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