omniture

Kingold Jewelry Reports Record Unaudited Fiscal 2012 First Quarter Financial Results

2012-05-10 04:05 742

WUHAN CITY, China, May 10, 2012 /PRNewswire-Asia/ -- Kingold Jewelry, Inc. (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 the first quarter ended March 31, 2012, highlighted by double-digit percentage growth in revenue and net income year-over-year.

Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "We continued to see strong growth in our sales volume during the first quarter of 2012, particularly from our investment gold business. We continue to gradually shift resources to support demand from our bank partners, and were pleased that this has helped serve as a new driver for sales. We are now distributing products from the investment gold business to several provinces and municipal locations throughout China, including Beijing, Hubei, Jiangsu, Jiangxi, Liaoning, Zhejiang, Henan and Sichuan. In our jewelry business, we have continued to build upon and expand our customer base over the past year, with new clients including Harbin Hengyuan Gold Corp, Hangzhou Xingya Jewelry, Wuxi Yinglou and Datong Jintai Jewelry. We were also pleased to receive a AAA credit rating from the Gems & Jewelry Trade Association of China, which we feel is a testament to our reputation in China's jewelry industry and strong financial position. We feel that the long-term demand drivers in the jewelry business, such as a rising middle class, growing disposable income and culture (weddings and child births) will continue to provide stable growth for the Company."

2012 First Quarter Operational and Financial Review

  • In the first quarter of 2012, Kingold processed approximately 8.84 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products, an increase of 17.6% over the 7.52 metric tons processed in the first quarter of 2011. In the first quarter Kingold processed approximately 970,000 pieces of jewelry, gold bars and coins, with the majority being necklaces and rings (roughly 250,000 pieces for each category).
  • The Company reported revenues for the 2012 first quarter of $225.0 million, an increase of 42.6% from $157.7 million in the first quarter of 2011. The increase in net sales was primarily driven by increased branded production as well as by the increase in the price of gold. Of the $67.3 million increase in net sales, approximately $35.3 million was attributable to increased branded production and approximately $25.2 million to the increase in the price of gold and the remaining is due to the gain from exchange rate fluctuations.
  • The Company expects a higher percent of its revenue in future quarters to be derived from its investment gold business, which generated incremental $9.9 million of revenue in the first quarter of 2012. The Company's investment gold consists of products such as gold coins, bars and certain gold gift products, which are sold to individual branch locations under that bank's specific brand. The Company typically expects a higher margin from its investment gold products than its branded jewelry and ornament production.
  • Gross profit for the 2012 first quarter was $11.6 million, an increase of 29.0% from $9.0 million in the prior-year period. The Company's gross margin for the period was 5.1% compared to 5.7% from the prior year period. Gross margin was lower for the period primarily because gold prices increased nearly 9% while the Company could not raise its processing fee proportionally. However, Kingold's gross margin improved over the gross margin of 4.1% reported in the fourth quarter of 2011. The fourth quarter gross margin was affected by a shift in product mix (more branded production) and initial costs involved with ramping up the Company's investment gold business.
  • The Company reported net income attributable to Kingold shareholders for the first quarter of 2012 of $7.3 million, or $0.13 per diluted share based on 54.4 million weighted average diluted shares outstanding, compared to net income of $5.3 million, or $0.11 per diluted share based on 49.7 million weighted average diluted shares outstanding, in the prior-year period.

Balance Sheet and Cash Flow Highlights

(in millions except for percentages)


3/31/2012


12/31/2011

% Change

Cash and Cash Equivalents

$

3.0

$

8.8

(66%)

Inventories (gold)


122.9


108.1

13.7%

Working Capital


121.7


113.4

7.4%

Short Term Loan


6.3


6.3

0%

Total Long-term Debt


0


0

N/A

Stockholders' Equity


135.0


127.0

6.3%

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).

Market and Business Outlook

Despite the fluctuation in gold prices, China's gold consumption remained very strong in the first quarter of 2012. According to statistics from the Hong Kong Census and Statistics Department from May 2012, in the first quarter Hong Kong alone exported 135.5 metric tons of gold into mainland China, five times more than in the same period from last year. China is widely expected to overtake India as the world's largest gold market in 2012.

The Company reaffirms its 2012 guidance that sales volume will be approximately 35 tons. This guidance is based solely on our current organic growth projections. Kingold expects its second quarter sales volume to continue the momentum and growth seen in the first quarter.

Chairman Jia concluded, "We have been very pleased with the development over the past six months, as we have begun to shift our resources towards growing the investment gold business. We expect this segment to continue to grow as a percentage of our revenues in coming periods. We continue to closely monitor gold price fluctuations globally, but were pleased to see stable pricing throughout the first quarter. We continue to feel that population growth, a rising middle class, and a trend towards risk-averse investment in gold will continue to drive China's gold demand for the immediate and long-term future to the benefit of Kingold. We remain confident about the long-term growth prospects for the investment gold market and 24-karat gold jewelry in China and look forward to continuing to develop our new products and distribution abilities throughout the country. We have maintained a healthy balance sheet, are debt-free, and remain wholly focused on expanding our operations."

Conference Call

Kingold will discuss these results in a conference call tomorrow morning (May 10, 2012) at 8:30 a.m. ET.

The dial-in numbers are:

Live Participant Dial In (Toll Free): 877-407-0778
Live Participant Dial In (International): 201-689-8565

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://www.investorcalendar.com/IC/CEPage.asp?ID=168420.

The Company will also post 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, 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. 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, Vice President
(212) 836-9606
aprior@equityny.com

Katherine Yao, Account Executive
+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 March 31,






2012


2011











NET SALES


$

224,967,394

$

157,712,467











COST OF SALES








Cost of sales



(213,102,255)


(148,461,128)



Depreciation



(297,788)


(285,207)




Total cost of sales



(213,400,043)


(148,746,335)











GROSS PROFIT



11,567,351


8,966,132











OPERATING EXPENSES








Selling, general and administrative expenses


1,058,342


1,154,032



Stock compensation expense


356,439


122,500



Depreciation



33,420


31,914



Amortization



2,996


2,873




Total Operating Expenses


1,451,197


1,311,319











INCOME FROM OPERATIONS



10,116,154


7,654,813











OTHER INCOME (EXPENSES)








Interest expense



(111,136)


(83,648)




Total Other Expenses, net


(111,136)


(83,648)











NET INCOME BEFORE PROVISION FOR INCOME TAXES


10,005,018


7,571,165











PROVISION FOR INCOME TAXES


(2,691,006)


(2,025,604)











NET INCOME


$

7,314,012

$

5,545,560



Less: net income attribute to the noncontrolling interest


-


(253,403)











NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

7,314,012

$

5,292,157











OTHER COMPREHENSIVE INCOME







Total foreign currency translation gains


352,704


656,149



Less: foreign currency translation gains








attributable to noncontrolling interest


-


(15,509)



Foreign currency translation gains








attributable to common stockholders


352,704


640,640











COMPREHENSIVE INCOME


$

7,666,716

$

5,932,797











Earnings per share








Basic


$

0.14

$

0.11



Diluted


$

0.13

$

0.11


Weighted average number of shares







Basic



53,107,343


48,249,588



Diluted



54,358,067


49,724,008



KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)


















March 31,


December 31,








2012


2011











ASSETS











CURRENT ASSETS









Cash and cash equivalents



$

2,954,410

$

8,810,173


Accounts receivable




363,510


896,949


Inventories





122,865,734


108,088,420


Other current assets and prepaid expenses



340,486


72,333


Value added tax recoverable




5,093,005


4,750,847



Total Current Assets




131,617,145


122,618,722











PROPERTY AND EQUIPMENT, NET




12,632,290


12,942,902











OTHER ASSETS









Other assets





153,336


153,102


Intangible assets, net




513,328


515,543



Total other assets




666,664


668,645

TOTAL ASSETS




$

144,916,099

$

136,230,269











LIABILITIES AND STOCKHOLDERS' EQUITY











CURRENT LIABILITIES









Short term loan




$

6,353,270

$

6,343,578


Other payables and accrued expenses




678,874


870,454


Income tax payable




2,696,367


1,451,929


Other taxes payable




162,154


562,027



Total Current Liabilities




9,890,665


9,227,988











COMMITMENTS AND CONTINGENCIES




-


-











EQUITY









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







authorized, none issued or outstanding








as of March 31, 2012 and December 31, 2011


-


-


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







authorized, 53,107,343 shares issued and outstanding







as of March 31, 2012 and December 31, 2011


53,108


53,108


Additional paid-in capital




56,084,448


55,728,009


Retained earnings








Unappropriated




67,250,131


59,936,120


Appropriated





967,543


967,543


Accumulated other comprehensive income



10,670,204


10,317,501



Total Equity





135,025,434


127,002,281











TOTAL LIABILITIES AND EQUITY



$

144,916,099

$

136,230,269


KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)




















For the three months ended March 31,









2012


2011

CASH FLOWS FROM OPERATING ACTIVITIES








Net income




$

7,314,012

$

5,545,560


Adjusted to reconcile net income to cash used in









Operating activities:










Depreciation





331,208


317,121



Amortization of intangible assets




2,996


2,873



Share based compensation





356,439


122,500


Changes in operating assets and liabilities








(Increase) decrease in:










Accounts receivable





533,746


959,184



Inventories





(14,583,108)


(25,666,030)



Other current assets and prepaid expenses




(255,292)


61,844


Deferred offering costs





-


666,364



Value added tax recoverable




(334,233)


(2,695,585)


Increase (decrease) in:










Other payables and accrued expenses




(203,998)


(713,329)



Income tax payable





1,239,750


(167,321)



Other taxes payable





(399,935)


(473,637)



Net cash used in operating activities




(5,998,415)


(22,040,456)












CASH FLOWS FROM INVESTING ACTIVITIES








Purchase of property and equipment




(1,476)


(39,500)



Net cash used in investing activities




(1,476)


(39,500)












CASH FLOWS FROM FINANCING ACTIVITIES








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




-


20,194,055












EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS


144,129


(6,264)












NET DECREASE IN CASH AND CASH EQUIVALENTS




(5,855,763)


(1,892,166)












CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD




8,810,173


9,151,536












CASH AND CASH EQUIVALENTS, END OF PERIOD



$

2,954,410

$

7,259,370












SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

















Cash paid for interest expense



$

117,302

$

84,750


Cash paid for income tax




$

1,450,421

$

2,192,925

Source: Kingold Jewelry, Inc.
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