CHANGSHU, China, May 13 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (the "Company", "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 down-stream applications, today announced its financial results for the third fiscal quarter 2010, ended March 31, 2010.
Third Fiscal Quarter 2010 Financial Highlights:
-- Total revenues were US$114.5 million in the third fiscal quarter 2010,
an increase of US$18.6 million or 19.5% as compared to the same period
last year
-- Gross profit was US$9.3 million in the third fiscal quarter 2010, an
increase of US$2.2 million, or 31.0% as compared to the same period
last year. Gross margin was 8.1% for the three months ended March 31,
2010 as compared to 7.4% for the same period last year
-- Net income was US$3.4 million for the third fiscal quarter 2010, an
increase of US$0.7 million or 24.5% as compared to the same period last
year
-- Fully diluted earnings per share was US$0.09 for the third fiscal
quarter 2010, an increase of US$0.02 or 22.4% as compared to the same
period last year
"We are pleased with the growth in revenue, net income as well as gross margin in this quarter as compared with the same period last year," stated Ms. Lifang Chen, Chairwoman and CEO of Sutor. "Despite of the fluctuations in the raw material costs and the steel market, we were able to increase production and profitability during the quarter as we continued to implement new marketing and growth strategies, including focusing on high margin products, expanding international sales and partnering with the first class distributors."
"As a result of these strategic moves, we have been broadening our end market and customer base and diversifying our product offerings. During the third fiscal quarter, we experienced increased sales from South and Central China where Sutor made significant strides to boost its sales through a series of incentive programs. In addition, we established a strong presence in a number of emerging and fast-growing industries including green energy applications and the auto manufacturing sector that are in line with China's economic stimulus package and the government's commitment to a low carbon economy and developing energy-saving materials. We believe that Sutor's business in these industries also benefited from the Chinese government's commitment to transforming the economy from an export and government spending basis to a domestic demand driven economy."
Ms. Chen continued, "With our proactive marketing efforts and R&D initiatives, we expect increasing demand for our high-end fine finish steel products and customized value added processing services."
"On the financial front, the additional equity capital we raised in the quarter will allow us to strengthen our R&D capacity and the integration of our production processes that will help us further cut production cost and better serve small- to mid-sized clients."
Third Fiscal Quarter 2010 Financial Results
Revenues. Revenues were US$114.5 million in the third fiscal quarter 2010 compared to US$95.8 million in the same period last year, a 19.5% increase. Domestic sales were US$103.7 million, a 16.5% increase, accounting for 90.6% of total revenues. International sales were US$10.7 million, a 57.3% increase, accounting for 9.4% of total revenue for the three months ended March 31, 2010.
Gross Profit. Gross profit in the third fiscal quarter 2010 was US$9.3 million compared to US$7.1 million in the same period last year, a 31.0% increase. Gross margin was 8.1% for the third fiscal quarter 2010 compared to 7.4% for the same period last year. The increase in gross margin was the result of the increased sales of the company's high margin new products and exported products which provided higher margins for the company than domestic sales.
Operating Expenses. Operating expenses were US$3.8 million compared to US$2.9 million in the same period last year, up approximately $0.9 million, or 31.8%. As a percentage of revenue, it was approximately 3.0% vs. 3.3% in the same period last year. The higher operating expenses were primarily the result of the company's efforts to expand overseas market share and increased shipping costs associated with international sales.
Income from Operations. Income from operations was US$5.5 million in the third fiscal quarter 2010 as compared to US$4.2 million in the same period last year, a 30.5% increase.
Net Income. Net income was US$3.4 million in the third fiscal quarter 2010, compared to US$2.7 million in the same period last year, a 24.5% increase. The company had a higher effective income tax rate of 22.1% this quarter vs. 15.7% for the same period last year due to gradual phase out of preferred income tax treatment.
Financial Condition
In March 2010, the Company completed a US$7.4 million registered direct equity offering. The net proceeds from the offering will be used for general corporate purposes including expanding its R&D facilities and capacity at its existing facilities, and investing in new businesses, products and technologies, both through acquisitions and capital programs, funding ongoing operating, repayment of indebtedness and working capital requirements.
As of March 31, 2010, the Company had cash and cash equivalents of US$16.8 million plus US$48.2 million in restricted cash. The Company had working capital of US$95.3 million.
Recent Developments
In May 2010, Sutor signed new contracts with Hyundai-KIA Group ("Hyundai-KIA"), Baosteel Group Corporation ("Baosteel") and Nantong GangZhen Steel Strip Ltd. to offer acid pickling steel processing services to the three companies with an annual processing amount of 36,000 metric tons, 48,000 metric tons, and 42,000 metric tons, respectively. The processed steel products will be directly used in auto manufacturing. For the contracts, Sutor is a toll processor and does not pay for the raw materials, but rather receives a fee for processing the orders. Sutor will not have the risk associated with the fluctuations in raw material costs, and the processing orders are expected to achieve gross margins significantly higher than those of the average steel production business. Through the partnership with the world leading auto and steel firms like Hyundai-KIA and Baosteel, the Company expects to further strengthen its industry position and capitalize on the compelling market opportunities ahead.
Conference Call
The dial-in number for the conference call, which will begin today, Thursday, May 13, 2010 at 08:30 a.m. U.S. Eastern Time (08:30 p.m. May 13, 2010 in Beijing/Hong Kong), is the U.S: +1-877-847-0047; China: +800-8765011; Hong Kong: +852 30068101. The conference call passcode is Sutr. More information about the Company is available on our website at http://www.sutorcn.com/English/ .
About Sutor Technology Group Limited
Sutor (Nasdaq: SUTR) 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 down stream applications. Sutor utilizes a variety of processes and technological methodologies to convert steel manufactured by third parties into fine finished steel products, including hot-dipped 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/English/ .
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 and strategic and operational plans, our future operating results, our expectations regarding the market for our steel finishing fabrication products, our expectations regarding the continued growth of the steel market, as well as all assumptions, expectations, predictions, intentions or beliefs about our relative strength and 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, including developments in the world economy and in our industry, 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, 2009, and other risks mentioned in our other reports filed with the Securities Exchange Commission, or 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:
Mr. Jason Wang
Sutor Technology Group Limited
Tel: +86-512-5268-0988
Web: http://www.sutorcn.com
Mr. Brian M. Prenoveau, CFA
ICR, LLC
Tel: +1-203-682-8200
-- FINANCIAL TABLES FOLLOW --
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, June 30,
2010 2009
ASSETS
Current Assets:
Cash and cash equivalents $16,808,922 $10,653,438
Restricted cash 48,241,237 64,811,741
Trade accounts receivable, net of allowance
for doubtful accounts of $610,848 and
$816,268, respectively 12,513,078 12,107,602
Other receivables 359,896 463,916
Advances to suppliers, related parties 104,008,051 76,391,552
Advances to suppliers, net of allowance of
$291,931 and $817,159, respectively 23,573,629 25,039,763
Inventory 37,387,616 44,163,502
Notes receivable 1,448,194 178,237
Deferred income taxes 334,749 397,998
Total Current Assets 244,675,372 234,207,749
Property and Equipment, net of accumulated
depreciation of $23,970,850 and $18,799,763,
respectively 71,220,529 77,242,707
Intangible Assets, net of accumulated
amortization of $396,523 and $345,130,
respectively 3,000,423 3,047,498
TOTAL ASSETS $318,896,324 $314,497,954
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $17,040,271 $16,077,413
Advances from customers 22,667,310 18,805,901
Other payables and accrued expenses 4,571,506 3,810,075
Other payables - related parties 298,416 140,252
Short-term notes payable 104,201,015 104,338,736
Short-term notes payable - related parties 585,129 9,900,727
Total Current Liabilities 149,363,647 153,073,104
Long-Term Notes Payable 2,859,995 2,859,995
Long-Term Notes Payable - Related parties -- 249,996
Total Liabilities 152,223,642 156,183,095
Stockholders' Equity
Undesignated preferred stock - $0.001
par value; 1,000,000 shares authorized;
no shares outstanding -- --
Common stock - $0.001 par value; 500,000,000
shares authorized; 40,715,602 and
37,955,602 shares outstanding, respectively 40,715 37,955
Additional paid-in capital 42,439,051 42,233,307
Statutory reserves 12,601,921 12,601,921
Retained earnings 92,788,297 84,865,780
Accumulated other comprehensive income 18,802,698 18,575,896
Total Stockholders' Equity 166,672,682 158,314,859
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $318,896,324 $314,497,954
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
For The Three Months Ended For The Nine Months Ended
March 31, March 31,
2010 2009 2010 2009
Revenue:
Revenue $53,393,402 $33,579,821 $165,933,164 $185,494,277
Revenue from
related parties 61,058,979 62,230,954 187,502,281 134,444,871
114,452,381 95,810,775 353,435,445 319,939,148
Cost of Revenue
Cost of revenue 48,928,589 31,773,931 153,813,836 171,572,683
Cost of revenue
from related
party sales 56,209,868 56,926,963 177,272,203 118,400,951
105,138,457 88,700,894 331,086,039 289,973,634
Gross Profit 9,313,924 7,109,881 22,349,406 29,965,514
Operating Expenses:
Selling expense 1,815,730 1,157,110 4,464,208 3,119,871
General and
administrative
expense 1,980,356 1,723,817 4,466,783 4,339,052
Total Operating
Expenses 3,796,086 2,880,927 8,930,991 7,458,923
Income from
Operations 5,517,838 4,228,954 13,418,415 22,506,591
Other Income
(Expense):
Interest income 389,750 352,733 973,089 1,348,171
Other income 6,211 12,281 373,175 304,865
Interest expense (1,535,430) (1,320,993) (4,150,479) (4,644,134)
Other expense (22,592) (37,402) (344,870) (582,387)
Total Other
Income (Expense) (1,162,061) (993,381) (3,149,085) (3,573,485)
Income Before
Taxes 4,355,777 3,235,573 10,269,330 18,933,106
Provision for
income taxes (961,085) (509,433) (2,346,813) (2,109,790)
Net Income $3,394,692 $2,726,140 $7,922,517 $16,823,316
Basic and Diluted
Earnings per
Common Share $0.09 $0.07 $0.21 $0.44
Net Income $3,394,692 $2,726,140 $7,922,517 $16,823,316
Foreign currency
translation
adjustment 33,378 172,713 226,802 543,105
Comprehensive
Income $3,428,070 $2,898,853 $8,149,319 $17,366,421
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended
March 31,
2010 2009
Cash Flows from Operating Activities:
Net income $7,922,517 $16,823,316
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 5,260,692 4,522,952
Deferred income taxes 63,740 (21,402)
Stock based compensation 10,133 --
Loss (gain) on sale of assets 3,549 (161,410)
Changes in current assets and liabilities:
Trade accounts receivable, net (389,975) 1,282,339
Other receivable, net 104,586 (18,441)
Advances to suppliers - related parties (37,108,213) 35,084,256
Advances to suppliers 1,561,993 8,955,166
Inventories 6,830,463 12,766,527
Accounts payable 2,980,169 (8,228,932)
Advances from customers 3,836,561 (17,006,436)
Other payables and accrued expenses 1,432,592 551,307
Other payables - related parties 298,345 --
Net Cash Provided By (Used in) Operating
Activities (7,192,848) 54,549,242
Cash Flows from Investing Activities:
Changes in notes receivable (1,269,427) 99,256
Purchase of property and equipment, net
of value added tax refunds received (1,196,621) (17,105,642)
Proceeds from sale of assets -- 782,719
Net change in restricted cash 16,649,017 (2,739,553)
Net Cash Provided By (Used in) Investing
Activities 14,182,969 (18,963,220)
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable 95,709,395 125,537,883
Payments on notes payable (95,979,838) (161,740,223)
Proceeds from issuance of notes payable
- related parties 199,932 17,515,845
Payments on notes payable - related
parties (985,269) (8,757,922)
Distribution to certain shareholders in
connection with the reorganization of
Ningbo (6,615,825) --
Net proceeds from issuance of common
stock and warrants 6,814,196 --
Proceeds from issuance of notes payable
- principal shareholder -- 5,247,013
Net Cash (Used in) Financing Activities (857,409) (22,197,404)
Effect of Exchange Rate Changes on Cash 22,772 50,145
Net Change in Cash 6,155,484 13,438,763
Cash and Cash Equivalents at Beginning
of period 10,653,438 12,494,339
Cash and Cash Equivalents at End of
period $16,808,922 $25,933,102
Supplemental Non-Cash Financing Activities
Offset of notes payable to related party
against receivable from related
parties (Note 6) $9,597,783 $--
Supplemental Cash Flow Information
Cash paid during the period for interest $3,744,722 $4,666,281
Cash paid during the period for income
taxes $1,465,412 $2,391,874
