Sutor Technology Group Limited Reports Third Quarter Fiscal 2013 Financial Results Continues its Profitable Growth: 203% Increase in Third Quarter Net Income on 27% Increase in Revenues PR Newswire CHANGSHU, China, May 13, 2013 CHANGSHU, China, May 13, 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 the third quarter of fiscal 2013 ended March 31, 2013. Third quarter fiscal 2013 results highlights: 3Q FY2013 3Q FY2012 Change Revenue (million) $139.6 $109.9 27.0% Gross profit (million) $10.9 $7.9 38.0% Net income (million) $3.88 $1.28 203.1% EPS (fully diluted) $0.10 $0.03 233.3% Nine months Fiscal 2013 results highlights: 9M FY2013 9MFY2012 Change Revenue (million) $414.6 $348.0 19.1% Gross profit (million) $31.7 $29.3 8.2% Net income (million) $10.49 $9.06 15.8% EPS (fully diluted) $0.26 $0.22 18.2% Ms. Lifang Chen, CEO and Chairwoman of Sutor, commented: "Following a successful second quarterof fiscal 2013, we are pleased to report that the result of the third quarter exceeded our expectations. Further, we are on track to carry out our strategy to organically grow our production capacity, expand the asset-light B2B electronic commerce platform exclusively for the heavy industries, and selectively pursue merger and acquisition and joint-venture opportunities to accelerate our growth." Third Quarter Fiscal 2013 vs. Third Quarter Fiscal 2012 Highlights oThe 27% increase in revenue was mainly due to significantly increased production of acid-pickled steel and cold-rolled steel products. Although the output of PPGI and pipe products were also up, their impact on the revenue was partially offset by lower average selling price ("ASP") due to lower costs of raw materials. For the quarter ended on March 31 2013, total sales volume in tons was up approximately 54% whereas the ASP was down approximately 22% when compared with the same period last year. oRevenue generated from domestic sales increased by 25% to $129.7 million, while revenue generated from international sales increased by 56% to $9.9 million. As a percentage of total revenue, international sales accounted for 7.1%, as compared to 5.7% in the same quarter of fiscal 2012. oOur gross margin increased to 7.8% as compared to 7.2% primarily due to increased sales of higher-margin products like PPGI and pipe products. oTotal operating expenses (selling expenses and general and administrative expenses) as a percentage of revenue slightly decreased to 2.8% as compared to 2.9%.Of note, the third quarter fiscal 2013 selling expenses increased as compared to the same period of 2012 due to increased international shipping rate. oHigher revenue, lower operating expenses, lower interest expenses and higher interest income contributed to over 204% increase in net income. Liquidity oAs of March 31, 2013, cash and cash equivalents (excluding restricted cash) were $18.5 million and restricted cash were $98.2 million. oAs of March 31, 2013, short-term loans totaled approximately $130.8 million, and the current portion of long-term loans was $14.1 million. The Company also had approximately $2.3 million long-term loans. oAs of March 31, 2013, Sutor had an unused line of credit with banks of approximately $20.6million which entitles the Company to draw bank loans for general corporate purposes. Sutor expects sufficient liquidity to carry out normal operations for fiscal 2013. Ms. Chen concluded, The Chinese economyhad a weak recoveryduring the last two quarters after several consecutive quarters' decline in GDP growth rate. China Purchasing Managers' Index (PMI) for the manufacturing sector has been above 50% for seven consecutive months since last October. Although the latest economic indicators showed some weakness, we believe the overall trend remains healthy. Based on the year-to-date results, we feel optimistic that we can end fiscal 2013 on a positive note. In the longer term, we believe our new cold-rolled production line of 500,000 tons annual capacity, which is expected to commence trial production later this year, our recent joint venture with China Railway Materials Wuhan Company, and our new galvolume steel products launched in January this year will become the additional drivers for our future growth. We look forward to reporting our progress in the coming months. Conference Call Information Sutor's management will host an earnings conference call today, May 13, 2013, at 9:00 a.m. U.S. Eastern time/9:00 pm Beijing/Hong Kong time.Listeners may access the call by dialing US: +1 877 847 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 June 14, 2013. Listeners may access it by dialing US: +1 866 572 7808, CN: 800 876 5013, HK: +852 3012 8000, access code: 693127. Functional Currency and Translating Press Release The reporting currency of the Company is the United States Dollars (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 currencies 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 the 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: email@example.com Email: firstname.lastname@example.org Financial Tables Below: SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31, June 30, 2013 2012 ASSETS CurrentAssets: Cash and cash equivalents $ 18,531,950 $ 9,530,531 Restricted cash 98,166,557 111,582,149 Short-term investments - 4,849,112 Trade accounts receivable, net of allowance for doubtful accounts of $598,197 and $1,306,099 4,133,807 7,023,880 as of March 31, 2013 and June 30, 2012, respectively Notes receivable 210,446 475,112 Other receivables and prepayments, net of allowance for doubtful accounts of $331,090 and 2,635,181 4,275,817 $351,372 as of March 31, 2013 and June 30, 2012, respectively Advances to suppliers, unrelated parties, net of allowance for doubtful accounts of $393,740 and 17,460,469 27,446,626 $366,697 as of March 31, 2013 and June 30, 2012, respectively Advances to suppliers, related parties, net of right to offset 166,450,458 121,884,833 Inventories, net 64,948,147 50,432,279 Deferred tax assets 757,931 709,688 Total Current Assets 373,294,946 338,210,027 Non-current Assets: Advances for purchase of long term assets 15,571,485 15,001,088 Property, plant and equipment, net 73,047,748 77,231,273 Intangible assets, net 6,560,403 3,082,877 Equity method investments 6,442,406 - Total Non-current Assets 101,622,042 95,315,238 TOTAL ASSETS $ 474,916,988 $ 433,525,265 LIABILITIES AND STOCKHOLDERS¡¯ EQUITY Current Liabilities: Short-term loans $ 130,835,913 $ 111,166,838 Long-term loans, current portion 14,066,114 27,762,975 Accounts payable, unrelated parties 67,633,671 57,079,617 Accounts payable, related parties 13,486,508 - Other payables and accrued expenses 7,725,033 8,820,064 Advances from customers 14,229,545 7,924,812 Warrant liabilities 179,357 47,404 Total Current Liabilities 248,156,141 212,801,710 Long-Term Loans 2,319,979 8,490,772 Total Liabilities 250,476,120 221,292,482 Commitments and contingencies 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 March 31, 2013 and June 30, 2012; 40,865 40,805 issued: 40,865,602 and 40,805,602 shares as of March 31, 2013 and June 30, 2012. Additional paid-in capital 41,455,713 41,344,306 Statutory reserves 18,100,361 18,100,361 Retained earnings 128,220,435 117,732,738 Accumulated other comprehensive income 37,275,003 35,622,241 Less: Treasury stock, at cost, 590,838 and 544,477 shares as of March 31, 2013 and June 30, (651,509) (607,668) 2012, respectively Total Stockholders' Equity 224,440,868 212,232,783 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 474,916,988 $ 433,525,265 SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME For The Three Months Ended For The Nine Months Ended March 31, March 31, 2013 2012 2013 2012 Revenue: Revenue from $ 84,994,226 $ 77,293,342 $ 280,587,798 $ 258,760,839 unrelated parties Revenue from 54,554,833 32,641,713 134,014,810 89,264,631 related parties 139,549,059 109,935,055 414,602,608 348,025,470 Cost of Revenue Cost of revenue from unrelated (77,127,522) (71,781,784) (255,617,288) (237,734,303) parties Cost of revenue from related (51,488,687) (30,282,224) (127,296,140) (81,019,969) parties (128,616,209) (102,064,008) (382,913,428) (318,754,272) Gross Profit 10,932,850 7,871,047 31,689,180 29,271,198 Operating Expenses: Selling expenses (1,417,039) (874,867) (5,709,207) (5,289,139) General and administrative (2,490,828) (2,272,424) (7,170,901) (7,776,539) expenses Total Operating (3,907,867) (3,147,291) (12,880,108) (13,065,678) Expenses Income from 7,024,983 4,723,756 18,809,072 16,205,520 Operations Other Incomes/(Expenses): Interest income 967,706 368,561 2,989,756 1,046,976 Interest expense (2,579,181) (3,484,944) (8,453,617) (7,652,460) Changes in fair value of warrant (146,476) 56,502 (131,953) 288,968 liabilities Income from equity 50,998 - 225,444 - method investments Other income 159,520 85,323 318,658 105,273 Other expense 72,639 79,488 (594,885) (779,179) Total Other (1,474,794) (2,895,070) (5,646,597) (6,990,422) Expenses, net Income Before Taxes 5,550,189 1,828,686 13,162,475 9,215,098 Income tax (1,670,169) (553,515) (2,674,778) (153,186) (expense)/benefit Net Income $ 3,880,020 $ 1,275,171 $ 10,487,697 $ 9,061,912 Other Comprehensive Income: Foreign currency translation 1,426,292 1,444,247 1,652,762 5,306,694 adjustment Comprehensive $ 5,306,312 $ 2,719,418 $ 12,140,459 $ 14,368,606 Income Basic Earnings per $ 0.10 $ 0.03 $ 0.26 $ 0.22 Share Diluted Earnings $ 0.10 $ 0.03 $ 0.26 $ 0.22 per Share Basic Weighted Average Shares 40,267,431 40,345,780 40,237,142 40,531,461 Outstanding Diluted Weighted Average Shares 40,267,431 40,345,780 40,237,142 40,531,461 Outstanding SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For The Nine Months Ended March 31, 2013 2012 Cash Flows from Operating Activities: Netincome $ 10,487,697 $ 9,061,912 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 6,628,874 6,492,260 Reversal for doubtful accounts (711,175) - Stock based compensation 111,467 93,602 Foreign currency exchange gain (145,186) (392,608) Loss on disposal of property, plant and 81,228 72,892 equipment Interest income from short-term investments (30,944) - carried at amortized cost Income from equity method investments (225,444) - Deferred income taxes (43,516) 10,738 Changes in fair value of warrant liabilities 131,953 (288,968) Changes in current assets and liabilities: Restricted cash for notes payable (14,483,765) (50,475,674) Trade accounts receivable 3,635,648 (8,291,096) Notes receivable 266,610 (350,930) Other receivable and prepayments 1,683,384 264,671 Advances to suppliers, unrelated parties 10,095,647 4,718,122 Advances to suppliers, related parties (43,541,260) 13,630,723 Inventories (14,134,383) (36,851,431) Accounts payable, unrelated parties 11,033,692 54,402,504 Accounts payable, related parties 13,431,063 - Other payables and accrued expenses (1,133,841) (1,133,980) Other payables, related parties - (608,674) Advances from customers 6,230,157 (1,619,409) Net Cash Used In Operating Activities (10,632,094) (11,265,346) Cash Flows from Investing Activities: Purchase of property, plant and equipment, net (3,818,123) (13,558,760) of value added tax refunds received Proceeds from disposal of property, plant and 529,721 26,025 equipment Purchase of intangible assets (3,565,706) - Equity method investments (6,190,476) - Payments for short-term investments - (4,755,262) Proceeds from sale of short-term investments 4,891,063 - Net Cash Used In Investing Activities (8,153,521) (18,287,997) Cash Flows from Financing Activities: Proceeds from loans 117,233,696 143,934,932 Repayment of loans (118,055,195) (114,432,824) Restricted cash for bank loans 28,556,205 (15,621,037) Payments on repurchase of common stock (43,841) (534,269) Net Cash Provided by Financing Activities 27,690,865 13,346,802 Effect of Exchange Rate Changes on Cash and 96,169 425,014 Cash Equivalents Net Change in Cash and Cash Equivalents 9,001,419 (15,781,527) Cash and Cash Equivalents at Beginning of 9,530,531 21,324,931 Period Cash and Cash Equivalents at End of Period $ 18,531,950 $ 5,543,404 Supplemental Non-Cash Information: Offset of notes payable to related parties $ 10,696,709 $ 10,352,131 against receivable from related parties Supplemental Cash Flow Information: Cash paid during the period for interest $ (7,106,565) $ (7,230,874) expense Cash (paid)/received during the period for $ (2,339,344) $ (476,495) income tax SOURCE Sutor Technology Group Limited Website: http://www.sutorcn.com/en/index.php
Sutor Technology Group Limited Reports Third Quarter Fiscal 2013 Financial Results
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