CHANGSHU, China, May 14, 2014 /PRNewswire/ -- 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 third quarter of fiscal year 2014 ended
on March 31, 2014.
Third Quarter of Fiscal 2014 Financial Results
Highlights:
|
3QFY2014
|
3QFY2013
|
Change
|
Revenues
(million):
|
$96.4
|
$139.5
|
-30.9%
|
Gross profit
(million)
|
$7.3
|
$10.9
|
-33.0%
|
Net income
(million)
|
$1.1
|
$3.9
|
-71.8%
|
EPS
|
$0.03
|
$0.10
|
-70.0%
|
Mr. Zhuo Wang, CEO of Sutor,
commented, "While the total revenue was down as we reduced sales of
low margin products like acid-pickled (AP) steel and focused on
producing high-end products, the reduction in the gross margin for
our main product HDG steel was larger than expected. We were
affected by the recent decelerated GDP growth in China.
During the quarter, the prices of steel products declined sharply
as the steel industry was undergoing transition to improve
performance and due to reduced economic activities in several
sectors. Many of Sutor's customers are small and medium-sized
downstream manufacturers and some are steel trading companies. When
the prices of steel products reached a multi-year low level and the
overall liquidity in China was
contracting, they were affected most and some faced liquidity
reduction. To minimize the risks, some of our customers reduced
procurements and others took a wait-and-see approach. "
Mr. Wang continued, "We believe we are exposed to an economic
slowdown, which may remain for some time. As the on-going
economic restructuring begins to yield positive results and
China's economy resumes its upward
trajectory, we anticipate the performance of the Chinese industrial
sectors will start to improve. "
"To cope with the near term challenges, we have taken a number
of initiatives to transform Sutor from a manufacturing company to a
product and service provider: (1) Shift our strategy from pursuing
sales volume and scale to providing more fee-based processing
services and quality-centered product offerings; (2) Reduce sales
of low gross margin products like AP steel and develop high growth
and high margin products; (3) Improve procurement efficiency and
reduce purchasing costs through competitive bidding on our Internet
B2B platform; (4) Seek strategic industrial and financial partners
to strengthen our market position and financial ability; and (5)
Enhance our investor relations efforts and increase our exposure to
the investment community." Mr. Wang concluded.
Third Quarter of Fiscal Year 2014 Results
Revenue. For the three months ended March 31, 2014, revenue was $96.4 million, compared to $139.5 million for the same period last year, a
decrease of $43.1 million, or 30.9%.
The decrease was mainly attributable to the reduced revenue of
approximately $34.6 million from our
AP steel products. Except for limited fee-based processing
services for AP products, we did not sell any AP steel
products. Instead, the AP products were used internally for
further processing. Historically AP steel had a gross margin of
about 3%. Reduced sales of this product may help improve our
overall gross margin. Our strategy is to phase out sales of low
margin products like AP steel and focus on high margin and high
growth products. In addition, reduced sales of cold-rolled steel
products of approximately $7 million
also contributed to the overall decrease in our revenue during the
third quarter of fiscal 2014.
Gross profit and gross margin. Gross profit decreased by
$3.6 million to $7.3 million in the three months ended
March 31, 2014, from $10.9 million in the same period in 2013. Gross
profit as a percentage of revenue (gross margin) was 7.6% for the
three months ended March 31, 2014, as
compared to 7.8% for the same period last year. The
decreased gross margin was primarily due to decreased gross margin
for our main product HDG steel which contributed to approximately
70% of the total revenue. During the quarter ended on
March 31, 2014, the gross margin of
our HDG steel was 6.6% as compared with approximately 9.9% for the
same period last year. During the third quarter of fiscal
2014, the sale volume of HDG steel was up approximately 6.9%, but
its impact on the revenue was offset by lower average selling price
of approximately 9.7%.
Total operating expenses. Our total operating expenses
decreased by $0.2 million to
$3.7 million in the three months
ended March 31, 2014, from
$3.9 million in the same period in
2013. As a percentage of revenue, our total operating expenses
increased to 3.8% in the three months ended March 31, 2014, from 2.8% in the same period in
2013.
Selling
expenses. Our selling expenses decreased by $0.4 million to $1.0
million in the three months ended March 31, 2014, from $1.4
million in the same period in 2013. As a percentage of
revenue, our selling expenses was approximately 1.0% for the three
months ended March 31, 2014, as
compared with approximately 1.0% for the same period last
year. The reduced dollar amount of selling expenses was
primarily due to reduced shipping and handling expenses of
approximately $0.4 million as a
result of lower sales volumes, particularly our international
sales.
General and
administrative expenses. General and administrative expenses
increased by $0.2 million to
$2.7million, or 2.8% of the total
revenue, in the three months ended March 31,
2014, from $2.5 million, or
1.8% of the revenue, in the same period in 2013. The increased
general and administrative expenses were primarily due to higher
employee benefits of approximately $0.14
million.
Interest expense. Our interest expense decreased by
$0.6 million to $2.0 million in the three months ended
March 31, 2014, from $2.6 million in the same period in 2013. As a
percentage of revenue, our interest expense was 2.1% of the total
revenue in the three months ended March 31,
2014, compared to 1.8% in the same period in 2013. The
reduced interest expenses were primarily due to reduced interest
expenses on discounted bank notes.
Provision for income taxes. Our income tax
expense decreased to $0.6 million in
the three months ended March 31,
2014, from $1.7 million of
income tax taxes in the same period last year, due to lower taxable
income and valuation allowance provided for the entities that
incurred losses.
Net income. Net income, without including the foreign
currency translation adjustment, decreased by $2.8 million, or 71.8%, to $1.1 million in the three months ended
March 31, 2014, from $3.9 million in the same period in 2013, as a
cumulative result of the above factors.
Financial Condition and Liquidity
As of March 31, 2014, we had
approximately $6.7 million in cash
and $95.6 million in restricted cash.
Our short-term loans plus the current portion of long-term loans
were approximately $116.9 million.
The long-term loans were approximately $11.0
million. As of March 31,
2014, the Company had an unused line of credit with banks of
approximately $17.8 million.
Conference Call Information
Sutor's management will host an earnings conference call today,
May 14, 2014, at 9:00 a.m. U.S. Eastern time/9:00 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 June 13, 2014.
Listeners may access it by dialing US: +1866 572 7808, CN:
800 876 5013, HK: +852 3012 8000, access code: 706791.
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 in nature within the meaning of the Private Securities
Litigation Reform Act of 1995. 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 fiscal year ended June 30, 2013,
and other risks mentioned in our other reports filed with the
Securities and 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:
Investor
Relations
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
|
|
|
|
|
|
|
|
March
31,
|
|
June
30,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
6,695,327
|
$
|
3,601,385
|
Restricted
cash
|
|
95,602,581
|
|
108,825,425
|
Short-term
investments
|
|
13,791,537
|
|
-
|
Trade accounts and notes receivable, unrelated parties, net of allowance for doubtful accounts
of $811,072
and $623,742, respectively
|
|
8,073,693
|
|
7,652,179
|
Trade accounts and notes receivable, related parties, net of allowance for doubtful accounts of
nil,
respectively
|
|
26,528,163
|
|
-
|
Other receivables and
prepayments, net of allowance for doubtful accounts of $259,539
and
$248,128,
respectively
|
|
5,153,803
|
|
3,446,187
|
Advances to
suppliers, unrelated parties, net of allowance for doubtful
accounts of $481,229
and
$796,026, respectively
|
|
21,712,719
|
|
43,175,047
|
Advances to
suppliers, related parties, net of allowance for doubtful accounts
of nil, and net of
right to
offset
|
|
282,985,781
|
|
185,615,973
|
Inventories,
net
|
|
91,592,944
|
|
52,377,135
|
Deferred tax
assets
|
|
964,069
|
|
952,417
|
Total Current
Assets
|
|
553,100,617
|
|
405,645,748
|
Non-current
Assets:
|
|
|
|
|
Advances for purchase
of long term assets
|
|
85,147
|
|
17,085,958
|
Property, plant and
equipment, net
|
|
90,608,310
|
|
71,508,912
|
Intangible assets,
net
|
|
3,586,585
|
|
3,074,372
|
Equity method
investments
|
|
6,377,989
|
|
6,686,539
|
Total
Non-current Assets
|
|
100,658,031
|
|
98,355,781
|
TOTAL
ASSETS
|
$
|
653,758,648
|
$
|
504,001,529
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Short-term
loans
|
$
|
114,495,119
|
$
|
138,968,845
|
Long-term loans,
current portion
|
|
2,362,762
|
|
7,418,003
|
Accounts payable,
unrelated parties
|
|
146,867,131
|
|
82,602,243
|
Accounts payable,
related parties
|
|
61,773,624
|
|
20,162,069
|
Other payables and
accrued expenses, unrelated parties
|
|
7,557,809
|
|
7,291,220
|
Other payables and
accrued expenses, related parties
|
|
27,521,741
|
|
-
|
Advances from
customers, unrelated parties
|
|
15,720,810
|
|
11,008,550
|
Advances from
customers, related parties
|
|
15,920,149
|
|
|
Warrant
liabilities
|
|
67,866
|
|
144,535
|
Total Current
Liabilities
|
|
392,287,011
|
|
267,595,465
|
Non-Current
Liabilities
|
|
|
|
|
Long-term loans,
unrelated parties
|
|
2,859,995
|
|
1,180,877
|
Long-term loans,
related parties
|
|
8,182,018
|
|
-
|
Total Non-current
Liabilities
|
|
11,042,013
|
|
1,180,877
|
Total
Liabilities
|
|
403,329,024
|
|
268,776,342
|
|
|
|
|
|
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 March 31, 2014 and June 30,
2013;
issued: 42,252,267and
40,965,602shares as of March 31, 2014 and June 30, 2013.
|
|
42,252
|
|
40,965
|
Additional paid-in
capital
|
|
43,584,827
|
|
41,793,142
|
Statutory
reserves
|
|
20,426,971
|
|
20,426,971
|
Retained
earnings
|
|
145,008,631
|
|
132,311,592
|
Accumulated other
comprehensive income
|
|
42,018,452
|
|
41,304,026
|
Less: Treasury stock,
at cost, 590,838 shares as of March 31, 2014 and June 30,
2013
|
|
(651,509)
|
|
(651,509)
|
Total
Stockholders' Equity
|
|
250,429,624
|
|
235,225,187
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
|
653,758,648
|
$
|
504,001,529
|
|
|
|
|
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONDENSEDCONSOLIDATED STATEMENTS OF
OPERATIONS
|
AND COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
|
For The
Three Months Ended
|
|
|
For The
Nine Months Ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
Revenue from unrelated parties
|
|
$
|
50,478,926
|
$
|
83,729,219
|
|
$
|
254,891,263
|
$
|
274,802,236
|
Revenue from related
parties
|
|
|
45,898,686
|
|
55,819,840
|
|
|
108,911,484
|
|
139,800,372
|
|
|
|
96,377,612
|
|
139,549,059
|
|
|
363,802,747
|
|
414,602,608
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Revenue
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue from unrelated parties
|
|
|
(46,173,329)
|
|
(75,981,582)
|
|
|
(229,744,921)
|
|
(250,302,280)
|
Cost of revenue from
related parties
|
|
|
(42,881,492)
|
|
(52,634,627)
|
|
|
(100,906,781)
|
|
(132,611,148)
|
|
|
|
(89,054,821)
|
|
(128,616,209)
|
|
|
(330,651,702)
|
|
(382,913,428)
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
7,322,791
|
|
10,932,850
|
|
|
33,151,045
|
|
31,689,180
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
(1,006,441)
|
|
(1,417,039)
|
|
|
(4,339,215)
|
|
(5,709,207)
|
General and
administrative expenses
|
|
|
(2,687,763)
|
|
(2,490,828)
|
|
|
(8,216,753)
|
|
(7,170,901)
|
Total Operating
Expenses
|
|
|
(3,694,204)
|
|
(3,907,867)
|
|
|
(12,555,968)
|
|
(12,880,108)
|
Income from
Operations
|
|
|
3,628,587
|
|
7,024,983
|
|
|
20,595,077
|
|
18,809,072
|
|
|
|
|
|
|
|
|
|
|
|
Other
Incomes/(Expenses):
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
771,046
|
|
967,706
|
|
|
2,607,812
|
|
2,989,756
|
Interest
expense
|
|
|
(1,998,580)
|
|
(2,579,181)
|
|
|
(6,376,833)
|
|
(8,453,617)
|
Changes in fair value
of warrant liabilities
|
|
|
143,567
|
|
(146,476)
|
|
|
76,669
|
|
(131,953)
|
Income from equity
method investments
|
|
|
30,681
|
|
50,998
|
|
|
296,809
|
|
225,444
|
Other
income
|
|
|
(90,919)
|
|
159,520
|
|
|
128,107
|
|
318,658
|
Other
expense
|
|
|
(744,370)
|
|
72,639
|
|
|
(964,150)
|
|
(594,885)
|
Total Other
Expenses, net
|
|
|
(1,888,575)
|
|
(1,474,794)
|
|
|
(4,231,586)
|
|
(5,646,597)
|
|
|
|
|
|
|
|
|
|
|
|
Income Before
Taxes
|
|
|
1,740,012
|
|
5,550,189
|
|
|
16,363,491
|
|
13,162,475
|
Income tax
expense
|
|
|
(626,356)
|
|
(1,670,169)
|
|
|
(3,666,452)
|
|
(2,674,778)
|
Net
Income
|
|
$
|
1,113,656
|
$
|
3,880,020
|
|
$
|
12,697,039
|
$
|
10,487,697
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(2,422,686)
|
|
1,426,292
|
|
|
714,426
|
|
1,652,762
|
Comprehensive
Income
|
|
$
|
(1,309,030)
|
$
|
5,306,312
|
|
$
|
13,411,465
|
$
|
12,140,459
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per
Share
|
|
$
|
0.03
|
$
|
0.10
|
|
$
|
0.31
|
$
|
0.26
|
Diluted Earnings
per Share
|
|
$
|
0.03
|
$
|
0.10
|
|
$
|
0.31
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
Basic Weighted Average Shares Outstanding
|
|
|
41,548,819
|
|
40,267,431
|
|
|
41,470,152
|
|
40,237,142
|
Diluted
Weighted Average Shares Outstanding
|
|
|
41,548,819
|
|
40,267,431
|
|
|
41,470,152
|
|
40,237,142
|
|
|
|
|
|
|
|
|
|
|
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONDENSEDCONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
|
|
For The
Nine Months Ended
|
|
|
March
31,
|
|
|
2014
|
|
2013
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net income
|
$
|
12,697,039
|
$
|
10,487,697
|
Adjustments to
reconcile net income to net cash provided by/(used in) operating
activities
|
|
|
|
|
Depreciation and
amortization
|
|
6,800,389
|
|
6,628,874
|
Provision/(reversal)
for doubtful accounts
|
|
(121,322)
|
|
(711,175)
|
Stock based
compensation
|
|
398,123
|
|
111,467
|
Foreign currency
exchange gain
|
|
(37,907)
|
|
(145,186)
|
(Gain)/loss on
disposal of property, plant and equipment
|
|
(11,075)
|
|
81,228
|
Interest income from
short-term investments carried at amortized cost
|
|
-
|
|
(30,944)
|
Income from equity
method investments
|
|
(296,809)
|
|
(225,444)
|
Deferred income
taxes
|
|
(8,987)
|
|
(43,516)
|
Changes in fair value
of warrant liabilities
|
|
(76,669)
|
|
131,953
|
Changes in current
assets and liabilities:
|
|
|
|
|
Restricted
cash
|
|
(7,926,735)
|
|
(14,483,765)
|
Trade accounts and
notes receivable, unrelated parties
|
|
(588,183)
|
|
3,902,258
|
Trade accounts and
notes receivable, related parties
|
|
(26,643,587)
|
|
-
|
Other receivable and
prepayments
|
|
(1,821,968)
|
|
1,683,384
|
Advances to
suppliers, unrelated parties
|
|
21,997,275
|
|
10,095,647
|
Advances to
suppliers, related parties
|
|
(89,009,045)
|
|
(43,541,260)
|
Inventories
|
|
(38,600,780)
|
|
(14,134,383)
|
Accounts payable,
unrelated parties
|
|
64,198,549
|
|
11,033,692
|
Accounts payable,
related parties
|
|
41,735,109
|
|
13,431,063
|
Other payables and
accrued expenses, unrelated parties
|
|
247,358
|
|
(1,133,841)
|
Other payables and
accrued expenses, related parties
|
|
27,528,078
|
|
-
|
Advances from
customers, unrelated parties
|
|
4,702,254
|
|
6,230,157
|
Advances from
customers, related parties
|
|
15,989,417
|
|
-
|
Net Cash
Provided by Operating Activities
|
|
31,150,524
|
|
(10,632,094)
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(8,488,717)
|
|
(3,818,123)
|
Proceeds from
disposal of property, plant and equipment
|
|
17,178
|
|
529,721
|
Purchase of
intangible assets
|
|
(568,119)
|
|
(3,565,706)
|
Payments for
short-term investments
|
|
(13,851,544)
|
|
-
|
Proceeds from sale of
short-term investments
|
|
-
|
|
4,891,063
|
Payment for equity
method investments
|
|
-
|
|
(6,190,476)
|
Net Cash Used In
Investing Activities
|
|
(22,891,202)
|
|
(8,153,521)
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Proceeds from
loans
|
|
93,219,276
|
|
117,233,696
|
Repayment of
loans
|
|
(121,389,798)
|
|
(118,055,195)
|
Proceeds from
issuance of common stock
|
|
1,500,000
|
|
-
|
Changes in restricted
cash
|
|
21,517,459
|
|
28,556,205
|
Payments on
repurchase of common stock
|
|
-
|
|
(43,841)
|
Net Cash
Provided by Financing Activities
|
|
(5,153,063)
|
|
27,690,865
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
(12,317)
|
|
96,169
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
|
3,093,942
|
|
9,001,419
|
Cash and Cash
Equivalents at Beginning of Period
|
|
3,601,385
|
|
9,530,531
|
Cash and Cash
Equivalents at End of Period
|
$
|
6,695,327
|
$
|
18,531,950
|
|
|
|
|
|
SOURCE Sutor Technology Group Limited