DONGBANG TOWN, China, Sept. 25 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (Nasdaq: SUTR; the "Company" or "Sutor"), one of the leading private manufacturers of fine finished steel products used by steel fabricators and other applications in China, today announced its financial results for the fourth quarter and fiscal year ended June 30, 2009.
Commenting on the results, Ms. Lifang Chen, Chairwoman and CEO of Sutor said, "We were pleased with our fourth quarter results given the challenging market conditions which included lower steel prices and softened demand. Despite the difficult operating environment, we continued our strategy of strengthening direct sales to end customers, the introduction of high
value-added products for customers and expansion of our sales channels. We also focused our efforts on increasing sales to international customers which delivers a higher margin for our business. We are now seeing greater stability in steel prices and increased domestic and international customer orders which should enhance our sales and margin performance in the future."
"As we look into the 2010 fiscal year, we are seeking new ways to build sustainable growth through expanded sales channels, strengthening our research and development capabilities and maximizing our production capacity utilization. We are also focused on expanding our vertical integration which will enhance our gross margin. As China's steel industry enters into a consolidation period, we are building a platform that can establish Sutor as a market leader in the years to come," concluded Ms. Chen.
Full Year 2009 Results
Revenue. For the fiscal year ended June 30, 2009, the Company reported revenue of $341.5 million, an 18.3% decrease compared to $418.1 million during the same period last year. Revenue decreased as a result of the global economic crisis, which led to decline of the price of steel, the Company's main raw material, unit sale price pressure for the Company's products and therefore decreased revenue.
On a geographic basis, revenue generated from outside of China was $23.5 million, or 6.9% of the Company's revenue for fiscal year 2009, as compared to $16.2 million, or 3.9% of the Company's revenue for fiscal year 2008. This increase was mainly due to the Company's effort to expand penetration of the Middle East market and acceptance of its newly developed anti-septic and
anti-fingerprint products by the international market.
Gross Profit. Gross profit for the 2009 fiscal year was $32.8 million, or 9.6% of sales, compared to gross profit of $44.9 million, or 10.8% of revenue, during the same period last year. The decrease in gross margin was mainly attributable to the Company's strategic decision to reduce the per unit sale price to retain market share and attract new customers, as well as a larger proportion of smaller orders we received in fiscal year 2009 which generally had higher costs as compared to that of large orders.
General and administrative expense. General and administrative expenses increased $0.2 million to $3.9 million, or 1.2% of revenue, in fiscal year 2009 from $3.7 million, or 0.9% of revenue, in fiscal year 2008. The Company incurred more expenses for start-up and staffing in fiscal year 2009 in connection with the two new HDG production lines which became operative at the end of September 2008.
Selling Expense. Selling expenses increased to $3.1 million, or 0.9% of total revenue, in fiscal year 2009 from $2.2 million, or 0.5% of total revenue, in fiscal year 2008. As part of the Company's sales promotion and marketing efforts, it agreed to pay the transportation costs for certain clients. Additional, international sales expenses, especially transportation expenses, increased in fiscal year 2009 as compared to last year.
Income from Operations. Income from operations in fiscal 2009 was $25.7 million, a 33.9% decrease compared to $38.9 million during the same period last year.
Net income. Net income was $18.6 million, or $0.49 per diluted share, a decrease of 40.2%, compared to net income of $31.1 million, or $0.82 per diluted share, during the same period last year.
Fourth Fiscal Quarter 2009 Financial Results
Revenue. Revenue was $92.4 million in the fourth fiscal quarter 2009, compared to $105.5 million revenues in the fourth fiscal quarter 2008, a decrease of 12.4%.
Gross Profit. Gross profit was $4.6 million in the fourth fiscal quarter 2009, a 55.4% decrease compared to $10.3 million in the fourth fiscal quarter 2008. Gross margins were 5.0% in the fourth fiscal quarter 2009, compared to 9.8% in the fourth fiscal quarter 2008.
Income from Operations. Income from operations was $2.6 million in the fourth fiscal quarter 2009, a 77.9% decrease compared to $11.8 million in the fourth fiscal quarter 2008. Operating margins for the fourth fiscal quarter 2009 were 2.8%, down from 11.2% in the fourth fiscal quarter 2008.
Net Income. Net income was $1.0 million, or $0.03 per diluted share, for the fourth fiscal quarter 2009 compared to $10.1 million, or $0.26 per diluted share, for fourth fiscal quarter 2008.
Financial Condition
The Company's cash, restricted cash and cash equivalents as of June 30, 2009 were $62.3 million, compared to $71.3 million as of June 30, 2008. As of June 30, 2009, the Company had working capital of $82.2 million. Stockholders' equity increased 14.5% to $151.9 million, compared to $132.7 million as of June 30, 2008.
Conference Call Information
Sutor's management will host an earnings conference call on September 25, 2009 at 9:00 a.m. U.S. Eastern Time. Listeners may access the call by dialing US: +1-877-847-0047, CN: 800876 5011,HK +852 30068101, access code: SUTR. A webcast will also be available via the Company's website at http://www.sutorcn.com . A recording of the call will be available through September 25, 2009. Listeners may access it by dialing US: +1-866-572-7808, CN: 8008765013, HK: +852 3012 8000 access code: 578816.
Functional Currency and Translating Press Release
The functional currency of the Company is the Chinese Yuan Renminbi ("RMB"); however, the accompanying financial information has been expressed in United States Dollars ("USD"). The accompanying consolidated balance sheets have been translated into USD 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. Transactions in the Company's equity securities have 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 in China. 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 fine finished steel products, our expectations regarding the continued growth of the steel market, as well as all assumptions, expectations, predictions, intentions or beliefs 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 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, 2009, 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.
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
2009 2008
(Restated)
ASSETS
Current Assets:
Cash and cash equivalents $10,511,028 $11,806,101
Restricted cash 51,809,170 59,489,508
Trade accounts receivable, net of
allowance for doubtful accounts of
$389,765 and $70,653, respectively 8,355,361 6,268,858
Other receivables 326,848 100,271
Advances to suppliers, related
parties 95,810,109 76,118,544
Advances to suppliers, net of
allowance of $817,159 and
$1,472,828, respectively 23,955,493 28,035,815
Inventory 38,548,418 51,315,521
Notes receivable 17,532 130,970
Deferred taxes 266,110 288,976
Total Current Assets 229,600,069 233,554,564
Property and Equipment, net of
accumulated depreciation of
$17,484,268 and $12,019,445,
respectively 69,766,127 59,736,612
Intangible Assets, net of
accumulated amortization of
$345,130 and $285,888, respectively 3,047,498 3,238,931
TOTAL ASSETS $302,413,694 $296,530,107
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $12,129,003 $6,003,898
Advances from customers 17,845,426 16,871,618
Other payables and accrued expenses 3,176,493 3,265,860
Short-term notes payable 104,312,763 129,192,870
Short-term notes payable - related
parties 9,900,727 1,311,510
Total Current Liabilities 147,364,412 156,645,756
Long-Term Notes Payable 2,859,995
Long-Term Notes Payable - Related
Parties 249,996 7,099,998
Total Liabilities 150,474,403 163,745,754
Minority Interest in 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 84,407,200 65,772,975
Accumulated other comprehensive
income 17,736,977 17,181,567
Total Stockholders' Equity 151,939,291 132,749,656
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $302,413,694 $296,530,107
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
For the Years Ended June 30,
2009 2008 2007
Revenue:
Revenue $190,506,892 $237,494,371 $147,466,726
Revenue from related
parties 150,978,922 180,535,469 155,972,011
341,485,814 418,029,840 303,438,737
Cost of Revenue
Other cost of revenue 142,559,158 266,149,352 115,285,842
Purchases from related
parties 166,119,456 106,960,453 157,615,325
308,678,614 373,109,805 272,901,167
Gross Profit 32,807,200 44,920,035 30,537,570
Operating Expenses:
Selling expense 3,128,676 2,237,957 2,319,728
General and administrative
expense 3,959,258 3,749,453 4,735,973
Total Operating Expenses 7,087,934 5,987,410 7,055,701
Income from Operations 25,719,266 38,932,625 23,481,869
Other Income (Expense):
Interest income 1,386,466 943,466 566,469
Other income 149,007 188,273 298,488
Interest expense (5,886,727) (6,253,098) (2,258,425)
Other expense (402,936) (756,943) (874,651)
Total Other Income
(Expense) (4,754,190) (5,878,302) (2,268,119)
Income Before Taxes and
Minority Interest 20,965,076 33,054,323 21,213,750
Provision for income
taxes (2,330,851) (1,916,468) (696,754)
Minority interest in loss
of consolidated
subsidiary -- (1,885) 3,395
Net Income $18,634,225 $31,135,970 $20,520,391
Basic and Diluted
Earnings per Common
Share $0.49 $0.82 $0.59
Net Income $18,634,225 $31,135,970 $20,520,391
Foreign currency
translation adjustment 555,410 12,261,597 3,488,320
Comprehensive Income $19,189,635 $43,397,567 $24,008,711
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30,
2009 2008 2007
(Restated)
Cash Flows from Operating
Activities:
Net income $18,634,225 $31,135,970 $20,520,391
Adjustments to reconcile net
income to net cash
provided by (used in)
operating activities
Depreciation and amortization 5,746,392 4,384,418 2,708,805
Minority interest in loss of
consolidated subsidiary -- 1,885 (3,395)
Deferred income taxes 23,994 (272,375) --
Stock based compensation -- -- 528,077
Gain on sale of assets (161,458) (2,844) --
Changes in current assets and
liabilities:
Trade accounts receivable, net (2,111,269) 9,537,171 (13,596,643)
Other receivables, net (226,140) (48,258) (41,539)
Advances to suppliers 4,139,480 7,869,743 (20,747,998)
Inventories 12,959,033 (24,623,639) (9,075,799)
Accounts payable 6,202,723 1,562,872 395,630
Advances from customers 906,806 7,102,064 490,208
Other payables and accrued
expenses (24,798) 257,455 802,466
Related party receivables or
payables (18,057,041) (71,873,877) (10,536,690)
Net Cash Provided by (Used in)
Operating Activities 28,031,947 (34,969,415) (28,556,487)
Cash Flows from Investing
Activities:
Changes in notes receivable 99,296 89,430 (126,402)
Purchase of property and
equipment, net of value
added tax refunds received (16,473,995) (10,872,302) (8,850,305)
Proceeds from sale of assets 783,033 10,369 --
Purchase of land use rights -- -- (198,301)
Net change in restricted cash 7,911,082 (26,998,292) 5,607,772
Net Cash Used in Investing
Activities (7,680,584) (37,770,795) (3,567,236)
Cash Flows from Financing
Activities:
Proceeds from issuance of
notes payable 186,704,193 160,238,315 136,558,731
Payments on notes payable (209,223,167) (91,833,084) (112,004,593)
Proceeds from issuance of
Series B preferred stock -- -- 33,130,712
Proceeds from issuance of
notes payable - related
parties 3,354,441 8,411,508 --
Payments on notes payable -
related parties (2,520,812) (2,244,164) --
Payments on long-term debt -- -- (2,554,598)
Capital distribution to
shareholders -- -- (21,036,767)
Net Cash Provided by (Used in)
Financing Activities (21,685,345) 74,572,575 34,093,485
Effect of Exchange Rate
Changes on Cash 38,909 1,140,794 328,687
Net Change in Cash (1,295,073) 2,973,159 2,298,449
Cash and Cash Equivalents
at Beginning of Year 11,806,101 8,832,942 6,534,493
Cash and Cash Equivalents at
End of Year $10,511,028 $11,806,101 $8,832,942
Supplemental Cash Flow
Information
Cash paid during the period
for interest $4,204,006 $5,952,002 $2,258,425
Cash paid during the period
for taxes $3,061,596 $3,746,316 $2,436,656
For more information, please contact:
Mr. Jason Wang
Sutor Technology Group Limited
Tel: +86-512-5268-0988
