Kingold Jewelry Reports Financial Results for The First Quarter 2019
Company to Hold Conference Call with Accompanying Slide Presentation at 8:30 a.m. ET on May 16, 2019
WUHAN, China, May 15, 2019 /PRNewswire/ -- Kingold Jewelry, Inc. ("Kingold" or "the Company") (NASDAQ: KGJI), one of China's leading manufacturers and designers of high quality 24-karat gold jewelry, ornaments and investment-oriented products, today announced its financial results for the first quarter ended March 31, 2019.
2019 First Quarter Financial Highlights (all results compared to prior year period)
- Net sales were approximately $453.5 million, compared to approximately $539.5 million in the prior year period.
- Processed a total of 22 metric tons of 24-karat gold products, compared to 23.3 tons in the first quarter 2018.
- Net income was approximately $6.4 million, or $0.10 per diluted share, compared to net income of approximately $13.2 million, or $0.20 per diluted share in the prior year period.
Outlook for 2019
- The Company reiterates its guidance of processing between 110 metric tons and 120 metric tons of 24-karat gold products in 2019.
Management Commentary
Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "In the first quarter of 2019, both of Kingold's operational and financial performances were affected by China's economic slowdown, which negatively impacted our customers' purchases of gold products and it was not until the end of the first quarter that the market gradually warmed up. Every time when Kingold encounters the impact from challenging environment, we have always maintained a positive attitude and focused on our product research and development. We believe in our ability of providing good quality products to meet consumer demand once the market picks up, which is a key strength of Kingold."
2019 FIRST QUARTER OPERATIONAL REVIEW
Metric Tons of Gold Processed |
||||
Three Months Ended: |
||||
March 31, 2019 |
March 31, 2018 |
|||
Volume |
% of Total |
Volume |
% of Total |
|
Branded* |
11.2 |
50.9% |
13.0 |
55.8% |
Customized** |
10.8 |
49.1% |
10.3 |
44.2% |
Total |
22.0 |
100% |
23.3 |
100% |
* |
Branded Production: |
The Company acquires gold from the Shanghai Gold Exchange to produce branded products. |
** |
Customized Production: |
Clients who purchase customized products supply gold to the Company for processing. |
For the three months ended March 31, 2019, the Company processed a total of 22.0 metric tons of gold, of which branded production was 11.2 metric tons, representing 50.9% of total gold processed, and customized production was 10.8 metric tons, representing 49.1% of total gold processed in the first quarter of 2019. In the first quarter of 2018, the Company processed a total of 23.3 metric tons, of which branded production was 13.0 metric tons, or 55.8% of the total gold processed, and customized production was 10.3 metric tons, or 44.2% of total gold processed.
2019 FIRST QUARTER FINANCIAL REVIEW
Net Sales
Net sales for the three months ended March 31, 2019 was $453.5 million, a decrease of approximately $86.0 million, or 15.9%, from net sales of $539.5 million for the three months ended March 31, 2018.
The decrease in net sales was mainly due to the decrease in sales volume of 1.3 metric tons resulting in a revenue decrease of approximately $73.4 million, the currency translation loss of approximately $29.5 million, offset by the revenue increase of approximately $17.0 million as a result of the increase in average unit selling price. The average unit selling price for brand production sales increased from RMB 258.32 per gram in three months ended March 31, 2018 to RMB 266.65 per gram in three months ended March 31, 2019. The average unit selling price for customized production sales increased from RMB 6.84 per gram in three months ended March 31, 2018 to RMB 6.96 per gram in three months ended March 31, 2019.
Gross Profit
Gross profit for the three months ended March 31, 2019 was $55.3 million, compared to $64.2 million for the same period in 2018.
The decrease in gross profit was mainly due to the decrease in sales volume, and the increase in unit cost of raw materials used in production reduced gross profit for the three months ended March 31, 2019 as compared to the same period of 2018. The unit cost of branded production sales was RMB 239.7 per gram for the three months ended March 31, 2019 while the unit cost of branded production sales was RMB 232.12 per gram for three months ended March 31, 2018. The unit cost of customized production sales was RMB 0.34 per gram for the three months ended March 31, 2019 while the unit cost of customized production sales was RMB 0.31 per gram for three months ended March 31, 2018.
Gross Margin
The Company's gross margin was 12.2% for the three months ended March 31, 2019, compared to 11.9% in the prior year period.
The increase in gross margin was mainly due to the increased average selling price of branded production and customized production sales. The average selling price of branded production was RMB 266.65 per gram for the three months ended March 31, 2019, increased by RMB 8.33 or 3.2%, from RMB 258.32 per gram for the same period in 2018. The average selling price of customized production sales was RMB 6.96 per gram for the three months ended March 31, 2019, increased by RMB 0.12, or 1.7%, from RMB 6.84 per gram for the three months ended March 31, 2018 to RMB 6.96 per gram for the three months ended March 31, 2019.
Net Income
Net income for the three months ended March 31, 2018 was $6.4 million, or $0.10 per diluted share based on 66.1 million weighted average diluted shares outstanding, compared to net income of $13.2 million, or $0.20 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior-year period.
Balance Sheet and Cash Flow
(in millions except for percentages) |
3/31/2019 |
12/31/2018 |
% Changed |
Cash |
$ 1.0 |
$ 0.23 |
335% |
Inventories |
$ 163.8 |
$ 127.0 |
29% |
Working Capital |
$ 919.8 |
$ 837.3 |
9.9% |
Stockholders' Equity |
$ 632.0 |
$ 638.3 |
(1%) |
Net cash used in operating activities was $96.7 million for the year ended March 31, 2019, compared with net cash provided by operating activities of $211.4 million for the same period in 2018. The decrease of operating cash flows was mainly due to the increase in gold purchases of approximately $33.5 million in order to meet the production demand, the increased gold purchases of approximately $55.8 million in order to pledge such gold as collateral with various financial institutions to obtain additional loans, and the increase in value added tax receivable of $11.7 million and a decrease in income tax payable of approximately $1.2 million and decrease in other tax payable by approximately $2.6 million.
Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories. Other factors that may vary significantly include accounts payable, purchases of gold and income taxes. Looking forward, the Company expects the net cash that it generates from operating activities to continue to fluctuate as the Company's inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger or smaller quantities of raw materials. These fluctuations could cause net cash from operating activities to decrease, even if Kingold's net income grows as the Company continue to expand. Although the Company expects that net cash from operating activities will increase over the long term, it cannot predict how these fluctuations will affect its cash flow in any particular quarter.
OUTLOOK FOR 2019
Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company reiterates its expectation that gold processed will be between 110 metric tons and 120 metric tons during 2019.
Conference Call Details
Kingold also announced that it will discuss these financial results in a conference call on May 16, 2019, at 8:30 a.m. ET. The dial-in numbers are:
Live Participant Dial In (Toll Free): |
+1-877-407-9038 |
Live Participant Dial In (International): |
+1-201-493-6742 |
The conference call will also be webcast live. To listen to the call, please go to the Investor Relations section of Kingold's website at www.kingoldjewelry.com, or click on the following link: https://78449.themediaframe.com/dataconf/productusers/kgji/mediaframe/30429/indexl.html. The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.
About Kingold Jewelry, Inc.
Kingold Jewelry, Inc. (NASDAQ: KGJI), centrally located in Wuhan City, one of China's largest cities, was founded in 2002 and today is one of China's leading designers and manufacturers of high quality 24-karat gold jewelry, ornaments, and investment-oriented products. The Company sells its products both directly to retailers and through major distributors across China. Kingold has received numerous industry awards and has been a member of the Shanghai Gold Exchange since 2003. For more information, please visit www.kingoldjewelry.com.
Business Risks and Forward-Looking Statements
This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. You can identify these forward -looking statements by words such as "expects," "believe," "project," "anticipate," or similar expressions. The forward-looking statements in this release include statements regarding Kingold's outlook for gold processing and investment in 2019. Forward-looking statements are subject to a number of risks, including those contained in Kingold's SEC filings available at www.sec.gov, including Kingold's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Kingold undertakes no obligation to update or revise any forward-looking statements for any reason.
COMPANY CONTACT
Kingold Jewelry, Inc. Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
[email protected]
INVESTOR RELATIONS
The Equity Group Inc.
Katherine Yao, Senior Associate
Phone: +86-10-6587-6435
[email protected]
KINGOLD JEWELRY, INC. |
||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME |
||||||
(IN US DOLLARS) |
||||||
(UNAUDITED) |
||||||
For the three months ended March 31, |
||||||
2019 |
2018 |
|||||
NET SALES |
$ |
453,539,100 |
$ |
539,524,055 |
||
COST OF SALES |
||||||
Cost of sales |
(397,991,894) |
(474,965,584) |
||||
Depreciation |
(245,740) |
(317,665) |
||||
Total cost of sales |
(398,237,634) |
(475,283,249) |
||||
GROSS PROFIT |
55,301,466 |
64,240,806 |
||||
OPERATING EXPENSES |
||||||
Selling, general and administrative expenses |
2,618,192 |
2,477,788 |
||||
Stock compensation expenses |
5,364 |
5,364 |
||||
Depreciation |
82,941 |
108,829 |
||||
Amortization, other |
2,801 |
2,973 |
||||
Lease expense |
21,338 |
67,566 |
||||
Total operating expenses |
2,730,636 |
2,662,520 |
||||
INCOME FROM OPERATIONS |
52,570,830 |
61,578,286 |
||||
OTHER INCOME (EXPENSES) |
||||||
Interest Income |
338,613 |
376,001 |
||||
Interest expense, including amortization of financing costs of $2,322,964 and $2,255,066 |
(44,300,105) |
(44,116,880) |
||||
Total other expenses, net |
(43,961,492) |
(43,740,879) |
||||
INCOME FROM OPERATIONS BEFORE TAXES |
8,609,338 |
17,837,407 |
||||
INCOME TAX PROVISION (BENEFIT) |
||||||
Current |
3,762,171 |
3,257,474 |
||||
Deferred |
(1,533,412) |
1,345,009 |
||||
Total income tax provision |
2,228,759 |
4,602,483 |
||||
NET INCOME (LOSS) |
6,380,579 |
13,234,924 |
||||
OTHER COMPREHENSIVE INCOME (LOSS) |
||||||
Unrealized loss related to investments in gold, net of tax |
$ |
(29,416,040) |
$ |
(18,622,697) |
||
Total foreign currency translation gain |
16,651,738 |
13,819,701 |
||||
Total Other comprehensive loss |
$ |
(12,764,302) |
$ |
(4,802,996) |
||
COMPREHENSIVE INCOME (LOSS) |
$ |
(6,383,723) |
$ |
8,431,928 |
||
Earnings per share |
||||||
Basic and diluted |
$ |
0.10 |
$ |
0.20 |
||
Weighted average number of shares |
||||||
Basic |
66,113,502 |
66,113,502 |
||||
Diluted |
66,113,502 |
66,541,351 |
||||
KINGOLD JEWELRY, INC. |
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
(IN U.S. DOLLARS) |
|||||
(UNAUDITED) |
|||||
March 31, |
December 31, |
||||
2019 |
2018 |
||||
ASSETS |
(Unaudited) |
||||
Cash |
$ |
926,028 |
$ |
233,391 |
|
Restricted cash |
15,705,478 |
4,798,185 |
|||
Accounts receivable |
- |
451,059 |
|||
Inventories |
163,848,955 |
127,034,673 |
|||
Investments in gold |
2,174,076,950 |
1,593,557,391 |
|||
Value added tax recoverable |
277,741,555 |
259,582,324 |
|||
Prepaid expenses and other current assets |
381,376 |
87,590 |
|||
Total current assets |
2,632,680,342 |
1,985,744,613 |
|||
Property and equipment, net |
5,104,757 |
5,395,330 |
|||
Restricted cash |
1,660,633 |
7,766,372 |
|||
Investments in gold |
232,428,147 |
700,225,896 |
|||
Land use right |
402,673 |
395,719 |
|||
Other noncurrent assets |
519,295 |
285,768 |
|||
Total long-term assets |
240,115,505 |
714,069,085 |
|||
TOTAL ASSETS |
$ |
2,872,795,847 |
$ |
2,699,813,698 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
CURRENT LIABILITIES |
|||||
Short term loans |
$ |
1,600,320,041 |
$ |
1,034,947,774 |
|
Related party loan |
74,494,554 |
72,699,779 |
|||
Due to related party |
4,164,872 |
3,976,742 |
|||
Income tax payable |
15,443,613 |
18,504,197 |
|||
Other taxes payable |
2,008,975 |
2,577,102 |
|||
Accrued expenses and other payables |
16,457,625 |
15,749,564 |
|||
Total current liabilities |
1,712,889,680 |
1,148,455,158 |
|||
Deferred tax liabilities |
12,809,830 |
24,218,911 |
|||
Other long-term liability |
163,887 |
- |
|||
Related party loans |
348,912,801 |
373,327,862 |
|||
Long term loans |
166,063,261 |
515,477,020 |
|||
TOTAL LIABILITIES |
$ |
2,240,839,459 |
$ |
2,061,478,951 |
|
COMMITMENTS AND CONTINGENCIES |
|||||
SHAREHOLDERS' EQUITY |
|||||
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of March 31, |
- |
- |
|||
Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding |
66,113 |
66,113 |
|||
Additional paid-in capital |
224,298,271 |
224,292,907 |
|||
Retained earnings |
|||||
Unappropriated |
359,593,904 |
353,213,325 |
|||
Appropriated |
967,543 |
967,543 |
|||
Accumulated other comprehensive income, net of tax |
47,030,557 |
59,794,859 |
|||
Total Shareholders' Equity |
631,956,388 |
638,334,747 |
|||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
2,872,795,847 |
$ |
2,699,813,698 |
|
KINGOLD JEWELRY, INC. |
||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
||||||
(IN US DOLLARS) |
||||||
(UNAUDITED) |
||||||
For the three months ended March 31, |
||||||
2019 |
2018 |
|||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||
Net income |
$ |
6,380,579 |
$ |
13,234,924 |
||
Adjusted to reconcile net income to cash provided by (used in) operating activities: |
||||||
Depreciation |
484,271 |
426,494 |
||||
Amortization of intangible assets |
2,801 |
2,973 |
||||
Share based compensation for services and warrants expense |
5,364 |
5,364 |
||||
Amortization of debt origination costs included in interest expense |
2,322,964 |
2,255,066 |
||||
Deferred tax provision (benefit) |
(1,533,412) |
1,345,009 |
||||
Changes in operating assets and liabilities |
||||||
Accounts receivable |
459,688 |
786,072 |
||||
Inventories |
(89,285,287) |
155,338,325 |
||||
Prepaid expenses and other current assets |
(515,299) |
(608,086) |
||||
Value added tax recoverable |
(11,687,064) |
37,013,840 |
||||
Accrued expenses and other payables |
491,789 |
63,818 |
||||
Income tax payable |
(1,213,932) |
2,020,558 |
||||
Other taxes payable |
(2,626,402) |
(439,118) |
||||
Net cash provided by (used in) operating activities |
(96,713,940) |
211,445,239 |
||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||
Purchases of property and equipment |
(62,800) |
(375,289) |
||||
Net cash used in investing activities |
(62,800) |
(375,289) |
||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||
Proceeds from short term loans |
238,565,607 |
- |
||||
Repayments of short term loans |
(168,037,342) |
(239,183,259) |
||||
Proceeds from long term loans |
105,890,198 |
220,188,104 |
||||
Repayments of related party loan – short term |
- |
(235,915,825) |
||||
Proceeds from related party loan – long term |
10,076,313 |
335,000,472 |
||||
Repayments of related party loan – long term |
(43,525,506) |
(290,176,465) |
||||
Payment of debt origination fees |
(2,200,489) |
- |
||||
Borrowings from related party |
196,771 |
485,179 |
||||
Net cash provided by (used in) financing activities |
140,965,552 |
(209,601,794) |
||||
EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH |
(38,694,621) |
(2,772,527) |
||||
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH |
5,494,191 |
(1,304,371) |
||||
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD |
12,797,948 |
17,924,397 |
||||
CASH AND RESTRICTED CASH, END OF PERIOD |
$ |
18,292,139 |
$ |
16,620,026 |
||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||
Cash paid for interest expense |
$ |
41,921,367 |
$ |
43,192,416 |
||
Cash paid for income tax |
$ |
6,974,183 |
$ |
1,236,915 |
||
NON-CASH INVESTING AND FINANCING ACTIVITIES |
||||||
Investments in gold transferred to inventories |
$ |
176,670,960 |
$ |
333,328,678 |
||
Inventories transferred to investments in gold |
$ |
271,682,171 |
$ |
303,391,045 |
||
Unrealized loss on investments in gold |
$ |
(29,416,040) |
$ |
(18,622,697) |
||
Right-of-use assets obtained in exchange for operating lease obligations |
$ |
226,472 |
$ |
- |
||
SOURCE Kingold Jewelry, Inc.
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