Sutor Technology Group Limited Reports Second Quarter Fiscal 2013 Financial Results

 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

  o The 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.
  o Revenue 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.
  o Our 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. 
  o Total operating expenses (selling expenses and general and administrative
    expenses) slightly decreased despite higher revenue, mainly due to cost
    control measures.
  o Higher revenue, lower operating expenses, lower interest expenses and
    higher interest income contributed to a 71.4% increase in net income.

Liquidity

  o Operating 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.
  o Sutor'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. 
  o As 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

  o The 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.   
  o We 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.
  o We 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: investor_relations@sutorcn.com  Email: lcati@equityny.com

Financial Tables Below:

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                                   December 31,   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
Trade accounts receivable, net of allowance for doubtful accounts of $566,912 and $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
Advances to suppliers, unrelated parties, net of allowance for doubtful accounts of $414,811 and
                                                                                                   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: Treasury stock, at cost, 590,838 and 544,477 shares as of December 31, 2012 and June 30,
                                                                                                   (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:
Revenue from unrelated parties                $ 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
Cost of revenue from unrelated parties          (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)
Changes in fair value of warrant liabilities    (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
Basic Weighted Average Shares Outstanding       40,224,003      40,487,224      40,222,247      40,602,179
Diluted Weighted Average Shares Outstanding     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 cash for 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 cash for 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