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Kingold Jewelry Reports 2017 First Quarter Financial Results

2017-05-11 05:15
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Company to Hold Conference Call with Accompanying Slide Presentation at 5:30 p.m. ET on May 11, 2017

WUHAN CITY, China, May 10, , May 11, 2017 /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 its unaudited financial results for the first quarter ended March 31, 2017.

2017 First Quarter Financial Highlights (all results compared to prior year period)

  • Net sales were $292.3 million, an increase of 4% from $282.2 million
  • Processed a total of 16.0 metric tons of 24-karat gold products, increased 8.1% from 14.8 metric tons
  • Net loss was $21.3 million, or $(0.32) per diluted share, compared to net income of $15.2 million, or $0.23 per diluted share

Outlook for 2017

  • Company reiterates guidance of between 70 metric tons and 80 metric tons of 24-karat gold products in 2017

Management Commentary

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased to deliver strong operating results in the first quarter of 2017, and continue to increase our production capacity and total gold processed volume. During the quarter, we have witnessed strong growing demand for 24-karat gold products to encourage us to further expand our production. Under this competitive environment our management team continues to focus on establishing new sales channels while seeking sufficient free cash flow to support production volume to remain competitive. However, we have seen challenges from the higher interest rate resulted by our expansion in the gold investment business during the quarter, therefore we should be further observant in balancing the relationship of the market demand and trend with capital needs."  

2017 FIRST QUARTER OPERATIONAL REVIEW

Metric Tons of Gold Sales


Three Months Ended:


March 31, 2017

March 31, 2016


Volume

% of Total

Volume

% of Total

Branded*

8.1

50.3%

8.2

55.1%

Customized**

7.9

49.7%

6.6

44.9%

Total

16.0

100.0%

14.8

100%


* Branded Production:

The Company acquires gold from the Shanghai Gold Exchange to produce branded products.

** Customized Production:

Clients who purchase customized products supply gold to the Company for processing.

For the three months ended March 31, 2017, the Company sold a total of 16 metric tons of gold, of which branded production was 8.1 metric tons, representing 50.3% of total gold sold, and customized production was 7.9 metric tons, representing 49.7% of total gold sold in the first quarter of 2017. In the first quarter of 2016, the Company sold a total of 14.8 metric tons, of which branded production was 8.2 metric tons, or 55.1% of the total gold sold, and customized production was 6.6 metric tons, or 44.9% of total gold sold.

2016 FINANCIAL REVIEW

Net Sales

Net sales for the three months ended March 31, 2017 was $292.3 million, representing an increase of $10.1 million, or 4%, from $282.2 million for the same period in 2016. The increase in net sales was primarily driven by the increase in the average selling price for our branded production from RMB 222.24 per gram in the three months ended March 31, 2016 to RMB 245.70 per gram in three months ended March 31, 2017. 

Gross Profit

Gross profit for the three months ended March 31, 2017 was $17.1 million, compared to $28.5 million for the same period in 2016.

Gross Margin

The Company's gross margin was 6% for the three months ended March 31, 2017, compared to 10% in the prior year period. The decrease in gross margin was primarily due to the increased unit cost of our branded production sales.  The unit cost of branded production sales was RMB 234.92 per gram for the three months ended March 31, 2017, increased by 16% compared to RMB 202.58 per gram for the same period in 2016.

Net Income (Loss)

Net loss for the three months ended March 31, 2017 was $21.3 million, or $(0.32) per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $15.2 million in the prior year period, or $0.23 per diluted share based on 66.0 million weighted average diluted shares outstanding in the prior-year period.

Balance Sheet Highlights (USD in Millions)


3/31/2017


12/31/2016

Percentage Change

Cash and Cash Equivalents

$9.4


$21.3

(55.8) %

Inventories

$88.8


$119.4

(25.6) %

Working Capital (Current Assets -- Current Liabilities)

$696.3


$460.0

51.4 %

Stockholders' Equity

$360.7


$282.5

27.7 %

Net cash used in operating activities was $54.7 million for the three months ended March 31, 2017, compared with net cash used in operating activities of $148 million for the same period in 2016. The increase of net cash used in operating was mainly due to the increase in value added tax receivable of $64.4 million, decrease in other payable and accrued expense of $2.1 million, offset by our decrease in inventories of $31.6 million for the increased production to meet the sales demand.

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 other factors described above change with increased production and purchase of larger quantities of raw materials (principally gold).

OUTLOOK FOR 2017

Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company reiterates its expectation that gold processed will be between 70 metric tons and 80 metric tons during 2017.

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on May 11, 2017, at 5:30 p.m. 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/q1-2017. 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, one of China's largest cities, 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, as amended, and the Securities Exchange Act of 1934, as amended. You can identify these forward -looking statements by words such as "expects," "believe," "project," "anticipate," or similar expressions. The forward-looking statements in this release include statements regarding Kingold's outlook with respect to its 2017 outlook for gold processing, its expectations with respect to completion of construction of the Jewelry Park and planned grand opening, as well as its ability to engage in presales and finance the remaining construction. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. Forward-looking statements are subject to a number of risks, including those 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)
bl@kingoldjewelry.com

INVESTOR RELATIONS
The Equity Group Inc.
Katherine Yao, Senior Associate
Phone: +86-10-6587-6435
kyao@equityny.com

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)








For the three months ended    

March 31,


2017


2016




(Restated)

NET SALES

$

292,264,077


$

282,188,057

COST OF SALES






Cost of sales


(274,909,008)



(253,412,444)

Depreciation


(294,443)



(290,682)

Total cost of sales


(275,203,451)



(253,703,126)

GROSS PROFIT


17,060,626



28,484,931

OPERATING EXPENSES






Selling, general and administrative expenses


3,697,383



2,838,593

Stock compensation expenses


11,143



11,143

Depreciation


105,839



23,513

Amortization, other


2,743



2,890

Total operating expenses


3,817,108



2,876,139







INCOME FROM OPERATIONS

$

13,243,518


$

25,608,792

OTHER INCOME (EXPENSES)






   Other income 


65,365



-

Interest Income


686,845



59,224

Interest expense, including amortization of debt issuance costs of $3,287,709 and $430,772


(37,589,496)



(5,404,125)

Total other expenses, net


(36,837,286)



(5,344,901)

INCOME (LOSS) FROM OPERATIONS BEFORE TAXES


(23,593,768)



20,263,891

INCOME TAX PROVISION (BENEFIT)






Current


-



4,811,004

Deferred


(2,287,949)



255,674

Total income tax provision (benefit)


(2,287,949)



5,066,678







NET INCOME (LOSS)


(21,305,819)



15,197,213

Less: net loss attributable to the non-controlling interest


-



(1,197)

NET INCOME (LOSS) ATTRIBUTABLE TO KINGOLD JEWELRY, INC.

$

(21,305,819)


$

15,198,410







OTHER COMPREHENSIVE INCOME 






Change in unrealized gain related to investments in gold

$

102,907,389


$

17,564,866

Total foreign currency translation gain (loss)


(3,427,417)



1,962,694

Less: foreign currency translation loss attributable to non-controlling interest


-



(454)

Total other comprehensive income attributable to KINGOLD JEWELRY, INC.

$

99,479,972


$

19,528,014







COMPREHENSIVE INCOME ATTRIBUTABLE TO:






KINGOLD JEWELRY, INC.

$

78,174,153


$

34,726,424

Non-controlling interest


-



(1,651)



78,174,153


$

34,724,773

Earnings (Losses) per share






Basic and diluted

$

(0.32)


$

0.23

Weighted average number of shares






Basic and diluted


66,018,867



65,963,502



















KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)








March 31,


December 31,


2017


2016





ASSETS












CURRENT ASSETS






Cash

$

9,425,086


$

21,333,193

Restricted cash


64,456,118



52,786,257

Accounts receivable


320,774



670,878

Inventories


88,822,115



119,435,595

Investments in gold - current


1,059,682,318



281,895,403

Other current assets and prepaid expenses


657,627



698,217

Prepaid income tax


3,356,372



3,330,468

Value added tax recoverable


339,336,936



272,835,051

Total current assets


1,566,057,346



752,985,062







PROPERTY AND EQUIPMENT, NET


7,415,615



7,224,698







OTHER ASSETS






Restricted cash


8,503,599



7,558,173

Investments in gold


1,254,859,708



1,493,938,551

Other assets


285,204



283,003

Deferred income tax assets


1,027,910



-

Land use right


414,137



413,662

Total long-term assets


1,272,506,173



1,509,418,087

TOTAL ASSETS

$

2,838,563,519


$

2,262,403,149







LIABILITIES AND STOCKHOLDERS' EQUITY












CURRENT LIABILITIES






Short term loans, less unamortized debt issuance costs of $2,031,821 and $4,480,085

$

528,644,984


$

234,691,670

Third party loan


29,022,521



28,798,526

Gold leases payable - Bank


7,223,140



7,167,391

Other payables and accrued expense


11,672,302



13,716,472

Related parties loan


29,225,215



-

Due to related party


1,680,327



7,223,321

Other taxes payable


1,338,211



1,518,731

Total current liabilities


869,806,700



293,116,111

Deferred income tax liability


-



1,249,622

Related parties loan


568,841,421



460,776,408

Long term loans, less unamortized debt issuance costs of $5,570,959 and $4,350,348


1,039,239,815



1,224,770,721

TOTAL LIABILITIES


2,477,887,936



1,979,912,862







COMMITMENTS AND CONTINGENCIES












EQUITY






Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of March 31, 2017 and December 31, 2016


-



-

Common stock $0.001 par value, 100,000,000 shares authorized, 66,018,867 shares issued and outstanding as of March 31, 2017 and December 31, 2016


66,018



66,018

Additional paid-in capital


80,242,111



80,230,968

Retained earnings






Unappropriated


256,168,140



277,473,959

Appropriated


967,543



967,543

Accumulated other comprehensive income (deficit)


23,231,770



(76,248,201)

Total stockholders' equity


360,675,583



282,490,287







TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,838,563,519


$

2,262,403,149



















KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)








For the three months ended
March 31,


2017


2016




(Restated)

CASH FLOWS FROM OPERATING ACTIVITIES






Net income (loss)

$

(21,305,819)


$

15,197,213

Adjusted to reconcile net income (loss) to cash provided by (used in) operating activities:






Depreciation


400,282



314,195

Amortization of intangible assets


2,743



2,890

Share based compensation for services and warrants expense


11,143



75,347

Amortization of debt issuance costs included in interest expense


3,287,709



430,772

Deferred tax provision (benefit)


(2,287,949)



255,674

Changes in operating assets and liabilities






(Increase) decrease in:






Accounts receivable


355,430



736,891

Inventories


31,552,069



161,022,459

Other current assets and prepaid expenses


46,031



(2,037,978)

Value added tax recoverable


(64,399,390)



(28,871,518)

Increase (decrease) in:






Other payables and accrued expenses


(2,147,164)



(2,362,754)

Income tax payable


-



3,252,855

Other taxes payable


(192,391)



151

Net cash provided by (used in) operating activities


(54,677,306)



148,016,197







CASH FLOWS FROM INVESTING ACTIVITIES






Purchases of property and equipment


(506,991)



(42,449)

Investments in gold


(422,116,819)



(361,816,442)

Construction in progress-Jewelry Park


-



(13,101,275)

Net cash used in investing activities


(422,623,810)



(374,960,166)







CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from bank loans – short term


29,031,368



-

Repayments of bank loans – short term


(145,157)



(6,115,740)

Proceeds from bank loans - long term 


95,803,516



319,547,435

Repayments of bank loans - long term 


(29,031,368)



-

Proceeds from related party loan – short term


284,507,410




Proceeds from related party loan – long term


479,017,578



-

Repayments of related party loan – long term


(374,504,652)



-

Payment of loan origination fees


(1,990,977)



-

Restricted cash


(12,149,628)



(15,555,150)

Due to related party 


(5,586,376)



250,226

Proceeds from (repayment of) debt financing instruments-private placement


-



(61,157,404)

Net cash provided by financing activities


464,951,714



236,969,367







EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS


441,295



140,910

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


(11,908,107)



10,166,308

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


21,333,193



3,100,569

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

9,425,086


$

13,266,877







SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION






Cash paid for interest expense

$

27,688,571


$

3,951,608

Cash paid for income tax

$

-


$

1,111,571

NON-CASH INVESTING AND FINANCING ACTIVITIES






Investments in gold obtained in a lease from a related party and fully repaid

$

131,117,303


$

138,287,308

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kingold-jewelry-reports-2017-first-quarter-financial-results-300455623.html

Source: Kingold Jewelry, Inc.

Related stocks: NASDAQ-SMALL:KGJI

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