omniture

Kingold Jewelry Reports Financial Results For The Third Quarter And Nine Months Ended September 30, 2016

The Company Raises its Gold Processed Guidance to Between 60 Tons and 65 Tons from Between 50 Tons to 60 Tons
2016-11-15 05:05 2411

WUHAN CITY, China, Nov 15, 2016 /PRNewswire-Asia/ -- 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 third quarter and nine months ended September 30, 2016.

2016 THIRD QUARTER FINANCIAL HIGHLIGHTS (ALL RESULTS ARE COMPARED TO PRIOR YEAR PERIOD)

  • Net sales were $390.5 million, an increase of $126.8 million, or 48.1%, compared to $263.8 million. The increase in net sales was primarily due to increased sales volume in the Company's branded gold product production.
  • Processed a total of 20.6 metric tons of 24-karat gold products, an increase of 53.0%, compared to 13.5 metric tons.
  • Gross profit increased to $50.4 million, an increase of $34.9 million, or 223.9%, compared to $15.6 million, and gross margin was 12.9% compared to 5.9% for the same period in 2015.
  • Net income increased 79.3% to $15.7 million, or $0.24 per diluted share, compared to $8.8 million, or $0.13 per diluted share.

OUTLOOK FOR 2016

  • Company raises its guidance of 24-karat gold processed in 2016 to between 60 and 65 metric tons.

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased to deliver strong operating results in the first nine months of 2016, as we took full advantage of the increase in the gold price and growing gold demand in China. In the third quarter, we were more focused on corporate developments to further increase our production capacity, design capability and sales marketing initiatives. We understand Kingold operates in a capital-intensive industry, and sufficient free cash flow is a prerequisite for gold production Company to ensuring quality and timely customer delivery to stay competitive. We feel this is a benefit of having the access to capital to leverage our production and to remain our market leading position."

2016 THIRD QUARTER OPERATIONAL REVIEW

In the third quarter of 2016, the Company processed a total of 20.6 metric tons of gold, of which branded production was 10 metric tons, representing 48.3% of total gold processed, and customized production was 10.6 metric tons, representing 51.7% of total gold processed. In the third quarter of 2015, the Company processed a total of 13.5 metric tons, of which branded production was 7.8 metric tons, or 58.0% of the total gold processed, and customized production was 5.7 metric tons, or 42.0% of total gold processed.

Metric Tons of Gold Processed


Three Months Ended:


September 30, 2016

September 30, 2015


Volume

% of Total

Volume

% of Total

Branded*

10.0

48.3%

7.8

58.0%

Customized**

10.6

51.7%

5.7

42.0%

Total

20.6

100%

13.5

100.0%


Nine Months Ended:


September 30, 2016

September 30, 2015


Volume

% of Total

Volume

% of Total

Branded*

28.6

51.4%

20.3

50.4%

Customized**

27.1

48.6%

20.0

49.6%

Total

55.7

100.0%

40.3

100.0%




* 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.

2016 THIRD QUARTER FINANCIAL REVIEW

Net Sales
Net sales for the three months ended September 30, 2016 were $390.5 million, an increase of $126.7 million, or 48.1%, from net sales of $263.8 million for the three months ended September 30, 2015. Net sales increased primarily as a result of increase in total sales volume in amount of $84.7 million, the increase in the average unit selling price for branded production in amount of $63.2 million, offset by approximately $17.1 million of foreign currency translation loss.

Net sales for the nine months ended September 30, 2016 were $1,063 million, an increase of $343.6 million, or 47.8%, from net sales of $719.4 million for the nine months ended September 30, 2015. The increase in net sales was primarily driven by increase in total sales volume in amount of $308.9 million, the increase in the average unit selling price for branded production in amount of $91.5 million, partially offset the decreased sales in customized production, and offset by approximately a $45.9 million foreign currency translation loss.

Gross Profit
Gross profit for the three months ended September 30, 2016 was $50.4 million, an increase of $34.9 million from $15.6 million for the same period in 2015.

Gross profit for the nine months ended September 30, 2016 was $125.0 million, an increase of $96.2 million from $28.8 million for the same period in 2015.

Gross Margin
Gross margin for the three months ended September 30, 2016 was 12.9%, compared to 5.9% for the same period in 2015. The substantial increase in gross margin was because: 1) the unit price of branded production sales increased from RMB 206.7 per gram for the three months ended September 30, 2015 to RMB 257.1 per gram in the same period of 2016; 2) the percentage increase of the unit price is smaller than the increase in the sales as the unit cost of branded production increased from RMB 197.2 per gram for the three months ended September 30, 2015 to RMB 227.6 per gram in the same period in 2016; 3) the Company purchased a significant quantity of gold in prior periods at relatively low prices, making the production costs for three months ended September 30, 2016 much lower than normal.

Gross margin for the nine months ended September 30, 2016 was 11.8%, compared to 4.0% for the same period in 2015. The substantial increase in gross margin was because: 1) the unit price of branded production sales increased from RMB 212.5 per gram for the nine months ended September 30, 2015 to RMB 240.3 per gram in the same period of 2016; 2) the percentage increase of the unit price is smaller than the increase in the sales as the unit cost of branded production increased from RMB 209.2 per gram for the nine months ended September 30, 2015 to RMB 215.3 per gram in the same period in 2016; 3) the Company purchased a significant quantity of gold in prior periods at relatively low prices, making the production costs for nine months ended September 30, 2016 much lower than normal.

Net Income
For the three months ended September 30, 2016, net income increased 79.3% to $15.7 million, or $0.24 per diluted share, based on 66.7 million weighted average diluted shares outstanding, compared to $8.8 million for the same period in 2015, or $0.13 per diluted share, based on 66.0 million weighted average diluted shares outstanding in the prior-year period.

Net income for the nine months ended September 30, 2016 increased 218.9% to $50.7 million, or $0.76 per diluted share based on 66.3 million weighted average diluted shares outstanding, compared to $15.9 million, or $0.24 per diluted share, based on 66.0 million weighted average diluted shares outstanding in the same period of 2015.

BALANCE SHEET HIGHLIGHTS








(in millions except for percentages)


9/30/2016

12/31/2015



(Unaudited)


Cash


$129.6

$3.1

Inventories (gold)


1,097.1

298.3

Working Capital (Current Assets - Current Liabilities)


1,017.7

174.9

Stockholders' Equity


308.6

265.7

Net cash used in operating activities was $726.3 million for the nine months ended September 30, 2016, compared with net cash used in operating activities of $34.0 million for the same period in 2015. The significant increase in net cash used in operating was mainly due to purchase of inventory of $817.8 million in anticipation of the increased production and sales demand when the Jewelry Park is completed which may stimulate Kingold's sales starting from the second half 2016. In addition, in connection with the Company's significant bank borrowings during the nine months ended September 30, 2016, the Company was required to pledge significant of gold with the banks as collateral, which also led the Company to increase the inventory purchases and stockpile. On the other hand, in connection with the Jewelry Park Transfer Contract, the Company received net proceeds of $151.4 million cash payment from Wuhan Lianfuda for the Jewelry Park transfer, such amount will be adjusted when the Company delivers the Jewelry Park to Wuhan Lianfuda in the near future. The overall increase in cash used in operating activities for the nine months ended September 30, 2016 is reflected in the above mentioned factors.

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 2016
Based on 2016 first nine months results, its existing resources and capacity (which includes the Company's recent proceeds from its previously announced financing and gold lease agreements) along with strong demand for 24-karat gold products in China, the Company raised its guidance for gold processed during 2016 from between 50 metric tons and 60 metric tons to between 60 metric tons and 65 metric tons.

INVESTOR CONFERENCE CALLS
The Company has elected to discontinue hosting live quarterly conference calls at this time. An open line of communication with investors and analysts remains a top priority of the Company and management is readily available for discussions with investors on a one on one basis. Investors and analysts wishing to speak with management are urged to contact the Company's investor relations representatives at The Equity Group at +86 10-6587-6435 or kyao@equityny.com.

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, but are not limited to, statements regarding Kingold's outlook with respect to its 2015 gold processing, expectations with respect to expansion into a higher margin, direct retail business through the online retail store, 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, and its expectations with respect to a long-term partnership with Fosun. 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 INCOME AND COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)











For the three months ended September 30,



For the nine months ended September 30,




2016



2015



2016



2015















NET SALES


$

390,547,042



$

263,762,713



$

1,062,995,744



$

719,378,985



















COST OF SALES

















Cost of sales



(339,845,689)




(247,894,654)




(937,138,523)




(689,700,092)


Depreciation



(286,710)




(304,849)




(869,075)




(924,958)


Total cost of sales



(340,132,399)




(248,199,503)




(938,007,598)




(690,625,050)



















GROSS PROFIT



50,414,643




15,563,210




124,988,146




28,753,935



















OPERATING EXPENSES

















Selling, general and administrative expenses



3,931,214




3,247,362




13,643,705




7,130,925


Stock compensation expenses



11,143




102,344




33,428




417,471


Depreciation



25,102




24,776




72,089




75,204


Amortization



2,836




3,034




8,617




9,203


Total operating expenses



3,970,295




3,377,516




13,757,839




7,632,803



















INCOME FROM OPERATIONS



46,444,348




12,815,694




111,230,307




21,121,132



















OTHER INCOME (EXPENSES)

















Other Income (expenses)



(75,748)




3,209




(75,618)




9,740


Interest Income



1,216,697




(575)




1,900,120




150,497


Interest expense



(26,551,667)




(273,953)




(45,146,833)




(656,106)


Total other expenses, net



(25,410,718)




(271,319)




(43,322,331)




(495,869)



















INCOME FROM OPERATIONS BEFORE TAXES



21,033,630




11,914,375




67,907,976




20,625,263



















INCOME TAX PROVISION (BENEFIT)

















Current



25,230,923




71,176




36,891,707




3,357,451


Deferred



(19,909,244)




3,078,209




(19,653,506)




1,348,181


Total income tax provision



5,321,679




3,149,385




17,238,201




4,705,632



















NET INCOME



15,711,951




8,764,990




50,669,775




15,919,631


Add: net loss attributable to non-controlling interest



445




448




1,910




636



















NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS


$

15,712,396



$

8,765,438



$

50,671,685



$

15,920,267



















OTHER COMPREHENSIVE INCOME (LOSS)

















Total foreign currency translation gains (loss)


$

(1,330,413)



$

(10,487,596)



$

(7,990,100)



$

(8,899,780)


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



271




2,821




1,847




2,739


Foreign currency translation gains (loss) attributable to common stockholders


$

(1,330,684)



$

(10,484,775)



$

(7,991,947)



$

(8,897,041)



















COMPREHENSIVE INCOME ATTRIBUTABLE TO:

















Common stockholders


$

14,381,712



$

(1,719,337)



$

42,679,738



$

7,023,226


Non-controlling interest



(174)




-




(63)




-




$

14,381,538



$

(1,719,337)



$

42,679,675



$

7,023,226




































Earnings per share

















Basic


$

0.24



$

0.13



$

0.77



$

0.24


Diluted


$

0.24



$

0.13



$

0.76



$

0.24


Weighted average number of shares

















Basic



66,018,867




65,963,502




65,982,294




65,963,502


Diluted



66,740,085




65,963,502




66,291,236




65,963,502



















KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)







September 30, 2016

December 31, 2015


ASSETS




CURRENT ASSETS




Cash

$129,649,710

$3,100,569


Restricted cash

111,471,928

26,649,687


Accounts receivable

803,371

1,624,323


Inventories

1,097,089,498

298,303,185


Other current assets and prepaid expenses

4,766,011

1,046,032


Value added tax recoverable

130,914,603

15,526,002


Total current assets

1,474,695,121

346,249,798






PROPERTY AND EQUIPMENT, NET

7,684,808

7,622,509


OTHER ASSETS






Deposit on land use right - Jewelry Park

9,047,947

9,296,763


Construction in progress- Jewelry Park

152,867,231

105,844,259


Other assets

144,733

148,713


Land use right

433,524

454,180


Deferred income tax assets

17,660,837

-


Total long-term assets

187,839,080

123,366,424


TOTAL ASSETS

1,662,534,201

469,616,222










LIABILITIES AND STOCKHOLDERS' EQUITY




CURRENT LIABILITIES




Short term loans

$195,195,961

$55,455,428


Debts payable, net

-

61,471,962


Construction payables-Jewelry Park

53,971,233

23,876,642


Deposit payable-Jewelry Park

170,908,906

22,182,171


Other payables and accrued expenses

9,935,272

6,355,979


Due to related party

1,041,634

200,059


Income tax payable

24,962,897

1,119,918


Other taxes payable

977,152

710,104


Total current liabilities

456,993,055

171,372,263


Deferred income tax liability

-

1,774,993


Long term loans

896,971,914

30,808,571


TOTAL LIABILITIES

1,353,964,969

203,955,827


COMMITMENTS AND CONTINGENCIES








EQUITY




Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of September 30, 2016 and December 31, 2015 - - Common stock $0.001 par value, 100,000,000 shares authorized, 66,018,867 and 65,963,502 shares issued and outstanding as of September 30, 2016 and
December 31, 2015

66,018

65,963


Additional paid-in capital

80,219,824

79,990,717


Retained earnings




Unappropriated

235,235,832

184,564,147


Appropriated

967,543

967,543


Accumulated other comprehensive income (deficit)

(7,993,196)

(1,249)


Total stockholders' equity

308,496,021

265,587,121


Non-controlling interest

73,211

73,274


Total Equity

308,569,232

265,660,395






TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$1,662,534,201

$469,616,222


KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)






For the nine months ended September 30,



2016



2015

CASH FLOWS FROM OPERATING ACTIVITIES








Net income


$

50,669,775



$

15,919,631

Adjustments to reconcile net income to cash used in operating activities:








Depreciation



941,164




1,000,162

Amortization of intangible assets



8,617




9,203

Amortization of deferred financing costs



143,227




162,322

Share based compensation



229,162




417,471

Deferred tax provision (benefit)



(19,653,506)




1,348,181

Changes in operating assets and liabilities








(Increase) decrease in:








Accounts receivable



788,112




307,315

Inventories



(817,804,500)




(69,261,230)

Other current assets and prepaid expenses



(3,799,223)




(134,535)

Value added tax recoverable



(117,388,028)




(9,744,403)

Increase (decrease) in:








Other payables and accrued expenses



3,673,428




2,438,517

Deposit payable ,Jewelry Park, net



151,362,720




23,374,347

Income tax payable



23,499,156




(886,440)

Other taxes payable



990,281




1,052,294

Net cash used in operating activities



(726,339,615)




(33,997,165)









CASH FLOWS FROM INVESTING ACTIVITIES








Purchase of property and equipment



(306,652)




(59,406)

Cash payment in construction in progress-Jewelry Park



(20,440,112)




(26,111,485)

Net cash used in investing activities



(20,746,764)




(26,170,891)









CASH FLOWS FROM FINANCING ACTIVITIES








Capital contribution from minority interest for the new subsidiary



-




73,045

Proceeds from bank loans



1,076,863,691




55,189,430

Repayments of bank loans



(54,861,388)




(16,232,185)

Restricted cash



(86,705,385)




(14,250,445)

Proceeds from related party loan



842,226




-

Proceeds from exercise of warrants



66,439




-

(Repayment) proceeds from debt financing instruments under private placement



(60,788,241)




64,928,741

Deferred financing costs



-




(649,287)









Net cash provided by financing activities



875,417,342




89,059,299









EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS



(1,781,822)




(608,719)









NET INCREASE IN CASH AND CASH EQUIVALENTS



126,549,141




28,282,524









CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD



3,100,569




1,331,658









CASH AND CASH EQUIVALENTS, END OF PERIOD


$

129,649,710



$

29,614,182

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION








Cash paid for interest expense


$

45,155,522



$

3,751,584

Cash paid for income tax


$

12,692,294



$

4,243,891

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kingold-jewelry-reports-financial-results-for-the-third-quarter-and-nine-months-ended-september-30-2016-300362416.html

Source: Kingold Jewelry, Inc.
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