WUHAN CITY, China, March 28, 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 fourth quarter and year ended December 31, 2012.
2012 Financial and Operating Highlights (comparisons are to 2011):
Fourth Quarter 2012 Highlights (comparisons are to Fourth Quarter 2011):
Subsequent Operating Highlights
Outlook for 2013
Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "The last several months have been a strong period in our Company's history, as we finished 2012 by reporting solid financial results and strengthened our financial position considerably through the closing of our recent financing and securing new sources of gold. Kingold beat its previously announced volume guidance by over 7% and achieved year-over-year growth in volume, net sales, gross profit margin, and net income. We believe that gold design and processing companies like Kingold, with our developed distribution network, attractive designs and reliable product quality, are well-positioned to expand our brand and capture an increasing share of China's growing gold jewelry and investment market."
Operational Review
For 2012, Kingold processed a total of 37.8 metric tons of 24-karat gold products, a 26.0% increase over the 30 metric tons processed in 2011. In the fourth quarter of 2012, Kingold processed approximately 7.6 metric tons of 24-karat gold products, an increase of 33.3% over the 5.7 metric tons sold in the fourth quarter of 2011. During the quarter and year, the Company continued to see strong demand from major clients in jewelry products and increased sales of investment gold products from its partner commercial banks' retail branches in provinces throughout China.
Jewelry Business
Kingold offers a wide range of in-house designed jewelry products (launches approximately 10,000 each year) including, but not limited to, gold necklaces, rings, earrings, bracelets, and pendants. Kingold sells its jewelry products directly to distributors, retailers and other wholesalers, who then sell these products to consumers through retail counters located in both department stores and other traditional stand-alone jewelry stores. In 2012, the Company secured and deepened its sales relationship with leading wholesalers and retailers in China, including Shenzhen Tongxing Jewelry as well as Shanghai Lao Feng Xiang.
In 2012, the Company also expanded its business into new geographic regions in China. The Company's jewelry products are now being sold in 25 provinces and municipalities in China compared to 17 provinces at the end of 2011.
Investment Gold Business
Kingold's investment gold products primarily include gold bars and coins and other customized products specifically designed for use by commercial banks. Kingold distributes its investment gold products in partnered commercial banks' local retail branches across China. Pricing of products is made at the time of sale based upon the then-current price of gold, and Kingold then reports sales upon delivery.
By the end of 2012, Kingold signed agreements with four major Chinese banks: the Bank of Communications, China Merchant Bank, China CITIC Bank and Wuhan Rural Commercial Bank, and expects to seek additional partnerships throughout the coming year. In 2012, the Company worked diligently to widen the geographic reach of its investment gold business, and products produced by Kingold are now currently available in 366 retail bank branches across eight provinces in China.
Market Overview
The average international gold price per ounce remained relatively flat between 2011 and 2012. On an average basis, the price for gold was RMB338.5 per gram in 2012 and RMB 326.3 per gram in 2011, according to the World Gold Council. Kingold purchases gold directly from the Shanghai Gold Exchange, of which it has been a member since 2003. The membership grants the Company the privilege of purchasing gold directly from the Shanghai Gold Exchange.
Total consumer demand in China recently reached a record of 776.1 metric tons sold and processed in 2012, with jewelry accounting for 510.6 metric tons and investment gold 265.5 metric tons (World Gold Council). The Company is continuing to see consumers allocate greater sums of their available spendable income to gold investment and jewelry purchases. Kingold believes this is largely due to the continued urbanization of China's population, the dominance of 24-karat gold and its role as a savings proxy, and increasing availability of gold investment products to a populace with a growing awareness of gold's investment properties - particularly its role as an inflation hedge.
2012 Fourth Quarter Financial Review
Full-year 2012 Financial Review
Balance Sheet and Cash Flow
(in millions except for percentages) | 12/31/2012 | 12/31/2011 | % Change | |
Cash | $ | 2.5 | 8.8 | (71.6%) |
Inventories (gold) | 150.0 | 108.1 | 38.8% | |
Working Capital | 149.2 | 113.4 | 31.6% | |
Stockholders' Equity | 161.5 | 127.0 | 27.2% |
Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include our accounts payable, purchases of gold and income taxes. The Company expects the net cash that it generates from operating activities to continue to fluctuate as its inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger quantities of raw materials (gold).
Outlook for 2013
Based on the Company's existing resources and capacity (which includes the Company's recent proceeds from its previously announced financing and gold lease agreements), Kingold believes gold processed will be between 50 metric tons and 60 metric tons during 2013. This guidance is based solely on current projected, organic growth, and would represent a 32.3% to 58.7% increase from the 37.8 metric tons processed in 2012.
Mr. Jia concluded, "We believe that Kingold is well-positioned and capitalized to safely expand on our strong market position in China's gold market. Our recent financing activities have provided Kingold with a strong capital base from which to rapidly expand production. With 100% percent of our resources focused on organic growth in our core jewelry and investment gold segments, we are focused on returning shareholder value by re-investing in our business and taking advantage of continued strong demand for gold products in China."
Conference Call
Kingold also announced that it will also discuss these results in a conference call tomorrow morning (March 28, 2013) at 8:30 a.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. 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 - News), centrally located in Wuhan City, China's fourth largest 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 Kingold's ability to accelerate growth and achieve greater balance in its free cash flow, the amount of gold to be processed in 2013, [Kingold's gross margins for 2013,] Kingold's ability to expand its brand and capture market share, the entry into additional partnerships for the investment gold business, consumer demand in China for gold, and fluctuations in net cash from operating activities. 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.
Company Contact:
Kingold Jewelry, Inc.
Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
Email: bl@kingoldjewelry.com
INVESTOR RELATIONS
The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com
Katherine Yao, Associate
+86 10-6587-6435
kyao@equityny.com
KINGOLD JEWELRY, INC. | ||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||
(IN US DOLLARS) | ||||||||||||||
For the three months ended December 31, | For the years ended December 31, | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||
NET SALES | $ | 201,442,617 | $ | 168,435,388 | $ | 915,732,800 | $ | 788,968,746 | ||||||
COST OF SALES | ||||||||||||||
Cost of sales | (189,370,237) | (161,251,439)) | (863,563,502) | (745,497,529) | ||||||||||
Depreciation | (362,837) | (351,293) | (1,253,256) | (1,223,418) | ||||||||||
Total cost of sales | (189,733,074) | (161,602,732) | (864,816,758) | (746,720,947) | ||||||||||
GROSS PROFIT | 11,709,543 | 6,832,656 | 50,916,042 | 42,247,799 | ||||||||||
OPERATING EXPENSES | ||||||||||||||
Selling, general and administrative | 1,385,011 | 1,381,298 | 4,550,669 | 3,931,824 | ||||||||||
Stock compensation | 130,958 | 547,296 | 1,178,313 | 804,796 | ||||||||||
Depreciation | 44,395 | 39,299 | 148,979 | 137,724 | ||||||||||
Amortization | 3,020 | 2,919 | 11,978 | 11,700 | ||||||||||
Total Operating Expenses | 1,563,384 | 1,970,912 | 5,889,939 | 4,886,044 | ||||||||||
INCOME FROM OPERATIONS | 10,146,159 | 4,861,744 | 45,026,103 | 37,361,755 | ||||||||||
OTHER INCOME (EXPENSES) | ||||||||||||||
Other income | - | 29,415 | - | 47,649 | ||||||||||
Interest income | - | 22,846 | - | 22,846 | ||||||||||
Other expenses | (15,848) | (5,758) | (17,407) | - | ||||||||||
Interest expense | (108,785) | (321,027) | (444,997) | (441,838) | ||||||||||
Total Other Expenses, net | (124,633) | (274,524) | (462,404) | (371,343) | ||||||||||
INCOME FROM OPERATIONS BEFORE TAXES | 10,021,526 | 4,587,220 | 44,563,699 | 36,990,412 | ||||||||||
PROVISION FOR INCOME TAXES | (2,612,737) | (1,411,009) | (11,893,370) | (9,758,782) | ||||||||||
NET INCOME | $ | 7,408,789 | $ | 3,176,211 | 32,670,329 | $ | 27,231,630 | |||||||
Less: net income attribute to the noncontrolling interest | - | - | (1,039,754) | |||||||||||
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 7,408,789 | $ | 3,176,211 | 32,670,329 | $ | 26,191,876 | |||||||
OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||
Total foreign currency translation gains (loss) | (815,549) | 1,623,658 | (62,772) | 4,957,237 | ||||||||||
Less: foreign currency translation gains | ||||||||||||||
attributable to noncontrolling interest | - | - | - | (49,612) | ||||||||||
Foreign currency translation gains (loss) | ||||||||||||||
attributable to common stockholders | (815,549) | 1,623,658 | (62,772) | 4,907,625 | ||||||||||
COMPREHENSIVE INCOME | $ | 6,593,240 | $ | 4,799,869 | 32,607,557 | $ | 31,099,501 | |||||||
Earnings per share | ||||||||||||||
Basic | $ | 0.14 | $ | 0.06 | 0.61 | $ | 0.53 | |||||||
Diluted | $ | 0.14 | $ | 0.06 | 0.60 | $ | 0.52 | |||||||
Weighted average number of shares | ||||||||||||||
Basic | 54,493,965 | 50,279,886 | 53,590,528 | 49,616,147 | ||||||||||
Diluted | 54,669,131 | 51,264,247 | 54,359,564 | 50,600,508 | ||||||||||
KINGOLD JEWELRY, INC. | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(IN US DOLLARS) | ||||||||||
December 31, | December 31, | |||||||||
2012 | 2011 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash | $ | 2,544,114 | $ | 8,810,173 | ||||||
Accounts receivable | 692,762 | 896,949 | ||||||||
Inventories | 150,041,421 | 108,088,420 | ||||||||
Other current assets and prepaid expenses | 133,539 | 72,333 | ||||||||
Value added tax recoverable | 7,031,374 | 4,750,847 | ||||||||
Total Current Assets | 160,443,210 | 122,618,722 | ||||||||
PROPERTY AND EQUIPMENT, NET | 11,683,987 | 12,942,902 | ||||||||
OTHER ASSETS | ||||||||||
Other assets | 153,029 | 153,102 | ||||||||
Intangible assets, net | 503,313 | 515,543 | ||||||||
Total other assets | 656,342 | 668,645 | ||||||||
TOTAL ASSETS | $ | 172,783,539 | $ | 136,230,269 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES | ||||||||||
Short term loans | $ | 6,340,551 | $ | 6,343,578 | ||||||
Other payables and accrued expenses | 1,445,513 | 870,454 | ||||||||
Related party loan | 209,890 | - | ||||||||
Income tax payable | 2,587,680 | 1,451,929 | ||||||||
Other taxes payable | 659,989 | 562,027 | ||||||||
Total Current Liabilities | 11,243,624 | 9,227,988 | ||||||||
COMMITMENTS AND CONTINGENCIES | - | - | ||||||||
EQUITY | ||||||||||
Preferred stock, $0.001 par value, 500,000 shares | ||||||||||
authorized, none issued or outstanding | ||||||||||
as of December 31, 2012 and December 31, 2011 | - | - | ||||||||
Common stock $0.001 par value, 100,000,000 shares | ||||||||||
authorized, 54,521,140 and 53,107,343 shares | ||||||||||
and December 31, 2011 | 54,521 | 53,108 | ||||||||
Additional paid-in capital | 57,656,674 | 55,728,009 | ||||||||
Retained earnings | ||||||||||
Unappropriated | 92,606,479 | 59,936,120 | ||||||||
Appropriated | 967,543 | 967,543 | ||||||||
Accumulated other comprehensive income | 10,254,729 | 10,317,501 | ||||||||
Total Equity | 161,539,916 | 127,002,281 | ||||||||
TOTAL LIABILITIES AND EQUITY | $ | 172,783,539 | $ | 136,230,269 |
KINGOLD JEWELRY, INC. | |||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||||||
(IN US DOLLARS) | |||||||||||
For the years ended December 31, | |||||||||||
2012 | 2011 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income | $ | 32,670,329 | $ | 27,231,630 | |||||||
Adjusted to reconcile net income to cash used in | |||||||||||
operating activities: | |||||||||||
Depreciation | 1,402,235 | 1,361,142 | |||||||||
Amortization of intangible assets | 11,978 | 11,700 | |||||||||
Share based compensation | 1,178,313 | 804,796 | |||||||||
Changes in operating assets and liabilities | |||||||||||
(Increase) decrease in: | |||||||||||
Accounts receivable | 203,662 | 315,857 | |||||||||
Inventories | (41,984,607) | (48,845,404) | |||||||||
Other current assets and prepaid expenses | (48,588) | (10,731) | |||||||||
Value added tax recoverable | (2,281,708) | (698,584) | |||||||||
Increase (decrease) in: | |||||||||||
Other payables and accrued expenses | 562,823 | (852,514) | |||||||||
Income tax payable | 1,135,904 | (815,831) | |||||||||
Other taxes payable | 98,184 | (8,636) | |||||||||
Net cash used in operating activities | (7,051,475) | (21,506,575) | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Purchase of property and equipment | (150,091) | (368,791) | |||||||||
Net cash used in investing activities | (150,091) | (368,791) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Net Proceeds from Stock repurchase agreement | 751,765 | - | |||||||||
Deferred offering costs | - | 666,364 | |||||||||
Proceeds from bank loans | 6,337,537 | 21,557,736 | |||||||||
Repayments of bank loans | (6,337,537) | (21,557,736) | |||||||||
Proceeds from related party loan | 209,510 | 3,655,604 | |||||||||
Repayments of related party loan | - | (3,655,604) | |||||||||
Net proceeds from stock issuance in public offering | - | 20,144,255 | |||||||||
Net proceeds from exercise of warrants | - | 49,800 | |||||||||
Net cash provided by financing activities | 961,275 | 20,860,419 | |||||||||
EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS | (25,768) | 673,584 | |||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (6,266,059) | (341,363) | |||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 8,810,173 | 9,151,536 | |||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 2,544,114 | $ | 8,810,173 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||||
Cash paid for interest expense | $ | 470,455 | $ | 441,838 | |||||||
Cash paid for income tax | $ | 10,757,465 | $ | 10,574,613 |