-- 2Q09 Revenue Decreases 38.4% to US$70.8 Million Compared to 2Q08
-- 2Q09 Net Income Decreases 33.8% to US$4.4 Million Compared to 2Q08
-- Gross Margin Increased to 11.6% from 9.9% for 2Q08
DONGBANG TOWN, China, Feb. 13 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (the "Company" or "Sutor") (Nasdaq: SUTR), a leading provider of steel finishing fabrication products in China, today reported its financial results for the second fiscal quarter ending December 31, 2008.
Second Fiscal Quarter 2009 Financial Highlights:
Total revenues decreased 38.4% over the second fiscal quarter of 2008 to US$70.8 million.
-- Total revenues decreased 38.4% over the second fiscal quarter of 2008
to US$70.8 million.
-- Gross margin increased to 11.6% for the second fiscal quarter of 2009
from 9.9% for the same period last year.
-- Net income decreased 33.8% over the second fiscal quarter of 2008 to
US$4.4 million.
-- Fully-diluted earnings per common share for the second fiscal quarter
2009 was US$0.11, compared to US$0.18 for the second fiscal quarter
2008
Ms. Lifang Chen, Chairlady and CEO of Sutor said, "after a strong fiscal 2008 and first quarter fiscal 2009, the global economy crisis and, in particular the general economic slow-down in China and the steel industry, began affecting Sutor during this second quarter. The Chinese government has taken quick and decisive actions to reestablish growth trends with a series of stimulus packages which are expected to have a positive impact on the steel industry in general and Sutor in particular. We are ready to respond strategically and actively to this unprecedented challenge."
Second Fiscal Quarter 2009 Financial Results:
Revenues. Revenues amounted to US$70.8 million in the second fiscal quarter 2009, compared to US$114.9 million for the second fiscal quarter 2008, representing a decrease of 38.4%. The decrease was mainly contributable to the decrease of revenue from Jiangsu Cold-Rolled and the decrease of per unit sale prices of our products.
Gross Profit. Gross profit decreased 28.2% to US$8.2 million for the second fiscal quarter 2009 from US$11.4 million for the same period last year. However, gross margin increased to 11.6% in the second fiscal quarter 2009 from 9.9% for the same period last year. The improved margins mainly resulted from the change of product mix, vertical integration strategy and our increased direct sales to end customers.
Income from Operations. Income from operations for the second fiscal quarter 2009 was US$6.2 million, representing a 28.9% decrease from US$8.7million for the second fiscal quarter 2008.
Operating Expenses. Our total operating expenses decreased by 26.2% to US$2.0 million in the second fiscal quarter of 2009, compared to US$2.8 million in the second fiscal quarter 2008.
Income before Tax and Minority Interests. As a result of the foregoing, our income before tax and minority interests decreased by 35.7% from US$7.5 million in the second fiscal quarter 2008 to US$4.8 million for the second fiscal quarter 2009.
Net Income. Net income decreased by 33.8% from US$6.7 million for second fiscal quarter 2008 to US$4.4 million for the second fiscal quarter 2009 primarily as a result of the decrease of revenue and per unit sale price of our products.
Financial Condition:
The Company's cash and cash equivalents balances as of December 31, 2008 were US$45.7 million, compared to cash equivalents of US$47.4 million as of December 31, 2007. As of December 31, 2008, the Company had working capital of US$74.4 million. Stockholders' equity increased 38.1% to US$147.6 million, compared to US$106.9 million as of December 31, 2007.
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 steel finishing fabrication products in China. Sutor utilizes a variety of processes and technological methodologies to convert steel manufactured by third parties into steel finishing fabrication 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 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, 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.
-- FINANCIAL TABLES FOLLOW --
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, June 30,
2008 2008
ASSETS
Current Assets:
Cash and cash equivalents $14,650,094 $11,806,101
Restricted cash 31,075,882 59,489,508
Trade accounts receivable, net of
allowance for doubtful accounts
of $10,515 and $70,653, respectively 3,193,093 6,268,858
Other receivables 914,741 100,271
Accounts receivable, related parties 82,218,408 76,118,544
Advances to suppliers, net of
allowance for doubtful accounts
of $654,355 and $1,472,828,
respectively 6,260,007 28,035,815
Inventory 50,929,691 51,315,521
Notes receivable -- 130,970
Deferred taxes 112,249 288,976
Total Current Assets 189,354,165 233,554,564
Property and Equipment, net of
accumulated depreciation of
$14,270,839 and $12,019,445,
respectively 72,999,496 59,736,612
Intangible Assets, net of accumulated
amortization of $310,769 and
$285,888, respectively 3,077,203 3,238,931
TOTAL ASSETS $265,430,864 $296,530,107
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $13,378,048 $6,003,898
Advances from customers 6,443,921 16,871,618
Other payables and accrued expenses 3,350,546 3,265,860
Short-term notes payable 79,513,409 130,504,380
Short-term notes payable - Principal
Shareholder 12,242,108 --
Total Current Liabilities 114,928,032 156,645,756
Long-Term Liabilities:
Long-Term Notes Payable -
Principal Shareholder -- 7,099,998
Long-Term Notes Payable 2,859,996 --
Total Liabilities 117,788,028 163,745,754
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 80,320,411 65,772,975
Accumulated other comprehensive
income 17,527,311 17,181,567
Total Stockholders' Equity 147,642,836 132,749,656
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $265,430,864 $296,530,107
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenue:
Revenue $43,584,953 $65,827,292 $117,955,203 $123,607,780
Revenue from related
parties 27,251,324 49,064,729 54,658,763 90,774,333
70,836,277 114,892,021 172,613,966 214,382,113
Cost of Revenue
Cost of revenue 36,351,143 84,327,960 69,257,229 141,937,951
Purchases from related
parties 26,294,464 19,152,518 81,719,016 49,648,028
62,645,607 103,480,478 150,976,245 191,585,979
Gross Profit 8,190,670 11,411,543 21,637,721 22,796,134
Operating Expenses:
Selling expense 472,091 961,748 1,162,396 1,535,493
General and
administrative expense 1,563,498 1,791,154 2,007,461 4,281,097
Total Operating
Expenses 2,035,589 2,752,902 3,169,857 5,816,590
Income from Operations 6,155,081 8,658,641 18,467,864 16,979,544
Other Income (Expense):
Interest income 486,539 222,177 961,987 353,768
Other income -- 7,106 -- 38,585
Interest expense (1,801,322) (1,257,146) (3,282,058) (2,172,483)
Other expense -- (109,164) -- (230,254)
Total Other Income
(Expense) (1,314,783) (1,137,027) (2,320,071) (2,010,384)
Income before Taxes and
Minority Interest 4,840,298 7,521,614 16,147,793 14,969,160
Provision for income
taxes (414,059) (833,562) (1,600,357) (1,664,405)
Minority interest in loss
of consolidated
subsidiary -- (260) -- 3,027
Net Income $4,426,239 $6,687,792 $14,547,436 $13,307,782
Basic and Diluted
Earnings
per Common Share $0.11 $0.18 $0.38 $0.35
Net Income $4,426,239 $6,687,792 $14,547,436 $13,307,782
Foreign currency
translation adjustment 10,541 2,877,741 345,744 4,201,379
Comprehensive Income $4,436,780 $9,565,533 $14,893,180 $17,509,161
SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended
December 31,
2008 2007
Cash Flows from Operating Activities:
Net income $14,547,436 $13,307,782
Adjustments to reconcile net income to
net cash (used in) provided by operating
activities
Depreciation and amortization 2,518,110 1,770,360
Minority interest in loss of consolidated
subsidiary -- (3,027)
Deferred income taxes 177,496 --
Gain on sale of sewer assets (161,340) --
Changes in current assets and
liabilities:
Trade accounts receivable, net 3,041,853 14,339,637
Other receivables, net (741,445) (48,046)
Advances to suppliers 21,801,770 (20,483,161)
Inventory 513,682 (22,679,207)
Accounts payable 7,464,066 1,292,495
Advances from customers (10,472,603) 6,147,430
Other payables and accrued expenses 153,140 (405,840)
Related party receivables or payables (5,554,305) --
Net Cash Provided by (Used in) Operating
Activities 33,287,860 (6,761,577)
Cash Flows from Investing Activities:
Collection of notes receivable 43,775 133,489
Changes in notes receivable - related
parties 972,834 --
Purchase of property and equipment, net
of value added tax refunds received (16,601,244) (435,472)
Proceeds from sale of sewer assets 782,464 -
Net change in restricted cash 28,570,720 (7,771,455)
Net Cash Provided by (Used in) Investing
Activities 13,768,549 (8,073,438)
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable 75,646,423 37,813,493
Payments on notes payable (125,022,435) (34,230,234)
Proceeds from issuance of notes payable -
Principal Shareholder 5,142,688 12,577,667
Net Cash (Used in) Provided by Financing
Activities (44,233,324) 16,160,926
Effect of Exchange Rate Changes on Cash 20,908 262,206
Net Change in Cash 2,843,993 1,588,117
Cash and Cash Equivalents at Beginning of
Period 11,806,101 8,832,942
Cash and Cash Equivalents at End of
Period $14,650,094 $10,421,059
Supplemental Cash Flow Information
Cash paid during the period for interest $2,915,387 $2,172,483
Cash paid during the period for taxes 1,955,643 1,809,864
For more information, please contact:
Company Contact (PRC):
Mr. Jason Wang
Tel: +86-512-5268-0988
Web: http://www.sutorcn.com