CHANGSHU, China, Dec. 15, 2014 /PRNewswire/ -- Sutor Technology
Group Limited (the "Company" or "Sutor") (Nasdaq: SUTR), one of the
leading China-based manufacturers
and service providers for fine finished steel products used by a
variety of downstream applications, today announced its audited
financial results for the fiscal year ended June 30, 2014.
Fiscal 2014 Financial Results Highlights:
|
FY2014
|
FY2013
|
Change
|
Revenues
(million):
|
$405.4
|
$612.1
|
(33.8)%
|
Gross profit
(million)
|
$33.6
|
$44.9
|
(25.2)%
|
Net income
(million)
|
$7.1
|
$16.9
|
(58.2)%
|
EPS
|
$0.17
|
$0.42
|
(59.5)%
|
Major Events Highlights:
- Started transition from a traditional fine finished steel
manufacturer to a valued-added service provider offering both
products and fee-based processing services for fine finished steel
products.
- Started producing products in small quantities on our new
500,000 MT cold-rolled production line and expects gradual ramp-up
of capacity utilization in the coming quarters.
- Renewed the certificate of Jiangsu Provincial High-tech
Enterprise for Changshu Huaye Steel Strip Co. Ltd, a subsidiary of
Sutor ("Changshu Huaye"). The high-tech enterprise status enhances
the Company's market position and entitles Changshu Huaye to a
preferential income tax rate for three more years.
Fiscal Year 2014 Results
Revenue. For the fiscal year ended June 30, 2014, revenue was $405.4 million compared to $612.1 million last year, a decrease of
approximately $206.7 million, or
33.8%. Total sales volume in tons decreased approximately 39.3% in
fiscal year 2014 as compared to last year, which reflected the
impact of stagnant Chinese real estate markets, steel industry
overcapacity as well as the Company's transition from a pure
fine-finished steel manufacturer to a steel product and processing
service provider. For a typical product sales transaction, our
product price covers the cost of raw materials as well as gross
profits; while for a fee-based steel processing service, the price
for our service does not contain the cost of raw materials as the
customers buy the raw materials and we charge them only for a
processing fee to cover processing expenses and a profit.
Therefore, revenue from steel processing services is significantly
lower than that from product sales.
Our business was relatively stable during the first three
quarters of fiscal 2014 while our sales declined significantly
during the fourth quarter. We believe a number of factors
contributed to this change: First, the prices of steel products
declined to a multi-year low level during the fourth quarter and
the market generally believed that the near-term outlook remained
bearish. As a result, very few customers were willing to place
large orders with us and fulfilling small orders reduced our
production efficiency. Second, the real estate markets in most
cities in China were stagnant. In
some markets, housing prices and sales declined so dramatically
that the local governments had to repeal its restrictive policies
to control housing prices and excessive investment in the real
estate. A stagnant real estate market affected demands for a
variety of steel products including steel products for construction
and infrastructure as well as for household appliances. Moreover,
banks in general tightened their policy of granting of new lines of
credit to non-state-owned enterprises. Due to the tight liquidity
of many small and medium enterprises (SMEs), which are our core
clients, they were unable to expand their operations and some even
had to reduce their operating scale, which significantly adversely
affected our operations.
Gross profit and gross margin. Gross profit
decreased $11.3 million to
$33.6 million in fiscal year 2014
from $44.9 million in fiscal year
2013. Gross profit as a percentage of revenue (gross margin) was
8.3% in fiscal year 2014 as compared with 7.3% last year. The
increased gross margin mainly resulted from the change in the
composition of the products we sold. We sold much less low margin
AP steel in fiscal 2014 than in fiscal 2013.
Selling expenses. Our selling expenses decreased
approximately $3.3 million to $5.0
million in fiscal year 2014, from $8.3 million in fiscal year 2013. As a percentage
of revenue, our selling expense was 1.3% in fiscal year 2014 as
compared to 1.3% in fiscal 2013. The dollar decrease of selling
expenses was primarily due to reduced sales, particularly our
internationals sales. In addition, a higher percentage of more
shipment was made through the local harbor in Changshu, which
further reduced shipping and handling expenses.
General and administrative expenses. General and
administrative expenses increased $1.0
million, or 9.5%, to $11.5
million, or 2.8% of revenue, in fiscal year 2014, from
$10.5 million, or 1.7% of revenue, in
fiscal year 2013. The higher general and administrative expenses
were primarily due to the provision for account receivables in the
amount of approximately $0.5 million.
Our research and development expenses increased $0.1 million, or 25.0%, to $ 0.5 million, or 1.4 % of revenue in fiscal year
2014 as compared to $0.4 million, or
0.1% of revenue in fiscal year 2013.
Interest expense. Our interest expense decreased
$0.1 million to $10.1 million in fiscal year 2014, from
$10.2 million in fiscal year 2013. As
a percentage of revenue, our interest expenses increased to 2.5% in
fiscal year 2014, from 1.7% in fiscal year 2013. The increase in
interest expense as percentage of revenue was mainly attributable
to the fact that the decrease in total revenue outpaced the
decrease in interest expense. The Company's total debt and average
interest rate remained relatively stable.
Provision for income taxes. We incurred income tax
expense of $3.0 million with an
effective tax rate of 29.9% in fiscal year 2014 as compared to
$2.7 million with an effective tax
rate of 13.9% in fiscal year 2013. The primary reason of the
significant change in effective tax rate is that we had a favorable
one-time income tax credit and income tax refund in the amount of
approximately $0.87 million last
fiscal year.
Net income. Net income, without including the
foreign currency translation adjustment, decreased $9.8 million, or approximately 58.2%, to
$7.1 million in fiscal year 2014,
from $16.9 million in fiscal year
2013, as a cumulative result of the above factors.
Financial Condition and Liquidity
As of June 30, 2014, we had
approximately $12.2 million in cash
and $60.9 million in restricted cash.
Our short-term loans were approximately $139.2 million. We also had approximately
$11.0 million long-term loans. As of
June 30, 2014, the Company had an
unused line of credit with banks of approximately $31.7 million.
For fiscal 2015, we anticipate a very limited amount of capital
expenditure for major maintenance and equipment improvement. For
the 500,000-ton new cold-rolled production line, the remaining
capital expenditure is approximately $2.5
million, and most of which is expected to be paid one year
after the commercial production starts.
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 service
providers for high-end fine finished steel products and welded
steel pipes 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 year
ended June 30, 2014, 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:
Investor Relations
Sutor Technology Group Limited
Tel: +86-512-5268-0988
Email: investor_relations@sutorcn.com
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
June
30,
|
|
June
30,
|
|
|
2014
|
|
2013
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
12,178,225
|
$
|
3,601,385
|
Restricted
cash
|
|
60,860,255
|
|
108,825,425
|
Short-term
investments
|
|
3,248,652
|
|
-
|
Trade
accounts receivable, unrelated parties, net of allowance for
doubtful accounts of $1,368,723 and $623,742,
respectively
|
|
6,331,702
|
|
7,331,291
|
Trade
accounts receivable, related parties
|
|
16,149,269
|
|
-
|
Notes
receivables
|
|
194,919
|
|
19,835,677
|
Other receivables and
prepayments, unrelated parties, net of allowance for doubtful
accounts of $255,628 and $248,128, respectively
|
|
1,875,785
|
|
3,446,187
|
Other receivables and
prepayments, related parties
|
|
405,558
|
|
-
|
Advances to
suppliers, unrelated parties, net of allowance for doubtful
accounts of $527,673 and $796,026, respectively
|
|
8,645,751
|
|
43,175,047
|
Advances to
suppliers, related parties
|
|
286,085,768
|
|
251,900,527
|
Inventories,
net
|
|
78,277,682
|
|
52,377,135
|
Current deferred tax
assets
|
|
1,507,840
|
|
952,417
|
Total Current
Assets
|
|
475,761,406
|
|
491,445,091
|
Non-current
Assets:
|
|
|
|
|
Advances for purchase
of long term assets
|
|
85,241
|
|
17,085,958
|
Property, plant and
equipment, net
|
|
87,121,382
|
|
71,508,912
|
Intangible assets,
net
|
|
3,568,855
|
|
3,074,372
|
Long-term
investments
|
|
1,814,734
|
|
6,686,539
|
Total Non-current
Assets
|
|
92,590,212
|
|
98,355,781
|
TOTAL
ASSETS
|
$
|
568,351,618
|
$
|
589,800,872
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Short-term
loans
|
$
|
139,223,123
|
$
|
138,968,845
|
Long-term loans,
current portion
|
|
-
|
|
7,418,003
|
Accounts payable,
unrelated parties
|
|
5,843,599
|
|
9,645,713
|
Notes
payable
|
|
136,274,446
|
|
178,917,942
|
Other payables and
accrued expenses, unrelated parties
|
|
4,613,201
|
|
7,291,220
|
Other payables and
accrued expenses, related parties
|
|
3,110,196
|
|
-
|
Advances from
customers, unrelated parties
|
|
7,917,111
|
|
11,008,550
|
Advances from
customers, related parties
|
|
15,114,353
|
|
-
|
Warrant
liabilities
|
|
866
|
|
144,535
|
Total Current
Liabilities
|
|
312,096,895
|
|
353,394,808
|
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
|
|
323,138,908
|
|
354,575,685
|
|
|
|
|
|
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 June 30, 2014 and 2013;
issued: 42,252,267
shares and 40,965,602 shares as of June 30, 2014 and 2013,
respectively
|
|
42,252
|
|
40,965
|
Additional paid-in
capital
|
|
43,652,089
|
|
41,793,142
|
Statutory
reserves
|
|
22,725,841
|
|
20,426,971
|
Retained
earnings
|
|
137,081,594
|
|
132,311,592
|
Accumulated other
comprehensive income
|
|
42,362,443
|
|
41,304,026
|
Less: Treasury stock,
at cost, 590,838 as of June 30, 2014 and 2013
|
|
(651,509)
|
|
(651,509)
|
Total
Stockholders' Equity
|
|
245,212,710
|
|
235,225,187
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
|
568,351,618
|
$
|
589,800,872
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
AND COMPREHENSIVE
INCOME
|
|
|
|
For The Year
Ended
|
|
|
June
30
|
|
|
2014
|
|
2013
|
|
|
|
|
|
Revenue from
unrelated parties
|
$
|
262,635,057
|
$
|
395,433,973
|
Revenue from related
parties
|
|
142,780,398
|
|
216,641,488
|
Total
Revenue
|
|
405,415,455
|
|
612,075,461
|
Cost of
Revenue
|
|
(371,768,467)
|
|
(567,139,939)
|
Gross
Profit
|
|
33,646,988
|
|
44,935,522
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
Selling
expenses
|
|
(4,993,368)
|
|
(8,266,533)
|
General and
administrative expenses
|
|
(11,491,805)
|
|
(10,516,116)
|
Total Operating
Expenses
|
|
(16,485,173)
|
|
(18,782,649)
|
Income from
Operations
|
|
17,161,815
|
|
26,152,873
|
|
|
|
|
|
Other
Incomes/(Expenses):
|
|
|
|
|
Interest
income
|
|
3,263,566
|
|
3,414,416
|
Interest
expense
|
|
(10,113,479)
|
|
(10,209,681)
|
Changes in fair value
of warrant liabilities
|
|
143,669
|
|
(97,131)
|
Income from equity
method investments
|
|
274,225
|
|
370,814
|
Other
income
|
|
139,624
|
|
457,735
|
Other
expense
|
|
(784,597)
|
|
(460,412)
|
Total Other
Expenses
|
|
(7,076,992)
|
|
(6,524,259)
|
|
|
|
|
|
Income Before
Taxes
|
|
10,084,823
|
|
19,628,614
|
Income tax
expense
|
|
(3,015,951)
|
|
(2,723,150)
|
Net
Income
|
$
|
7,068,872
|
$
|
16,905,464
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
Foreign currency
translation adjustment
|
|
1,058,417
|
|
5,681,785
|
Comprehensive
Income
|
|
8,127,289
|
|
22,587,249
|
|
|
|
|
|
Basic Earnings per
Share
|
$
|
0.17
|
$
|
0.42
|
Diluted Earnings
per Share
|
$
|
0.17
|
$
|
0.42
|
|
|
|
|
|
Basic Weighted
Shares Outstanding
|
|
41,517,840
|
|
40,251,218
|
Diluted Weighted
Shares Outstanding
|
|
41,517,840
|
|
40,251,218
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
For The Year
Ended
|
|
|
June
30
|
|
|
2014
|
|
2013
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net income
|
$
|
7,068,872
|
$
|
16,905,464
|
Adjustments to
reconcile net income to net cash provided by/(used in) operating
activities
|
|
|
|
|
Depreciation and
amortization
|
|
9,068,355
|
|
8,868,707
|
Provision/(reversal)
for doubtful accounts
|
|
478,682
|
|
(392,969)
|
Write downs of
inventories
|
|
-
|
|
141,173
|
Stock-based
compensation
|
|
496,292
|
|
193,518
|
Foreign currency
exchange gain
|
|
(47,909)
|
|
(454,657)
|
(Gain)/loss on
disposal of property, plant and equipment
|
|
(11,062)
|
|
16,240
|
Interest income from
short-term investments carried at amortized cost
|
|
-
|
|
(31,059)
|
Income from equity
method investments
|
|
(274,225)
|
|
(370,814)
|
Deferred income
taxes
|
|
(552,796)
|
|
(223,911)
|
Changes in fair value
of warrant liabilities
|
|
(143,669)
|
|
97,131
|
Changes in current
assets and liabilities:
|
|
|
|
|
Restricted
cash
|
|
27,002,074
|
|
(20,674,295)
|
Trade
accounts receivable, unrelated parties
|
|
286,190
|
|
544,243
|
Trade accounts
receivable, related parties
|
|
(16,182,388)
|
|
-
|
Notes
receivable
|
|
19,759,493
|
|
(2,514,588)
|
Other receivables and
prepayments, unrelated parties
|
|
1,443,844
|
|
1,150,326
|
Other receivables and
prepayments, related parties
|
|
(406,390)
|
|
-
|
Advances to suppliers,
unrelated parties
|
|
35,042,929
|
|
(15,318,614)
|
Advances to suppliers,
related parties
|
|
(33,197,638)
|
|
(54,965,689)
|
Inventories
|
|
(25,116,596)
|
|
(982,823)
|
Accounts payable,
unrelated parties
|
|
(3,740,716)
|
|
(4,385,361)
|
Notes
payable
|
|
(43,438,610)
|
|
50,723,310
|
Other payables and
accrued expenses, unrelated parties
|
|
(2,709,446)
|
|
(1,668,531)
|
Other payables and
accrued expenses, related parties
|
|
3,113,187
|
|
-
|
Advances from
customers, unrelated parties
|
|
(3,140,092)
|
|
2,874,317
|
Advances from
customers, related parties
|
|
15,145,350
|
|
-
|
Net Cash Used
In Operating Activities
|
|
(10,056,269)
|
|
(20,468,882)
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(7,750,475)
|
|
(5,310,774)
|
Proceeds from disposal
of property, plant and equipment
|
|
411,448
|
|
889,743
|
Purchase of intangible
assets
|
|
(567,444)
|
|
(3,565,706)
|
Payment for long-term
investments
|
|
-
|
|
(6,213,456)
|
Proceeds from disposal
of long-term investments
|
|
4,557,440
|
|
-
|
Payments for
short-term investments
|
|
(3,255,314)
|
|
-
|
Disposal of
subsidiary, net of cash disposed of $27,401 and nil,
respectively
|
|
-
|
|
(27,401)
|
Proceeds from sale of
short-term investments
|
|
-
|
|
4,909,220
|
Net Cash Used In
Investing Activities
|
|
(6,604,345)
|
|
(9,318,374)
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Proceeds from
loans
|
|
238,160,540
|
|
117,603,938
|
Payments of
loans
|
|
(235,852,667)
|
|
(119,567,659)
|
Proceeds from issuance
of common stock
|
|
1,500,000
|
|
|
Changes in restricted
cash
|
|
21,491,892
|
|
25,763,889
|
Payments on repurchase
of common stock
|
|
-
|
|
(43,841)
|
Net Cash Provided
By Financing Activities
|
|
25,299,765
|
|
23,756,327
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash
|
|
(62,311)
|
|
101,783
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
|
8,576,840
|
|
(5,929,146)
|
Cash and Cash
Equivalents at Beginning of Year
|
|
3,601,385
|
|
9,530,531
|
Cash and Cash
Equivalents at End of Year
|
$
|
12,178,225
|
$
|
3,601,385
|
|
|
|
|
|
Supplemental
Non-Cash Information:
|
|
|
|
|
Offset of notes
payable to related parties against receivable from related
parties
|
$
|
-
|
$
|
10,791,134
|
Accounts payable for
purchase of long-term assets
|
|
(107,346)
|
|
(1,244,579)
|
Advances for purchase
of long-term assets
|
|
17,103,162
|
|
(1,733,684)
|
|
|
|
|
|
Supplemental Cash
Flow Information:
|
|
|
|
|
Cash paid during the
year for interest expense
|
$
|
(11,484,801)
|
$
|
(8,670,207)
|
Cash paid during the
year for income tax
|
$
|
(5,113,782)
|
$
|
(2,595,402)
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/sutor-technology-group-limited-reports-fiscal-year-2014-financial-results-300009490.html
|
SOURCE Sutor Technology Group Limited