EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE

 

KINGOLD JEWELRY REPORTS 2013 SECOND QUARTER FINANCIAL RESULTS

 

Company to Hold Conference Call with Accompanying Slide Presentation on August 14, 2013, at 8:30 a.m. ET

 

WUHAN CITY, China, August 13, 2013 -- 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 financial results for its second quarter and six months ended June 30, 2013.

 

2013 Second Quarter Financial and Operating Highlights (Comparisons are to 2012 Second Quarter):

·

Net sales increased 36.7% to $367.0 million compared to $268.5 million, largely as a result of increased production due to higher demand.

·

Processed 15.2 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products compared to 11.8 metric tons.

·

As a result of lower gold prices, the Company incurred a $2.4 million write-down on the value of its inventory.

·

Gross profit decreased to $11.1 million compared to $15.0 million, and gross margin was 3.0% compared to 5.6%, largely as a result of this write-down in inventory.

·

Net income attributable to common shareholders was $6.3 million, or $0.10 per diluted share, compared to $9.6 million, or $0.18 per diluted share.

·

Book value per diluted share of $2.99 at June 30, 2013 compared to $2.97 at December 31, 2012.

 

Company Reiterates Guidance for 2013 Due to Strong Demand in Second Quarter

·

During the quarter, the Company experienced an increase in demand for its jewelry and investment gold products as a result of the May 1st Chinese Labor Day Holiday and correction in the price of gold in April.

·

Kingold reiterates its expectation of processing between 50-60 metric tons of 24-karat gold products in 2013. The Company processed 23.8 million metric tons through the first six months of 2013.

 

Management Comments

Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, “We were pleased to report top-line growth and profitability despite changes in global gold pricing. As reported previously, we were affected by the rapid changes in gold prices. Our customers altered their buying patterns and delayed orders as a result of the extreme volatility in pricing. We mitigated the impact on our operations by slowing down sales of products where we are not able to fix the price at the time of sale (such as our investment gold business and sales to certain jewelry customers) to avoid market risk and to preserve value. We also wrote-down our inventory to reflect the change in market value. We understand that Kingold is subject to commodity risk, however we remain focused on properly running our business through all market cycles. We are pleased that from mid-to-late April and throughout the remainder of the second quarter we witnessed a surge in demand as prices stabilized, and as expected, saw increased demand for our products due to the May 1^st Chinese Labor Day holiday. We focused on providing quick turnaround to meet this demand, and have received a favorable response from our customer base. Over the long-term, we think this will add tremendous value to our brand and customer loyalty, and ultimately continue to drive sales and profits in the future. Further, we are benefitting from an improving balance sheet position, as noted by our increased cash, lower receivables, lower inventory, and increasing book value. We feel that our business is a sustainable and flexible model that can shift with changing market cycles that may create great difficulty for our smaller competitors.”

 

 

Operational Review

In the second quarter of 2013, Kingold processed a total of 15.2 metric tons of 24-karat gold products compared to 11.8 metric tons processed in the prior-year period. The Company’s net sales consisted primarily of sales of branded products to wholesale and retail customers, as well as fees generated from customized production (as detailed in the table below). Of the 15.2 metric tons processed during the period, Kingold’s branded production accounted for 8.5 metric tons (56.2%) and customized production accounted for 6.7 metric tons (43.8%).

 

In the first half of 2013, the Company processed a total of 23.8 metric tons of gold, of which branded production accounted for 13.2 metric tons (55.3%) and the customized production accounted for 10.6 metric tons (44.7%).In the first half of 2012, Kingold processed a total of 20.6 metric tons of gold, of which branded production accounted for 10.1 metric tons (49.1%) and customized production accounted for 10.5 metric tons (50.9%).

 

Metric Tons of Gold Processed

 

		Three Months Ended:
		June 30, 2013								June 30, 2012
Branded*			8.5				56.2	%			5.6				47.2	%
Customized**			6.7				43.8	%			6.2				52.8	%
Total			15.2				100	%			11.8				100	%

 

		Six Months Ended:
		June 30, 2013								June 30, 2012
Branded*			13.2				55.3	%			10.1				49.0	%
Customized**			10.6				44.7	%			10.5				51.0	%
Total			23.8				100	%			20.6				100	%

 

* Branded Production: The Company purchases gold from the Shanghai Gold Exchange to produce branded products.

** Customized Production: Clients who purchase customized products supply gold to the Company for processing.

 

2013 Second Quarter Financial Review

·

Net sales for the three months ended June 30, 2013 was $367.0 million, an increase of $98.5 million, or 36.7%, compared to net sales of $268.5 million for the three months ended June 30, 2012. The increase in net sales was primarily driven by increased production of $124.4 million, offset by approximately $31.3 million due to the decrease in the price of gold.

 

·

Gross profit for the three months ended June 30, 2013 was $11.1 million, a decrease of $3.8 million, compared to $15.0 million for the same period in 2012. Gross margin for the three months ended June 30, 2013 was 3.0% compared to 5.6% for the same period in 2012. The decrease in gross profit and gross margin was primarily the result of a $2.4 million write-down of Kingold’s gold inventory to current market prices, as well and the shift in product mix to increased branded production as compared to higher-margin customized production during the period.

 

 

·

Net income attributable to Kingold shareholders for the second quarter of 2013 was $6.3 million, or $0.10 per diluted share based on 64.3 million weighted average diluted shares outstanding, compared to net income of $9.6 million, or $0.18 per diluted share based on 54.6 million diluted shares outstanding, in the prior-year period.

 

Fiscal 2013 Six Month Financial Review

 

·

Net sales for the six months ended June 30, 2013 were $588.5 million, an increase of 19.3% from $493.5 million in the same period of the prior year. The increase in net sales was primarily driven by increased production of $132.5 million, offset by approximately $43.5 million due to the decrease in the in the price of gold, with the remaining increase due to gains from exchange rate fluctuations.

 

·

Gross profit for the six months ended June 30, 2013 was $17.4 million, a decrease of $9.1 million, compared to $26.5 million in the prior-year period. The Company’s gross margin for the six months ended June 30, 2013 was 3.0% compared to 5.4% for the prior year period. The decrease in gross margin was primarily due to a $5.2 million write-down of inventory, as well as the shift in product mix to increased branded production as compared to higher-margin customized production during the period.

 

·

Net income attributable to Kingold shareholders for the six months ended June 30, 2013 was $9.4 million, or $0.15 per diluted share based on 62.7 million weighted average diluted shares outstanding, compared to net income of $16.9 million, or $0.31 per diluted share based on 54.4 million weighted average diluted shares outstanding, in the prior-year period.

 

Balance Sheet and Cash Flow

(in millions except for percentages)		6/30/2013				12/31/2012				% Change
Cash		$	5.7			$	2.5				128	%
Inventories (gold)			163.2				150.0				8.2	%
Working Capital			180.2				149.2				20.8	%
Short-term debt			6.5				6.3				2.1	%
Stockholders’ Equity			192.2				161.5				19.0	%

 

Kingold’s net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include the Company’s purchases of gold and income taxes. The Company expects that the net cash it generates from operating activities will 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 quantities of raw materials (principally gold).

 

 

Outlook for 2013

Kingold believes gold processed will be between 50 metric tons and 60 metric tons during 2013. This guidance is based solely on current projected, organic growth, and would represent a 32.3% to 58.7% increase from the 37.8 metric tons processed in 2012.

 

Mr. Jia concluded, “Kingold is on track to produce its expected volume through 2013, largely as a result of a substantial increase in demand in the early weeks of the second quarter surrounding the May 1^st Labor Day holiday in the PRC. We are also looking into new methods of expanding our brand presence, including opening new showrooms for Kingold’s own products. In addition, we are steadily increasing the marketing of our investment gold products, while controlling this growth in light of changing gold prices. Our goal throughout the first half of 2013 has been to continue developing our relationships with our customers, who we believe recognize the strength of a well-capitalized and organized company that can quickly handle their production needs throughout any cycle.”

 

Conference Call Details

Kingold also announced that it will discuss financial results in a conference call on Wednesday, August 14, 2013, at 8:30 AM ET.

 

The dial-in numbers are:

Live Participant Dial In (Toll Free):         877-407-9038

Live Participant Dial In (International):  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: http://kingoldjewelry.equisolvewebcast.com/q2-2013.

 

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, was founded in 2002 and today is one of China’s leading designers and manufacturers of 24-karat gold jewelry, ornaments and investment-oriented products. The Company sells both directly to retailers as well as 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 and the Securities Exchange Act of 1934. These include statements regarding the amount of gold to be processed in 2013, Kingold’s ability to benefit from the recent stability in gold prices which will help fortify client relationships, Kingold’s ability to withstand global pricing effects and gain market share from competitors that do not have such an advantage, consumer demand in China for gold, and fluctuations in net cash from operating activities. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. In addition, please refer to the risk factors 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: bl@kingoldjewelry.com

 

INVESTOR RELATIONS

 

The Equity Group Inc.	Katherine Yao, Associate
Adam Prior, Senior Vice President	+86 10-6587-6435
(212) 836-9606	kyao@equityny.com
aprior@equityny.com

 

###

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)

 

		For the three months ended June 30,								For the six months ended June 30,
		2013				2012				2013				2012
NET SALES		$	367,042,088			$	268,485,840			$	588,450,210			$	493,453,234
COST OF SALES
Cost of sales			(355,619,825	)			(253,222,376	)			(570,410,614	)			(466,324,631	)
Depreciation			(302,694	)			(296,107	)			(601,776	)			(593,895	)
Total cost of sales			(355,922,519	)			(253,518,483	)			(571,012,390	)			(466,918,526	)
GROSS PROFIT			11,119,569				14,967,357				17,437,820				26,534,708
OPERATING EXPENSES
Selling, general and administrative expenses			871,886				1,350,642				1,995,756				2,408,984
Stock compensation expenses			510,830				311,466				758,788				667,905
Depreciation			37,158				34,453				73,993				67,874
Amortization			3,045				2,979				6,054				5,975
Total Operating Expenses			1,422,919				1,699,540				2,834,591				3,150,738
INCOME FROM OPERATIONS			9,696,650				13,267,817				14,603,229				23,383,970
OTHER INCOME (EXPENSES)
Other Expense			-				(1,560	)			-				(1,560	)
Interest expense			(989,896	)			(111,778	)			(1,750,922	)			(222,913	)
Total Other Expenses, net			(989,896	)			(113,338	)			(1,750,922	)			(224,473	)
INCOME FROM OPERATIONS BEFORE TAXES			8,706,754				13,154,479				12,852,307				23,159,497
INCOME TAX PROVISION (BENEFIT)
Current			2,976,395				3,573,568				4,795,298				6,264,574
Deferred			(594,907	)			-				(1,301,887	)			-
TOTAL INCOME TAX PROVISION			2,381,488				3,573,568				3,493,411				6,264,574
NET INCOME		$	6,325,266			$	9,580,911			$	9,358,896			$	16,894,923
OTHER COMPREHENSIVE INCOME (LOSS)
Total foreign currency translation gains (loss)		$	2,539,475			$	(1,300,687	)		$	3,502,015			$	(947,983	)
COMPREHENSIVE INCOME		$	8,864,741			$	8,280,224			$	12,860,911			$	15,946,940
Earnings per share
Basic		$	0.10			$	0.18			$	0.15			$	0.32
Diluted		$	0.10			$	0.18			$	0.15			$	0.31
Weighted average number of shares
Basic			64,002,331				53,168,337				62,428,297				53,138,008
Diluted			64,253,053				54,579,029				62,727,247				54,383,690

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)

 

		June 30,				December 31,
		2013				2012
ASSETS
CURRENT ASSETS
Cash		$	5,692,140			$	2,544,114
Restricted cash			2,559,514				-
Accounts receivable			-				692,762
Inventories			163,232,062				150,041,421
Other current assets and prepaid expenses			8,562,286				133,539
Value added tax recoverable			10,526,400				7,031,374
Deferred income tax assets			1,315,157				-
Total Current Assets			191,887,559				160,443,210
PROPERTY AND EQUIPMENT, NET			11,288,112				11,683,987
OTHER ASSETS
Other assets			156,196				153,029
Intangible assets, net			507,612				503,313
Total other assets			663,808				656,342
TOTAL ASSETS		$	203,839,479			$	172,783,539
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Short term loans		$	6,471,758			$	6,340,551
Other payables and accrued expenses			1,412,843				1,445,513
Related party loans			359,753				209,890
Income tax payable			2,995,638				2,587,680
Other taxes payable			417,872				659,989
Total Current Liabilities			11,657,864				11,243,623
COMMITMENTS AND CONTINGENCIES			-				-
EQUITY
Preferred stock, $0.001 par value, 500,000 shares
authorized, none issued or outstanding
as of June 30, 2013 and December 31, 2012			-				-
Common stock $0.001 par value, 100,000,000 shares
authorized, 64,294,216 and 54,521,140 shares issued and outstanding
as of June 30, 2013 and December 31, 2012			64,294				54,521
Additional paid-in capital			75,427,689				57,656,674
Retained earnings
Unappropriated			101,965,345				92,606,449
Appropriated			967,543				967,543
Accumulated other comprehensive income			13,756,744				10,254,729
Total Equity			192,181,615				161,539,916
TOTAL LIABILITIES AND EQUITY		$	203,839,479			$	172,783,539

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)

 

		For the Six months ended June 30,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	9,358,896			$	16,894,923
Adjusted to reconcile net income to cash used in
operating activities:
Depreciation			675,769				661,769
Amortization of intangible assets			6,054				5,975
Share based compensation			758,788				667,905
Inventory valuation allowance			5,207,547				-
Deferred tax provision (benefit)			(1,301,887	)			-
Changes in operating assets and liabilities
(Increase) decrease in:
Accounts receivable			699,963				438,129
Inventories			(15,191,547	)			(22,277,149	)
Other current assets and prepaid expenses			(8,414,355	)			(73,432	)
Value added tax recoverable			(3,315,726	)			(3,399,771	)
Increase (decrease) in:
Other payables and accrued expenses			36,309				200,238
Income tax payable			350,834				2,134,041
Other taxes payable			(253,195	)			(243,627	)
Net cash provided (used in) operating activities			(11,382,550	)			(4,991,000	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(44,545	)			(149,381	)
Net cash( used in) investing activities			(44,545	)			(149,381	)
CASH FLOWS FROM FINANCING ACTIVITIES
Restricted cash			(2,533,688	)			-
Proceeds from related party loans			59,948				-
Net proceeds from stock issuance			12,522,000				-
Net proceeds from exercise of warrants			4,500,000				-
Net cash provided by financing activities			14,548,260				-
EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS			26,861				78,530
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			3,148,026				(5,061,851	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			2,544,114				8,810,173
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	5,692,140			$	3,748,322
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense		$	2,640,896			$	229,054
Cash paid for income tax		$	4,444,464			$	4,129,700