Sutor Technology Group Limited Reports Second Quarter Fiscal 2013 Financial Results 71.4% Increase in Second Quarter Net Income on 46.3% Increase in Revenues PR Newswire CHANGSHU, China, Feb. 7, 2013 CHANGSHU, China, Feb. 7, 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 fiscal 2013 second quarter ended December 31, 2012. Second quarter fiscal 2013 results highlights: 2Q FY2013 2Q FY2012 Change Revenue (million) $157.9 $107.9 46.3% Gross profit (million) $12.2 $10.4 17.3% Net income (million) $4.8 $2.8 71.4% EPS (fully diluted) $0.12 $0.07 71.4% Discussing second quarter fiscal 2013 results, Lifang Chen, Chairwoman and CEO of Sutor, commented, "We are pleased to report that we substantially improved our top and bottom lines, expanded our product offering, introduced new products and services, and further diversified our customer base." Second Quarter FY2013 vs. Second Quarter FY2012 Highlights oThe 46.3% increase in revenue was mainly due to an 87.0% increase in sales volume, partially offset by a 21.7% decrease in the average selling price (ASP) primarily due to lower costs of raw materials. As the Chinese economy continues to gradually regain its strength, we anticipate stable or higher steel product prices in the coming quarters. oRevenue generated from domestic sales increased by 49.2% to $139.6 million, while revenue generated from international sales increased by 27.5% to $18.3 million. As a percentage of total revenue, international sales accounted for 11.6%, as compared to 13.3% in the same quarter of fiscal 2012. oOur gross margin decreased due to changes in the product mix, as we sold more acid pickled steel products which have lower gross margin as compared to other products. oTotal operating expenses (selling expenses and general and administrative expenses) slightly decreased despite higher revenue, mainly due to cost control measures. oHigher revenue, lower operating expenses, lower interest expenses and higher interest income contributed to a 71.4% increase in net income. Liquidity oOperating activities provided approximately $6.2 million of cash in the six months ended December 31, 2012. As of December 31, 2012, cash and cash equivalents (excluding restricted cash) were $17.8 million and restricted cash were $99.4 million. oSutor's major sources of liquidity are borrowings through short-term bank loans.As of December 31, 2012, short-term loans totaled approximately $112.9 million, and the current portion of long-term loans was $30.8 million. The Company also had approximately $3.4 million long-term loans. oAs of December 31, 2012, Sutor had an unused line of credit with banks of approximately $34.7 million which entitles the Company to draw bank loans for general corporate purposes. Sutor expects sufficient liquidity to carry out normal operations for fiscal 2013. Recent Business Developments oThe new high precision cold-rolled steel production line with a designed annual capacity of 500,000 metric tons (MT) is expected to start trial operations in the first half of calendar year 2013. Once operational, we expect this new line will increase our cold-rolled steel capacity to 750,000 MT.Cold-rolled steel products are used as raw materials to manufacture hot-dip galvanized and pre-painted galvanized steel products, for which we have a capacity of 700,000 MT and 200,000 MT, respectively. oWe are making progress on our recently established electronic commerce B2B platform, a complementary business to our existing capital intensive and asset heavy steel processing business. We believe that this platform has significant upside potential. We are currently using it to promote and sell our own products to existing customers.Additionally, we plan to introduce this platform to other companies in the heavy industry to promote and sell their products. oWe recently started commercial production of galvolume steel plates. Derived from hot-dip aluminum galvanization and hot-dip zinc galvanization technology, our galvolume steel plates possess exceptional anti-corrosion, anti-oxidation and electric-chemical properties, which make it less prone to rust and corrosion. As a result, this product can be used in a variety of industries such as construction, household appliances, automobiles, machinery and shipping. Ms. Chen concluded, "We have well positioned our Company to take advantage of additional opportunities arising from China's expected economic recovery.Sutor's business is strong and competitive, and should continue to profitably grow in fiscal 2013." Conference Call Information Sutor's management will host an earnings conference call today, February 7, 2013, at 9:00 a.m. U.S. Eastern time/10:00 pm Beijing/Hong Kong time.Listeners may access the call by dialing US: +1877 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 March 9, 2013. Listeners may access it by dialing US: +1866 572 7808, CN: 800 876 5013, HK: +852 3012 8000, access code: 689245. Functional Currency The reporting currency of the Company is the United States Dollar ("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 currency 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 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: firstname.lastname@example.org Email: email@example.com Financial Tables Below: SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS December31, June 30, 2012 2012 ASSETS Current Assets: Cash and cash equivalents $ 17,798,409 $ 9,530,531 Restricted cash 99,395,193 111,582,149 Short-term investments - 4,849,112 Tradeaccountsreceivable,netofallowancefordoubtfulaccountsof$566,912and$1,306,099 3,860,126 7,023,880 as of December 31, 2012 and June 30, 2012, respectively Notes receivable 110,960 475,112 Other receivables and prepayments, net of allowance for doubtful accounts of $335,588 and 3,427,375 4,275,817 $351,372 as of December 31, 2012 and June 30, 2012, respectively Advancestosuppliers,unrelatedparties,netofallowancefordoubtfulaccountsof$414,811and 33,393,020 27,446,626 $366,697 as of December 31, 2012 and June 30, 2012, respectively Advances to suppliers, related parties, net of right to offset (Note 10) 137,031,287 121,884,833 Inventories, net 57,809,111 50,432,279 Deferred tax assets 889,819 709,688 Total Current Assets 353,715,300 338,210,027 Non-current Assets: Advances for purchase of long term assets 15,349,526 15,001,088 Property, plant and equipment, net 74,589,227 77,231,273 Intangible assets, net 6,565,187 3,082,877 Investments in affiliated company 6,356,497 - Total Non-current Assets 102,860,437 95,315,238 TOTAL ASSETS $ 456,575,737 $ 433,525,265 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term loans $ 112,884,062 $ 111,166,838 Long-term loans, current portion 30,786,516 27,762,975 Accounts payable, unrelated parties 51,315,445 57,079,617 Accounts payable, related parties 17,976,698 - Other payables and accrued expenses 7,747,798 8,820,064 Advances from customers 13,300,180 7,924,812 Warrant liabilities 32,881 47,404 Total Current Liabilities 234,043,580 212,801,710 Long-Term Loans 3,437,544 8,490,772 Total Liabilities 237,481,124 221,292,482 Stockholders' Equity Undesignated preferred stock - $0.001 par value; 1,000,000 shares authorized; nil shares - - outstanding Common stock - $0.001 par value; authorized: 500,000,000 shares as of December 31, 2012 and June 30, 2012; 40,855 40,805 issued: 40,855,602 and 40,805,602 shares as of December 31, 2012 and June 30, 2012. Additional paid-in capital 41,415,780 41,344,306 Statutory reserves 18,100,361 18,100,361 Retained earnings 124,340,415 117,732,738 Accumulated other comprehensive income 35,848,711 35,622,241 Less:Treasurystock,atcost,590,838and544,477sharesasofDecember31,2012andJune30, (651,509) (607,668) 2012, respectively Total Stockholders' Equity 219,094,613 212,232,783 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 456,575,737 $ 433,525,265 SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For The Three Months Ended For The Six Months Ended December 31, December 31, 2012 2011 2012 2011 Revenue: Revenuefromunrelatedparties $ 106,478,486 $ 83,070,982 $ 195,593,572 $ 181,467,497 Revenue from related parties 51,388,372 24,823,816 79,459,977 56,622,918 157,866,858 107,894,798 275,053,549 238,090,415 Cost of Revenue Costofrevenuefromunrelatedparties (96,462,341) (74,930,923) (178,489,766) (165,952,519) Cost of revenue from related parties (49,195,171) (22,552,581) (75,807,453) (50,737,745) (145,657,512) (97,483,504) (254,297,219) (216,690,264) Gross Profit 12,209,346 10,411,294 20,756,330 21,400,151 Operating Expenses: Selling expenses (1,978,916) (2,078,492) (4,292,168) (4,414,272) General and administrative expenses (2,550,249) (2,578,617) (4,680,073) (5,504,115) Total Operating Expenses (4,529,165) (4,657,109) (8,972,241) (9,918,387) Income from Operations 7,680,181 5,754,185 11,784,089 11,481,764 Other Incomes/(Expenses): Interest income 1,059,709 388,207 2,022,050 678,415 Interest expense (2,340,244) (2,438,976) (5,874,436) (4,167,516) Changesinfairvalueofwarrantliabilities (1,501) 22,082 14,523 232,466 Equity in gains of affiliated company 185,888 - 174,446 - Other income 122,520 14,592 159,138 19,950 Other expense (563,209) (477,176) (667,524) (858,667) Total Other Expenses, net (1,536,837) (2,491,271) (4,171,803) (4,095,352) Income Before Taxes 6,143,344 3,262,914 7,612,286 7,386,412 Income tax (expense)/benefit (1,371,012) (460,504) (1,004,609) 400,329 Net Income $ 4,772,332 $ 2,802,410 $ 6,607,677 $ 7,786,741 Other Comprehensive Income: Foreign currency translation adjustment 708,871 1,375,046 226,470 3,862,447 Comprehensive Income $ 5,481,203 $ 4,177,456 $ 6,834,147 $ 11,649,188 Basic Earnings per Share $ 0.12 $ 0.07 $ 0.16 $ 0.19 Diluted Earnings per Share $ 0.12 $ 0.07 $ 0.16 $ 0.19 BasicWeightedAverageSharesOutstanding 40,224,003 40,487,224 40,222,247 40,602,179 DilutedWeightedAverageSharesOutstanding 40,224,003 40,487,224 40,222,247 40,602,179 SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For The Six Months Ended December 31, 2012 2011 Cash Flows from Operating Activities: Net income $ 6,607,677 $ 7,786,741 Adjustments to reconcile net income to net cash provided by/(used in) operating activities Depreciation and amortization 4,408,037 4,179,300 Reversal for doubtful accounts (708,630) - Stock based compensation 71,524 61,257 Foreign currency exchange gain (10,234) (686,395) Loss on disposal of property, plant and 85,198 - equipment Interest income from short-term investments (30,900) - carried at amortized cost Equity in gains of affiliated company (174,446) - Deferred income taxes (179,476) (47,431) Changes in fair value of warrant liabilities (14,523) (232,466) Changes in current assets and liabilities: Restricted cashfor notes payable 2,221,324 (50,625,460) Trade accounts receivable 3,910,051 (7,624,315) Notes receivable 364,553 (526,505) Other receivable and prepayments 868,254 269,075 Advances to suppliers, unrelated parties (5,968,905) 6,087,748 Advances to suppliers, related parties (15,026,467) 1,984,400 Inventories (7,330,679) (46,491,155) Accounts payable, unrelated parties (5,156,443) 60,932,832 Accounts payable, related parties 17,975,273 - Other payables and accrued expenses (1,078,382) 222,530 Other payables, related parties - (601,014) Advances from customers 5,368,031 (5,520,486) Net Cash Provided by/(Used In) Operating 6,200,837 (30,831,344) Activities Cash Flows from Investing Activities: Purchase of property, plant and equipment, net (3,217,771) (9,786,882) of value added tax refunds received Proceeds from disposal of property, plant and 523,761 - equipment Purchase of intangible assets (3,560,563) - Investment in affiliated company (6,181,547) - Proceeds from sale of short-term investments 4,884,009 - Net Cash Used In Investing Activities (7,552,111) (9,786,882) Cash Flows from Financing Activities: Proceeds from loans 94,118,588 128,876,501 Repayment of loans (94,530,050) (102,275,514) Restricted cashfor bank loans 10,065,475 - Payments on repurchase of common stock (43,841) (534,269) Net Cash Provided by Financing Activities 9,610,172 26,066,718 Effect of Exchange Rate Changes on Cash and 8,980 228,347 Cash Equivalents Net Change in Cash and Cash Equivalents 8,267,878 (14,323,161) Cash and Cash Equivalents at Beginning of 9,530,531 21,324,931 Period Cash and Cash Equivalents at End of Period $ 17,798,409 $ 7,001,770 Supplemental Non-Cash Information: Offset of notes payable to related parties $ 10,609,363 $ 10,263,357 against receivable from related parties Supplemental Cash Flow Information: Cash paid during the period for interest $ (5,025,598) $ (3,915,785) expense Cash (paid)/received during the period for $ (1,669,952) $ 6,019 income tax SOURCE Sutor Technology Group Limited Website: http://www.sutorcn.com/en/index.php
Sutor Technology Group Limited Reports Second Quarter Fiscal 2013 Financial Results
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