Breaking News

Tweet TWEET

Sutor Technology Group Limited Reports Second Quarter of Fiscal Year 2014 Financial Results

  Sutor Technology Group Limited Reports Second Quarter of Fiscal Year 2014
                              Financial Results

PR Newswire

CHANGSHU, China, Feb. 13, 2014

CHANGSHU, China, Feb. 13, 2014 /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 used by
a variety of downstream applications, today announced its unaudited financial
results for the second quarter of fiscal year 2014 ended December 31, 2013.

Second Quarter of Fiscal 2014 Financial Results Highlights:

                                      2QFY2014 2QFY2013 Change
Revenues (million):           $128.3   $157.9   -18.7%
Gross profit (million)          $13.6    $12.2    11.5%
Net income (million)            $6.4     $4.8     33.3%
EPS $0.15    $0.12    25.0%

In the second quarter of fiscal 2014, our revenue decreased from $157.9
million to $128.3 million, as compared with the same period last year
primarily due to reduced revenue of approximately $29.5 million from our
acid-pickled (AP) products. During the second quarter of fiscal 2014, almost
all of our AP steel was used internally for further processing. As the first
stage of steel processing and being of low gross margin, acid-pickling
historically had limited contribution to the Company's gross profits and its
revenue fluctuated significantly from quarter to quarter. In general,
depending on the requirements of our products, production scheduling and
market conditions, we may use our AP products for the next stage of processing
or sell them directly to the customers.

We improved our product specifications to meet the market demand. We produced
more HDG steel with thicker zinc coatings than we previously produced. We
gained more traction for our new Galvalume product and substantially increased
its production.We delivered more value-added customized services to retain
customer loyalty and to gain new customers by extending our one-stop solution
services further down-stream to cover certain steel processing services for
selected customers. As a result, our gross margin increased to 10.6% from 7.7%
and net income increased to $6.4 million from $4.8 million in the second
quarter of fiscal 2014 as compared with the same period last year.

Second Quarter of Fiscal 2014 Major Events Highlights:

  oSuccessfully completed the construction of the new cold-rolling production
    line of 500,000 metric tons annual capacity after more than two years of
    preparation, design and construction;
  oOur electronic commerce platform Jinying365.com continued to gain traction
    - the number of registered users has been doubled to more than
    200,000since the end of the first quarter of fiscal 2014;
  oMade further progress on transitioning from a pure traditional finished
    steel manufacturer to a full service provider of fine finished steel
    products and related services - we now sell fine finished steel and
    conduct other activities both on-line and off-line;
  oUpgraded our Quick Response (QR) systems for better inventory and
    production management; and
  oCompleted technological upgrading of certain production lines by improving
    the electric and electronic design and replacing the old components with
    new ones to establish a zero-incident management system; the new system is
    expected to reduce maintenance expenses, extend equipment life and improve
    the economic performance of the production lines.

Ms. Lifang Chen, Chairwoman of Sutor, commented, "We ended the second quarter
of fiscal 2014 with solid performance. During the quarter, we grew net income,
improved cash flow from operations and reduced bank borrowings.With the new
cold-rolling facility completed, we believe the Company will be in a better
financial and operating situation and the management will have more leeway to
consider various options for corporate development. In the near term, we will
focus on fine-tuning the new production line and starting commercial
production. In the longer term, we will continue to develop advanced
fine-finished steel products to meet the growing need of the on-going economic
transition and development in China. Further, we will continue to steadily
cultivate our newly developed e-commerce business and make it an important
part of our integrated manufacturing and supply-chain products and services."

Second Quarter of Fiscal Year 2014 Results

Revenue. For the three months ended December 31, 2013, revenue was $128.3
million, compared to $157.9 million for the same period last year, a decrease
of $29.6 million, or 18.7%. The decrease was mainly attributable to reduced
revenue of approximately $29.5 million from our AP products. During the
quarter, we produced 124,868 tons of AP steel and almost all of them were used
internally for further processing. In comparison, we sold 58,904 tons of AP
steel during the second quarter of fiscal 2013. Depending on our product
requirements, market conditions or our production line scheduling, we may use
some or all of our AP steel for further processing. Historically the gross
margin for our AP products was about 3% and contributed very limited gross
profits to the Company.

On a geographic basis, revenue from international sales was approximately $5.1
million, or 4.0% of the total revenue, for the three months ended December 31,
2013, as compared to $18.3 million, or 11.6% of the total revenue, for the
same period in 2012. The reduction was mainly due to the timing of the
contract delivery. During the second quarter of fiscal 2014, we signed more
contracts than the same period last year, but some of them are to be delivered
over the coming quarters. Historically international sales accounted for
approximately 10% of our total sales and we anticipate a similar ratio for
fiscal 2014.

Gross profit and gross margin. Gross profit increased by $1.4 million to $13.6
million in the three months ended December 31, 2013, from $12.2 million in the
same period in 2012. Gross profit as a percentage of revenue (gross margin)
was 10.6% for the three months ended December 31, 2013, as compared to 7.7%
for the same period last year.The most significant factors affecting the
gross margin were higher HDG production and PPGI production. During the second
quarter of fiscal 2014, production was up 9.1% and 83.7%, respectively, for
HDG steel and PPGI steel, than the same period last year. Better capacity
utilization reduced product unit depreciation and amortization costs and hence
improved gross margin.

Total operating expenses. Our total operating expenses decreased by $0.5
million to $4.0 million in the three months ended December 31, 2013, from $4.5
million in the same period in 2012. As a percentage of revenue, our total
operating expenses increased to 3.1% in the three months ended December 31,
2013, from 2.8% in the same period in 2012.

Selling expenses. Our selling expenses decreased by $0.7 million to
$1.3million in the three months ended December 31, 2013, from $2.0 million in
the same period in 2012. As a percentage of revenue, our selling expenses
decreased to 1.0% for the three months ended December 31, 2013, from 1.2% for
the same period last year.The decreased selling expenses were mainly due to
significantly reduced international sales. For the second quarter of fiscal
quarter 2014, our export revenue was $5.1 million as compared with $18.3
million for the same period last year. Further, we shipped more products
through our local harbor in Changshu to save transportation costs while in the
past, some products were transported through the harbor in Shanghai.

General and administrative expenses. General and administrative expenses
increased by $0.07 million to $2.62million, or 2.1% of the total revenue, in
the three months ended December 31, 2013, from $2.55 million, or 1.6% of the
revenue, in the same period in 2012. The increased general and administrative
expenses were primarily due to increased miscellaneous local fees and taxes.

Interest expense. Our interest expense increased by $0.3 million to $2.6
million in the three months ended December 31, 2013, from $2.3 million in the
same period in 2012. As a percentage of revenue, our interest expense was2.0%
of total revenue in the three months ended December 31, 2013, compared to 1.5%
in the same period in 2012.The increase in interest expense was mainly
attributable to increased interest expenses on discounted bank notes. The
average interest rate of our short-term bank loans was stable during these
periods.

Provision for income taxes. Our income tax expense increased to $1.6 million
in the three months ended December 31, 2013, from $1.4 million of income tax
in the same period last year primarily due to the increased taxable income.

Net income. Net income, without including the foreign currency translation
adjustment, increased by $1.6 million, or 33.3%, to $6.4 million in the three
months ended December 31, 2013, from $4.8 million in the same period in 2012,
as a cumulative result of the above factors.

Financial Condition and Liquidity

As of December 31, 2013, we had approximately $12.5 million in cash and $108.7
million in restricted cash. Our short-term loans plus the current portion of
long-term loans were approximately $128.4 million. The long-term loans were
approximately $2.9 million.As of December 31, 2013, the Company had an unused
line of credit with banks of approximately $16.0 million. Under normal
operating conditions, we believe we have sufficient liquidity to carry out our
operations in the foreseeable future.

Conference Call Information

Sutor's management will host an earnings conference call today, February 13,
2014, at 9:00 a.m. U.S. Eastern time/10:00 p.m. Beijing/Hong Kong
time.Listeners may access the call by dialing US: +18778470047, 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 15, 2014. Listeners may access
it by dialing US: +1866 572 7808, CN: 800 876 5013, HK: +852 3012 8000, access
code: 704213.

Functional Currency

The functional currency of the Company is the Chinese Yuan Renminbi ("RMB");
however, the accompanying financial information has been expressed in United
States Dollars ("USD"). The accompanying consolidated balance sheets have
been translated into USD at the exchange rates prevailing at each balance
sheet date.The accompanying consolidated statements of operations and cash
flows have been translated using the weighted-average exchange rates
prevailing during the periods of each statement.Transactions in the Company's
equity securities have been recorded at the exchange rate existing at the time
of the transaction.

About Sutor Technology Group Limited

Sutor is one of the leading China-based manufacturers and distributors of
high-end fine finished steel products 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 in nature within the
meaning of the Private Securities Litigation Reform Act of 1995. 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, 2013,
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:

Investor Relations
Sutor Technology Group Limited
Tel: +86-512-5268-0988
Email: investor_relations@sutorcn.com



SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    December31,   June 30,
                                                    2013           2013
ASSETS
Current Assets:
Cash and cash equivalents                         $ 12,525,255   $ 3,601,385
Restricted cash                                     108,741,521    108,825,425
Short-term investments                              3,272,144      -
Trade accounts receivable, net of allowance for
doubtful accounts of $753,383 and $623,742,         9,622,962      7,331,291
respectively
Notes receivable                                    109,617        320,888
Other receivables and prepayments, net of
allowance for doubtful accounts of $275,483 and     9,256,709      3,446,187
$248,128, respectively
Advances to suppliers, unrelated parties, net of
allowance for doubtful accounts of $780,924 and     25,943,158     43,175,047
$796,026, respectively
Advances to suppliers, related parties, net of
allowance for doubtful accounts of nil, and net     153,903,862    185,615,973
of right to offset
Inventories, net                                    114,409,491    52,377,135
Deferred tax assets                                 1,050,243      952,417
Total Current Assets                                438,834,962    405,645,748
Non-current Assets:
Advances for purchase of long term assets           85,857         17,085,958
Property, plant and equipment, net                  92,366,660     71,508,912
Intangible assets, net                              3,638,359      3,074,372
Equity method investments                           7,029,062      6,686,539
Total Non-current Assets                            103,119,938    98,355,781
TOTAL ASSETS                                      $ 541,954,900  $ 504,001,529
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term loans                                  $ 124,838,100  $ 138,968,845
Long-term loans, current portion                    3,542,760      7,418,003
Accounts payable, unrelated parties                 130,117,238    82,602,243
Accounts payable, related parties                   -              20,162,069
Other payables and accrued expenses                 7,066,224      7,291,220
Advances from customers                             21,644,382     11,008,550
Warrant liabilities                                 211,433        144,535
Total Current Liabilities                           287,420,137    267,595,465
Long-Term Loans                                     2,859,995      1,180,877
Total Liabilities                                   290,280,132    268,776,342
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, 2013 and      42,107         40,965
June 30, 2013; issued: 42,107,267 and 40,965,602
shares as of December 31, 2013 and June 30, 2013.
Additional paid-in capital                          43,521,086     41,793,142
Statutory reserves                                  20,426,971     20,426,971
Retained earnings                                   143,894,975    132,311,592
Accumulated other comprehensive income              44,441,138     41,304,026
Less: Treasury stock, at cost, 590,838 shares as    (651,509)      (651,509)
of December 31, 2013 and June 30, 2013
Total Stockholders' Equity                          251,674,768    235,225,187
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 541,954,900  $ 504,001,529



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,
                       2013            2012             2013            2012
Revenue:
Revenue from         $ 102,230,215   $ 103,844,847    $ 204,412,337   $ 191,073,017
unrelated parties
Revenue from           26,086,595      54,022,011       63,012,798      83,980,532
related parties
                       128,316,810     157,866,858      267,425,135     275,053,549
Cost of Revenue
Cost of revenue
from unrelated         (91,296,065)    (94,105,510)     (183,571,592)   (174,320,698)
parties
Cost of revenue
from related           (23,395,036)    (51,552,002)     (58,025,289)    (79,976,521)
parties
                       (114,691,101)   (145,657,512)    (241,596,881)   (254,297,219)
Gross Profit           13,625,709      12,209,346       25,828,254      20,756,330
Operating Expenses:
Selling expenses       (1,337,918)     (1,978,916)      (3,332,774)     (4,292,168)
General and
administrative         (2,624,720)     (2,550,249)      (5,528,990)     (4,680,073)
expenses
Total Operating        (3,962,638)     (4,529,165)      (8,861,764)     (8,972,241)
Expenses
Income from            9,663,071       7,680,181        16,966,490      11,784,089
Operations
Other
Incomes/(Expenses):
Interest income        786,544         1,059,709        1,836,766       2,022,050
Interest expense       (2,574,958)     (2,340,244)      (4,378,253)     (5,874,436)
Changes in fair
value of warrant       (54,311)        (1,501)          (66,898)        14,523
liabilities
Income from equity     180,956         185,888          266,128         174,446
method investments
Other income           174,752         122,520          219,026         159,138
Other expense          (201,757)       (563,209)        (219,780)       (667,524)
Total Other            (1,688,774)     (1,536,837)      (2,343,011)     (4,171,803)
Expenses, net
Income Before Taxes    7,974,297       6,143,344        14,623,479      7,612,286
Income tax expense     (1,579,161)     (1,371,012)      (3,040,096)     (1,004,609)
Net Income           $ 6,395,136     $ 4,772,332      $ 11,583,383    $ 6,607,677
Other Comprehensive
Income:
Foreign currency
translation            1,477,555       708,871          3,137,112       226,470
adjustment
Comprehensive        $ 7,872,691     $ 5,481,203      $ 14,720,495    $ 6,834,147
Income
Basic Earnings per   $ 0.15          $ 0.12           $ 0.28          $ 0.16
Share
Diluted Earnings     $ 0.15          $ 0.12           $ 0.28          $ 0.16
per Share
Basic Weighted
Average Shares         41,453,386      40,224,003       41,383,956      40,222,247
Outstanding
Diluted Weighted
Average Shares         41,453,386      40,224,003       41,383,956      40,222,247
Outstanding



SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  For The Six Months Ended
                                                  December 31,
                                                  2013            2012
Cash Flows from Operating Activities:
Net income                                      $ 11,583,383    $ 6,607,677
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities
Depreciation and amortization                     4,510,854       4,408,037
Provision/(reversal) for doubtful accounts        123,435         (708,630)
Stock based compensation                          238,320         71,524
Foreign currency exchange gain                    (194,913)       (10,234)
(Gain)/loss on disposal of property, plant and    (10,985)        85,198
equipment
Interest income from short-term investments       -               (30,900)
carried at amortized cost
Income from equity method investments             (266,128)       (174,446)
Deferred income taxes                             (86,678)        (179,476)
Changes in fair value of warrant liabilities      66,898          (14,523)
Changes in current assets and liabilities:
Restricted cash                                   (20,188,832)    2,221,324
Trade accounts receivable                         (2,320,586)     3,910,051
Notes receivable                                  213,696         364,553
Other receivable and prepayments                  (5,775,579)     868,254
Advances to suppliers, unrelated parties          17,643,081      (5,968,905)
Advances to suppliers, related parties            33,716,400      (15,026,467)
Inventories                                       (61,110,422)    (7,330,679)
Accounts payable, unrelated parties               46,830,652      (5,156,443)
Accounts payable, related parties                 (20,276,893)    17,975,273
Other payables and accrued expenses               (293,095)       (1,078,382)
Advances from customers                           10,458,615      5,368,031
Net Cash Provided byOperating Activities          14,861,223      6,200,837
Cash Flows from Investing Activities:
Purchase of property, plant and equipment         (7,818,783)     (3,217,771)
Proceeds from disposal of property, plant and     15,052          523,761
equipment
Purchase of intangible assets                     (567,268)       (3,560,563)
Payments for short-term investments               (3,254,308)     -
Proceeds from sale of short-term investments      -               4,884,009
Investment in affiliated company                  -               (6,181,547)
Net Cash Used In Investing Activities             (11,625,307)    (7,552,111)
Cash Flows from Financing Activities:
Proceeds from loans                               93,079,729      94,118,588
Repayment of loans                                (110,464,374)   (94,530,050)
Proceeds from issuance of common stock            1,500,000       -
Changes in restricted cash                        21,485,248      10,065,475
Payments on repurchase of common stock            -               (43,841)
Net Cash Provided by Financing Activities         5,600,603       9,610,172
Effect of Exchange Rate Changes on Cash and       87,351          8,980
Cash Equivalents
Net Change in Cash and Cash Equivalents           8,923,870       8,267,878
Cash and Cash Equivalents at Beginning of         3,601,385       9,530,531
Period
Cash and Cash Equivalents at End of Period      $ 12,525,255    $ 17,798,409
Supplemental Non-Cash Information:
Offset of notes payable to related parties      $ 11,126,897    $ 10,609,363
against receivable from related parties
Accounts payable for purchase of long-term      $ (495,344)     $ (658,841)
assets
Advances for purchase of long-term assets       $ 17,097,874    $ (334,858)
Supplemental Cash Flow Information:
Cash paid during the period for interest        $ (4,430,640)   $ (5,025,598)
expense
Cash paid during the period for income tax      $ (3,122,617)   $ (1,669,952)

SOURCE Sutor Technology Group Limited

Website: http://www.sutorcn.com/en/index.php
Website: http://jinying365.com/
 
Press spacebar to pause and continue. Press esc to stop.