CHANGSHU, China, Dec. 15, 2014 /PRNewswire/ -- Sutor Technology
Group Limited (the "Company" or "Sutor") (Nasdaq: SUTR), one of the
leading China-based manufacturers
and service providers for fine finished steel products used by a
variety of downstream applications, today announced its unaudited
financial results for the first quarter of fiscal year 2015 ended
September 30, 2014.
First Quarter of Fiscal 2015 Financial Results
Highlights:
|
1Q FY2015
|
1Q FY2014
|
Change
|
Revenues
(million):
|
38.0
|
139.1
|
(72.7)%
|
Gross profit
(million)
|
(1.8)
|
12.2
|
(114.8)%
|
Net income
(million)
|
(5.1)
|
5.2
|
(198.2)%
|
EPS
|
(0.12)
|
0.13
|
(192.3)%
|
Ms. Lifang Chen, CEO of Sutor,
commented, "Based on our recent operating results and market
outlook, we anticipate our performance for the second quarter of
fiscal year 2015 will improve. We believe the recent net loss
reflected the unusual challenges facing the Chinese steel industry
and our company.
"It appears that the steel industry is at a cyclical bottom. The
headwinds we encountered were stronger than we had expected. The
Chinese economy is undergoing a structural adjustment. During the
process, those companies without technology or markets for their
products are being phased out. This structural change temporarily
reduced demands for certain steel products, depressed prices to a
multi-year low level, and altered our customers purchase patterns.
Further, tight liquidity for some small and medium enterprises
further constrained our customers' operations and affected our
performance."
Ms. Chen continued, "To cope with these challenges, we are
carrying out a number of strategic initiatives. We are taking a
multi-faceted approach and transforming ourselves from a
traditional steel manufacturer to a fine finished steel product and
service provider. We are developing fee-based steel processing
services to minimize the risks of declining steel prices. We
believe that such services are more scalable and allow us to
quickly adapt to the changes in the market place.
"We believe the growth of Chinese economy cannot be sustainable
without a healthy and growing steel industry. We also believe the
Chinese steel sector is at a cyclical bottom and the valuation of
Chinese steel companies is generally depressed. This creates a
tremendous opportunity for the steel industry to restructure and
consolidate. We are taking advantage of this historical opportunity
and actively evaluating merger and acquisition opportunities that
are otherwise not available to us.We have engaged Ernst & Young
as our financial advisor to help us evaluate and structure deals
and to maximize our asset value. We believe we can become larger
and stronger through steel industry restructuring and
consolidation. We will update the market on this potential
development when it is appropriate." Ms. Chen concluded.
First Quarter of Fiscal Year 2015
Results
Revenue. For the three months ended September 30, 2014, revenue was $38.0million, compared to $139.1 million for the same period last year, a
decrease of $101.1 million, or 72.7%.
The decrease was mainly attributable to the change in our business
model. In the past, our revenue was primarily derived from selling
manufactured products and the sales price included the cost of
steel sheets plus a gross profit. Under the fee-based processing
services, the price of processing services does not include the
cost of steel sheets as the customers are responsible for
procurement of the raw materials. As a result, revenue from
processing one ton of fine finished steel products is only a
fraction of the revenue from the traditional practice of the
revenue from the traditional business model. We believe the
fee-based model is more scalable and allows us to better adapt to
the changes in the Chinese economy than our traditional
manufacturing and sales model. Finally, as fewer products were
available for sales for the first quarter of fiscal 2015 than in
the same period last year, sales to related parties were also
significantly reduced.
On a geographic basis, revenue generated from outside of
China was $1.0 million, or 2.8% of the total revenue, for
the three months ended September 30,
2014, as compared to $18.1
million, or 13.0% of the total revenue, for the same period
in 2013. Our pre-painted galvanized steel ("PPGI") line was shut
down during the first quarter of fiscal 2015 for scheduled
technical upgrading. PPGI historically was one of our main export
products.
Gross profit and gross margin.Gross profit
decreased by $14.0 million to
$(1.8) million in the three months
ended September 30, 2014, from
$12.2 million in the same period in
2013. Gross profit as a percentage of revenue (gross margin) was
(4.9)% for the three months ended September
30, 2014, as compared to 8.8% for the same period last year.
The main reason for the declined gross margin was our effort to
make our new fee-based processing services more competitive by
setting up our fees at a comparatively low level. In addition,
overall lower production volumes in the first quarter of fiscal
2015 than the same period last year also reduced gross margin due
to fixed production expenses.
Total operating expenses. Our total operating
expenses decreased by $2.4 million to
$2.5million in the three months ended
September 30, 2014, from $4.9 million in the same period in 2013. As a
percentage of revenue, our total operating expenses increased to
6.6% in the three months ended September 30,
2014, from 3.5% in the same period in 2013.
Selling expenses. Our selling expenses decreased by
$1.7 million to $0.3 million in the three months ended
September 30, 2014, from $2.0 million in the same period in 2013. As a
percentage of revenue, our selling expenses decreased to 0.7% for
the three months ended September 30,
2014, from 1.4% for the same period last year. The reduced
dollar amount of the selling expenses was primarily due to reduced
shipping and handling activities as the total sales were
reduced.
General and administrative expenses. General and
administrative expenses was $2.2
million, or 5.9% of the total revenue, in the three months
ended September 30, 2014, as compared
with $2.9 million, or 2.1% of the
revenue, in the same period in 2013. The decreased dollar amount of
general and administrative expenses was primarily due to the
reversal of a prior period bad debt allowance.
Interest expense. Our interest expense increased
by $1.2 million to $3.0 million in the three months ended
September 30, 2014, from $1.8 million in the same period in 2013. As a
percentage of revenue, our interest expense was 7.8% of total
revenue in the three months ended September
30, 2014, compared to 1.3% in the same period in 2013. The
higher amount of interest expenses was mainly due to more
outstanding bank loans in the first quarter of fiscal 2015 than the
same period last year.
Provision for income
taxes. Our income tax benefit was
$1.6 million in the three months
ended September 30, 2014, as compared
to $1.5 million of income tax expense
in the same period last year, mainly due to net losses for the
first quarter of fiscal 2015.
Net income. Net income, without including the
foreign currency translation adjustment, decreased by $10.3 million, or 198.2%, to $(5.1) million in the three months ended
September 30, 2014, from $5.2 million in the same period in 2013, as a
cumulative result of the above factors.
Financial Condition and Liquidity
As of September 30, 2014, we had
approximately $4.0 million in cash
and $14.8 million in restricted cash.
Our short-term loans were approximately $186.8 million. We also had approximately
$11.0 million long-term loans. As of
September 30, 2014, the Company had
an unused line of credit with banks of approximately $31.2 million.
As a result of the completion of its500,000 MT cold-rolled
production line, the Company does not expect any major capital
expenditures within the next twelve months and intends to use cash
flow from operations and unused line of credit from banks to meet
the near-term working capital requirements. The Company also
expects to renew bank loans when they become due. However, there is
no assurance that additional financing will become available on
terms acceptable to us.
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 service
providers for 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"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, 2014, 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
|
|
|
|
September
30,
|
|
June
30,
|
|
|
2014
|
|
2014
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
4,021,868
|
$
|
12,178,225
|
Restricted
cash
|
|
14,779,924
|
|
60,860,255
|
Short-term
investments
|
|
-
|
|
3,248,652
|
Trade accounts
receivable, unrelated parties, net of allowance for doubtful
accounts of $1,243,554 and $1,368,723, respectively
|
|
3,939,382
|
|
6,331,702
|
Trade accounts
receivable, related parties
|
|
40,790,071
|
|
16,149,269
|
Notes
receivables
|
|
576,795
|
|
194,919
|
Other receivables and
prepayments, unrelated parties, net of allowance for doubtful
accounts of $257,946 and $255,628, respectively
|
|
2,679,247
|
|
1,875,785
|
Other receivables and
prepayments, related parties
|
|
405,670
|
|
405,558
|
Advances to suppliers,
unrelated parties, net of allowance for doubtful accounts of
$661,926 and $527,673, respectively
|
|
7,898,158
|
|
8,645,751
|
Advances to suppliers,
related parties
|
|
287,018,783
|
|
286,085,768
|
Inventories,
net
|
|
56,202,616
|
|
78,277,682
|
Current deferred tax
assets
|
|
3,104,989
|
|
1,507,840
|
Total Current
Assets
|
|
421,417,503
|
|
475,761,406
|
Non-current
Assets:
|
|
|
|
|
Advances for purchase
of long term assets
|
|
85,264
|
|
85,241
|
Property, plant and
equipment, net
|
|
85,008,417
|
|
87,121,382
|
Intangible assets,
net
|
|
3,548,143
|
|
3,568,855
|
Long-term
investments
|
|
1,815,236
|
|
1,814,734
|
Total
Non-current Assets
|
|
90,457,060
|
|
92,590,212
|
TOTAL
ASSETS
|
$
|
511,874,563
|
$
|
568,351,618
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Short-term
loans
|
$
|
186,818,007
|
$
|
139,223,123
|
Long-term loans,
current portion
|
|
-
|
|
-
|
Accounts payable,
unrelated parties
|
|
5,717,104
|
|
5,843,599
|
Notes
payable
|
|
33,295,758
|
|
136,274,446
|
Other payables and
accrued expenses, unrelated parties
|
|
9,411,081
|
|
4,613,201
|
Other payables and
accrued expenses, related parties
|
|
3,113,169
|
|
3,110,196
|
Advances from
customers, unrelated parties
|
|
7,095,891
|
|
7,917,111
|
Advances from
customers, related parties
|
|
15,118,527
|
|
15,114,353
|
Warrant
liabilities
|
|
3
|
|
866
|
Total Current
Liabilities
|
|
260,569,540
|
|
312,096,895
|
Non-Current
Liabilities
|
|
|
|
|
Long-term loans,
unrelated parties
|
|
2,859,995
|
|
2,859,995
|
Long-term loans,
related parties
|
|
8,182,018
|
|
8,182,018
|
Total Non-current
Liabilities
|
|
11,042,013
|
|
11,042,013
|
Total
Liabilities
|
|
271,611,553
|
|
323,138,908
|
|
|
|
|
|
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 September 30 and June 30, 2014;
issued: 42,252,267
shares and 42,252,267 shares as of September 30 and June 30, 2014,
respectively
|
|
42,252
|
|
42,252
|
Additional paid-in
capital
|
|
43,720,091
|
|
43,652,089
|
Statutory
reserves
|
|
22,725,841
|
|
22,725,841
|
Retained
earnings
|
|
131,989,310
|
|
137,081,594
|
Accumulated other
comprehensive income
|
|
42,437,025
|
|
42,362,443
|
Less: Treasury stock,
at cost, 590,838 as of September 30 and June 30, 2014
|
|
(651,509)
|
|
(651,509)
|
Total
Stockholders' Equity
|
|
240,263,010
|
|
245,212,710
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
|
511,874,563
|
$
|
568,351,618
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
AND COMPREHENSIVE
INCOME
|
|
|
|
For the Three
Months Ended
|
|
|
September
30
|
|
|
2014
|
|
2013
|
|
|
|
|
|
Revenue from
unrelated parties
|
$
|
16,991,898
|
$
|
102,182,122
|
Revenue from related
parties
|
|
20,995,932
|
|
36,926,203
|
Total
Revenue
|
|
37,987,830
|
|
139,108,325
|
Cost of
Revenue
|
|
(39,832,100)
|
|
(126,905,780)
|
Gross
(Loss)/Profit
|
|
(1,844,270)
|
|
12,202,545
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
Selling
expenses
|
|
(269,640)
|
|
(1,994,856)
|
General and
administrative expenses
|
|
(2,249,251)
|
|
(2,904,270)
|
Total Operating
Expenses
|
|
(2,518,891)
|
|
(4,899,126)
|
(Loss)/Income from
Operations
|
|
(4,363,161)
|
|
7,303,419
|
|
|
|
|
|
Other
Incomes/(Expenses):
|
|
|
|
|
Interest
income
|
|
446,485
|
|
1,050,222
|
Interest
expense
|
|
(2,978,347)
|
|
(1,803,295)
|
Changes in fair value
of warrant liabilities
|
|
863
|
|
(12,587)
|
Income from equity
method investments
|
|
-
|
|
85,172
|
Other
income
|
|
273,362
|
|
44,274
|
Other
expense
|
|
(66,845)
|
|
(18,023)
|
Total Other
Expenses
|
|
(2,324,482)
|
|
(654,237)
|
|
|
|
|
|
Income
(Loss) Before Taxes
|
|
(6,687,643)
|
|
6,649,182
|
Income tax
benefit/(expense)
|
|
1,595,359
|
|
(1,460,935)
|
Net
Income/(Loss)
|
$
|
(5,092,284)
|
$
|
5,188,247
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
Foreign currency
translation adjustment
|
|
74,582
|
|
1,659,557
|
Comprehensive
Income/(Loss)
|
|
(5,017,702)
|
|
6,847,804
|
|
|
|
|
|
Basic
Earnings/(Loss) per Share
|
$
|
(0.12)
|
$
|
0.13
|
Diluted
Earnings/(Loss) per Share
|
$
|
(0.12)
|
$
|
0.13
|
|
|
|
|
|
Basic Weighted
Shares Outstanding
|
|
41,661,429
|
|
41,314,527
|
Diluted Weighted
Shares Outstanding
|
|
41,661,429
|
|
41,314,527
|
SUTOR TECHNOLOGY
GROUP LIMITED AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
For the Three
Months Ended
|
|
|
September
30
|
|
|
2014
|
|
2013
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net income
(loss)
|
$
|
(5,092,284)
|
$
|
5,188,247
|
Adjustments to
reconcile net income to net cash provided by/(used in) operating
activities
|
|
|
|
|
Depreciation and
amortization
|
|
2,139,619
|
|
2,244,793
|
Provision for doubtful
accounts
|
|
10,827
|
|
106,557
|
Stock-based
compensation
|
|
68,002
|
|
64,264
|
Foreign currency
exchange gain
|
|
-
|
|
(91,689)
|
Income from equity
method investments
|
|
-
|
|
(85,172)
|
Deferred income
taxes
|
|
(1,595,359)
|
|
(112,083)
|
Changes in fair value
of warrant liabilities
|
|
(863)
|
|
12,587
|
Changes in current
assets and liabilities:
|
|
|
|
|
Restricted
cash
|
|
46,057,480
|
|
(8,735,865)
|
Trade accounts
receivable, unrelated parties
|
|
2,517,420
|
|
(2,708,302)
|
Trade accounts
receivable, related parties
|
|
(24,615,145)
|
|
-
|
Notes
receivable
|
|
(381,494)
|
|
(41,394,993)
|
Other receivables and
prepayments, unrelated parties
|
|
(804,498)
|
|
(8,236,889)
|
Advances to suppliers,
unrelated parties
|
|
615,344
|
|
(2,831,826)
|
Advances to suppliers,
related parties
|
|
(853,727)
|
|
93,269,690
|
Inventories
|
|
22,077,021
|
|
(54,550,385)
|
Accounts payable,
unrelated parties
|
|
574,496
|
|
3,728,819
|
Accounts payable,
related parties
|
|
-
|
|
9,268,908
|
Notes
payable
|
|
(102,927,694)
|
|
17,255,052
|
Other payables and
accrued expenses, unrelated parties
|
|
4,792,724
|
|
(361,778)
|
Other payables and
accrued expenses, related parties
|
|
2,641
|
|
-
|
Advances from
customers, unrelated parties
|
|
(822,613)
|
|
(190,350)
|
Net Cash
(Used In)/Provided by Operating Activities
|
|
(58,238,103)
|
|
11,839,585
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
(685,244)
|
|
(6,557,827)
|
Payments for
short-term investments
|
|
-
|
|
(3,243,910)
|
Proceeds from sale of
short-term investments
|
|
3,246,753
|
|
-
|
Net Cash
Provided By/(Used In) Investing Activities
|
|
2,561,509
|
|
(9,801,737)
|
|
|
|
|
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Proceeds from
loans
|
|
79,796,650
|
|
32,728,061
|
Payments of
loans
|
|
(32,281,138)
|
|
(44,606,562)
|
Proceeds from issuance
of common stock
|
|
-
|
|
1,500,000
|
Changes in restricted
cash
|
|
-
|
|
10,864,531
|
Net Cash Provided
By Financing Activities
|
|
47,515,512
|
|
486,030
|
|
|
|
|
|
Effect of Exchange
Rate Changes on Cash
|
|
4,725
|
|
25,427
|
|
|
|
|
|
Net Change in Cash
and Cash Equivalents
|
|
(8,156,357)
|
|
2,549,305
|
Cash and Cash
Equivalents at Beginning of Year
|
|
12,178,225
|
|
3,601,385
|
Cash and Cash
Equivalents at End of Year
|
$
|
4,021,868
|
$
|
6,150,690
|
|
|
|
|
|
Supplemental
Non-Cash Information:
|
|
|
|
|
Offset of notes
payable to related parties against receivable from related
parties
|
$
|
-
|
$
|
10,997,923
|
Accounts payable for
purchase of long-term assets
|
|
(702,495)
|
|
-
|
|
|
|
|
|
Supplemental Cash
Flow Information:
|
|
|
|
|
Cash paid during the
year for interest expense
|
$
|
(2,726,391)
|
$
|
(2,030,947)
|
Cash paid during the
year for income tax
|
$
|
-
|
$
|
(1,539,622)
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/sutor-technology-group-limited-reports-first-quarter-of-fiscal-year-2015-financial-results-300009486.html
|
SOURCE Sutor Technology Group Limited