Kingold Jewelry Reports 2013 Second Quarter Financial Results

        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

PR Newswire

WUHAN, China, Aug. 13, 2013

WUHAN, China, Aug. 13, 2013 /PRNewswire/ --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):

  oNet sales increased 36.7% to $367.0 million compared to $268.5 million,
    largely as a result of increased production due to higher demand.
  oProcessed 15.2 metric tons [one metric ton = 35,274 ounces] of 24-karat
    gold products compared to 11.8 metric tons.
  oAs a result of lower gold prices, the Company incurred a $2.4 million
    write-down on the value of its inventory.
  oGross 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.
  oNet 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.
  oBook 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

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

  oNet 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.
  oGross 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.
  oNet 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

  oNet 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.
  oGross 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.
  oNet 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     For the six months ended June
                  June 30,                        30,
                  2013            2012            2013            2012
                                                                
                $ 367,042,088   $               $ 588,450,210   $
NET SALES                         268,485,840                     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      (355,922,519)   (253,518,483)   (571,012,390)   (466,918,526)
     sales
GROSS PROFIT      11,119,569      14,967,357      17,437,820      26,534,708
OPERATING
EXPENSES
 Selling,
 general and      871,886         1,350,642       1,995,756       2,408,984
 administrative
 expenses
 Stock
 compensation     510,830         311,466         758,788         667,905
 expenses
 Depreciation     37,158          34,453          73,993          67,874
 Amortization     3,045           2,979           6,054           5,975
     Total
     Operating    1,422,919       1,699,540       2,834,591       3,150,738
     Expenses
INCOME FROM       9,696,650       13,267,817      14,603,229      23,383,970
OPERATIONS
OTHER INCOME
(EXPENSES)
 Other Expense    -               (1,560)         -               (1,560)
 Interest         (989,896)       (111,778)       (1,750,922)     (222,913)
 expense
     Total
     Other        (989,896)       (113,338)       (1,750,922)     (224,473)
     Expenses,
     net
INCOME FROM
OPERATIONS        8,706,754       13,154,479      12,852,307      23,159,497
BEFORE TAXES
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     2,381,488       3,573,568       3,493,411       6,264,574
 TAX PROVISION
NET INCOME      $ 6,325,266     $ 9,580,911     $ 9,358,896     $ 16,894,923
OTHER
COMPREHENSIVE
INCOME (LOSS)
 Total foreign
 currency       $ 2,539,475     $ (1,300,687)   $ 3,502,015     $ (947,983)
 translation
 gains (loss)
COMPREHENSIVE   $ 8,864,741     $ 8,280,224     $ 12,860,911    $ 15,946,940
INCOME
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,         64,294        54,521
       2012
 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                (1,301,887)         -
       (benefit)
 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      (8,414,355)         (73,432)
       expenses
       Value added tax recoverable           (3,315,726)         (3,399,771)
 Increase (decrease) in:
       Other payables and accrued            36,309              200,238
       expenses
       Income tax payable                    350,834             2,134,041
       Other taxes payable                   (253,195)           (243,627)
       Net cash provided (used in)           (11,382,550)        (4,991,000)
       operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of property and equipment          (44,545)            (149,381)
       Net cash( used in) investing          (44,545)            (149,381)
       activities
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        14,548,260          -
       activities
EFFECT OF EXCHANGE RATES ON CASH & CASH      26,861              78,530
EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH     3,148,026           (5,061,851)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF      2,544,114           8,810,173
PERIOD
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

SOURCE Kingold Jewelry, Inc.

Website: http://www.kingoldjewelry.com