Sutor Technology Group Limited Announces First Quarter of Fiscal Year 2012 Financial Results

CHANGSHU, China, Nov. 14, 2011 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (the "Company" or "Sutor") (Nasdaq: SUTR), a leading China-based non-state-owned manufacturer and distributor of high-end fine finished steel products and welded steel pipes used by a variety of downstream applications, today announced its unaudited financial results for the first quarter of fiscal year 2012 ended September 30, 2011.

Fiscal first quarter results highlights:

"We are pleased with our first quarter results as we achieved outstanding results despite unstable political and economic situations overseas and slowdown in economic growth in China during the past quarter," commented by Ms. Lifang Chen, Chief Executive Officer and Chairwoman of Sutor. "Once again our integrated production processes and diversified product portfolio enabled us to maintain stable growth when certain sectors of the Chinese economy were experiencing a difficult time. We are particularly pleased with the fact that our quarterly international sales were historically high. We believe that we are positioned to capitalize on our intensified marketing efforts when the global economy eventually recovers."

Ms. Chen continued, "We believe we have in place an achievable plan for near-term and mid-term growth. We will constantly evaluate rewards and risks to maintain sustainable growth.  The construction progress of our new cold-roll production line of 500,000 metric tons designed annual capacity is on track.  We have completed the construction of the workshop building and plan to start commercial operations in July 2012. We have been repurchasing our shares since the announcement of the program in September.  We take very seriously our responsibilities as a U.S. public company. We will continue to take measures to improve our corporate governance and evaluate all options to maximize shareholder value."

Revenue. For the three months ended September 30, 2011, revenue was $130.2 million compared to $101.9 million for the same period last year, an increase of approximately 27.8%. The increase was mainly attributable to the increased production capacity utilization and output of our 400,000 metric tons HDG production lines at Jiangsu Cold-Rolled which generated approximately $47.5 million for this quarter as compared to $27.0 million for the same period last year.  In addition, we also benefited from higher sales volume and higher prices for our PPGI products due to higher demand and raw material prices in this quarter which was partially offset by lower revenue from cold-rolled steel products as most of them were used internally for the production of our higher end products in the quarter ended on September 30, 2011.

On a geographic basis, revenue generated from outside of China was $24.8 million, or 19.1% of total revenue, for the three months ended September 30, 2011, as compared to $7.0 million, or 6.9% of total revenue, for the same period in 2010. The increase mainly resulted from our successful efforts to expand product penetration into new markets, increase brand recognition and foster acceptance of our products in the international markets.

Cost of revenue. Cost of revenue increased $25.7 million, or 27.5%, to $119.2 million in the three months ended September 30, 2011 from $93.5 million in the same period in 2010. As a percentage of revenue, cost of revenue decreased slightly to 91.6% in the three months ended September 30, 2011 from 91.7% in the same period last year.  We believe the increase in cost of revenue was generally in line with the increase in sales revenue.

Gross profit and gross margin. Gross profit increased $2.6 million to $11.0 million in the three months ended September 30, 2011 from $8.4 million in the same period in 2010. Gross profit as a percentage of revenue (gross margin) was 8.4% in the three months ended September 30, 2011, as compared to 8.3% in the same period in 2010.

Total operating expenses. Our total operating expenses increased approximately $2.3 million to $5.3 million in the three months ended September 30, 2011 from $3.0 million in the same period in 2010. As a percentage of revenue, our total operating expenses increased to 4.1% in the three months ended September 30, 2011 from 2.9% in the same period in 2010.

Selling expenses. Our selling expenses increased approximately $0.9 million to $2.3 million in the three months ended September 30, 2011, from $1.4 million in the same period in 2010. As a percentage of revenue, our selling expenses increased to 1.8% for the three months ended September 30, 2011, from 1.4% for the same period last year. The dollar and percentage increase of selling expenses was primarily due to the increased international sales which generally had relatively higher shipping costs than domestic sales.

General and administrative expenses. General and administrative expenses increased $1.3 million, or 81.3%, to $2.9 million, or 2.2% of the total revenue, in the three months ended September 30, 2011, from $1.6 million, or 1.6% of revenue, in the same period in 2010. Several factors contributed to the increased general and administrative expenses, including banking related fees related to a line of credit from an overseas financial institution, increased insurance premiums, and administrative and startup expenses associated with our subsidiary, Sutor Technology Co., Ltd.   Furthermore, the management expenses at the three other operating subsidiaries in this quarter were also higher than the same period last year due to overall inflationary environment in China.  

Provision for income taxes. Our provision for income taxes decreased $1.5 million as compared to $0.6 million in the same period last year primarily due to tax refunds. In the three months ended September 30, 2011, Changshu Huaye and Jiangsu Cold-Rolled received tax refunds of $0.3 million and $1.1 million, respectively.

Net income. Net income, without including the foreign currency translation adjustment, increased approximately $1.4 million, or 41.2%, to $4.8 million in the three months ended September 30, 2011, from $3.4 million in the same period in 2010, as a cumulative result of the above factors.

Liquidity and Capital Resources

As of September 30, 2011, our total short-term loans were approximately $110.3 million. We also had approximately $36.1 million under long-term notes payable. We had approximately $26.0 million cash and cash equivalents and $85.8 million restricted cash. In addition, we also had an unused line of credit with banks of approximately $15 million which entitled us to draw bank loans for general corporate purposes.  As of September 30, 2011, our current assets were approximately $369.9 million and current liabilities $213.3 million. The current ratio was approximately 1.7.  We believe that we have sufficient liquidity and capital resources to carry out normal operating activities for the remainder of fiscal year 2012.

Business Outlook

We maintain our anticipation that both revenue and net income of the Company will grow at a compound annual growth rate (CAGR) of approximately 25% to 35% for the next two fiscal years. Although Chinese GDP growth rate is expected to decline from approximately 9% this year to around 8% next year partially due to anticipated lower infrastructure spending next year, we believe that the benefits from our larger exposure to the growing consumer durables sector will offset the disadvantages that may be caused by our limited exposure to the construction sector.

Conference Call Information

Sutor's management will host an earnings conference call on Tuesday, November 15, 2011, at 9:00 a.m. eastern time. Listeners may access the call by dialing US: 1 877 847 0047, China: 800 876 5011, Hong Kong 852 3006 8101, access code: SUTR. A recording of the call will be available shortly after the call through December 14, 2011. Listeners may access it by dialing US: 1 866 572 7808, China: 800 876 5013, Hong Kong: 852 3012 8000, access code: 658119.

About Sutor Technology Group Limited

Sutor is a leading China-based non-state-owned manufacturer and distributor 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. These products are used for household appliances, solar water heaters, automobiles, information technology, construction, and other applications. Currently Sutor has three operating subsidiaries located in two provinces with 12 major production lines capable of processing approximately 2 million metric tons of steel products annually. To learn more about the company, please visit http://www.sutorcn.com/en/index.php.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements include, among others, those concerning our financial and business outlook in the next two years, our expectation regarding cash flow and liquidity, our new facility and capacity expansion, and its expected impact on the Company's business and financial performance, our expectations regarding the market for our existing products and new products, our expected financial performance and strategic and operational plans, 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 actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. 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. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements regarding future economic conditions or performance, uncertainties related to conducting business in China and the current global economic crisis on our business and on our customers' business, and any of the factors and risks mentioned in the "Risk Factors" sections of our Annual Report on Form 10-K for the year ended June 30, 2011 and subsequent SEC filings. 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:

Mr. Jason Wang, Director of IR
Sutor Technology Group Limited
Tel: +86-512-5268-0988    
Email: [email protected]

SOURCE Sutor Technology Group Limited

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED