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Sutor Technology Group Limited Reports Third Quarter Fiscal 2013 Financial Results



  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

  o The 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.
  o Revenue 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.
  o Our 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. 
  o Total 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.
  o Higher revenue, lower operating expenses, lower interest expenses and
    higher interest income contributed to over 204% increase in net income.

Liquidity

  o As of March 31, 2013, cash and cash equivalents (excluding restricted
    cash) were $18.5 million and restricted cash were $98.2 million.
  o As 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. 
  o As 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 economy had a weak recovery during 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: investor_relations@sutorcn.com Email: lcati@equityny.com

Financial Tables Below:

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                                                                                       March 31,     June 30,
                                                                                                                                                       2013          2012
ASSETS
Current Assets:                                                                                                                                     
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:
Net income                                     $ 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
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