omniture

Kingold Jewelry Reports 2013 First Quarter Financial Results

2013-05-16 04:05 913

WUHAN CITY, China, May 16, 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 first quarter ended March 31, 2013.

2013 First Quarter Financial and Operating Highlights (Comparisons are to 2012 First Quarter):

  • Throughout February and March 2013, Kingold's customers delayed purchase orders due to steadily declining gold prices
  • Net sales decreased 1.6% to $221.4 million compared to $225.0 million, largely as a result of lower gold prices
  • Processed 8.6 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products compared to 8.8 metric tons
  • As a result of lower gold prices, the Company incurred a $2.8 million write-down on the value of its inventory
  • Gross profit decreased 45.4% to $6.3 million compared to $11.6 million, and gross margin was 2.9% compared to 5.1%.
  • Net income attributable to common shareholders was $3.0 million, or $0.05 per diluted share, compared to $7.3 million, or $0.13 per diluted share
  • Book value per diluted share of $2.92 at March 31, 2013 compared to $2.97 at December 31, 2012

Company Reiterates Guidance for 2013 Due to Strong Demand in Second Quarter

  • The sharp correction in the price of gold in mid-April has stimulated substantial demand in China for gold. Accordingly, the Company experienced an immediate increase in demand for the Company's jewelry and investment gold products.
  • As a result of this increased demand, Kingold reiterates its expectation of processing between 50-60 metric tons of 24-karat gold products in 2013.

Management Comments

Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "While the global gold market presented obstacles during the period, we believe that the Company's strong financial footing places Kingold in a position to benefit from the recent stability in gold prices. While our customers continued to express strong demand for our jewelry and investment gold products in the first quarter, many delayed making purchases because they believed they could purchase the products at a lower price at a later date. As a result, Kingold encountered lower sales during the period. Despite these challenges, we continued to report profitable operations and have built a foundation that allows our Company to withstand global pricing effects and gain market share from our competitors that do not have these advantages."

Chairman Jia continued, "During the quarter, we took a cautious approach and slowed down sales of products where we were not able to fix the price at the time of sale, such as our investment gold business and sales to certain jewelry customers, to avoid market risk and to preserve value. We believe this conservative approach served the best interests of the Company as we experienced an immediate increase in product orders following two days of considerable decreases in gold pricing in mid-April. The increase in orders was largely the result of a number of our customers placing orders to build up inventory in advance of China's Labor Day holiday, which is typically a large order period for us. We continue to leverage Kingold's production capacity and are working with our distribution network to fill and process orders as efficiently as possible. Over the long term, we believe that Kingold's ability to withstand global gold price fluctuations will help fortify client relationships, thereby demonstrating the strength and value of the Kingold brand."

Operational Review

In the first quarter of 2013, Kingold processed a total of 8.64 metric tons of 24-karat gold products compared to 8.84 metric tons processed in the prior-year period. The Company's net sales consisted primarily of sales of branded products to wholesale and retail customers, as well as fees generated from customized production. Of the 8.64 metric tons processed during the period, Kingold's branded production accounted for 4.63 metric tons (53.6%) and customized production accounted for 4.01 metric tons (46.4%).

2013 First Quarter Financial Review

  • Net sales for the three months ended March 31, 2013 was $221.4 million, a decrease of $3.6 million, or 1.6%, compared to net sales of $225.0 million for the three months ended March 31, 2012. The decrease in net sales was primarily due to an approximately $7.2 million decline due to the decrease in the price of gold during the period as compared with the prior period, partially offset by increased branded production. The decrease was also partially offset by the translation gain from Renminbi into U.S. dollars.
  • Gross profit for the three months ended March 31, 2013 was $6.3 million, a decrease of $5.2 million, or 45.4%, compared to $11.6 million for the same period in 2012. Gross margin for the three months ended March 31, 2013 was 2.9% compared to 5.1% for the same period in 2012. The decrease in gross profit and gross margin was primarily the result of a $2.8 million write-down covering the decrease in value of Kingold's gold inventory, which was caused by declining gold prices during the period.
  • Net income attributable to Kingold shareholders for the first quarter of 2013 was $3.0 million, or $0.05 per diluted share based on 61.2 million weighted average diluted shares outstanding, compared to net income of $7.3 million, or $0.13 per diluted share based on 54.4 million diluted shares outstanding, in the prior-year period.

Balance Sheet and Cash Flow

(in millions except for percentages)


3/31/2013

12/31/2012

% Change

Cash

$

20.3

$ 2.5

712%

Inventories (gold)


144.4

150.0

(3.7%)

Working Capital


166.2

149.2

11.3%

Short-term debt


6.4

6.3

(1.5%)

Stockholders' Equity


178.3

161.5

10.4%

As a result of declining gold prices during the three months ended March 31, 2013, the Company recorded a $2.8 million write-down on its gold inventories.

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

Outlook for 2013

As a result of increased demand throughout the first six weeks of the second quarter of 2013 and based on the Company's existing resources and capacity, 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 are pleased with the acceleration of orders since mid-April. We believe that our strong cash position and inventory of gold, along with our ability to deliver products quickly, have helped Kingold meet this surge in demand. We remain confident regarding the long-term prospects for 24-karat gold products in China and believe that our Company is well-equipped to expand on its market position."

Conference Call Details

Kingold also announced that it will discuss financial results in a conference call on Thursday, May 16, 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/q1-2013. 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, 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 the amount of gold to be processed in 2013, Kingold's ability to benefit from the recent stability in gold prices which will help fortify client relationships, Kingold's ability to withstand global pricing effects and gain market share from competitors that do not have such an advantage, 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

Katherine Yao, Associate

(212) 836-9606

+86 10-6587-6435

aprior@equityny.com

kyao@equityny.com

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN U.S. DOLLARS)

(UNAUDITED)













For the three months ended March 31,






2013


2012









NET SALES


$

221,408,122

$

224,967,394









COST OF SALES







Cost of sales



(214,790,789)


(213,102,255)


Depreciation



(299,082)


(297,788)



Total cost of sales


(215,089,871)


(213,400,043)









GROSS PROFIT



6,318,251


11,567,351









OPERATING EXPENSES






Selling, general and administrative expenses


1,123,870


1,058,342


Stock compensation expenses


247,958


356,439


Depreciation



36,835


33,420


Amortization



3,009


2,996



Total Operating Expenses


1,411,672


1,451,197









INCOME FROM OPERATIONS


4,906,579


10,116,154









OTHER INCOME (EXPENSES)






Interest expense


(761,026)


(111,136)



Total Other Expenses, net


(761,026)


(111,136)









INCOME FROM OPERATIONS BEFORE TAXES


4,145,553


10,005,018









INCOME TAX PROVISION (BENEFIT)






Current



1,818,903


2,691,006


Deferred



(706,980)


-


TOTAL INCOME TAX PROVISION


1,111,923


2,691,006









NET INCOME


$

3,033,630

$

7,314,012









OTHER COMPREHENSIVE INCOME






Total foreign currency translation gains

$

962,540

$

352,704









COMPREHENSIVE INCOME

$

3,996,170

$

7,666,716









Earnings per share







Basic


$

0.05

$

0.14


Diluted


$

0.05

$

0.13

Weighted average number of shares






Basic



60,818,892


53,107,343


Diluted



61,165,502


54,358,067










KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)

(UNAUDITED)








March 31,


December 31,








2013


2012

ASSETS

CURRENT ASSETS









Cash




$

20,272,126

$

2,544,114


Restricted cash





2,517,891


-


Accounts receivable





89,781


692,762


Inventories





144,387,037


150,041,421


Other current assets and prepaid expenses





1,016,910


133,539


Value added tax recoverable





6,746,397


7,031,374


Deferred tax assets





707,803


-



Total Current Assets





175,737,945


160,443,210











PROPERTY AND EQUIPMENT, NET





11,432,361


11,683,987











OTHER ASSETS









Other assets





153,871


153,029


Intangible assets, net





503,068


503,313



Total other assets





656,939


656,342

TOTAL ASSETS




$

187,827,245

$

172,783,539











LIABILITIES AND STOCKHOLDERS' EQUITY











CURRENT LIABILITIES









Short term loans




$

6,375,416

$

6,340,551


Other payables and accrued expenses





855,946


1,445,513


Related party loan





299,509


209,890


Income tax payable





1,821,020


2,587,680


Other taxes payable





169,310


659,989



Total Current Liabilities





9,521,201


11,243,623











COMMITMENTS AND CONTINGENCIES





-


-











EQUITY










Preferred stock, $0.001 par value, 500,000 shares









authorized, none issued or outstanding










as of March 31, 2013 and December 31, 2012




-


-


Common stock $0.001 par value, 100,000,000 shares









authorized, 61,571,140 and 54,521,140 shares

issued and outstanding as of March 31, 2013








and December 31, 2012




61,571


54,521


Additional paid-in capital





70,419,582


57,656,674


Retained earnings









Unappropriated





95,640,078


92,606,449


Appropriated





967,543


967,543


Accumulated other comprehensive income





11,217,270


10,254,729



Total Equity





178,306,044


161,539,916











TOTAL LIABILITIES AND EQUITY




$

187,827,245

$

172,783,539











KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN U.S. DOLLARS)

(UNAUDITED)



















For the three months ended March 31,









2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES








Net income





$

3,033,630

$

7,314,012


Adjusted to reconcile net income to cash used in









operating activities:











Depreciation






335,917


331,208



Amortization of intangible assets





3,009


2,996



Share based compensation






247,958


356,439



Inventory valuation allowance





2,827,921


-



Deferred tax provision (benefit)





(706,980)


-


Changes in operating assets and liabilities









(Increase) decrease in:











Accounts receivable






606,085


533,746



Inventories






3,643,980


(14,583,108)



Other current assets and prepaid expenses




(881,611)


(255,292)



Value added tax recoverable





323,264


(334,233)


Increase (decrease) in:











Other payables and accrued expenses





(593,874)


(203,998)



Income tax payable






(779,983)


1,239,750



Other taxes payable






(493,734)


(399,935)



Net cash provided by (used in) operating activities




7,565,582


(5,998,415)












CASH FLOWS FROM INVESTING ACTIVITIES








Purchase of property and equipment





(20,409)


(1,476)



Net cash (used in) investing activities





(20,409)


(1,476)












CASH FLOWS FROM FINANCING ACTIVITIES








Restricted cash






(2,514,965)


-


Proceeds from related party loan





90,048


-


Net proceeds from stock issuance in public offering




12,522,000


-



Net cash provided by financing activities




10,097,083


-












EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS



85,756


144,219












NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS



17,728,012


(5,855,673)












CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD




2,544,114


8,810,173












CASH AND CASH EQUIVALENTS, END OF PERIOD



$

20,272,126

$

2,954,501












SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION


















Cash paid for interest expense





$

1,553,103

$

117,302


Cash paid for income tax





$

2,598,886

$

1,450,421












Source: Kingold Jewelry, Inc.
collection