The growth in revenues between the first and second quarters resulted in a mix of products with lower gross margins, in part because of the nature of the product and in part because of continuing labor and raw material cost pressures. Even so, our current order activity points towards a stronger second half of the year with a return to a higher margin product mix. The Company reiterates its guidance for the full fiscal year of 2011, of revenues of between $115 million and $125 million, net income of between $11.5 million and $12.5 million, and diluted earnings per share of between $0.29 and $0.32.
"We are encouraged by the pick-up in sales in the second quarter. We are continuing to build customer relationships and look forward to offering new options from our new flexo line in the second half, all of which will provide momentum as we head in to 2012."
China Shengda Packaging Group today announced that its board of directors has approved a share repurchase program for up to $5 million of its common stock over the next twelve months, subject to market and other conditions. "This reflects the board's belief that our stock is significantly undervalued given our strong industry position and growth opportunities. We will continue to pursue actions that maximize value for our shareholders."
The Company also reiterated previous guidance expecting fiscal year 2011 revenues of between $115 million and $125 million, net income of between $11.5 million and $12.5 million, and diluted earnings per share of between $0.29 and $0.32.
The Company expects fiscal 2011 revenues of between $115 million and $125 million, net income of between $11.5 million and $12.5 million, and diluted earnings per share of between $0.29 and $0.32.
The Company anticipates that the second quarter will be weaker than the first quarter, an improvement in the back half of the year, and an overall flat full year sales performance compared to 2010. The restrictive financial policies of the PCOB are expected to persist over the balance of the year and continue to impact the manufacturing enterprises in the YRD. The Company also expects electricity shortages in the YRD during the summer season that are more severe than those experienced historically. The Company expects net income to be lower than in 2010 given the inflation in raw material prices and labor costs in China. Based on the experience of management, during a period of inflation, it is very difficult for the Company to pass on all of the input cost increases. The Company also recently raised employee salaries to attract additional workers. Finally, the packaging orders the Company lost in the first quarter due to the labor shortage will be difficult to win back as customers are hesitant to change suppliers after they have made a switch.
"We expect to return to growth in 2012 as a result of an improved macro environment as well due to several important business developments and initiatives. Shengda Color has moved to their new facility and is expected to contribute more to our total sales with a higher gross margin. We are currently targeting three large clients and have passed the supplier qualification checks for one of them earlier this month and expect to receive orders soon. We are optimistic about the other two. We are increasing our advertising investments and attending more exhibitions to help drive additional sales. Finally, we are increasing our investments in research and development to continue to shift our revenue profile to higher margin products."