TORONTO, June 30, 2011 /CNW/ - Liuyang Fireworks Limited (TSX-V: FWK) ("Liuyang" or "the Company") released its financial results for the three-month period ending March 31, 2011. All amounts are in Canadian dollars unless otherwise stated.

Selected Q1 2011 Financial Highlights

In thousands except share and % data  FY 2011 Q1  FY 2010 Q1  Change (%) 
Revenue  $4,113  $2,646  55% 
Gross margins  35.4%  35.4%  0% 
EBITDA  $665  $195  242% 
Net Income  $489  $131  273% 
Earnings per share  $0.009  $0.003  200% 
Cash and Cash equivalents  $4,425  $2,031  118% 
Working capital  $7,167  $3,806  88% 

Miao Hu, President and Chief Executive Officer, Liuyang Fireworks Limited states, "We are very pleased that both our revenue and earnings have grown dramatically during the quarter. The results are largely attributed to the successful implementation of our two-pronged strategy. Domestically, we have acquired two wholesalers that have contributed significantly to our sales revenue during the Chinese New Year season. Our sales from the domestic market accounted for 56% of total sales for the first quarter of 2011. The increase in sales from the domestic market over the first quarter has diminished the seasonal trend that the Company has operated under in the past. Earnings growth has surpassed revenue, as we continue to manage our expense and bring more value to our shareholders."

Other Highlights for First Quarter 2011:

Completed a non-brokered private placement of 12,033,700 shares for gross proceeds of $2.17 million
Announced record sales of $3.6 million for the 2011 Chinese New Year selling season
Hunan Liuyang Fireworks Display Art Company (100% owned subsidiary of the Company) successfully presented fireworks displays at eight different events during the first two months of 2011
Review of First Quarter 2011 Financial Results

Revenue for the first quarter of 2011 reached $4.11 million, a 55% increase over the same period last year. This significant increase was credited mainly to rapid sales growth in the domestic market. During the 2011 Chinese New Year sales season, the Hangzhou Wanjia wholesaler (acquired in the second quarter last year) alone contributed $1.3 million new revenue to the company.

Gross profit for the first quarter was $1.46 million, an increase of 56% from $0.94 million over the same period in 2010. As a percentage of revenue, gross profit margin for the first quarter was 35.4%, consistent with the same period last year. The Company expects to improve gross margin by optimizing product mix and controlling production costs by aligning with all of its subcontractors for raw materials purchases.

EBITDA for the first quarter of 2011 was $0.67 million, an increase of 242% over the same period last year. EBITDA as a percentage of revenue for the first quarter of 2011 was 16.2%, compared with 7.4% from the same period last year. The improvement in EBITDA for the first quarter of 2011 was linked to a higher sales volume of fireworks and a slightly higher sale price. Additionally, due to the earlier timing of Chinese New Year for 2011, lower transportation costs were recorded for the first quarter.

Net income for the first quarter was $0.49 million, an increase of 273% from the same period in 2010. Net income as a percentage of revenue (net profit margin) for the first quarter of 2011 was 12%, compared with 5% for the first quarter of 2010. The significant improvement of net income for the first quarter of 2011 was primarily due to higher sales revenue and lower operating expenses. The Company has entered into the domestic Chinese market for the second year with full integration of two wholesale joint venture companies and is poised to generate higher net income into the future.

At March 31, 2011, the Company had a working capital of $7.17 million and cash and cash equivalents totaling $4.43 million. These figures compare to $3.81 million and $2.03 million respectively, as of December 31, 2010.

Outlook

President and Chief Executive Officer of Liuyang Fireworks Limited, Miao Hu reports, "We have seen great success in implementing our long-term strategy to create more value for our company and shareholders. Internationally, we continue to see strong sales growth from both existing and new customers, especially in the European market. It is due to these factors, coupled with recent financing, that we have the capability to pursue more aggressive marketing strategies and acquisition opportunities within the domestic market. We believe that the Company will continue to experience sales growth in both markets over the remainder of 2011."

Subsequent to this quarter, Liuyang adjusted the Company's fiscal year end from the current fiscal year end of December 31 to June 30, to better align with Company's financial reporting, tax planning, and business cycles of both customers and suppliers.

Liuyang's consolidated financial statements for the quarter ended March 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.

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.

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