Liuyang Fireworks Reports Second Quarter Growth in Revenue and Profitability

TORONTO, March 1, 2012 /CNW/ - Liuyang Fireworks Limited (TSX-V: FWK) ("Liuyang" or "the Company") today announced financial results for its second quarter and first six months ended December 31, 2011. All amounts are in Canadian dollars unless otherwise indicated.

Highlights for the second quarter:

• Growth in international and domestic sales led to a 17.6% increase in revenue during the six month period ended December 31, 2011 compared with the same period of 2010;Domestic sales and international sales accounted for 37% and 63% of revenue respectively;
• The Company achieved gross profit of $3.8 million during the six month period to December 31, 2011 which represents the highest level in the Company's history.
• The Company established two joint ventures in Hunan Province: a manufacturing joint venture in Liuyang City and a wholesale joint venture in Youxian City. Both joint ventures are expected to contribute to the Company's operations during the second half of fiscal 2012 in the form of increased manufacturing capacity and expanded distribution;
• The Company has had a successful marketing program thus far in fiscal 2012 with the completion of three fireworks displays as well as organizing the 10th annual China (Liuyang) International Fireworks Festival;
• The Company won the gold award at the China Liuyang International Pyro-musical Competition;
• As at December 31, 2011 the Company had cash of $7.03 million and total bank debt of $6.7 million.

"Our strong second quarter results were driven by growth in both international and domestic sales channels resulting from the focused execution of our business plan," said Mr. Hu, Liuyang's president and CEO.  "During the quarter, we achieved higher sales volume in the U.S. fireworks market in conjunction with our continued efforts to further penetrate the domestic market in China as well as benefiting from higher overall selling prices. Importantly, our efforts translated to a more than tripling of our bottom line for the quarter."

SUMMARY FINANCIAL STATEMENTS

In thousands except per share and % data		3 months ended Dec. 31		6 months ended Dec. 31
		2011	2010	2011	2010
Revenue		$5,974	$4,986	$9,901	$8,419
Gross profit		$2,284	$1,841	$3,785	$3,306
Gross margins		38.2%	36.9%	38.2%	39.3%
EBITDA		$511	$222	$757	$806
EBITDA before stock-based compensation		$601	$269	$1,057	$900
Net income		$280	$91	$372	$578
Net income per share	Basic	$0.005	$0.002	$0.007	$0.014
	Diluted	$0.004	$0.001	$0.005	$0.012
Balance Sheet Highlights
Cash		$7,026	$2,031
Current ratio		1.66:1	1.46:1
Working capital		$7,751	$3,806
Total assets		$21,520	$13,533
Debt to equity ratio		1.21:1	1.39:1

Review of Second Quarter Results

Revenue for the quarter was $5.97 million, representing an increase of 19.8% or $0.99 million compared to the same three month period a year earlier. The increase was primarily attributable to higher U.S. market fireworks sales volume combined with higher selling prices during the quarter.

Gross profit for the quarter was $2.28 million, representing an increase of 24.1% or $0.44 million over the comparable period. The increase was driven by higher sales volume and higher selling prices during the quarter. Gross margin for the quarter increased to 38.2% of revenue compared to 36.9% of revenue for the comparable period.

EBITDA for the quarter was $0.51 million, representing an increase of 130.2% or $0.29 million over the comparable period. EBITDA before stock-based compensation expense was $0.60 million, representing an increase of 123.4% or $0.33 million compared to the same three month period a year earlier. Net income improved to $0.28 million, or $0.005 per share ($0.004 diluted), compared to $0.09 million, or $0.002 per share ($0.001 diluted) for the same three month period a year earlier.

At December 31, 2011, the Company had cash of $7.03 million and working capital of $7.75 million. These figures compare to cash of $2.03 million and working capital of $3.81 million at December 31, 2010. The Company has sufficient cash and working capital to continue its growth and expansion plans for the balance of fiscal 2012.

Liuyang's consolidated financial statements for the three and six months ended December 31, 2011 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities within applicable timelines and will be available via SEDAR at www.sedar.com.

Outlook

"As we continue to carry out our business strategy, we expect our sales to continue to grow both internationally and domestically in China," said Mr. Hu. "Importantly, our two recent joint ventures will contribute to our results in the second half of the fiscal year. The manufacturing joint venture we established during the quarter will increase our production capacity, while the wholesale joint venture we established in the first quarter will yield additional distribution."

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 more than 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, China, where more than half of the world's fireworks are produced.

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.

Jacky Long
Chief Financial Officer
Liuyang Fireworks Limited
Tel : [phone]
[email protected]