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Liuyang Fireworks (TSXV: FWK) Reports Third Quarter Results; Remains Profitable Despite Challenging Chinese Market

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Toronto, Ontario - (Newsfile Corp. - May 30, 2014) (www.investorideas.com newswire) Liuyang Fireworks Limited (TSXV: FWK) (Liuyang) today announced financial results for its third quarter and nine months ended March 31, 2014.

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Highlights for the third quarter:

  • Sales of the Company's firework products were lower as a result of a weaker domestic Chinese sales due to a depressed general economy, and from concerns over poor air quality in major cities in China;
  • During the third quarter ended March 31, 2014 revenues declined by 36% compared with the same period in 2013 to $3.9 million;
  • International sales during the third quarter represented 62% of sales compared with 41% during the third quarter of 2013;
  • Gross margin during the quarter was 39.1% compared with 34.9% the same period in 2013
  • Net income was $74,027 compared to net income of $379,623 a year earlier.
  • As a result of lower income, EBITDA was negative $222,277 compared to $686,452 the previous year;

"Our solid market position helped us to remain profitable in the third quarter despite continued challenges in the Chinese domestic market," says Miao Hu, Liuyang President and CEO. "Lingering concerns about large volume use of fireworks contributing to increased air pollution in and around major centers in China negatively impacted our financial results for the quarter and year-to-date. Nevertheless, we remain a leading fireworks manufacturer in China and around the world. With our integrated business model and our strong management team, we fully expect to continue our expansion plans in the quarters and years ahead."

Summary Financial Statements

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Balance Sheet Highlights

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Review of Results

Liuyang's financial results for the third quarter were negatively impacted by continued concerns over fireworks' contributing to increased air pollutions in major urban centers in China. Revenue for the third quarter was $3.93 million, representing a decline of $2.2 million or 36% compared to the same period a year ago. Revenue from the sale of fireworks to the domestic Chinese market was $1.50 million, a decrease of $2.08 million, and accounted for 38% of revenue for the quarter.

Gross profit for the quarter was $1.5 million, down $0.6 million or 28.3% from the same quarter in 2013. The decrease in gross profit was primarily attributable to lower product volumes for the domestic market. Gross margin as a percentage of sales increased 4.2% to 39.1%, from 34.9% in the third quarter of 2013.

EBITDA for the quarter was a $222 thousand, representing a decrease of $464 thousand, or 67.6%, compared with the third quarter of 2013.

Net income decreased by $312 thousand to $74 thousand from $380 thousand in the third quarter a year ago. The decrease was primarily attributable to decreased sales revenue during the quarter. Net income as a percentage of sales was 1.9%, down from 6.2% in the third quarter of 2013.

At March 31, 2014, Liuyang held cash of $3.1 million and working capital of $7.6 million. These figures compare to cash of $2.8 million and working capital of $8.1 million at March 31, 2013.

Liuyang's consolidated financial statements for the three and nine months ended March 31, 2014, and related Management's Discussion and Analysis (MD&A) are filed with securities regulatory authorities within applicable timelines and available via SEDAR at www.sedar.com.

About Liuyang Fireworks Limited

Liuyang Fireworks Limited is a leading China-based manufacturer of fireworks distributed both domestically and within more than 15 countries in North America, South America and Europe. The Company has over 17 years of experience in the fireworks industry and is a supplier to the world's top five fireworks wholesalers and retailers. Liuyang's ISO9001-certified manufacturing facilities are located in the Liuyang area of Hunan Province, China, where more than half of the world's fireworks are produced.

For further information please contact:

Jacky Long
Chief Financial Officer
Liuyang Fireworks Limited
Tel : 647 350 8818
jackylong@farocean.com

Forward-Looking Statements

The forward-looking information contained in this news release represents the expectations of the Company as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While the Company may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable securities legislation.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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