Lihua International awarded Scrap Copper import license

Lihua International, Inc. (Nasdaq: LIWA) (“Lihua” or the “Company”), a leading Chinese copper and alternative copper products company, today announced that it has received an Environmental Import License from the Ministry of Environmental Protection of the People’s Republic of China (PRC). As the Company had previously disclosed, Lihua received a Scrap Metal Import License from the General Administration of Quality Supervision, Inspection and Quarantine of the PRC in November 2010.  Together, these licenses enable Lihua to begin purchasing and importing scrap copper directly from overseas suppliers.

Lihua expects that importing scrap copper directly, rather than purchasing from domestic importers, should provide the Company with material cost savings on scrap copper procurement. In anticipation of the receipt of these licenses, the Company has already placed initial trial orders with a few scrap copper suppliers in the U.S. and expects to begin purchasing from these suppliers during the third quarter of 2011.  The Company expects to ramp up its scrap copper imports to material volume by the end of 2011.

“As we continue working to expand the scale of our business and focus on increasing profitability, our ability to import scrap copper marks a significant milestone for Lihua,” said Mr. Jianhua Zhu, Chairman and CEO of Lihua. “By making direct purchases from overseas suppliers, we believe that over time we can achieve considerable raw material cost savings, which we believe will drive incremental gains to our bottom line as we continue to expand our scrap copper refinery capacity.”

In conjunction with the projected profitability improvement from importing scrap copper, as well as continued strong demand in China for recycled copper and copper alternatives, Lihua has raised its 2011 gross profit guidance to be between $81.0 million and $83.0 million, and non-GAAP net income guidance to be between $53.0 million and $55.0 million, representing year-over-year growth of 30.4-33.7% and 32.2-37.2% respectively.

The Company also provided an update on its previously announced $15 million share buyback program.  Under this program, Lihua has purchased over 264,000 shares, or over $2 million of common stock, in the open market as of June 21 2011. Lihua plans to continue making purchases under this program as regulations and market conditions allow.

As of March 31, 2011, Lihua had $90.7 million, or $2.99 per diluted share, in cash and cash equivalents. While the Company’s strong balance sheet reflects substantial cash reserves, the currency regulatory agency in PRC has annual amount limitations on an entity’s ability to convert Chinese RMB to U.S. dollars for use overseas, unless this money is used for normal business operations. Due to these restrictions and to accelerate the Company’s ability to continue to purchase shares under its share buyback program, Lihua has entered into a promissory note agreement (the “Note”) for up to U.S. $4 million with Magnify Wealth Enterprise Limited, an entity affiliated with Mr. Jianhua Zhu, Chairman and CEO of Lihua. Repayment of the Note is to be made by the Company’s PRC operating subsidiary in RMB at the prevailing conversion rate at the time of repayment. Lihua’s Audit Committee and Board of Directors have reviewed and approved the Note and the payment arrangement related to partial funding of the share buyback program.

Under this agreement, Magnify Wealth has loaned $1.3 million to Lihua to-date, which the Company’s PRC operating subsidiary has already repaid in full in RMB.  In addition, to fund the initial share buyback Lihua has used approximately $1 million of the U.S. currency it had in its Hong Kong bank account.

This transaction was determined to be the most suitable and cost effective solution for securing U.S. currency to continue purchasing shares under the Company’s share buyback program. Lihua is exploring additional alternatives to complete the remainder of its $15 million Share Repurchase Program.

In addition to its share buyback program, Mr. Zhu, through his affiliated entity Magnify Wealth, has purchased 125,000 shares in the open market as of June 21, 2011, and intends to continue to purchase shares.

Mr. Zhu added, “Our management and Board are committed to the further creation of shareholder value and the Company will continue to seek additional opportunities to increase shareholder returns.”

Source: PR Newswire

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