omniture

Sutor Technology Group Limited Announces Third Quarter Financial Results Of Fiscal 2009

2009-05-15 08:45 955

DONGBANG TOWN, China, May 15 /PRNewswire-Asia-FirstCall/-- Sutor Technology Group Limited (Nasdaq: SUTR), a leading provider of fine finished steel products used by steel fabricators and other applications, today reported operating income of US$4.6 million in its third fiscal quarter ended March 31, 2009.

Third Fiscal Quarter 2009 Financial Highlights:

-- Total revenues were US$76.5 million, a decrease of 22.0 % over the

third fiscal quarter of 2008.

-- Gross margin was 8.6% for the third fiscal quarter of 2009, compared to

12.1% for the third quarter of fiscal 2008.

-- Net income was US$3.1 million, a decrease of 60.7 % over the third

fiscal quarter of 2008.

-- Fully-diluted earnings per common share for the third fiscal quarter

2009 was US$0.08, compared to US$0.21 for the third quarter of fiscal

2008.

Ms. Lifang Chen, Chairperson and CEO of Sutor said, "Like many companies in our industry, we are affected by the current global economic downtown. Despite the fact that we continued to face challenges during our third fiscal quarter, we nonetheless realized profits in the quarter while many companies in the steel industry suffered losses. Compared to the second fiscal quarter of 2009, our revenue increased by 8.0% in the third fiscal quarter, which we view as a positive sign and as validation of our development strategy and that our reaction to the volatile economic crisis has been swift and effective. We anticipate that we will continue to grow by taking advantage of a long-awaited resurgence in manufacturing and industrial development and activity and favorable economic results from the implementation of PRC government’s active stimulus policies during the coming quarters."

Third Fiscal Quarter 2009 Financial Results:

Revenues. Revenues were US$76.5 million in the third quarter of fiscal 2009, compared to US$98.1 million for the third quarter of fiscal 2008, representing a decrease of 22.0%. The decrease was mainly attributable to the global economic slowdown which led to a softening of customer demand and the attendant decline of per unit sale price of our products.

Total Operating Expenses. Our total operating expenses increased to US$1.9 million in the third fiscal quarter of 2009, compared to US$1.6 million in the third fiscal quarter of 2008. This increase mainly caused by the large portion of smaller orders we received in the third fiscal quarter of 2009 as compared to large orders received in same period of last year, which led to less efficient and predictable operations and higher production costs. Additionally, we shouldered more transportation costs for our clients in this quarter as compared to the same quarter last year.

Gross Profit. Gross profit was US$6.6 million for the third quarter of fiscal 2009, a decrease of 44.5% from US$11.8 million for the same period in fiscal 2008. Gross margin decreased to 8.6% in the third quarter of fiscal 2009 from 12.1 % for the same period in fiscal 2008. The decreased margins mainly resulted from heightened pricing pressure which caused us to lower our per unit prices and from large portion of smaller orders we received in the third quarter of 2009 as compared to those received in the same period in fiscal 2008, which led to less efficient and predictable operations and higher costs of production and, ultimately, a compression in our gross margin.

Income from Operations. Income from operations for the third quarter of fiscal 2009 was US$4.6 million, a decrease of approximately 54.4% from US$10.2 million for the third quarter of fiscal 2008.

Income before Tax and Minority Interests. As a result of the foregoing, our income before tax and minority interests decreased by 58.3% to US$3.6 million for the third quarter of fiscal 2009 from US$8.7 million in the third quarter of fiscal 2008.

Net Income. Net income was US$3.1 million in the third quarter of fiscal 2009, a decrease of 60.7% from US$7.8 million for third quarter of fiscal 2008. The lower net income in our third fiscal quarter resulted primarily from decrease in revenue and per unit sale price of our products.

Financial Condition:

As of March 31, 2009, the Company had cash and cash equivalents of US$25.7 million, plus $58.0 million in restricted cash and working capital of US$79.6 million. Stockholders’ equity increased 26.1% to US$150.9 million, compared to US$119.6 million as of March 31, 2008.

Functional Currency and Translating Press Release

The functional currency of the Company is the Chinese Yuan Renminbi ("RMB"); however, the accompanying financial information are expressed in United States Dollars. The accompanying consolidated balance sheets have been translated into U.S. Dollars at the exchange rates prevailing at each balance sheet date. The accompanying consolidated statements of operations and cash flows have been translated using the weighted-average exchange rates prevailing during the periods of each statement. Each transaction in the Company’s equity securities has been recorded at the exchange rate existing at the time of the transaction.

About Sutor Technology Group Limited

Sutor (Nasdaq: SUTR) is one of the leading private manufacturers of fine finished steel products used by steel fabricators and other applications. Sutor utilizes a variety of processes and technological methodologies to convert steel manufactured by third parties into fine finished steel products, including hot-dipped galvanized steel, pre-painted galvanized steel, acid-pickled steel, and cold-rolled steel. To learn more about the Company, please visit http://www.sutorcn.com .

Forward-Looking Statements

This press release includes certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for our steel finishing fabrication products, our expectations regarding the continued growth of the steel market, as well as all assumptions, expectations, predictions, intentions or beliefs about our relative strength and about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties, including developments in the world economy and in our industry, could cause our actual results to differ materially from those anticipated, expressed or implied in the forward-looking statements. These risks and uncertainties include, but not limited to, the factors mentioned in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended June 30, 2008, and other risks mentioned in our other reports filed with the Securities Exchange Commission, or SEC. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov . The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

For more information, please contact:

Company Contact (PRC):

Mr. Jason. Wang

Tel: +86-512-52680988

Email: investor_relations@sutorcn.com

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, June 30,

2009 2008

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents $25,716,041 $11,806,101

Restricted cash 57,993,456 59,489,508

Trade accounts receivable, net of

allowance for doubtful accounts of

$69,038 and $70,653, respectively 9,712,637 6,268,858

Other receivables 430,733 100,271

Accounts receivable, related parties 42,623,415 76,118,544

Advances to suppliers, net of

allowance for doubtful accounts of

$1,480,495 and $1,472,828,

respectively 28,638,328 28,035,815

Inventory 46,062,853 51,315,521

Notes receivable -- 130,970

Deferred taxes 259,301 288,976

Total Current Assets 211,436,764 233,554,564

Property and Equipment, net of

accumulated depreciation of

$15,915,429 and $12,019,445,

respectively 71,106,424 59,736,612

Intangible Assets, net of accumulated

amortization of $328,128 and

$285,888, respectively 3,064,104 3,238,931

TOTAL ASSETS $285,607,292 $296,530,107

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable $10,414,311 $6,003,898

Advances from customers 9,029,765 16,871,618

Other payables and accrued expenses 4,077,259 3,265,860

Short-term notes payable 95,974,056 130,504,380

Short-term notes payable - Principal

Shareholder 12,347,011 --

Total Current Liabilities 131,842,402 156,645,756

Long-Term Liabilities:

Long-Term Notes Payable - Principal

Shareholder -- 7,099,998

Long-Term Notes Payable 2,859,996 --

Total Liabilities 134,702,398 163,745,754

Minority Interest in Net Assets of

Subsidiary -- 34,697

Stockholders’ Equity

Undesignated preferred stock - $0.001

par value; 1,000,000 shares

authorized; no shares outstanding -- --

Common stock - $0.001 par value;

500,000,000 shares authorized;

37,955,602 shares outstanding 37,955 37,955

Additional paid-in capital 37,170,164 37,170,164

Statutory reserves 12,586,995 12,586,995

Retained earnings 83,385,108 65,772,975

Accumulated other comprehensive

income 17,724,672 17,181,567

Total Stockholders’ Equity 150,904,894 132,749,656

TOTAL LIABILITIES AND STOCKHOLDERS’

EQUITY $285,607,292 $296,530,107

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

Three Months Ended March 31, Nine Months Ended March 31,

2009 2008 2009 2008

Revenue:

Revenue $27,381,648 $45,258,150 $145,336,851 $168,865,930

Revenue from related

parties 49,075,289 52,843,085 103,734,052 143,617,418

76,456,937 98,101,235 249,070,903 312,483,348

Cost of Revenue

Cost of revenue 41,167,360 53,443,350 110,424,589 195,381,301

Purchases from

related parties 28,727,887 32,840,446 110,446,903 82,488,474

69,895,247 86,283,796 220,871,492 277,869,775

Gross Profit 6,561,690 11,817,439 28,199,411 34,613,573

Operating Expenses:

Selling expense 493,253 550,291 1,655,649 2,085,784

General and

administrative

expense 1,425,285 1,087,563 3,432,746 5,368,660

Total Operating

Expenses 1,918,538 1,637,854 5,088,395 7,454,444

Income from

Operations 4,643,152 10,179,585 23,111,016 27,159,129

Other Income

(Expense):

Interest income 277,624 309,486 1,239,611 663,254

Other income -- 90,333 -- 128,918

Interest expense (1,294,486) (1,764,273) (4,576,544) (3,936,756)

Other expense -- (113,008) -- (343,262)

Total Other Income

(Expense) (1,016,862) (1,477,462) (3,336,933) (3,487,846)

Income before Taxes

and Minority

Interest 3,626,290 8,702,123 19,774,083 23,671,283

Provision for income

taxes (561,592) (903,606) (2,161,949) (2,568,011)

Minority interest in

loss of

consolidated

subsidiary -- (6,259) -- (3,232)

Net Income $3,064,698 $7,792,258 $17,612,134 $21,100,040

Basic and Diluted

Earnings per Common

Share $0.08 $0.21 $0.46 $0.56

Net Income $3,064,698 $7,792,258 $17,612,134 $21,100,040

Foreign currency

translation

adjustment 197,361 4,972,227 543,105 9,173,606

Comprehensive Income $3,262,059 $12,764,485 $18,155,239 $30,273,646

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

For the Nine Months Ended March 31,

2009 2008

Cash Flows from Operating Activities:

Net income $17,612,134 $21,100,040

Adjustments to reconcile net income

to net cash provided by operating

activities

Depreciation and amortization 4,161,563 2,703,957

Minority interest in loss of

consolidated subsidiary -- 3,232

Deferred income taxes 30,757 --

Gain on sale of assets (161,410) (2,722)

Changes in current assets and

liabilities:

Trade accounts receivable, net (3,467,616) 14,187,846

Other receivables, net (329,891) (20,977)

Advances to suppliers (544,163) 6,746,811

Inventory 5,440,752 (28,808,894)

Accounts payable 4,488,304 3,006,624

Advances from customers (7,900,263) 2,375,369

Other payables and accrued expenses 875,602 (177,945)

Related party receivables or payables 34,111,105 (9,373,474)

Net Cash Provided by Operating

Activities 54,316,874 11,739,867

Cash Flows from Investing Activities:

Collection of notes receivable 116,772 203,059

Changes in notes receivable - related

parties 973,151 --

Purchase of property and equipment,

net of value added tax refunds

received (16,249,207) (6,469,417)

Proceeds from sale of assets 782,719 10,139

Net change in restricted cash 1,722,391 (13,152,963)

Net Cash Used in Investing Activities (12,654,174) (19,409,182)

Cash Flows from Financing Activities:

Proceeds from issuance of notes

payable 122,230,308 66,032,525

Payments on notes payable (155,277,962) (67,666,600)

Proceeds from issuance of notes

payable - Principal Shareholder 5,247,013 7,099,998

Payment on short-term loans - related

party -- (2,211,931)

Net Cash (Used in) Provided by

Financing Activities (27,800,641) 3,253,992

Effect of Exchange Rate Changes on

Cash 47,881 477,483

Net Change in Cash 13,909,940 (3,937,840)

Cash and Cash Equivalents at

Beginning of Period 11,806,101 8,832,942

Cash and Cash Equivalents at End of

Period $25,716,041 $4,895,102

Supplemental Cash Flow Information

Cash paid during the period for

interest $4,576,544 $3,936,756

Cash paid during the period for taxes 2,357,109 2,715,920

Source: Sutor Technology Group Limited
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