Anna Bin - IR Jie Han - Chairman and CEO Qingwei Market - COO Taylor Zhang - CFO Junjie Ma - Chief Technology Officer Dr. Kenan Gong - General Manager of the Dubai Subsidiary Rujun Dai - General Manager of the Heilongjiang Subsidiary

Jason Cooper - ‎Stuyvesant Capital Matthew Larson - Wells Fargo

Thank you all for joining for our China XD Plastics Fourth Quarter 2017 Financial Results Conference Call. Joining me on the call today are Mr.

Jie Han, Chairman and the Chief Executive Officer; Mr. Qingwei Ma, Chief Operating Officer; Mr.

Taylor Zhang, Chief Financial Officer; Mr. Junjie Ma, Chief Technology Officer; Dr.

Kenan Gong, General Manager of the Dubai Subsidiary; and Mr. Rujun Dai, General Manager of the Heilongjiang Subsidiary.

Earlier today, China XD Plastics issued a press release announcing the fourth quarter 2017 results. Before management's presentation, I would like to refer to the Safe Harbor statements in connection with today's conference call, and to remind our listeners that the management's prepared remarks during the call may contain forward-looking statements, which are subject to risks and uncertainties, and that management may make additional forward-looking statements in response to your questions.

All statements other than statements of historical fact contained are forward-looking statements, including, but not limited to: the company's growth potential in international markets; the effectiveness and profitability of the company's product diversification; the impact of the company's product mix shift to more advanced products and related pricing policies; the volatility of the company's operating results and the financial condition; the company's projections of performance in 2017, and other risks detailed in the company's filings with the Securities and Exchange Commission are available on its Web site. These forward-looking statements involve known and unknown risks and uncertainties, and are based on current expectations, assumptions, estimates and the projections about the company and the industry.

The company therefore claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and we will refer you to a more detailed discussion for the risks and uncertainties in the company's filings with the Securities and Exchange Commission.

In addition, any projection as to the company's future performance represents management's estimate as of today, March 15, 2018. China XD Plastics assumes no obligation to update these projections in the future as market conditions change.

To supplement the financial results presented in accordance with the U.S. GAAP, management will make reference to earnings before interest, expenses, income taxes, depreciation and amortization, which we refer to as EBITDA.

EBITDA is a non-GAAP financial measure reconciled from net income, which the company believes to provide meaningful additional information to better understand its operating performance. A table reconciling net income to EBITDA can be found on the earnings press release issued earlier today.

I would now like to turn the call over to our Chairman and Chief Executive Officer, Mr. Han.

Mr. Han will be speaking in Chinese and I will translate his opening remarks into English.

Mr. Han, please go ahead.

[Foreign Language]

[Foreign Language] [Translated] Thank you all for joining us today. Our total revenues increased expectation for the fourth quarter and full-year, although net income decreased significantly due to the newly inactive attrition [Ph] tax as compared to the same period last year.

Assumable macroeconomic environment through our China's automotive supply chain led to positive growth in our sales value. Although this was offset by the company's marketing strategy of offering lower end products with lower R&D pricing in order to further penetrate the new regional markets in Central China and the South China, which negatively affected our gross margin.

However, we are confident that in our operating capabilities, and believe that our new geographical positioning and the new developmental project will create a more robust and the diversified enterprise. [Foreign Language] [Translated] We continue to gain traction into new territories attributable to all the new state-of-the-art Sichuan manufacturing facility located in Southwest China was fully operational.

Their strategic initiative will add 800,000 metric tons of annual production capacity to our 390,000 metric tons of annual production capacity from our more established Northeast Harbin plant. Our Sichuan facility currently has 15 production lines with 216,000 metric tons of annual production capacity.

And that we expect that the ongoing construction in our Sichuan campus will be completed by the end of second quarter of 2018. The installation of high-precision equipment in our Sichuan facilities will enable us to broaden our product platform to serve an area of high-growth verticals which will ultimately result in additional income streams.

[Foreign Language] [Translated] We are very enthusiastic about all of our new industrial projects. Our development project with the management committee of Harbin Economic Technological Development Zone includes an industrial project for upgrading existing equipment for 100,000 metric tons of engineering plastics, which we expect will be completed by the end of June 2018.

Also included is an industrial project for 300,000 metric tons of biological composite materials, an industrial project for 3D printing intelligent manufacture demonstration factory and a 3D printing display and experience cloud factory, all of which we expect to be completed by the end of July 2019. We anticipate our development project with the People's Government of Shunqing District, Nanchong City of Sichuan Province for the production of 300,000 metric tons of bio-composite materials and additive manufacturing and 20,000 metric tons of functional master batch will be completed by the end of December 2018.

[Foreign Language] [Translated] Our Dubai facility extends our specialized hi-tech products into an important overseas market. We plan to complete the installation of 45 production lines with 12,000 metric tons of annual production capacity by the end of April 2018, and to complete the installation of an additional 50 production lines with 13,000 metric tons of annual production capacity by the end of 2018.

This will bring the total annual production capacity of our Dubai 25,000 metric tons. The Dubai facility will target high end product for overseas market and will ultimately help us to both source raw materials and make inroads into the markets of Europe, the Middle East, Russia and other overseas markets.

[Foreign Language] [Translated] We believe that our increased production capacity, geographically expansion and a more diversified customer base both strengthen and augment our current automotive business. Further our new development projects, which leverage our technical expertise, could lead to additional new business.

We view ourselves as a leader in the polymer composite sector, which will enable us to provide creative technology solution for China's modernizing, transportation, energy, healthcare and industrial sector. In terms of 2018 guidance, we expect revenues to be in the range of 1.2 billion and 1.4 billion.

And net income to be in a range of 90 million and 110 million excluding the effect of repatriation tax. [Foreign Language] [Translated] With that, I will now turn the call over to Taylor Zhang, our Chief Financial Officer to walk you through our financials.

Taylor, please go ahead.

Thank you, Mr. Han, and thank you everyone for joining the call today.

Before we review the numbers, let me remind you that all figures I discuss are for the reporting period fourth quarter of 2017, unless as stated otherwise. Additionally, any year-over-year comparison to the first quarter of 2016 and any sequential comparisons is to the third quarter of 2017.

So, let's go over our fourth quarter results. Revenues were $427.6 million for the fourth quarter of 2017 compared to $377.8 million for the same period of 2016, representing an increase of $49.8 million or 13.2%.

The year-over-year increase was primarily due to a 24.1% increase in sales volume and a 9.2% decrease in average RMB selling price of our products. The increase in revenue achieved in the first quarter was driven by growth in demand for our products in the domestic China market, our aggressive efforts to expand our customer base attributable to our new plants in Sichuan and our efforts to expand overseas sales.

We recorded sales increase of 46.6% in North China, 23.5% in East China, 23.3% in Central China, and 4.7% in South China. Overseas sales were $35.4 million for the fourth quarter of 2017 accounting for 8.3% of total sales, reflecting the company's resumed sales to overseas market in fiscal 2017.

Premium Premium products, namely, PA66, PO6, POM, PPO, Plastic Alloy and PLA, in total accounting for 73.3% of revenues in the first quarter of 2017 compared to 82.8% in the prior year period. Since the third quarter of 2017, the company implemented a market strategy of offering lower-end products with lower RMB pricing to further penetrate the new regional markets in East China, Central China and Southwest China.

Depending on this marketing strategy, the company intends to shift its product mix from traditionally lower-end products to higher-end products such as PLA, primarily due to: greater growth potential of advanced modified plastics in luxury automobile models in China; stronger demand as a result of promotion by the Chinese government for clean energy vehicles and better quality from consumer recognition of higher-end cars made by automotive manufacturers from Chinese and Germany joint venture, U.S. and Germany's joint ventures, which manufacturers tend to use more and higher-end modified plastics in quantity per vehicles in China.

Gross profits was $91.5 million for the first quarter of 2017 compared to $82.3 million for the same period of 2016 representing an increase of $9.2 million or 11.2%. Gross margin was 21.4% compared to 21.8% in the first quarter of 2016 primarily due to lower sales of higher-end products by Dubai Xinda and implementing a marketing strategy of offering lower-end products with lower RMB pricing to further penetrate the new regional markets in Central China and Southwest China since the third quarter of 2017 as compared to that of the prior year.

G&A expenses were $12.2 million for the first quarter of 2017 compared to $9.9 million for the same period of 2016, representing an increase of $2.3 million or 23%. This increase was primarily due to the increases of $1.8 million in compensation for determining contracts with our equipment supplier.

On a percentage basis, G&A expenses in the first quarter of 2017 were 2.9% compared to 2.6% for the same period of 2016. R&D expenses were $11.6 million for the first quarter of 2017 compared to $29.3 million for the same period of 2016, representing a decrease of $17.7 million or 60.5% due to a decrease of raw materials in two specific research and development products in Sichuan and Xinda.

As of December 31, 2017, the number of ongoing research and development products was 376. Operating income was $66.6 million for the first quarter of 2017 compared to $42.6 million for the same period of 2016 representing an increase of $24 million or 56.3%.

This increase was primarily due to the higher gross profits and low R&D expenses, partially offset by higher G&A expenses. Net interest expense was $11.2 million for the first quarter of 2017 compared to net interest expense of $7.6 million for the same period of last year primarily due to first the increase of interest expense due to the increase of average short-term and long-term loan balance, an amount of $840.7 million for the three months period ended December 31, 2017 compared to $727.4 million for the same period in 2016.

Secondly, the increase of the weighted loan interest rate of 4.8% for the three months period ended December 31, 2017 as compared to 4.5% for the same period last year, which was partially offset by the increase of interest income resulting from a decrease of average interest rates to 1% for the first quarter of 2017 compared to 1.9% of the same period of last year. And the increase of average departed balance in the amount of $529.8 million for the first quarter of 2017 compared to $282.6 million for the same period last year.

Income tax expense was $79.8 million for the first quarter of 2017 representing an effective income tax rate of 134.5% compared to an effective income tax rate of 6% for the same period of 2016. The significant increase of the effective tax rates was primarily due to the management's estimates of the amount of $71 million deemed repatriation tax based on overseas accumulated earnings amended by the U.S.

tax reform on December 22, 2017. Net loss was $20.5 million for the first quarter of 2017 compared to a net income of $36.7 million for the same period of 2016 representing a decrease of $57.2 million.

Losses per share was $0.31 for the first quarter ended December 31, 2017, compared to $0.56 per share of earnings in the first quarter of 2016. The average number of shares used in the computation of basic and diluted earnings per share for the three months ended December 31, 2017 was $49.7 million compared to $49.5 million shares for the basic and diluted earnings per share in the prior year period.

Earnings before interest tax depreciation and amortization was $82.9 million for the first quarter of 2017 compared to EBITDA of $58.2 million for the same period last year, representing an increase of $24.7 million or 42.4%. For a detailed reconciliation of EBITDA and non-GAAP measures to its nearest GAAP equivalent, please see financial tables at the end of our press release issued today.

Now let's turn to the balance sheet. As of December 31, 2017, the company had $190.4 million in cash and cash equivalents, $288 million in term deposits with commercial banks, $60.5 million in working capital in the current ratio of 1.

Stockholders' equity as of December 31 in 2017 was $712.8 million, an increase of 12.4% as compared to $634.3 million as of December 31, 2016. Accounts receivable decreased by 27.1% or $111.2 million due to the management efforts to collect outstanding balances due from the domestic customers.

Inventory increased by 50.1% to $421.7 million as of fiscal year end 2017 as compared to fiscal year end 2016 as a result of more purchases of raw materials and the company strategy to stock up finished goods for the upcoming audits. Prepayments to equipments and construction suppliers increased by 1242.3% [Ph] mainly because of advance to purchases for the storage facility in our equipments of Heilongjiang Xinda Group.

The aggregate short-term and long-term bank loans increased by 28.1% mainly because the Xinda Group obtained a seven-year unsecured loan of RMB $526.3 million equivalent to $80.6 million due to the utilization of existing amount of credit to support expansion of Sichuan and Dubai facilities. We believe our current debt level is manageable.

We define manageable debt level as the sum of aggregate short-term and long-term loans and those payable over total assets. Moving to our financial guidance and outlook for 2018, in light of anticipated contribution from production capacity to be added our entry to new markets, diversified customer base and escalation of sales overseas, the company project revenues for fiscal 2018 to range between $1.2 billion and $1.4 billion.

Gross margin in fiscal 2018 is expected to remain stable as compared to that of fiscal 2017. The company projects net income to range between $90 million to $110 million excluding the effect of repatriation tax, this is based on the anticipation of steady recovery throughout the Chinese automotive supply chain, and stabilization of crude oil pricing and it's impact on polymer composite materials in 2018.

This forecast also assumes contribution from the Sichuan plants in Dubai, second phase project. Both of which we will start production by the end of second quarter 2018, and by end of 2018 respectively.

It also assumes the average exchange rates of the U.S. dollar to RMB at 6.3.

This financial guidance reflects the company's preliminary view to -- of its business outlook for fiscal 2018, and is subject to revision based on changing market conditions and time. Before we open the call to your question, I would like note that for any question direction directed to management in China I'll translate both their questions and their answers.

If you want to ask your question is Chinese, please also ask it in English for the benefit of our other listeners. Please also note that we'll only be able to respond to questions about our financial and operating results.

For other matters including the going private offer we refer you to our already-issued press releases. You will now be able to respond to questions that are directed to the principals of the full and private offer about the proposed transaction.

With that, we will now open the call to your questions. Operator?

Hey, good evening and good morning to management and Taylor. I hope that the first question you can answer relates to the CapEx.

It looks like last year you guys spent approximately $464 million on your expansion plan and purchases of new property. What does that look like for 2018 and 2019?

Okay. For 2017 there's some other numbers, for example term deposit.

But for your information the total CapEx for 2017 was approximately $155 million. For 2018…

Yes, 2018.

Yes, for 2018 actually previously disclosed, we have products both in Harbin and also in Sichuan for the biomaterials additive manufacturing, which is the 3D printing materials. So those CapEx will start kick in.

So we obviously still are estimate, but we estimate for 2018 going to be in the neighborhood of $400 million.

And how is that going to be funded?

We'll be funded by our cash we have in hand and internally generated cash flow as far as bank loans.

Okay. On the statement of cash flows for the year it looks like your operating cash flow was approximately $80 million for the full-year.

How much was spent on working capital for you new plants?

You mean how much we spent on working capital in the Sichuan plants?

Yes.

Okay. For our Sichuan plants the working capital spent is, as approximate, is about $14 million.

So I think the source of operating cash flow in 2017 was mostly from cash collected from our customers. So the major use is actually the inventory, and the increase was explained earlier during the call.

Okay. Reuters reported on October 23rd, that you guys raised about $105 million for the buyout from Standard & Chartered, so I'm hoping you can give some guidance on how that's impacting your operations from an interest perspective.

And you really need to address the fact there is a buyout on the table that's been in place for, at this time, about 13 months, because it doesn't really matter about the operations if you guys are intent on buying the minority shareholder's position. So we do need to ask you guys about that.

Okay, so Jason, let me…

Where are we because…

Go ahead.

Go on.

So first of all, let me translate the question because I think this is probably new information to some of our team. So I want to make sure everybody is on the same page regarding this question.

Okay.

[Foreign Language] [Translated] So Jason, we believe the financing is ongoing. And so however I think reported from Reuters, I'm not sure if they are authorized to announce it.

But once it's finalized the rates and other terms will be disclosed accordingly. And also for the status of the going private offer I think the company will make appropriate announcements once it's reached the stage of doing so.

Okay. We need a timeline on that because it's been 13 months already.

And this shouldn't be as complicated as it has been. Does the independent special committee now only consist of the two individuals that were previously on it, or has the new director, Joseph Chow, joined on?

Hello?

Hi, Jason. So currently just the two members, Joseph had not joined the special committee yet.

Okay. With respect to the special committee then, I know that you guys -- or maybe they hired Duff & Phelps to provide an audit and assess the valuation of the company.

Has that report been finalized? Has the special committee and the Board of Directors had access to it to appraise the value for the corporation?

The company has not received any form of the report yet. But once the report is finalized I think the special committee will report the results to the Board of Directors.

Is that report also going to be released to the minority shareholders, because if it's financed by the company the minority shareholders have a right to see the assumption that Duff & Phelps made and also to be put on an equal playing field with the Board of Directors which has an inherent conflict of interest in having access to the report given the fact that three of the members are part of the going private committee? So there's an informational advantage if you guys have access to the report and the minority shareholders don't, first in assessing its validity, and secondly in assessing if there is a conflict of interest in the take project movement.

Yes, so Jason, I totally understand where you're coming from. We believe our -- we'll follow the advice from our legal counsel and advisor once the report is ready.

And how -- and we're going to disclose the information of the reports.

Okay. I noticed that the market cap now is less than the trailing EBITDA, so I guess all I have to really say is that the shares appear tremendously undervalued.

And as I highlighted, there are immense conflicts of interests between the Board of Directors, management, and the going private committee. I believe that minority shareholders should have access to the Duff & Phelps report in order to assess what a fair value should be.

And if Duff & Phelps, which was hired by the Board, management, and the going private committee essentially used accurate assumptions in valuing the company, typically a management wouldn't spend $400 million in a year if the equity of the company wasn't generating appropriate returns. So the fact that you guys are taking on this massive expansion project, meaning that you guys are going to make whatever hurdle rate you guys set out, which seems to validate the fact that the stock should at least be trading or priced at book value at the very least on a going private offer.

So I guess we're going to just continue to wait this thing out, but I would advise all the institutional shareholders and minority shareholders to hold fast because we do have rights, and there is a pretty significant institutional holding. And we shouldn't settle for a low buyout offer.

And I'm really disappointed with some of the conflicts of interest in how this entire process has been handled. You guys could very easily rectify this, and have the stock share price reflect the inherent bit value of the company if you were to eliminate these conflicts of interests.

That's all I really have to say.

So, Jason, I think your points are well taken. And like I said, we'll -- we trust the judgment to be made by our legal counsel and other advisors when it comes to public disclosure and once we reach the point we'll follow their advice accordingly.

Okay, thank you.

All right, thank you, Jason.

Hey, Taylor.

Hi, Peter.

[Foreign Language] First, I just want to make a comment which is I hope you will translate at some point the comments of the last questioner to the management team. I think he made some very relevant points.

And then the only comment I will make on that is that in the 50 years or 60 years I've been investing I've never seen a buyout take this long. So I think he's raised a bunch of points, and I hope it's communicated to management.

I have a number of question -- sorry.

Yes, we will translate the comments from Jason Cooper and your request as well.

Okay. I noticed that -- first on the sales, I noticed that the sales were very strong in North China.

And I had expected that sales -- I mean that's Heilongjiang. So I had expected stronger sales in South and Southwest China.

Why was the balance when you've opened a new plant in Sichuan, why was the balance shifting to North China?

North China is different from Heilongjiang. Heilongjiang is in the Northeast China.

So North China is…

Right, I know that.

Yes, it's just basically in carving up Beijing and Tianjin area. So…

And for these Beijing and Tianjin is that -- I mean, where do you shift from, from Heilongjiang or from Sichuan to those areas?

Mostly from Heilongjiang.

Okay. So what that sounds like is that the factories in Heilongjiang is working in full capacity, and the factories in Sichuan still are ramping up.

Is that reasonable?

Yes, this is the case. Yes.

So as I look at your guidance for this year, you're not -- you have all these new factories coming online but you're not projecting much of a sales increase. Can you explain why?

Because we're still anticipate some ramping up ongoing for Sichuan facility. And also it's still early in the year.

We want to leave some room for the whole year.

Okay. But is there any reason why the Sichuan facility would not ramp up faster?

Is there anything -- are there any problems with either the customer base or the production in Sichuan?

Okay, Peter, let me translate your question to my team. [Foreign Language] So Peter, for Sichuan, the factory building and the construction was pretty much followed our latest plan.

There is still two factory not ready to produce yet. And we expect those two factory will start producing by the end of second quarter this year.

Right. So is that included -- is the production after the second quarter of those factories, that's included in the guidance or not?

Let me translate the question. [Foreign Language] Yes, Peter.

Okay. And the new factory in Sichuan when is that going to be and I just want to make sure the new factory in Heilongjiang is going to be finished in 2019.

And the new factory with the 3D printing and everything is that in Sichuan when is that finished again?

Let me translate your question. [Foreign Language] We can expect to see some contribution from the newest Sichuan projects by the end of this year.

And, the majority of the contribution will come in the 2019.

Okay. Now, Dubai there is no -- at the moment you had to redo the Dubai factory.

So at the moment, there is no production coming out of Dubai, is that correct?

Yes, there is no production from Dubai locally. And currently, we are using a interim approach which is using the production capability from Heilongjiang to produce…

Right. No, I understand that.

But overall your -- how much money we spent in Dubai?

So for overall, Dubai we have spent -- in total it's approximately 140.

Okay, so 140 million [indiscernible], right?

Yes.

So, I mean it's -- when we are going to start to see that production ramp up? When are we going to start seeing a return on that investment?

We are going to see the Dubai facility to be completed by the end of this year. So, we can say probably see it start producing in 2019.

So, all these things from the two new factories in Heilongjiang and Sichuan, Dubai, that -- and the ramp up of the other Sichuan factory, this is 2019 should be a year 50% plus growth, right?

I think in 2019, we will see the gradual increased contribution from all the new products.

Okay. Okay, thank you.

Thank you.

Hi. Thanks, Taylor to take my call and heartiest congratulations on a good year.

I mean as a long-term shareholder, it's nice to see the book values growing 12% since the going private offer was announced. So, one of the advantages of a process taking longer than any that I have ever experienced is that your company just gets more valuable.

And as such, the final offer if it's going to be fair, which it must be, because one of the primary aspects of taking a company private by management is if management is buying a company, you know, it's inside of buying, they must think it's a good value. And if they think it's a good value, then other shareholders should share in that notion and particularly when the partner is Morgan Stanley Private Equity.

And they normally would be buying private companies where the valuation would be whoever can work out the best deal. But when they are buying a public company, according to U.S.

laws, they have a fiduciary responsibility to treat all shareholders fairly. So, I am just piggy backing on what the last two callers touched on is that there is three things we have to consider here.

One is conflict of interest which already has been discussed. The second part is fiduciary responsibility which is a big thing now in the United States.

If you do not exercise that, there are consequences. So, I just say that to Morgan Stanley Private Equity people particularly the two directors.

And number three, reputational risk is one of the consequences. And Mr.

Han may not be as concerned about that in the PRC, but Morgan Stanley as a large company would definitely be concerned about that. And Mr.

James Gorman I am sure would be concerned if what some of my shareholders and I am speaking about wealthy retired people in that institutions who are angry at the process so far. Have even suggest that taking out an ad in the Asia Wall Street Journal and bringing this to the attention of senior management of Morgan Stanley and to the public in general that they feel an offer at about a third of book value is not the sort of fair type of transaction that would ever occur here in the United States because there would be class action lawyers circling.

So, I'll just leave it at that because it's been 13 months and has been tremendous opportunity cost. Most of my other holdings in Chinese companies have doubled probably since then.

Not all of them, but the market was extremely strong last year. And when this offer was announced last year, my investors felt thrilled and vindicated that they had made the right decision to invest alongside Morgan Staley.

And instead, they find that Morgan Stanley is either working against them or not representing their fiduciary interest. And so, I just want to put at out there because all the operational forecast and the CapEx spending discussion is a mute point.

It's immaterial to shareholders who aren't going to participate on that. So, the only thing we are interested in is potentially participating on that.

In other words, myself and my investors if they were offered the opportunity to invest alongside Morgan Stanley on the same terms, they would be happy to do so. And are not expected to be ticked off at a low level simply they are minority shareholders, all right?

So, I just want to leave that with you. I know we have had these discussions, but if that could be translated literally word for word to the management in China that would be helpful.

But the Morgan Stanley people don't need that translated, all right? And it's just -- I'll leave it at that.

It's one thing to get a low ball offer; it's another thing to just be strong out for 13 months. And it at some point it's unethical.

So, I'll leave at that. Thank you very much for your time.

Thank you, Matthew. And we appreciate your long-term loyalty.

And I -- while you were commenting we took notes and we will translate it word for word to the management team for their benefit. So, we understand that has been a long process.

And I think we have been waiting for very long already. And hopefully, we'll be able to hear from the special committees soon.

All right, thank you.

All right. Thank you, Matthew.

Could you just comment on how you are going to increase your sales? What competitive advantages do you have that will allow you to do that?

Thank you.

Okay, so, Frank, you are referring to how we increase sales in general or like in any -- like in new regions we are pursuing?

New production online, so presumably you are going to increase sales to allow that excess or the new capacity to be sold.

Yes.

And I am just wondering how you are going to do that?

Okay. So there is a combination of different strategy.

So first is with our existing customer, we are working with them to basically better service them with first of all more product varieties and second of all upgrading to more high end products. So, it's both a volume and quality increase for existing customer.

And for new regions, we are pursuing very aggressively. We are penetrating in different regions.

For example, we have made a lot of very good progress in North China, in East China, in Central China. Also, Southwest China is still a ongoing effort.

So, it's truly a strategy both pursuing our existing customer to make more and better quality sales team and also acquiring new customers and increase our customer base overall. So, it's basically across the board both within automotive and also in all of those sectors.

Okay. Then, I just want to congratulate management and board on another great quarter.

And like the previous caller said you guys seem to be running a really good operation and you just need to focus on this deal and make it fair for everybody. Thank you.

All right. Thank you, Frank.

On behalf of China XD Plastics, we want to thank you for your interest and the participation in this call. If you would like to speak with us further, please call either myself or Taylor in China XD's New York office.

The contact numbers for all of us are listed at the end of the press release. Thank you.