omniture

Sutor Technology Group Limited Announces Second Quarter of Fiscal Year 2012 Financial Results

2012-02-14 21:00 990

CHANGSHU, China, Feb.14, 2012 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (the "Company" or "Sutor") (Nasdaq: SUTR), a leading China-based non-state-owned manufacturer and distributor of high-end fine finished steel products and welded steel pipes used by a variety of downstream applications, today announced its unaudited financial results for the second quarter of fiscal year 2012 ended December 31, 2011.

Second-Quarter 2012 Highlights:


2QFY2012

2Q FY2011

Change

Revenues (million)

$107.9

$99.4

8.6%

Gross profit (million)

$10.4

$9.5

9.5%

Gross margin

9.6%

9.6%

-

Net income (million)

$2.8

$2.9

-3.4%

EPS:

$0.07

$0.07

-



  • Engaged Grant Thornton, the China member firm of Grant Thornton International, as its independent registered public accounting firm;
  • Continued construction of the Company's new cold-roll production line of 500,000-tons designed annual capacity, which is expected to start commercial operations in the summer 2012;
  • Repurchased 402,887 shares of the Company's common stock at the open market according to the Company's previously announced shares repurchase program; and
  • Started to build a B2B (business to business) electronic trading platform exclusively for the steel industry; it is anticipated that the platform will initially be used to market Sutor's products with the option of expanding into a profit center via hosting other companies' trading activities.

Ms. Lifang Chen, Chairlady and CEO, commented, "During the second fiscal quarter, we focused on seeking operating excellence and achieved growth in both revenue and gross profits despite the challenging macro-economic environment both at home and abroad. As China gradually transits from an export and investment-driven economy to a domestic-consumption economy, we will proactively develop new products to serve the growing consumer goods industries like solar water heaters, high-end household appliances, information technology and automobiles. Positioned in the downstream segment of the steel industry, we believe our businesses are affected more by the general conditions of the economy than the changes to the upstream iron and steel refining segment. We believe our integrated business model and superior geographic location near consumer centers and transportation hubs will enable us to benefit from the ongoing economic transition in China. We are looking forward to milestone events to celebrate the Company's 10th anniversary in 2012."

"Closely working with our new auditor, we will continue to enhance our corporate governance and provide timely and accurate financial information to our shareholders. We also intend to improve our communications with our shareholders and further reach out to the investment community in general. Finally, we will explore all options to improve shareholder value," concluded Ms. Chen.

Revenue. For the three months ended December 31, 2011, revenue was approximately $107.9 million, compared to $99.4 million for the same period last year, an increase of approximately 8.6%. The increase was mainly attributable to both the increased sales volumes and the average selling prices, or ASP, for our HDG products. During the fiscal second quarter of 2012, sales volumes and the ASP of our HDG products went up approximately 10.5% and 10.4%, respectively. In addition, we benefited from the significant improvement in steel pipe manufacturing business at Ningbo Zhehua, whose revenue rose by approximately 82.1% as compared to the same period last year. However, we experienced lower sales from cold rolled steel products as we used more of them internally for the production of our other products during the second fiscal quarter and from PPGI products due to changes in product mix as compared to the same period last year, which partially offset higher revenue from other products.

On a geographic basis, revenue generated from outside of China was approximately $14.4 million, or 13.3% of the total revenue, for the three months ended December 31, 2011, as compared to $7.6 million, or 7.6% of the total revenue, for the same period in 2010. The increase was mainly resulted from our efforts to expand product penetration, increase brand recognition, and foster acceptance of our products in the international markets.

Cost of revenue. Cost of revenue increased approximately $7.5 million, or 8.3%, to $97.5 million in the three months ended December 31, 2011, from $90.0 million in the same period in 2010. As a percentage of revenue, cost of revenue was approximately 90.4% in the three months ended December 31, 2011, as compared with approximately 90.4% in the same period last year. The increased amount of the cost of revenue was generally in line with the increased sales revenue.

Gross profit and gross margin. Gross profit increased approximately $0.9 million to $10.4 million in the three months ended December 31, 2011 from $9.5 million in the same period in 2010. Gross profit as a percentage of revenue (gross margin) was 9.6% in the three months ended December 31, 2011, as compared to approximately 9.6% in the same period last year.

Total operating expenses. Our total operating expenses increased approximately $1.0 million to $4.7 million in the three months ended December 31, 2011, from $3.7 million in the same period in 2010. As a percentage of revenue, our total operating expenses increased to approximately 4.3% in the three months ended December 31, 2011 from 3.7% in the same period in 2010.

Selling expenses. Our selling expenses increased approximately $0.1 million to $2.1 million in the three months ended December 31, 2011, from $2.0 million in the same period in 2010. As a percentage of revenue, our selling expenses decreased to 1.9% for the three months ended December 31, 2011, from 2.0% for the same period last year.

General and administrative expenses. General and administrative expenses increased $0.9 million to $2.6 million, or 2.4% of the total revenue, in the three months ended December 31, 2011, from $1.7 million, or 1.7% of the revenue, in the same period in 2010. The increased general and administrative expenses were primarily due to business expansion, increased labor costs and insurance premiums, and higher management expenses.

Interest expense. Our interest expense increased $0.1 million to $2.4 million in the three months ended December 31, 2011, from $2.3 million in the same period in 2010. As a percentage of revenue, our interest expense was approximately 2.3% of the total revenue in the three months ended December 31, 2011, compared to approximately 2.3% in the same period in 2010.

Provision for Income taxes. Our income tax expenses decreased to approximately $0.5 million due to lower taxable income in the three months ended December 31, 2011 from $0.6 million in the same period last year.

Net income. Net income, without including the foreign currency translation adjustment, decreased approximately $0.1 million, or 3.4%, to $2.8 million in the three months ended December 31, 2011, from $2.9 million in the same period in 2010, as a cumulative result of the above factors.

Liquidity and Capital Resources

As of December 31, 2011, our total short-term loans were approximately $108.6 million. We also had approximately $38.1 million under long-term notes payable. We had approximately $7.0 million cash and cash equivalents and $124.4 million restricted cash. In addition, we also had an available line of credit with banks of approximately $31.4 million which entitled us to draw bank loans for general corporate purposes. As of December 31, 2011, our current assets were approximately $393.1 million and current liabilities $237.8 million. We believe that we have sufficient liquidity and capital resources to carry out normal operating activities for the remainder of fiscal year 2012.

Business Outlook

We maintain our previously announced anticipation that both revenue and net income of the Company will grow at a compound annual growth rate (CAGR) of approximately 25% to 35% for the next two fiscal years.

Conference Call Information

Sutor's management will host an earnings conference call on Tuesday, February 14, 2012, at 9:00 a.m. eastern time. Listeners may access the call by dialing US: 1 877 847 0047, China: 800 876 5011, Hong Kong 852 3006 8101, access code: SUTR. A recording of the call will be available shortly after the call through March 15, 2012. Listeners may access it by dialing US: 1 866 572 7808, China: 800 876 5013, Hong Kong: 852 3012 8000, access code: 668195.

About Sutor Technology Group Limited

Sutor is a leading China-based non-state-owned manufacturer and distributor of high-end fine finished steel products and welded steel pipes used by a variety of downstream applications. The Company utilizes a variety of in-house developed processes and technologies to convert steel manufactured by third parties into fine finished steel products, including hot-dip galvanized steel, pre-painted galvanized steel, acid-pickled steel, cold-rolled steel and welded steel pipe products. These products are used for household appliances, solar water heaters, automobiles, information technology, construction, and other applications. Currently Sutor has three operating subsidiaries located in two provinces with 12 major production lines capable of processing approximately 2 million metric tons of steel products annually. To learn more about the company, please visit http://www.sutorcn.com/en/index.php.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements include, among others, those concerning our financial and business outlook in the next two years, our expectation regarding cash flow and liquidity, our new facility and capacity expansion, and its expected impact on the Company's business and financial performance, our expectations regarding the market for our existing products and new products, our expected financial performance and strategic and operational plans, 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 actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements. 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. Risks and uncertainties that could cause actual results to differ materially from those anticipated include risks related to new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements regarding future economic conditions or performance, uncertainties related to conducting business in China and the current global economic crisis on our business and on our customers' business, and any of the factors and risks mentioned in the "Risk Factors" sections of our Annual Report on Form 10-K for the year ended June 30, 2011 and subsequent SEC filings. 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:


Mr. Jason Wang, Director of IR

Sutor Technology Group Limited

Tel: +86-512-5268-0988

Email: investor_relations@sutorcn.com



- FINANCIAL TABLES FOLLOW -

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



December 31,


June 30,



2011


2011

ASSETS





Current Assets:





Cash and cash equivalents

$

7,001,770

$

21,324,931

Restricted cash


124,390,722


72,326,482

Trade accounts receivable, net of allowance for doubtful accounts of $1,030,942 and $856,554, respectively


11,679,042


3,969,090

Other receivables and prepayments, net of allowance for doubtful accounts of $549,427 and $529,068, respectively


1,766,763


2,004,044

Advances to suppliers, related parties, net of allowance of $130,015 and $127,903, respectively


116,782,481


116,772,842

Advances to suppliers, third parties, net of allowance of $564,375 and $493,761, respectively


36,645,254


42,067,716

Inventory, net


93,675,674


46,197,179

Notes receivable


699,851


168,029

Deferred tax assets


417,159


363,497

Total Current Assets


393,058,716


305,193,810






Advances for Purchase of Long Term Assets


82,531


81,191

Property, Plant and Equipment, net


86,080,564


79,103,131

Intangible Assets, net


3,097,967


3,083,569

TOTAL ASSETS

$

482,319,778

$

387,461,701






LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities:





Accounts payable

$

117,820,851

$

55,674,454

Advances from customers


6,371,107


11,737,085

Other payables and accrued expenses


4,998,772


4,840,135

Other payables - related parties


-


594,105

Short-term loans


108,565,063


95,494,490

Total Current Liabilities


237,755,793


168,340,269






Long-Term Loans


38,125,743


23,626,900

Total Liabilities


275,881,536


191,967,169






Stockholders' Equity





Undesignated preferred stock - $0.001 par value; 1,000,000 shares authorized; no shares outstanding


-


-

Common stock - $0.001 par value;

authorized: 500,000,000 shares as of December 31, 2011 and June 30, 2011;

issued: 40,745,602 shares as of December 31, 2011 and June 30, 2011;

outstanding: 40,285,780 and 40,745,602 as of December 31, 2011 and June 30, 2011, respectively


40,745


40,745

Additional paid-in capital


42,646,231


42,584,974

Statutory reserves


15,662,039


15,662,039

Retained earnings


114,691,488


107,137,213

Accumulated other comprehensive income


33,932,008


30,069,561

Less: Treasury stock, at cost


(534,269)


-

Total Stockholders' Equity


206,438,242


195,494,532

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

482,319,778

$

387,461,701




SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)



For The Three Months Ended



For The Six Months Ended



December 31,



December 31,



2011


2010



2011


2010











Revenue:










Revenue

$

83,070,982

$

55,720,704


$

181,467,497

$

95,280,863

Revenue from related parties


24,823,816


43,702,411



56,622,918


106,089,348



107,894,798


99,423,115



238,090,415


201,370,211











Cost of Revenue










Cost of revenue


74,930,923


50,290,654



165,952,519


86,037,699

Cost of revenue from related party sales


22,552,581


39,677,905



50,737,745


97,442,396



97,483,504


89,968,559



216,690,264


183,480,095











Gross Profit


10,411,294


9,454,556



21,400,151


17,890,116











Operating Expenses:




















Selling expenses


2,078,492


1,982,635



4,414,272


3,363,113

General and administrative expenses


2,578,617


1,720,113



5,504,115


3,363,258

Total Operating Expenses


4,657,109


3,702,748



9,918,387


6,726,371

Income from Operations


5,754,185


5,751,808



11,481,764


11,163,745











Other Incomes/(Expenses):










Interest income


388,207


248,402



678,415


437,715

Other income


14,592


99,255



19,950


121,292

Interest expense


(2,438,976)


(2,335,293)



(4,167,516)


(3,870,103)

Other expense


(477,176)


(209,349)



(858,667)


(275,063)

Total Other Expenses, net


(2,513,353)


(2,196,985)



(4,327,818)


(3,586,159)











Income Before Taxes


3,240,832


3,554,823



7,153,946


7,577,586

Income tax (expense)/benefit


(460,504)


(621,742)



400,329


(1,231,937)

Net Income

$

2,780,328

$

2,933,081


$

7,554,275

$

6,345,649











Basic Earnings per Share

$

0.07

$

0.07


$

0.19

$

0.16

Diluted Earnings per Share

$

0.07

$

0.07


$

0.19

$

0.16











Basic Weighted Average Shares Outstanding


40,487,224


40,715,602



40,602,179


40,715,602

Diluted Weighted Average Shares Outstanding


40,487,224


40,715,602



40,602,179


40,715,602











Net Income

$

2,780,328

$

2,933,081


$

7,554,275

$

6,345,649

Foreign currency translation adjustment


1,375,046


2,523,968



3,862,447


5,600,766

Comprehensive Income

$

4,155,374

$

5,457,049


$

11,416,722

$

11,946,415













SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



For The Six Months Ended



December 31,



2011


2010

Cash Flows from Operating Activities:





Net income

$

7,554,275

$

6,345,649

Adjustments to reconcile net income to net cash provided by/(used in) operating activities





Depreciation and amortization


4,179,300


3,784,283

Deferred tax assets


(47,431)


2,037

Foreign currency exchange (gain)/loss


(686,395)


23,198

Stock based compensation


61,257


62,737

Gain on disposal of assets


-


(4,710)

Changes in current assets and liabilities:





Trade accounts receivable, net


(7,624,315)


6,424,518

Other receivable and prepayment


269,075


(359,606)

Advances to suppliers


6,087,748


(3,224,708)

Advances to suppliers - related parties


1,984,400


(16,321,928)

Inventory


(46,491,155)


896,374

Accounts payable


60,932,832


(11,839,274)

Advances from customers


(5,520,486)


4,222,928

Other payables and accrued expenses


222,530


(800,652)

Other payables - related parties


(601,014)


107,084

Net Cash Provided by/(Used In) Operating Activities


20,320,621


(10,682,070)






Cash Flows from Investing Activities:





Changes in notes receivable


(526,505)


(798,557)

Purchase of property, plant and equipment, net of value added tax refunds received


(9,786,882)


(831,690)

Proceeds from disposal of assets


-


5,949

Net changes in restricted cash


(50,625,460)


4,724,215

Net Cash Provided by/(Used In) Investing Activities


(60,938,847)


3,099,917






Cash Flows from Financing Activities:





Proceeds from loans


128,876,501


71,169,376

Repayment of loans


(102,275,514)


(68,146,301)

Payments on repurchase of common stock


(534,269)


-

Net Cash Provided by Financing Activities


26,066,718


3,023,075






Effect of Exchange Rate Changes on Cash and Cash Equivalents


228,347


339,142






Net Change in Cash and Cash Equivalents


(14,323,161)


(4,219,936)

Cash and Cash Equivalents at Beginning of Period


21,324,931


13,336,736

Cash and Cash Equivalents at End of Period

$

7,001,770

$

9,116,800






Supplemental Non-Cash Information:





Offset of notes payable to related parties against receivable from related parties

$

10,263,357

$

9,870,221

Supplemental Cash Flow Information:





Cash paid during the period for interest

$

(3,915,785)

$

(3,583,122)

Cash received/(paid) during the period for income tax

$

6,019

$

(1,404,237)









Source: Sutor Technology Group Limited
Related Stocks:
NASDAQ:SUTR
Keywords: Mining/Metals
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