CHANGSHU, China, Nov. 13, 2013 /PRNewswire-FirstCall/
-- Sutor Technology Group Limited (the "Company" or "Sutor")
(Nasdaq: SUTR), a leading China-based manufacturer and distributor of
high-end fine finished steel products used by a variety of
downstream applications, today announced its unaudited financial
results for the first quarter of fiscal year 2014 ended
September 30, 2013.
First Quarter of Fiscal 2014 Financial Results
Highlights:
|
1QFY2014
|
1QFY2013
|
Change
|
Revenues
(million):
|
$139.1
|
$117.2
|
18.7%
|
Gross profit
(million)
|
$12.2
|
$8.5
|
43.5%
|
Net income
(million)
|
$5.2
|
$1.8
|
188.9%
|
EPS
|
$0.13
|
$0.05
|
160.0%
|
First Quarter of Fiscal 2014 Major Events Highlights:
- Successfully renewed the provincial High-tech Enterprise status
for Changshu Huaye Steel Strip Company Ltd., a subsidiary of
Sutor;
- Achieved the first milestone of 80,000 registered users for
Jinying365.com - an electronic B2B commerce platform
exclusively for the heavy industries;
- Completed technological upgrading of the steel pipe production
lines at Ningbo Zhehua Steel Pipe Manufacturing Co. Ltd., a
subsidiary of Sutor; and
- Made steady progress on the construction of a new cold-rolling
steel production line of 500,000-metric tons annual capacity. We
plan to start equipment test next month and commence trial
production in January, 2014.
Ms. Lifang Chen, Chairwoman and
CEO of Sutor, commented, "This is the fourth quarter in a row in
which we achieved a quarterly EPS of $0.10 or higher. We also generated more cash
flows from operations. We are very pleased that our performance has
stabilized during the last several quarters after a challenging
fiscal 2012. In the coming months, our priority will be on
completing the new production facility on budget and on schedule.
We hope the new facility will enable us to better optimize our
integrated production lines and further strengthen our
competitiveness. In addition, we will continue to explore the
potential of combining our manufacturing businesses with electronic
commerce. We hope the latter will provide us with additional growth
catalysts for the years to come."
Ms. Chen further commented "We believe the recent initiatives by
the Chinese central government to control excess capacity in
several industries including the iron and steel industry will
benefit the leading producers of the industries. Although we are in
the fine finished steel business, we believe a restructured
upstream segment of the iron and steel industry with balanced
supply and demand will benefit all the parties involved -
producers and consumers alike. We hope we can take advantage
of the opportunities created during the economic transformation
process in China and successfully
carry out our growth initiatives."
First Quarter of Fiscal Year 2014 Results
Revenue. For the three months ended September 30, 2013, revenue was $139.1 million, compared to $117.2 million for the same period last year, an
increase of $21.9 million, or 18.7%.
The increase was mainly attributable to increased sales of our HDG
products of approximately $23.6
million and higher revenue of approximately$12.5 million by
our pipeline segment which included a non-production related
revenue of approximately $8 million
for selling redundant materials. The increased revenue was
partially offset by lower ASP of approximately 5.4% for all
products as well as lower sales of AP products and cold-rolled
products as some of those were used internally as the intermediate
products for the next-stage processing in our vertically integrated
production lines.
We attribute increased demand for our HDG products to the
growing downstream demand for a variety of products including,
among others, household appliances, industrial containers,
automobiles, IT, medical instruments, solar water heaters, although
demand for certain construction related and low-tech steel products
remained sluggish. In addition, we focused our efforts on
developing high-end products and targeted new end customers in
China and overseas. We added more
than 600 new customers in the first quarter of fiscal 2014. Some of
the customers are in the environmental protection business.
Gross profit and gross margin. Gross profit
increased by $3.7 million to
$12.2 million in the three months
ended September 30, 2013, from
$8.5 million in the same period in
2012. Gross margin was 8.8% for the three months ended
September 30, 2013, as compared to
7.3% for the same period last year. The main reasons for
the improved gross margin included changes in the product mix
and increased international sales. We sold more higher-margin HDG
products and less lower-margin AP steel and cold-rolled steel
products in the first quarter of fiscal 2014 than in the same
period last year. Further, international sales historically had the
highest gross margin among all our product sales. For the quarter
ended on September 30, 2013, we
exported approximately 13% of our products as compared with 9% for
the same period last year.
Total operating expenses. Our total operating
expenses increased by $0.5 million to
$4.9 million in the three months
ended September 30, 2013, from
$4.4 million in the same period in
2012. As a percentage of revenue, our total operating expenses
decreased to 3.5% in the three months ended September 30, 2013, from 3.8% in the same period
in 2012.
Interest expense. Our interest expense decreased
by $1.7 million to $1.8 million in the three months ended
September 30, 2013, from $3.5 million in the same period in 2012. As a
percentage of revenue, our interest expense was 1.3% of total
revenue in the three months ended September
30, 2013, compared to 3.0% in the same period in 2012.
The decrease was primarily due to reduced interest expenses on
discounted bank notes, reflecting generally stable macro-economic
environment in China as well as
improved financing capability of the Company.
Provision for income
taxes. Our income tax expense increased to
$1.5 million in the three months
ended September 30, 2013, from
$0.4 million of income tax benefit in
the same period last year, mainly due to higher effective income
tax rate for the first quarter of fiscal 2014 than the same period
last year. In the first quarter of fiscal 2013, we received
income tax credits for purchasing certain domestic equipment
whereas we did not receive such credits in the first quarter of
fiscal 2014.
Net income.Net income increased by $3.4 million, or 188.9%, to $5.2 million in the three months ended
September 30, 2013, from $1.8 million in the same period in 2012, as a
cumulative result of the above factors.
Earnings per Shares. The EPS and weighted average shares
outstanding were $0.13 and
41,314,527, respectively, for the first quarter of fiscal 2014, as
compared with $0.05 and 40,235,700,
respectively, for the same period last year.
Financial Condition and Liquidity
As of September 30, 2013, we had
approximately $6.2 million in cash
and $107.3 million in restricted
cash. Our short-term loans were approximately $136.3 million. We did not have any long-term
loans. As of September 30,
2013, the Company had an unused line of credit with banks of
approximately $16.2 million. Under
normal operating conditions, we believe we have sufficient
liquidity to carry out our operations for the foreseeable
future.
Conference Call Information
Sutor's management will host an earnings conference call today,
November 13, 2013, at 9:00 a.m. U.S. Eastern time/10:00 pm Beijing/Hong
Kong time. Listeners may access the call by dialing
US: +1 877 847 0047, CN: 800 876 5011, HK: +852 3006 8101, access
code: SUTR. A recording of the call will be available shortly after
the call through December 13, 2013.
Listeners may access it by dialing US: +1 866 572 7808, CN: 800 876
5013, HK: +852 3012 8000, access code: 830357.
Functional Currency
The functional currency of the Company is the Chinese Yuan
Renminbi ("RMB"); however, the accompanying financial information
has been expressed in United
States Dollars ("USD"). The accompanying consolidated
balance sheets have been translated into USD at the exchange rates
prevailing at each balance sheet date. The accompanying
consolidated statements of operations and cash flows have been
translated using the weighted-average exchange rates prevailing
during the periods of each statement. Transactions in the
Company's equity securities have been recorded at the exchange rate
existing at the time of the transaction.
About Sutor Technology Group Limited
Sutor is one of the leading China-based manufacturers and distributors of
high-end fine finished steel products used by a variety of
downstream applications. The Company utilizes a variety of in-house
developed processes and technologies to convert steel manufactured
by third parties into fine finished steel products, including
hot-dip galvanized steel, pre-painted galvanized steel,
acid-pickled steel, cold-rolled steel and welded steel pipe
products. To learn more about the Company, please visit
http://www.sutorcn.com/en/index.php.
Forward-Looking Statements
This press release includes certain statements that are not
descriptions of historical facts, but are forward-looking
statements. Such statements include, among others, those concerning
our expected financial performance, liquidity and strategic and
operational plans, our future operating results, our expectations
regarding the market for our products, our expectations regarding
the steel market, as well as all assumptions, expectations,
predictions, intentions or beliefs about future events. You are
cautioned that any such forward-looking statements are not
guarantees of future performance and that a number of risks and
uncertainties could cause our actual results to differ materially
from those anticipated, expressed or implied in the forward-looking
statements. These risks and uncertainties include, but not limited
to, the factors mentioned in the "Risk Factors" section of our
Annual Report on Form 10-K for the year ended June 30, 2013, and other risks mentioned
in our other reports filed with the Securities Exchange Commission
("SEC"). Copies of filings made with the SEC are available through
the SEC's electronic data gathering analysis retrieval system
(EDGAR) at http://www.sec.gov. The words "believe," "expect,"
"anticipate," "project," "targets," "optimistic," "intend," "aim,"
"will" or similar expressions are intended to identify
forward-looking statements. All statements other than statements of
historical fact are statements that could be deemed forward-looking
statements. The Company assumes no obligation and does not intend
to update any forward-looking statements, except as required by
law.
For more information, please contact:
Jason Wang, Director of
IR
Sutor Technology Group
Limited
Tel:
+86-512-5268-0988
Email:
investor_relations@sutorcn.com
Financial Tables Below:
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
September 30,
|
|
June
30,
|
|
|
2013
|
|
2013
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
6,150,604
|
$
|
3,601,385
|
Restricted
cash
|
|
107,341,140
|
|
108,825,425
|
Short-term
investments
|
|
3,255,261
|
|
-
|
Trade accounts receivable, net of allowance for doubtful accounts of $717,771 and $623,742,
respectively
|
|
10,002,077
|
|
7,331,291
|
Notes
receivable
|
|
-
|
|
320,888
|
Other receivables and
prepayments, net of allowance for doubtful accounts of $284,814
and
$248,128,
respectively
|
|
11,696,699
|
|
3,446,187
|
Advances to
suppliers, unrelated parties, net of allowance for doubtful
accounts of $781,724
and $796,026,
respectively
|
|
46,294,458
|
|
43,175,047
|
Advances to
suppliers, related parties, net of allowance for doubtful accounts
of nil, and net of
right to
offset
|
|
112,073,556
|
|
185,615,973
|
Inventories,
net
|
|
107,432,138
|
|
52,377,135
|
Deferred tax
assets
|
|
1,070,597
|
|
952,417
|
Total Current
Assets
|
|
405,316,530
|
|
405,645,748
|
Non-current
Assets:
|
|
|
|
|
Advances for purchase
of long term assets
|
|
20,482,323
|
|
17,085,958
|
Property, plant and
equipment, net
|
|
72,603,492
|
|
71,508,912
|
Intangible assets,
net
|
|
3,073,888
|
|
3,074,372
|
Equity method
investments
|
|
6,812,059
|
|
6,686,539
|
Total
Non-current Assets
|
|
102,971,762
|
|
98,355,781
|
TOTAL
ASSETS
|
$
|
508,288,292
|
$
|
504,001,529
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Short-term
loans
|
$
|
128,757,929
|
$
|
138,968,845
|
Long-term loans,
current portion
|
|
7,518,718
|
|
7,418,003
|
Accounts payable,
unrelated parties
|
|
94,557,735
|
|
82,602,243
|
Accounts payable,
related parties
|
|
15,811,867
|
|
20,162,069
|
Other payables and
accrued expenses
|
|
6,966,053
|
|
7,291,220
|
Advances from
customers
|
|
10,881,613
|
|
11,008,550
|
Warrant
liabilities
|
|
157,122
|
|
144,535
|
Total Current
Liabilities
|
|
264,651,037
|
|
267,595,465
|
Long-Term
Loans
|
|
-
|
|
1,180,877
|
Total
Liabilities
|
|
264,651,037
|
|
268,776,342
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
Undesignated
preferred stock - $0.001 par value; 1,000,000 shares authorized;
nil shares
outstanding
|
|
-
|
|
-
|
Common stock - $0.001
par value;
authorized:
500,000,000 shares as of September 30, 2013 and June 30,
2013;
issued: 42,007,267
and 40,965,602 shares as of September 30, 2013 and June 30,
2013.
|
|
42,007
|
|
40,965
|
Additional paid-in
capital
|
|
43,356,364
|
|
41,793,142
|
Statutory
reserves
|
|
20,426,971
|
|
20,426,971
|
Retained
earnings
|
|
137,499,839
|
|
132,311,592
|
Accumulated other
comprehensive income
|
|
42,963,583
|
|
41,304,026
|
Less: Treasury stock,
at cost, 590,838 shares as of September 30, 2013 and June 30,
2013
|
|
(651,509)
|
|
(651,509)
|
Total
Stockholders' Equity
|
|
243,637,255
|
|
235,225,187
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
|
508,288,292
|
$
|
504,001,529
|
|
|
|
|
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE
INCOME
|
|
|
For The
Three Months Ended
|
|
|
September
30,
|
|
|
2013
|
|
2012
|
|
|
|
|
|
Revenue:
|
|
|
|
|
Revenue from
unrelated parties
|
$
|
102,182,122
|
$
|
87,228,170
|
Revenue from related
parties
|
|
36,926,203
|
|
29,958,521
|
|
|
139,108,325
|
|
117,186,691
|
|
|
|
|
|
Cost of
Revenue
|
|
|
|
|
Cost of revenue from
unrelated parties
|
|
(92,275,527)
|
|
(80,215,188)
|
Cost of revenue from
related parties
|
|
(34,630,253)
|
|
(28,424,519)
|
|
|
(126,905,780)
|
|
(108,639,707)
|
|
|
|
|
|
Gross
Profit
|
|
12,202,545
|
|
8,546,984
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
(1,994,856)
|
|
(2,313,252)
|
General and
administrative expenses
|
|
(2,904,270)
|
|
(2,129,824)
|
Total Operating
Expenses
|
|
(4,899,126)
|
|
(4,443,076)
|
Income from
Operations
|
|
7,303,419
|
|
4,103,908
|
|
|
|
|
|
Other
Incomes/(Expenses):
|
|
|
|
|
Interest
income
|
|
1,050,222
|
|
962,341
|
Interest
expense
|
|
(1,803,295)
|
|
(3,534,192)
|
Changes in fair value
of warrant liabilities
|
|
(12,587)
|
|
16,024
|
Income from equity
method investments
|
|
85,172
|
|
-
|
Other
income
|
|
44,274
|
|
25,176
|
Other
expense
|
|
(18,023)
|
|
(104,315)
|
Total Other
Incomes/(Expenses)
|
|
(654,237)
|
|
(2,634,966)
|
|
|
|
|
|
Income Before
Taxes
|
|
6,649,182
|
|
1,468,942
|
Income tax
benefit
|
|
(1,460,935)
|
|
366,403
|
Net
Income
|
$
|
5,188,247
|
$
|
1,835,345
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
Foreign currency
translation adjustment
|
|
1,659,557
|
|
(482,401)
|
Comprehensive
Income
|
$
|
6,847,804
|
$
|
1,352,944
|
|
|
|
|
|
Basic Earnings per
Share
|
$
|
0.13
|
$
|
0.05
|
Diluted Earnings
per Share
|
$
|
0.13
|
$
|
0.05
|
|
|
|
|
|
Basic Weighted
Average Shares Outstanding
|
|
41,314,527
|
|
40,235,700
|
Diluted
Weighted Average Shares Outstanding
|
|
41,314,527
|
|
40,235,700
|
|
|
|
|
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For The Three
Months Ended
|
|
|
September
30,
|
|
|
2,013
|
|
2,012
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net income
|
$
|
5,188,247
|
$
|
1,835,345
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities
|
|
|
|
|
Depreciation and
amortization
|
|
2,244,793
|
|
2,196,506
|
Provision/(reversal) for
doubtful accounts
|
|
106,557
|
|
(515,058)
|
Stock-based
compensation
|
|
64,264
|
|
42,659
|
Foreign currency exchange
gain
|
|
(91,689)
|
|
37,759
|
Loss on disposal of property, plant and equipment
|
|
-
|
|
84,778
|
Interest income from short-term investments carried at amortized
cost
|
|
-
|
|
(30,819)
|
Income from equity method investments
|
|
(85,172)
|
|
11,442
|
Deferred income taxes
|
|
(112,083)
|
|
(41,675)
|
Changes in fair value of warrant liabilities
|
|
12,587
|
|
(16,024)
|
Changes in current
assets and liabilities:
|
|
|
|
|
Restricted cash
|
|
(8,735,865)
|
|
(3,564,927)
|
Trade accounts
receivable
|
|
(2,708,302)
|
|
2,766,568
|
Notes receivable
|
|
321,684
|
|
285,987
|
Other receivables and
prepayments
|
|
(8,236,889)
|
|
1,513,858
|
Advances to suppliers,
unrelated parties
|
|
(2,831,826)
|
|
(13,446,937)
|
Advances to suppliers,
related parties
|
|
74,454,928
|
|
23,178,170
|
Inventories
|
|
(54,550,385)
|
|
(12,661,464)
|
Accounts payable, unrelated
parties
|
|
11,806,154
|
|
(2,687,618)
|
Accounts payable, related
parties
|
|
(4,455,376)
|
|
-
|
Other payables and accrued expenses
|
|
(361,778)
|
|
(2,459,681)
|
Advances from
customers
|
|
(190,350)
|
|
10,816,517
|
Net Cash Provided
by Operating Activities
|
|
11,839,499
|
|
7,345,386
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Purchase of property, plant and equipment
|
|
(6,557,827)
|
|
(799,732)
|
Proceeds from disposal of property, plant and equipment
|
|
-
|
|
62,444
|
Purchase of intangible assets
|
|
-
|
|
(3,551,219)
|
Payments for short-term investments
|
|
(3,243,910)
|
|
-
|
Proceed from sale of short-term investments
|
|
-
|
|
4,871,192
|
Investment in affiliated company
|
|
-
|
|
(6,165,326)
|
Net Cash Used In
Investing Activities
|
|
(9,801,737)
|
|
(5,582,641)
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Proceeds from loans
|
|
32,728,061
|
|
44,933,832
|
Payments of loans
|
|
(44,606,562)
|
|
(49,071,900)
|
Proceeds from issuance of common stock
|
|
1,500,000
|
|
-
|
Changes in restricted cash
|
|
10,864,531
|
|
-
|
Payments on repurchase of common stock
|
|
-
|
|
(43,841)
|
Net Cash Provided
By/(Used In) Financing Activities
|
|
486,030
|
|
(4,181,909)
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash
|
|
25,427
|
|
(17,446)
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
|
2,549,219
|
|
(2,436,610)
|
Cash and Cash
Equivalents at Beginning of Period
|
|
3,601,385
|
|
9,530,531
|
Cash and Cash
Equivalents at End of Period
|
$
|
6,150,604
|
$
|
7,093,921
|
|
|
|
|
|
Supplemental
Non-Cash Information:
|
|
|
|
|
Offset of notes payable to
related parties against receivable from related parties
|
$
|
10,997,923
|
$
|
10,521,846
|
Supplemental Cash
Flow Information:
|
|
|
|
|
Cash paid during the period
for interest expense
|
$
|
(2,030,947)
|
$
|
(2,814,456)
|
Cash paid during the period for income tax
|
$
|
(1,539,622)
|
$
|
(159,865)
|
SOURCE Sutor Technology Group Limited