Sutor Technology Group Limited Reports Third Quarter Fiscal 2013 Financial Results
Continues its Profitable Growth: 203% Increase in Third Quarter Net Income on 27% Increase in Revenues
CHANGSHU, China, May 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 and welded steel pipes used by a variety of downstream applications, today announced its financial results for the third quarter of fiscal 2013 ended March 31, 2013.
Third quarter fiscal 2013 results highlights:
| Change |
|||
| 3Q FY2013 |
3Q FY2012 |
||
| Revenue (million) |
$139.6 |
$109.9 |
27.0% |
| Gross profit (million) |
$10.9 |
$7.9 |
38.0% |
| Net income (million) |
$3.88 |
$1.28 |
203.1% |
| EPS (fully diluted) |
$0.10 |
$0.03 |
233.3% |
Nine months Fiscal 2013 results highlights:
| 9M FY2013 |
9MFY2012 |
Change |
|
| Revenue (million) |
$414.6 |
$348.0 |
19.1% |
| Gross profit (million) |
$31.7 |
$29.3 |
8.2% |
| Net income (million) |
$10.49 |
$9.06 |
15.8% |
| EPS (fully diluted) |
$0.26 |
$0.22 |
18.2% |
Ms. Lifang Chen, CEO and Chairwoman of Sutor, commented: "Following a successful second quarterof fiscal 2013, we are pleased to report that the result of the third quarter exceeded our expectations. Further, we are on track to carry out our strategy to organically grow our production capacity, expand the asset-light B2B electronic commerce platform exclusively for the heavy industries, and selectively pursue merger and acquisition and joint-venture opportunities to accelerate our growth."
Third Quarter Fiscal 2013 vs. Third Quarter Fiscal 2012 Highlights
- The 27% increase in revenue was mainly due to significantly increased production of acid-pickled steel and cold-rolled steel products. Although the output of PPGI and pipe products were also up, their impact on the revenue was partially offset by lower average selling price ("ASP") due to lower costs of raw materials. For the quarter ended on March 31 2013, total sales volume in tons was up approximately 54% whereas the ASP was down approximately 22% when compared with the same period last year.
- Revenue generated from domestic sales increased by 25% to $129.7 million, while revenue generated from international sales increased by 56% to $9.9 million. As a percentage of total revenue, international sales accounted for 7.1%, as compared to 5.7% in the same quarter of fiscal 2012.
- Our gross margin increased to 7.8% as compared to 7.2% primarily due to increased sales of higher-margin products like PPGI and pipe products.
- Total operating expenses (selling expenses and general and administrative expenses) as a percentage of revenue slightly decreased to 2.8% as compared to 2.9%. Of note, the third quarter fiscal 2013 selling expenses increased as compared to the same period of 2012 due to increased international shipping rate.
- Higher revenue, lower operating expenses, lower interest expenses and higher interest income contributed to over 204% increase in net income.
Liquidity
- As of March 31, 2013, cash and cash equivalents (excluding restricted cash) were $18.5 million and restricted cash were $98.2 million.
- As of March 31, 2013, short-term loans totaled approximately $130.8 million, and the current portion of long-term loans was $14.1 million. The Company also had approximately $2.3 million long-term loans.
- As of March 31, 2013, Sutor had an unused line of credit with banks of approximately $20.6million which entitles the Company to draw bank loans for general corporate purposes. Sutor expects sufficient liquidity to carry out normal operations for fiscal 2013.
Ms. Chen concluded, The Chinese economy had a weak recovery during the last two quarters after several consecutive quarters' decline in GDP growth rate. China Purchasing Managers' Index (PMI) for the manufacturing sector has been above 50% for seven consecutive months since last October. Although the latest economic indicators showed some weakness, we believe the overall trend remains healthy. Based on the year-to-date results, we feel optimistic that we can end fiscal 2013 on a positive note. In the longer term, we believe our new cold-rolled production line of 500,000 tons annual capacity, which is expected to commence trial production later this year, our recent joint venture with China Railway Materials Wuhan Company, and our new galvolume steel products launched in January this year will become the additional drivers for our future growth. We look forward to reporting our progress in the coming months.
Conference Call Information
Sutor's management will host an earnings conference call today, May 13, 2013, 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 14, 2013. Listeners may access it by dialing US: +1 866 572 7808, CN: 800 876 5013, HK: +852 3012 8000, access code: 693127.
Functional Currency and Translating Press Release
The reporting currency of the Company is the United States Dollars (USD). Sutor and Sutor BVI maintain their books and records in USD, their functional currency. The PRC subsidiaries maintain their books and records in its local currency, the Renminbi Yuan (RMB), which is their functional currencies as being the primary currency of the economic environment in which these entities operate. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not the USD are translated into USD, in accordance with ASC Topic 830-30, Translation of Financial Statement, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income.
About Sutor Technology Group Limited
Sutor is one of the leading China-based manufacturers and distributors of 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. 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, 2012, 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:
| China |
US |
| Jason Wang, Director of IR |
Lena Cati, IR Representative |
| Sutor Technology Group Limited |
The Equity Group |
| Tel: +86-512-5268-0988 |
Tel: 212 836-9611 |
| Email: [email protected] |
Email: [email protected] |
Financial Tables Below:
| SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES |
||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
| March 31, |
June 30, |
|||
| 2013 |
2012 |
|||
| ASSETS |
||||
| Current Assets: |
||||
| Cash and cash equivalents |
$ |
18,531,950 |
$ |
9,530,531 |
| Restricted cash |
98,166,557 |
111,582,149 |
||
| Short-term investments |
- |
4,849,112 |
||
| Trade accounts receivable, net of allowance for doubtful accounts of $598,197 and $1,306,099 |
4,133,807 |
7,023,880 |
||
| Notes receivable |
210,446 |
475,112 |
||
| Other receivables and prepayments, net of allowance for doubtful accounts of $331,090 and |
2,635,181 |
4,275,817 |
||
| Advances to suppliers, unrelated parties, net of allowance for doubtful accounts of $393,740 and |
17,460,469 |
27,446,626 |
||
| Advances to suppliers, related parties, net of right to offset |
166,450,458 |
121,884,833 |
||
| Inventories, net |
64,948,147 |
50,432,279 |
||
| Deferred tax assets |
757,931 |
709,688 |
||
| Total Current Assets |
373,294,946 |
338,210,027 |
||
| Non-current Assets: |
||||
| Advances for purchase of long term assets |
15,571,485 |
15,001,088 |
||
| Property, plant and equipment, net |
73,047,748 |
77,231,273 |
||
| Intangible assets, net |
6,560,403 |
3,082,877 |
||
| Equity method investments |
6,442,406 |
- |
||
| Total Non-current Assets |
101,622,042 |
95,315,238 |
||
| TOTAL ASSETS |
$ |
474,916,988 |
$ |
433,525,265 |
| LIABILITIES AND STOCKHOLDERS¡¯ EQUITY |
||||
| Current Liabilities: |
||||
| Short-term loans |
$ |
130,835,913 |
$ |
111,166,838 |
| Long-term loans, current portion |
14,066,114 |
27,762,975 |
||
| Accounts payable, unrelated parties |
67,633,671 |
57,079,617 |
||
| Accounts payable, related parties |
13,486,508 |
- |
||
| Other payables and accrued expenses |
7,725,033 |
8,820,064 |
||
| Advances from customers |
14,229,545 |
7,924,812 |
||
| Warrant liabilities |
179,357 |
47,404 |
||
| Total Current Liabilities |
248,156,141 |
212,801,710 |
||
| Long-Term Loans |
2,319,979 |
8,490,772 |
||
| Total Liabilities |
250,476,120 |
221,292,482 |
||
| Commitments and contingencies |
||||
| Stockholders' Equity |
||||
| Undesignated preferred stock - $0.001 par value; 1,000,000 shares authorized; nil shares |
- |
|||
| Common stock - $0.001 par value; authorized: 500,000,000 shares as of March 31, 2013 and June 30, 2012; issued: 40,865,602 and 40,805,602 shares as of March 31, 2013 and June 30, 2012. |
40,865 |
40,805 |
||
| Additional paid-in capital |
41,455,713 |
41,344,306 |
||
| Statutory reserves |
18,100,361 |
18,100,361 |
||
| Retained earnings |
128,220,435 |
117,732,738 |
||
| Accumulated other comprehensive income |
37,275,003 |
35,622,241 |
||
| Less: Treasury stock, at cost, 590,838 and 544,477 shares as of March 31, 2013 and June 30, |
(651,509) |
(607,668) |
||
| Total Stockholders' Equity |
224,440,868 |
212,232,783 |
||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
474,916,988 |
$ |
433,525,265 |
| SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES |
||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME |
||||||||||
| For The Three Months Ended |
For The Nine Months Ended |
|||||||||
| March 31, |
March 31, |
|||||||||
| 2013 |
2012 |
2013 |
2012 |
|||||||
| Revenue: |
||||||||||
| Revenue from unrelated parties |
$ |
84,994,226 |
$ |
77,293,342 |
$ |
280,587,798 |
$ |
258,760,839 |
||
| Revenue from related parties |
54,554,833 |
32,641,713 |
134,014,810 |
89,264,631 |
||||||
| 139,549,059 |
109,935,055 |
414,602,608 |
348,025,470 |
|||||||
| Cost of Revenue |
||||||||||
| Cost of revenue from unrelated parties |
(77,127,522) |
(71,781,784) |
(255,617,288) |
(237,734,303) |
||||||
| Cost of revenue from related parties |
(51,488,687) |
(30,282,224) |
(127,296,140) |
(81,019,969) |
||||||
| (128,616,209) |
(102,064,008) |
(382,913,428) |
(318,754,272) |
|||||||
| Gross Profit |
10,932,850 |
7,871,047 |
31,689,180 |
29,271,198 |
||||||
| Operating Expenses: |
||||||||||
| Selling expenses |
(1,417,039) |
(874,867) |
(5,709,207) |
(5,289,139) |
||||||
| General and administrative expenses |
(2,490,828) |
(2,272,424) |
(7,170,901) |
(7,776,539) |
||||||
| Total Operating Expenses |
(3,907,867) |
(3,147,291) |
(12,880,108) |
(13,065,678) |
||||||
| Income from Operations |
7,024,983 |
4,723,756 |
18,809,072 |
16,205,520 |
||||||
| Other Incomes/(Expenses): |
||||||||||
| Interest income |
967,706 |
368,561 |
2,989,756 |
1,046,976 |
||||||
| Interest expense |
(2,579,181) |
(3,484,944) |
(8,453,617) |
(7,652,460) |
||||||
| Changes in fair value of warrant liabilities |
(146,476) |
56,502 |
(131,953) |
288,968 |
||||||
| Income from equity method investments |
50,998 |
- |
225,444 |
- |
||||||
| Other income |
159,520 |
85,323 |
318,658 |
105,273 |
||||||
| Other expense |
72,639 |
79,488 |
(594,885) |
(779,179) |
||||||
| Total Other Expenses, net |
(1,474,794) |
(2,895,070) |
(5,646,597) |
(6,990,422) |
||||||
| Income Before Taxes |
5,550,189 |
1,828,686 |
13,162,475 |
9,215,098 |
||||||
| Income tax (expense)/benefit |
(1,670,169) |
(553,515) |
(2,674,778) |
(153,186) |
||||||
| Net Income |
$ |
3,880,020 |
$ |
1,275,171 |
$ |
10,487,697 |
$ |
9,061,912 |
||
| Other Comprehensive Income: |
||||||||||
| Foreign currency translation adjustment |
1,426,292 |
1,444,247 |
1,652,762 |
5,306,694 |
||||||
| Comprehensive Income |
$ |
5,306,312 |
$ |
2,719,418 |
$ |
12,140,459 |
$ |
14,368,606 |
||
| Basic Earnings per Share |
$ |
0.10 |
$ |
0.03 |
$ |
0.26 |
$ |
0.22 |
||
| Diluted Earnings per Share |
$ |
0.10 |
$ |
0.03 |
$ |
0.26 |
$ |
0.22 |
||
| Basic Weighted Average Shares Outstanding |
40,267,431 |
40,345,780 |
40,237,142 |
40,531,461 |
||||||
| Diluted Weighted Average Shares Outstanding |
40,267,431 |
40,345,780 |
40,237,142 |
40,531,461 |
||||||
| SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES |
||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
| For The Nine Months Ended |
||||
| March 31, |
||||
| 2013 |
2012 |
|||
| Cash Flows from Operating Activities: |
||||
| Net income |
$ |
10,487,697 |
$ |
9,061,912 |
| Adjustments to reconcile net income to net cash used in operating activities |
||||
| Depreciation and amortization |
6,628,874 |
6,492,260 |
||
| Reversal for doubtful accounts |
(711,175) |
- |
||
| Stock based compensation |
111,467 |
93,602 |
||
| Foreign currency exchange gain |
(145,186) |
(392,608) |
||
| Loss on disposal of property, plant and equipment |
81,228 |
72,892 |
||
| Interest income from short-term investments carried at amortized cost |
(30,944) |
- |
||
| Income from equity method investments |
(225,444) |
- |
||
| Deferred income taxes |
(43,516) |
10,738 |
||
| Changes in fair value of warrant liabilities |
131,953 |
(288,968) |
||
| Changes in current assets and liabilities: |
||||
| Restricted cash for notes payable |
(14,483,765) |
(50,475,674) |
||
| Trade accounts receivable |
3,635,648 |
(8,291,096) |
||
| Notes receivable |
266,610 |
(350,930) |
||
| Other receivable and prepayments |
1,683,384 |
264,671 |
||
| Advances to suppliers, unrelated parties |
10,095,647 |
4,718,122 |
||
| Advances to suppliers, related parties |
(43,541,260) |
13,630,723 |
||
| Inventories |
(14,134,383) |
(36,851,431) |
||
| Accounts payable, unrelated parties |
11,033,692 |
54,402,504 |
||
| Accounts payable, related parties |
13,431,063 |
- |
||
| Other payables and accrued expenses |
(1,133,841) |
(1,133,980) |
||
| Other payables, related parties |
- |
(608,674) |
||
| Advances from customers |
6,230,157 |
(1,619,409) |
||
| Net Cash Used In Operating Activities |
(10,632,094) |
(11,265,346) |
||
| Cash Flows from Investing Activities: |
||||
| Purchase of property, plant and equipment, net of value added tax refunds received |
(3,818,123) |
(13,558,760) |
||
| Proceeds from disposal of property, plant and equipment |
529,721 |
26,025 |
||
| Purchase of intangible assets |
(3,565,706) |
- |
||
| Equity method investments |
(6,190,476) |
- |
||
| Payments for short-term investments |
- |
(4,755,262) |
||
| Proceeds from sale of short-term investments |
4,891,063 |
- |
||
| Net Cash Used In Investing Activities |
(8,153,521) |
(18,287,997) |
||
| Cash Flows from Financing Activities: |
||||
| Proceeds from loans |
117,233,696 |
143,934,932 |
||
| Repayment of loans |
(118,055,195) |
(114,432,824) |
||
| Restricted cash for bank loans |
28,556,205 |
(15,621,037) |
||
| Payments on repurchase of common stock |
(43,841) |
(534,269) |
||
| Net Cash Provided by Financing Activities |
27,690,865 |
13,346,802 |
||
| Effect of Exchange Rate Changes on Cash and Cash Equivalents |
96,169 |
425,014 |
||
| Net Change in Cash and Cash Equivalents |
9,001,419 |
(15,781,527) |
||
| Cash and Cash Equivalents at Beginning of Period |
9,530,531 |
21,324,931 |
||
| Cash and Cash Equivalents at End of Period |
$ |
18,531,950 |
$ |
5,543,404 |
| Supplemental Non-Cash Information: |
||||
| Offset of notes payable to related parties against receivable from related parties |
$ |
10,696,709 |
$ |
10,352,131 |
| Supplemental Cash Flow Information: |
||||
| Cash paid during the period for interest expense |
$ |
(7,106,565) |
$ |
(7,230,874) |
| Cash (paid)/received during the period for income tax |
$ |
(2,339,344) |
$ |
(476,495) |
SOURCE Sutor Technology Group Limited
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