,755 2,423,174 5.9%
Gross margin (% of Sales) 24.5% 25.5% -3.8%
Operating expenses 475,927 139,928 240.1%
Income from operations 2,090,828 2,283,246 -8.4%
Other income 18,456 0 N/A
Income taxes 304,692 286,146 6.5%
Net income 1,804,592 1,997,100 -9.6%
EBITDA 2,226,520 2,372,046 -6.1%
EBITDA before stock-based compensation 2,539,590 2,372,046 7.1%
Earnings per share      
  Basic 0.014 0.019  
  Diluted 0.014 0.019  
Weighted average number of shares      
  Basic 127,823,450 106,300,000  
  Diluted 131,843,450 106,300,000  

During the three months ended June 30, 2011, the Company achieved EBITDA before stock based compensation of $2.5 million, a 7.1% increase over the same period of last year. Cash flow from operating activities of $706,000 was supplemented by the $8 million unit offering which improved the cash position to $9.9 million at the end of the first quarter.

Financing and Growth Initiatives

On April 26, 2011, the Company closed the proposed Qualifying Transaction. Concurrent with the Qualifying Transaction, the Company completed a non-brokered private placement of 20,288,800 units at $0.40 per unit. Each unit is comprised of one common share in the capital of the Company and one-half of one common share purchase warrant. Each full warrant is exercisable into one common share for a period of two years following the closing of the Qualifying Transaction, at $0.60 in the first year and $1.00 in the second year.

Over the past 18 months, the Company has invested $1.2 million to construct two new manufacturing buildings adjacent to its existing plant in Yichun City. The new buildings represent 11,800 square meters of additional manufacturing area. In addition, the Company has invested $3.9 million in new equipment for the new facilities with an additional $3.1 million to be invested as equipment is received.

As a means of utilizing the added capacity, the company has entered into discussions with potential acquisitions. The strategy of the Company is to secure additional customers and licenses thru such acquisitions. During the first quarter the Company made a $1.5 million non-interest bearing deposit to secure a right of first refusal for one acquisition. The Company is currently in the process of conducting due diligence and expects to complete this process by December 1, 2011.

About Asia Packaging Group Inc.

Asia Packaging Group, through its wholly-owned subsidiaries in the People's Republic of China ("PRC"), is in the business of manufacturing packaging products and services to the food and pharmaceutical industries in China. The Company operates a 38,000 square meter plant located in Yichun City, Jiangxi Province in PRC.

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