Attached files
| file | filename |
|---|---|
| 8-K - Sutor Technology Group LTD | v211142_8k.htm |
EXHIBIT 99.1
FOR
IMMEDIATE RELEASE
CONTACT: Mr.
Jason Wang
Tel:
+86-512-5268-0988
Sutor
Technology Group Limited
Changshu,
Jiangsu Province
People’s
Republic of China
http://www.sutorcn.com
NEWS
RELEASE
SUTOR
TECHNOLOGY GROUP LIMITED ANNOUNCES SECOND QUARTER FINANCIAL RESULTS OF FISCAL
YEAR 2011
CHANGSHU,
China, Feb 14/PRNewswire-Asia/ -- Sutor Technology Group Limited (the
“Company”, “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 second quarter of fiscal year 2011, ended December 31,
2010.
Overview
|
2QFY2011
|
2QFY2010
|
Change
|
||||||||||
|
Revenues
(million):
|
$ | 99.4 | $ | 115.2 |
-13.7
|
% | ||||||
|
Gross
profit (million):
|
$ | 9.5 | $ | 8.6 | 9.6 | % | ||||||
|
Gross
margin
|
9.5 | % | 7.5 | % | 26.7 | % | ||||||
|
Net
income (million):
|
$ | 2.9 | $ | 4.0 | -27.2 | % | ||||||
|
EPS
|
$ | 0.07 | $ | 0.11 | -36.4 | % | ||||||
“Our
gross profit and gross margin increased in the second quarter of fiscal year
2011 over the same period last year primarily as a result of a change in product
mix and our strategic decision to significantly reduce our lower-margin steel
trading business. During the quarter, we performed technological upgrades to our
production lines in an effort to produce higher value-added products. We believe
focusing on higher gross margin products will improve our competitive position
in the long run. During the quarter we also saw strength in our product prices
and higher average sale prices more than offset the increased cost of raw
materials. The decline in total revenue was primarily due to the strategic
reduction in our steel trading business. In addition, higher shipping costs on
international sales and increased G&A expenses reduced net income,” said Ms.
Chen, Chairwoman and CEO of Sutor.
“We
remain optimistic about the remainder of fiscal year 2011. In January, we
received approximately 10,000 tons of international sales orders as compared
with about 10,500 tons of such orders for the whole third quarter of FY2010. In
the second quarter of FY2011, Sutor was honored as a High-Tech Enterprise by
Jiangsu provincial government. This certification places Sutor among a selected
few value-added steel producers in China that won both government and market
recognition. Further, Sutor recently opened two new offices in metropolitan
Ningbo and Shanghai in an effort to attract talents, increase brand
recognition and better service our customers,” Ms. Chen further commented.
“As we continue our strategies of expanding sales channels, optimizing product
portfolio, enhancing research and development efforts, and improving brand
recognition, we believe we can capitalize on the ongoing industrial upgrading
and urbanization processes in China,” concluded Ms. Chen.
Second
Fiscal Quarter 2011 Financial Results
Revenues. Revenues were $99.4
million in the second fiscal quarter of 2011, compared to $115.2 million for the
same period last year, a decrease of $15.8 million, or approximately 13.7%. The
decrease was primarily attributable to significantly reduced steel trading
business at our subsidiary Ningbo Zhehua Heavy Steel Pipe Manufacturing Co.,
Ltd. During the quarter, revenue from Ningbo Zhehua decreased by approximately
$10.2 million from approximately $18.6 million for the three months ended
December 31, 2009 to $8.4 million for the three months ended December 31, 2010.
This accounted for most of our decreased revenues. In addition, lower production
volume for our PPGI products also contributed lower revenue. Our advanced
color-patterned PPGI products required sophisticated processing procedures and
hence more production time than in the same period of the previous fiscal year.
But the lower production volume was partially offset by higher average sales
prices. Our goal is to gradually transition to greater production of higher-end
and higher-margin products. We believe this strategy will improve our
competitiveness in the long run.
Gross profit. Gross profit
was $9.5 million in the second fiscal quarter of 2011, compared to $8.6 million
in the same period last year, an increase of $0.9 million, or approximately
9.6%. Gross margin increased to 9.5% for the second fiscal quarter of 2011 from
7.5% for the same period last year. The increased gross margin mainly resulted
from greater production of higher-margin products and significantly reduced
steel trading business. In addition, we also improved capacity utilization at
our subsidiary Jiangsu Cold-Rolled Technology Co., Ltd. (“Jiangsu Cold-Rolled”)
by moving more production from our subsidiary Changshu Huaye Steel Strip Co.,
Ltd. to Jiangsu Cold-Rolled as the HDG production lines at the latter are
newer and more efficient.
Selling expenses. Selling
expenses were $2.0 million for the second fiscal quarter of 2011 compared to
approximately $1.0 million in the same period last year, an increase of 89.8%.
The increase was mainly attributable to the increased shipping costs of our
international sales. Shipping and shipping related expenses at Ningbo Zhehua
were approximately $1.2 million for the three months ended December 31, 2010 as
compared to approximately $0.08 million for the same period last
year.
General and administrative
expenses. General and administrative expenses were $1.7 million in the
second fiscal quarter of 2011, compared to $1.2 million in the same period last
year, an increase of $0.5 million, or approximately 44.3%. The increase was
primarily due to the opening of two new offices located in metropolitan Ningbo
and Shanghai in an effort to attract talents, increase brand recognition and
improve customer services, attending international trade shows, increased
allowance for bad debt in the second fiscal quarter of 2011, and reversing of
bad debt allowance in the second fiscal quarter of 2010.
Income from operations.
Income from operations was $5.8 million in the second fiscal quarter of 2011
compared to $6.4 million in the same period last year, a decrease of $0.6
million, or approximately 10.0%.
Interest expenses. Interest
expense increased approximately $1.0 million to about $2.3 million for the three
months ended December 31, 2010, from approximately $1.3 million for the same
period last year. As a percentage of revenue, our interest expenses
increased to 2.3% for the three months ended December 31, 2010, from 1.1% for
the same period last year. Interest expenses consist of interest expenses
on bank loans and expenses on discounting bank acceptance notes. The amount
increase was mainly due to the higher cost of discounting bank acceptance notes
during the quarter. The interest expenses on bank loans remained relatively
stable.
Net income. Net income was
$2.9 million in the second quarter of fiscal 2011, compared to $4.0 million in
the same period last year, a decrease of $1.1 million, or approximately
27.2%.
Financial
Condition
As of
December 31, 2010, the Company had cash and cash equivalents of $9.1
million plus $45.0 million in restricted cash and working capital of $110.7
million. Stockholders’ equity increased 7.0% to $182.8 million, compared to
$170.8 million as of June 30, 2010. The management expects to have sufficient
capital for normal operations at its current level for the remainder of
fiscal year 2011.
Conference
Call Information
Sutor’s
management will host an earnings conference call today, February 14, 2011,
at 8:30 a.m. Eastern time. Listeners may access the call by dialing US:
1-877-847-0047, or 1-212-444-0133; China: 800-876 -5011, passcode: SUTR. A
recording of the call will be available shortly after the call through
March 16, 2011. Listeners may access it by dialing US: 1-866-572-7808,
China: 800-876-5013, HK: 852-3012-8000, access code:
643117.
Functional
Currency and Translating Press Release
The
functional currency of the Company is the Chinese Yuan Renminbi (“RMB”);
however, the accompanying financial information has been expressed in US Dollars
(“USD”). The consolidated balance sheets have been translated
into USD at the exchange rates prevailing at each balance sheet
date. The 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
(Nasdaq: SUTR) is 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. 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 ability to capitalize on China’s
industrial upgrading and urbanization processes, 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, 2010, and other risks mentioned in our
other reports filed with the Securities and Exchange Commission, or
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:
Mr. Jason
Wang, Director of IR
Sutor
Technology Group Limited
Tel:
+86-512-5268-0988
Email:
investor_relations@sutorcn.com
SUTOR
TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
December
31,
|
June
30,
|
|||||||
|
2010
|
2010
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 9,116,800 | $ | 13,336,736 | ||||
|
Restricted
cash
|
44,949,938 | 48,315,962 | ||||||
|
Trade
accounts receivable, net of allowance for doubtful accounts of $470,763
and $498,620, respectively
|
4,667,287 | 10,913,736 | ||||||
|
Other
receivables and prepayment
|
1,322,864 | 929,507 | ||||||
|
Advances
to suppliers-related parties
|
116,546,258 | 96,776,181 | ||||||
|
Advances
to suppliers, net of allowance of $533,988 and $542,490,
respectively
|
11,830,691 | 8,304,246 | ||||||
|
Inventory,
net of allowance for obsolescence of $105,065 and $102,028,
respectively
|
40,463,754 | 40,179,358 | ||||||
|
Notes
receivable
|
887,691 | 73,437 | ||||||
|
Deferred
income taxes
|
337,147 | 329,414 | ||||||
|
|
|
|||||||
|
Total
Current Assets
|
230,122,430 | 219,158,577 | ||||||
|
Property, Plant and Equipment,
net of accumulated depreciation of $30,477,143 and $25,914,352,
respectively
|
69,134,049 | 70,018,522 | ||||||
|
Intangible Assets, net
of accumulated amortization of $462,657 and $415,178,
respectively
|
3,049,527 | 2,995,488 | ||||||
|
|
|
|||||||
|
TOTAL
ASSETS
|
$ | 302,306,006 | $ | 292,172,587 | ||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
|
Current
Liabilities:
|
||||||||
|
Accounts
payable
|
$ | 12,627,409 | $ | 23,954,009 | ||||
|
Advances
from customers
|
11,250,649 | 6,769,481 | ||||||
|
Other
payables and accrued expenses
|
4,002,371 | 4,688,324 | ||||||
|
Other
payables - related parties
|
471,884 | 352,495 | ||||||
|
Short-term
notes payable
|
90,507,255 | 82,128,484 | ||||||
|
Short-term
notes payable - related parties
|
604,979 | 587,492 | ||||||
|
|
|
|||||||
|
Total
Current Liabilities
|
119,464,547 | 118,480,285 | ||||||
|
Long-Term
Notes Payable
|
— | 2,859,995 | ||||||
|
Total
Liabilities
|
119,464,547 | 121,340,280 | ||||||
|
Stockholders'
Equity
|
||||||||
|
Undesignated
preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares
outstanding
|
— | — | ||||||
|
Common
stock - $0.001 par value; 500,000,000 shares authorized, 40,715,602 shares
outstanding
|
40,715 | 40,715 | ||||||
|
Additional
paid-in capital
|
42,528,318 | 42,465,581 | ||||||
|
Statutory
reserves
|
12,629,151 | 12,629,151 | ||||||
|
Retained
earnings
|
102,510,577 | 96,164,928 | ||||||
|
Accumulated
other comprehensive income
|
25,132,698 | 19,531,932 | ||||||
|
Total
Stockholders' Equity
|
182,841,459 | 170,832,307 | ||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 302,306,006 | $ | 292,172,587 | ||||
SUTOR
TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
AND
COMPREHENSIVE INCOME
(Unaudited)
|
For
The Three Months Ended
|
For
The Six Months Ended
|
|||||||||||||||
|
December
31
|
December
31
|
|||||||||||||||
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
|
Revenue:
|
||||||||||||||||
|
Revenue
|
$ | 55,720,704 | $ | 55,735,197 | $ | 95,280,863 | $ | 112,539,762 | ||||||||
|
Revenue
from related parties
|
43,702,411 | 59,439,545 | 106,089,348 | 126,443,302 | ||||||||||||
| 99,423,115 | 115,174,742 | 201,370,211 | 238,983,064 | |||||||||||||
|
Cost
of Revenue
|
||||||||||||||||
|
Cost
of revenue
|
50,290,654 | 50,554,335 | 86,037,699 | 104,885,247 | ||||||||||||
|
Cost
of revenue from related party sales
|
39,677,905 | 55,993,413 | 97,442,396 | 121,062,335 | ||||||||||||
| 89,968,559 | 106,547,748 | 183,480,095 | 225,947,582 | |||||||||||||
|
Gross
Profit
|
9,454,556 | 8,626,994 | 17,890,116 | 13,035,482 | ||||||||||||
|
Operating
Expenses:
|
||||||||||||||||
|
Selling
expense
|
1,982,635 | 1,044,382 | 3,363,113 | 2,648,478 | ||||||||||||
|
General
and administrative expense
|
1,720,113 | 1,192,212 | 3,363,258 | 2,486,427 | ||||||||||||
|
Total
Operating Expenses
|
3,702,748 | 2,236,594 | 6,726,371 | 5,134,905 | ||||||||||||
|
Income
from Operations
|
5,751,808 | 6,390,400 | 11,163,745 | 7,900,577 | ||||||||||||
|
Other
Income (Expense):
|
||||||||||||||||
|
Interest
income
|
248,402 | 102,767 | 437,715 | 583,339 | ||||||||||||
|
Other
income
|
99,255 | 47,161 | 121,292 | 366,964 | ||||||||||||
|
Interest
expense
|
(2,335,293 | ) | (1,268,151 | ) | (3,870,103 | ) | (2,615,049 | ) | ||||||||
|
Other
expense
|
(209,349 | ) | (82,689 | ) | (275,063 | ) | (322,278 | ) | ||||||||
|
Total
Other Income (Expense)
|
(2,196,985 | ) | (1,200,912 | ) | (3,586,159 | ) | (1,987,024 | ) | ||||||||
|
Income
Before Taxes
|
3,554,823 | 5,189,488 | 7,577,586 | 5,913,553 | ||||||||||||
|
Provision
for income taxes
|
(621,742 | ) | (1,162,339 | ) | (1,231,937 | ) | (1,385,728 | ) | ||||||||
|
Net
Income
|
$ | 2,933,081 | $ | 4,027,149 | $ | 6,345,649 | $ | 4,527,825 | ||||||||
|
|
|
|
|
|||||||||||||
|
Basic
and Diluted Earnings per Share
|
$ | 0.07 | $ | 0.11 | $ | 0.16 | $ | 0.12 | ||||||||
|
|
|
|
|
|||||||||||||
|
Basic
and Diluted Weighted Shares Outstanding
|
40,715,602 | 37,955,602 | 40,715,602 | 37,955,602 | ||||||||||||
|
Net
Income
|
$ | 2,933,081 | $ | 4,027,149 | $ | 6,345,649 | $ | 4,527,825 | ||||||||
|
Foreign
currency translation adjustment
|
2,523,968 | 16,635 | 5,600,766 | 193,424 | ||||||||||||
|
Comprehensive
Income
|
$ | 5,457,049 | $ | 4,043,784 | $ | 11,946,415 | $ | 4,721,249 | ||||||||
SUTOR
TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
For
The Six Months Ended
|
||||||||
|
December
31
|
||||||||
|
2010
|
2009
|
|||||||
|
Cash
Flows from Operating Activities:
|
||||||||
|
Net
income
|
$ | 6,345,649 | $ | 4,527,825 | ||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||
|
Depreciation
and amortization
|
3,784,283 | 3,407,563 | ||||||
|
Deferred
income taxes
|
2,037 | 108,960 | ||||||
|
Foreign
currency exchange loss
|
23,198 | — | ||||||
|
Stock
based compensation
|
62,737 | — | ||||||
|
Gain
on sale of assets
|
(4,710 | ) | — | |||||
|
Changes
in current assets and liabilities:
|
||||||||
|
Trade
accounts receivable, net
|
6,424,518 | 7,570,593 | ||||||
|
Other
receivables and prepayment
|
(359,606 | ) | 33,099 | |||||
|
Advances
to suppliers - related parties
|
(16,321,928 | ) | (11,259,630 | ) | ||||
|
Advances
to suppliers
|
(3,224,708 | ) | 13,689,581 | |||||
|
Inventory
|
896,374 | 2,941,681 | ||||||
|
Accounts
payable
|
(11,839,274 | ) | (6,173,319 | ) | ||||
|
Advances
from customers
|
4,222,928 | (8,125,696 | ) | |||||
|
Other
payables and accrued expenses
|
(800,652 | ) | 1,364,563 | |||||
|
Other
payables - related parties
|
107,084 | — | ||||||
|
Net
Cash (Used In) Provided by Operating Activities
|
(10,682,070 | ) | 8,085,220 | |||||
|
Cash
Flows from Investing Activities:
|
||||||||
|
Changes
in notes receivable
|
(798,557 | ) | (231,042 | ) | ||||
|
Purchase
of property, plant and equipment, net of value added tax refunds
received
|
(831,690 | ) | (999,732 | ) | ||||
|
Proceeds
from sale of assets
|
5,949 | — | ||||||
|
Net
Cash Used In Investing Activities
|
(1,624,298 | ) | (1,230,774 | ) | ||||
|
Cash
Flows from Financing Activities:
|
||||||||
|
Proceeds
from issuance of notes payable
|
71,169,376 | 84,726,744 | ||||||
|
Payments
on notes payable
|
(68,146,301 | ) | (85,716,426 | ) | ||||
|
Proceeds
from issuance of notes payable - related parties
|
— | 199,932 | ||||||
|
Net
change in restricted cash
|
4,724,215 | 3,344,374 | ||||||
|
Distribution
to shareholders
|
— | (6,615,825 | ) | |||||
|
Net
Cash Provided By (Used in) Financing Activities
|
7,747,290 | (4,061,201 | ) | |||||
|
Effect
of Exchange Rate Changes on Cash
|
339,142 | 15,876 | ||||||
|
Net
Change in Cash
|
(4,219,936 | ) | 2,809,121 | |||||
|
Cash
and Cash Equivalents at Beginning of Period
|
13,336,736 | 10,653,438 | ||||||
|
Cash
and Cash Equivalents at End of Period
|
$ | 9,116,800 | $ | 13,462,559 | ||||
|
Supplemental
Non-Cash Financing Activities
|
||||||||
|
Offset
of notes payable to related party against receivable from related parties
(Note 7)
|
$ | 9,870,221 | $ | 9,508,621 | ||||
|
Supplemental
Cash Flow Information
|
||||||||
|
Cash
paid during the period for interest
|
$ | 3,583,122 | $ | 2,046,656 | ||||
|
Cash
paid during the period for income taxes
|
$ | 1,404,237 | $ | 1,366,124 | ||||