Kingold Jewelry Reports 2013 Third Quarter Financial Results
Company to Hold Conference Call with Accompanying Slide Presentation on
November 15, 2013, at 8:30 a.m. ET
WUHAN, China, Nov. 14, 2013
WUHAN, China, Nov. 14, 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 third
quarter and nine months ended September 30, 2013.
2013 Third Quarter Financial and Operating Highlights (Comparisons are to 2012
oNet sales increased 28.6% to $283.9 million compared to $220.8 million,
largely as a result of increased production.
oProcessed 13 metric tons [one metric ton = 35,274 ounces] of 24-karat gold
products compared to 9.5 metric tons.
oGross profit increased to $18.1 million from to $12.7 million, and gross
margin was 6.4% compared to 5.7%, due to increased production as a result
of greater access to gold through the Company's gold leasing transactions.
oNet income attributable to common shareholders increased 31.4% to $11.0
million, or $0.17 per diluted share, from $8.4 million, or $0.15 per
oCash flow from operations of $6.3 million for the nine months ended
September 30, 2013
oBook value per diluted share of $3.18 at September 30, 2013 compared to
$2.97 at December 31, 2012.
oKingold expects to process between 50-55 metric tons of 24-karat gold
products in 2013. The Company processed 36.8 metric tons during the first
nine months of 2013.
oManagement to travel to the United States for meetings in New York and
Boston during the week of November 18- 22 (details below).
Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "We have begun to
realize the benefit of the gold leasing transactions entered into this year.
As a result of increased access to gold, we have greater flexibility to expand
our production capacity at favorable times in the market cycle. This has
allowed Kingold to achieve higher margins, increase its cash flow from
operations, and better manage its operations during the period. Throughout
the first nine months of 2013, there has been considerable pressure on global
gold pricing. While this has created challenges for Kingold and a number of
gold manufacturers, we feel this presents a potential long-term opportunity to
win market share from some of our less capitalized competitors. We believe
the third quarter's strong sales and margin expansion despite this pressure on
pricing demonstrates our ability to execute throughout varying market cycles.
We are revising our 2013 sales volume guidance to provide for a tighter range
of between 50-55 metric tons in 2013 and as a result expect to produce strong
fourth quarter year-over-year improvements in production."
Chairman Jia continued, "Subsequent to the quarter, we reached a milestone
agreement that we feel is key for Kingold's long-term growth. We entered into
an acquisition agreement to acquire 66,666 square meters (717,587 square feet)
of industrial land for use in the development of Wuhan Kingold Jewelry
International Industry Park. This is expected to be a major commercial complex
where businesses in the jewelry industry and consumers can come together, with
manufacturing, wholesale, and retail shopping. We plan to move part of our
production facility to this industrial park, which will provide Kingold with
greater flexibility to expand production levels. We are very excited about
this project and look forward to updating investors on our progress."
Update on Gold Lease Transactions
On October 24, 2013, the Company announced an increase in the credit line
established under its previously disclosed gold leasing agreement with China
Construction Bank's Wuhan Jiang'An branch ("CCB"), dated December 20, 2012,
whose term was extended until July 22, 2014 (the "Gold Leasing Agreement").
Kingold's total credit line under the Gold Leasing Agreement with CCB is now
RMB400 million (approximately US$65.4 million), an increase of RMB150 million
from the original credit line of RMB250 million.
During the first nine months of 2013, the Company signed a new gold leasing
agreement with the Wuhan branch of Shanghai Pudong Development Bank Ltd. ("SPD
Bank") (under its previously disclosed framework agreement) and entered into a
new similar gold leasing arrangement with the Wuhan branch of CITIC Bank
Corporation Limited ("CITIC Bank"). The Company leased the gold as a way to
fuel its growth and will return the same amount of gold to CCB, SPD Bank, and
CITIC Bank at the end of the respective lease agreements.
Development of Wuhan Kingold Jewelry Industrial Park
On October 23, 2013, subsequent to the end of the quarter, the Company entered
into an acquisition agreement to acquire from Wuhan Huayuan Science and
Technology Development Limited Company the operating rights for 66,666 square
meters (717,587 square feet) of industrial land for use in the development of
Wuhan Kingold Jewelry International Industry Park in the Jiangan district,
Wuhan (the "Park"), for approximately RMB1.0 billion (approximately USD$164
million at current exchange rates) .
The Company expects construction of the Park to be completed by mid-2015. The
construction of the Park is anticipated to be an integral part of the
Company's long-term growth strategy as the Company expects that it will create
a major hub for the jewelry industry in the central region of China. Kingold
intends to update investors as the project progresses.
In the third quarter of 2013, Kingold processed a total of 13.0 metric tons of
24-karat gold products compared to 9.5 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 13.0 metric
tons processed during the period, Kingold's branded production accounted for
7.2 metric tons (55.2%) and customized production accounted for 5.8 metric
tons (44.8%). In the third quarter of 2012, Kingold processed a total of 9.5
metric tons of gold, of which branded production accounted for 4.6 metric tons
(48.6%) and customized production accounted for 4.9 metric tons (51.4%).
In the first nine months of 2013, the Company processed a total of 36.8 metric
tons of gold, of which branded production accounted for 20.3 metric tons
(55.2%) and the customized production accounted for 16.5 metric tons (44.8%).
In the first nine months of 2012, Kingold processed a total of 30.2 metric
tons of gold, of which branded production accounted for 14.7 metric tons
(48.8%) and customized production accounted for 15.5 metric tons (51.2%).
Metric Tons of Gold Processed
Three Months Ended:
September 30, 2013 September 30,
Branded* 7.2 55.2% 4.6 48.6%
Customized** 5.8 44.8% 4.9 51.4%
Total 13.0 100% 9.5 100%
Nine Months Ended:
September 30, 2013 September 30,
Branded* 20.3 55.2% 14.7 48.8%
Customized** 16.5 44.8% 15.5 51.2%
Total 36.8 100% 30.2 100%
* 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 Third Quarter Financial Review
oNet sales for the three months ended September 30, 2013 was $283.9
million, an increase of $63.1 million, or 28.6%, from $220.8 million for
the three months ended September 30, 2012. The increase in net sales was
primarily driven by increased production of $98.1 million, offset by
approximately $40.1 million due to the decrease in the price of gold, with
the remaining increase due to the translation gain from RMB into USD.
oGross profit for the three months ended September 30, 2013 was $18.1
million, an increase of $5.5 million, or 43.2%, from $12.7 million for the
same period in 2012. Gross margin for the three months ended September
30, 2013 was 6.4% compared to 5.7% for the same period in 2012. The
increase in gross profit and gross margin was primarily due to increased
production and higher processing fees for customized production in the
three months ended September 30, 2013.
oNet income attributable to Kingold shareholders for the third quarter of
2013 increased 31.4% to $11.0 million, or $0.17 per diluted share based on
64.5 million weighted average diluted shares outstanding, from $8.4
million, or $0.15 per diluted share based on 54.2 million diluted shares
outstanding, in the prior year period.
Fiscal 2013 Nine Month Financial Review
oNet sales for the nine months ended September 30, 2013 was $872.3 million,
an increase of $158.0 million, or 22.1%, from $714.3 million in prior year
period. The increase in net sales was primarily driven by increased
production, offset by approximately $86.7 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 nine months ended September 30, 2013 was $35.6
million, compared to $39.2 million in the prior year period. The
Company's gross margin for the nine months ended June 30, 2013 was 4.1%
compared to 5.5% for the prior year period. The primary reason for the
decrease in gross margin was that the unit processing fee for branded
production was higher in the nine months ended September 30, 2012.
oNet income attributable to Kingold shareholders for the nine months ended
September 30, 2013 was $20.4 million, or $0.32 per diluted share based on
63.3 million weighted average diluted shares outstanding, compared to net
income of $25.3 million, or $0.47 per diluted share based on 54.2 million
weighted average diluted shares outstanding, in the prior year period.
Balance Sheet and Cash Flow
(in millions except for percentages) 9/30/2013 12/31/2012 % Change
Cash $ 23.3 $ 2.5 832%
Inventories (gold) 169.4 150.0 12.9%
Working Capital 193.1 149.2 29.4%
Short-term debt 8.2 6.6 24.2%
Stockholders' Equity 204.8 161.5 26.8%
Outlook for 2013
Kingold revised its 2013 guidance, and believes that the Company will process
between 50 metric tons and 55 metric tons of gold products in 2013. This
guidance is based solely on current projected, organic growth, and would
represent a 32.3% to 45.5% increase from the 37.8 metric tons processed in
Upcoming Investor Meetings
As previously announced, the Company's management team will be hosting
investor meetings and conducting media appearances throughout the week of
November 18^th in New York and Boston. The Company's management team will
present an overview of Kingold's operations, including a discussion of its
strategy and recent activities.
Conference Call Details
Kingold also announced that it will discuss financial results in a conference
call on Friday, November 15, 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/q3-2013. The Company will 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 withstand global gold pricing
pressure and to win market share from its competitors that are less
capitalized than Kingold, Kingold's anticipated fourth quarter and 2013
production results, Kingold's plans for the construction and completion of the
Wuhan Kingold Jewelry International Industry Park (the "Park") to serve as a
major commercial complex, and Kingold's plan to move part of its production
facility to the Park and the greater production levels such move will
provide. 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.
Kingold Jewelry, Inc.
Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
The Equity Group Inc. In China
Adam Prior, Senior Vice President Katherine Yao, Associate
(212) 836-9606 +86 10-6587-6435
KINGOLD JEWELRY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN US DOLLARS)
For the three months ended For the nine months ended
September 30, September 30,
2013 2012 2013 2012
NET SALES $ 283,890,000 $ 220,836,949 $ 872,340,210 $ 714,290,183
COST OF SALES
Cost of sales (265,440,712) (207,868,634) (835,851,327) (674,193,265)
Depreciation (304,815) (296,524) (906,590) (890,419)
cost of (265,745,527) (208,165,158) (836,757,917) (675,083,684)
GROSS PROFIT 18,144,473 12,671,791 35,582,293 39,206,499
general and 1,143,882 756,674 3,139,638 3,165,658
compensation 375,002 379,450 1,133,790 1,047,355
Depreciation 36,293 36,710 110,286 104,584
Amortization 26 2,983 6,080 8,958
Operating 1,555,203 1,175,817 4,389,794 4,326,555
INCOME FROM 16,589,270 11,495,974 31,192,499 34,879,944
Other Expense - - - (1,559)
Interest (1,361,674) (113,298) (3,112,596) (336,212)
Other (1,361,674) (113,298) (3,112,596) (337,771)
OPERATIONS 15,227,596 11,382,676 28,079,903 34,542,173
Current 3,402,482 3,016,059 8,197,780 9,280,633
Deferred 830,419 - (471,468) -
TOTAL INCOME 4,232,901 3,016,059 7,726,312 9,280,633
NET INCOME $ 10,994,695 $ 8,366,617 $ 20,353,591 $ 25,261,540
currency $ 1,278,588 $ 1,700,761 $ 4,780,603 $ 752,777
COMPREHENSIVE $ 12,273,283 $ 10,067,378 $ 25,134,194 $ 26,014,317
Basic $ 0.17 $ 0.16 $ 0.32 $ 0.47
Diluted $ 0.17 $ 0.15 $ 0.32 $ 0.47
Basic 64,334,400 53,578,218 63,073,008 53,286,072
Diluted 64,486,938 54,246,563 63,310,034 54,200,552
KINGOLD JEWELRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN US DOLLARS)
Cash $ 23,317,032 $ 2,544,114
Restricted cash 4,335,470 -
Accounts receivable 280,561 692,762
Inventories 169,380,149 150,041,421
Other current assets and prepaid expenses 431,603 133,539
Value added tax recoverable 8,221,018 7,031,374
Deferred income tax assets 477,100 -
Total Current Assets 206,442,933 160,443,210
PROPERTY AND EQUIPMENT, NET 11,022,487 11,683,987
Other assets 157,131 153,029
Intangible assets, net 510,653 503,313
Total other assets 667,784 656,342
TOTAL ASSETS $ 218,133,204 $ 172,783,539
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term loans $ 6,510,523 $ 6,340,551
Other payables and accrued expenses 1,021,321 1,445,513
Related party loan 1,727,265 209,890
Income tax payable 3,422,526 2,587,680
Other taxes payable 621,669 659,989
Total Current Liabilities 13,303,304 11,243,623
COMMITMENTS AND CONTINGENCIES - -
Preferred stock, $0.001 par value, 500,000
authorized, none issued or outstanding
as of September 30, 2013 and December 31, - -
Common stock $0.001 par value, 100,000,000
authorized, 64,431,140 and 54,521,140 shares
issued and outstanding
as of September 30, 2013 and December 31, 64,431 54,521
Additional paid-in capital 75,802,554 57,656,674
Unappropriated 112,960,040 92,606,449
Appropriated 967,543 967,543
Accumulated other comprehensive income 15,035,332 10,254,729
Total Equity 204,829,900 161,539,916
TOTAL LIABILITIES AND EQUITY $ 218,133,204 $ 172,783,539
KINGOLD JEWELRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN US DOLLARS)
For the nine months ended September
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 20,353,591 $ 25,261,540
Adjusted to reconcile net income to
cash used in
Depreciation 1,016,876 995,002
Amortization of intangible assets 6,080 8,958
Share based compensation 1,133,790 1,047,355
Inventory valuation allowance 7,115,531 -
Deferred tax provision (benefit) (471,468) -
Changes in operating assets and
(Increase) decrease in:
Accounts receivable 425,686 517,022
Inventories (22,251,264) (33,590,814)
Other current assets and prepaid (291,007) 15,269
Value added tax recoverable (989,335) (3,001,419)
Increase (decrease) in:
Other payables and accrued (444,964) 81,959
Income tax payable 756,440 1,572,629
Other taxes payable (55,351) (85,251)
Net cash provided by (used in) 6,304,605 (7,177,750)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (53,669) (149,666)
Net cash (used in) investing (53,669) (149,666)
CASH FLOWS FROM FINANCING ACTIVITIES
Restricted cash (4,284,287) -
Proceeds from related party loan 1,501,252 -
Net proceeds from stock issuance 12,522,000 -
Net proceeds from exercise of 4,500,000 -
Net cash provided by financing 14,238,965 -
EFFECT OF EXCHANGE RATES ON CASH AND 283,017 142,448
NET INCREASE (DECREASE) IN CASH AND CASH 20,772,918 (7,184,969)
CASH AND CASH EQUIVALENTS, BEGINNING OF 2,544,114 8,810,173
CASH AND CASH EQUIVALENTS, END OF $ 23,317,032 $ 1,625,205
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
Cash paid for interest expense $ 3,235,628 $ 354,686
Cash paid for income tax $ 7,441,340 $ 7,708,004
SOURCE Kingold Jewelry, Inc.
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