omniture

Sutor Technology Group Limited Reports Audited Fiscal Year 2011 Financial Results

2011-10-13 20:02 1340

CHANGSHU, China, October 13, 2011 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (the "Company", "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 audited financial results for the fiscal year ended June 30, 2011.

Fiscal year 2011 results highlights:


FY 2011

FY2010

Change

Revenues (million):

$431.7

$478.7

-9.8%

Gross profit (million)

$40.5

$32.8

23.5%

Gross margin

9.4%

6.9%

36.2%

Net income (million)

$14.0

$11.3

23.9%

EPS

$0.34

$0.29

17.2%



Commenting on Sutor's operations, Ms. Lifang Chen, Chairwoman and CEO, said, "We ended fiscal year 2011 with improved gross margin, net income and earnings per share despite challenging economic condition. The fiscal year 2011 is a year of both challenges and achievements with the following highlights:

  • Net income and EPS grew 23.9% and 17.2%, respectively, and gross margin improved to approximately 9.4% from approximately 6.9%, in fiscal year 2011 as compared with fiscal year 2010. We believe the results validate our integrated one-stop service model and our strategies of pursuing sustainable growth;
  • Our export sales grew 15.8% from $53.7 million to $62.2 million from fiscal year 2010 to 2011 despite global economic uncertainties, which we believe demonstrates the growing brand recognition and competitive strengths of our products;
  • Changshu Huaye Steel Strip Company Ltd., one of our three directly owned operating subsidiaries, was certified as a high-tech enterprise by Jiangsu provincial government, which allows the subsidiary to enjoy a lower income tax rate than the statutory income tax rate;
  • We announced and started a share repurchase program to repurchase up to $5 million of the Company's common stock which reflects our confidence in the long-term prospects for Sutor, and underscores our continuous commitment to maximize value for our shareholders;
  • We relocated our headquarters into a new office building and broke ground for an integrated cold-roll production line of 500,000 metric tons annual production capacity. While pursuing selected capacity expansion opportunities, we will also continue to capitalize on our existing revenue base and diversified product offerings to improve profit margins."

Ms. Chen continued: "Since we were listed on Nasdaq Capital Market in February 2008, we have added 400,000 metric tons of hot-dipped galvanization and 400,000 metric tons of heavy steel pipe production capacities. In addition, a cold-roll production line of 500,000 metric tons annual capacity is planned for commercial operations next year. We would like to invite our investors to visit our manufacturing facilities and witness themselves how their investments are put into use. Despite the high volatility in the capital markets, we will remain focused on seeking operating excellence and pursuing outstanding customer services. We are committed to our shareholders, employees, and customers for the years to come."

Fiscal Year 2011 Results

Revenue. For the fiscal year ended June 30, 2011, revenue was $431.7 million compared to $478.7 million last year, a decrease of approximately 9.8%. Total sales volume in tons decreased approximately 18.6% in fiscal year 2011 as compared to the same period last year, which reflected the Company's continuing efforts to exit the lower-margin steel trading business and optimize its product mix, leading to improved profit margins. The impact of the lower sales volumes on revenue was partially offset by an increase of approximately 10.8% in overall average selling price.

The following table sets forth revenue by geography and the percentage of our total revenue and total revenue by business segments for fiscal years 2011 and 2010.

(All amounts, other than percentages, in thousands of U.S. dollars)




June 30, 2011


June 30, 2010



Amount


Percentage
of Revenue


Amount


Percentage
of Revenue

Geographic Data:









China

$

369,507


85.6%

$

425,009


88.8%

Other Countries


62,190


14.4%


53,679


11.2%










Segment Data:









Changshu Huaye

$

185,304


42.9%

$

217,631


45.5%

Jiangsu Cold-Rolled


214,868


49.8%


198,564


41.5%

Ningbo Zhehua


31,525


7.3%


62,493


13.0%




On a geographic basis, revenue generated from outside of China was $62.2 million, or 14.4% of total revenue, for fiscal year 2011, as compared to $53.7 million, or 11.2% of total revenue, for fiscal year 2010. The increase was mainly attributable to our efforts to expand product penetration into new markets, increase brand recognition and foster acceptance of our products in the international markets.

On a segment basis, after eliminating intercompany sales, revenue contributed by Changshu Huaye Steel Strip Company Ltd. (Changshu Huaye) decreased to $185.3 million for fiscal year 2011, a decrease of $32.3 million, or 14.8%, from $217.6 million in fiscal year 2010. Due to increasing market demand, we produced more advanced PPGI products in fiscal year 2011 which resulted in decrease of sales volume and revenue, but an increase in our gross margin. In addition, more HDG steel products were produced at Jiangsu Cold-Rolled Technology Company Ltd. (Jiangsu Cold-Rolled) to take advantage of its newer production lines which generally have lower production costs. As a result, the overall production volume at Changshu Huaye was reduced during fiscal year 2011.

After eliminating the inter-company sales, revenues contributed by Jiangsu Cold-Rolled were $214.9 million for fiscal year 2011, an increase of $16.3 million from $198.6 million last year, mainly as a result of higher sales volume and the increased output of our 400,000 MT HDG production lines.

Revenues contributed by Ningbo Zhehua Heavy Steel Pipe Manufacturing Company Ltd. (Ningbo Zhehua) were $31.5 million for fiscal year 2011, a decrease of approximately $31.0 million from $62.5 million in fiscal year 2010, primarily resulting from our strategic decision to reduce its lower-margin steel trading businesses and focus on higher-margin production businesses.

In terms of sales to related parties as compared with sales to unrelated parties, our direct sales to unrelated parties in fiscal year 2011 increased $31.5 million, or 13.4%, to $266.1 million from $234.6 million in fiscal year 2010.

Cost of revenue. Cost of revenue decreased $54.7 million, or 12.3%, to $391.2 million in fiscal year 2011 from $445.9 million in fiscal year 2010. As a percentage of revenue, cost of revenue decreased to 90.6% in fiscal year 2011 from 93.1% last year. Decreased cost of revenue was mainly due to the decreased sales volume.

Gross profit and gross margin. Gross profit increased $7.7 million to $40.5 million in fiscal year 2011 from $32.8 million in fiscal year 2010. Gross profit as a percentage of revenue (gross margin) was 9.4% in fiscal year 2011, as compared to 6.9% in fiscal year 2010. The increased gross margin mainly resulted from increased international sales volume and increased sales volume of higher margin products by Changshu Huaye. In addition, improved capacity utilization at Jiangsu Cold Rolled, which reduced the average cost of production, combined with the elimination of the lower margin steel trading business of Ningbo Zhehua, also contributed to the increase in gross margin. Finally, higher average selling prices year-over-year also improved gross margin.

On a segment basis, gross margin for Changshu Huaye increased to 13.5% in fiscal year 2011 from 10.4% last year, mainly because it produced and sold more higher-margin advanced PPGI products and exported more products in fiscal year 2011 than the same period last year. Gross margin for Jiangsu Cold-Rolled increased to 5.3% in fiscal year 2011 from 4.1% last year, mainly due to the higher capacity utilization of the new HDG production lines and higher average selling prices. Gross margin for Ningbo Zhehua increased to 13.7% in fiscal year 2011, as compared to 4.8% in fiscal year 2010, mainly because we reduced our lower-margin steel trading business.

Total operating expenses. Our total operating expenses increased approximately $0.9 million to $15.3 million in fiscal year 2011 from $14.4 million in fiscal year 2010. As a percentage of revenue, our total operating expenses increased to 3.5% in fiscal year 2011 from 3.0% in fiscal year 2010.

Selling expenses. Our selling expenses decreased approximately $0.6 million to $7.5 million in fiscal year 2011, from $8.1 million in fiscal year 2010. As a percentage of revenue, our selling expenses remained stable at approximately 1.7% of total revenue in fiscal year 2011. The dollar decrease of selling expenses was primarily due to effective cost control measures and lower international shipping costs.

General and administrative expenses. General and administrative expenses increased $1.5 million, or 22.9%, to $7.8 million, or 1.8% of revenue, in fiscal year 2011, from $6.4 million, or 1.3% of revenue, in fiscal year 2010. Higher general and administrative expenses were primarily due to higher bad debt allowance of approximately $1.7 million resulting from more direct sales and higher office expenses of $0.7 million for fiscal year 2011 than the same period last year. During fiscal year 2011, we relocated our headquarters into a new office building to prepare for anticipated future business needs.

Interest expense. Our interest expense increased $2.2 million to $8.0 million in fiscal year 2011, from $5.8 million in fiscal year 2010. As a percentage of revenue, our interest expenses increased to 1.8% in fiscal year 2011, from 1.2% in fiscal year 2010. The increase in interest expense was mainly attributable to the increase in benchmark interest rates. From October 2010 and continuing through the end of the 2011 fiscal year, China Central Bank raised its one-year lending interest rate by 1.0%, or 20.0% increase as compared with the interest rate during the 2010 fiscal year.

Provision for income taxes. We incurred income tax expense of $3.4 million in fiscal year 2011 as compared to $2.4 million last year, partially due to the higher taxable income.

Net income. Net income, without including the foreign currency translation adjustment, increased $2.7 million, or approximately 23.9%, to $14.0 million in fiscal year 2011, from $11.3 million in fiscal year 2010, as a cumulative result of the above factors.

Financial Condition and Liquidity

The Company's cash, restricted cash and cash equivalents as of June 30, 2011 were $93.7 million, compared to $61.7 million as of June 30, 2010. The total debt was approximately $119.1 million. As of June 30, 2011, the Company had working capital of approximately $138.1 million. Stockholders' equity increased 14.5% to $195.5 million, compared to $170.8 million as of June 30, 2010.

In September 2010, Sutor established a non-binding strategic cooperation framework with China Construction Bank. With the cash and cash equivalents on the balance sheet and existing lines of credit, the management expects to have sufficient liquidity to carry out normal operations for the foreseeable future.

Outlook

The management anticipates both revenue and net income to 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 October 14, 2011, at 8:30 a.m. eastern time. Listeners may access the call by dialing US: +1-877-847-0047, CN: 800 876 5011, HK: +852 30068101, access code: SUTR. A recording of the call will be available shortly after the call for through November 13, 2011. Listeners may access it by dialing US: +1-866-572-7808, CN: 800 876 5013, HK: +852 3012 8000 access code: 656546

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; the factors discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in this report, 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.

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




June 30,


June 30,



2011


2010






ASSETS





Current Assets:





Cash and cash equivalents

$

21,324,931

$

13,336,736

Restricted cash


72,326,482


48,315,962

Trade accounts receivable, net of allowance for doubtful accounts of $856,554 and $498,620, respectively


3,969,090


10,913,736

Other receivables and prepayments, net of allowance for doubtful accounts of $529,068 and $279,885, respectively


2,004,044


929,507

Advances to suppliers, related parties


116,772,842


96,776,181

Advances to suppliers, net of allowance of $493,761 and $542,490, respectively


42,067,716


8,304,246

Inventory, net of allowance for obsolescence of $88,346 and $102,028, respectively


46,197,179


40,179,358

Notes receivable


168,029


73,437

Deferred income taxes


363,497


329,414

Total Current Assets


305,193,810


219,158,577






Advances for Purchase of Long Term Assets


81,191


-

Property, Plant and Equipment, net of accumulated depreciation of $35,081,522 and $25,914,352, respectively


79,103,131


70,018,522

Intangible Assets, net of accumulated amortization of $509,200 and $415,178, respectively


3,083,569


2,995,488

TOTAL ASSETS

$

387,461,701

$

292,172,587






LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities:





Accounts payable

$

55,674,454

$

23,954,009

Advances from customers


11,737,085


6,769,481

Other payables and accrued expenses


4,840,135


4,688,324

Other payables - related parties


594,105


352,495

Short-term notes payable


95,494,490


82,128,484

Short-term notes payable - related parties


-


587,492

Total Current Liabilities


168,340,269


118,480,285






Long-Term Notes Payable


23,626,900


2,859,995

Total Liabilities


191,967,169


121,340,280






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, 40,745,602 and 40,715,602 shares outstanding at June 30, 2011 and 2010, respectively


40,745


40,715

Additional paid-in capital


42,584,974


42,465,581

Statutory reserves


15,662,039


12,629,151

Retained earnings


107,137,213


96,164,928

Accumulated other comprehensive income


30,069,561


19,531,932

Total Stockholders' Equity


195,494,532


170,832,307

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

387,461,701

$

292,172,587




SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME




For The Years Ended



June 30



2011


2010






Revenue:





Revenue

$

266,126,597

$

234,633,835

Revenue from related parties


165,569,921


244,053,884



431,696,518


478,687,719






Cost of Revenue





Cost of revenue


240,847,808


216,663,282

Cost of revenue from related party sales


150,397,400


229,216,965



391,245,208


445,880,247






Gross Profit


40,451,310


32,807,472






Operating Expenses:










Selling expenses


7,503,738


8,066,336

General and administrative expenses


7,813,711


6,358,399

Total Operating Expenses


15,317,449


14,424,735

Income from Operations


25,133,861


18,382,737






Other Incomes/(Expenses):





Interest income


901,511


1,106,114

Other income


159,496


448,465

Interest expense


(7,971,129)


(5,840,518)

Other expense


(793,540)


(363,376)

Gain/(loss) on sale of assets


4,481


(3,550)

Total Other Income/(Expense)


(7,699,181)


(4,652,865)






Income Before Taxes


17,434,680


13,729,872

Provision for income taxes


(3,429,507)


(2,403,494)

Net Income

$

14,005,173

$

11,326,378






Basic Earnings per Share

$

0.34

$

0.29

Diluted Earnings per Share

$

0.34

$

0.29






Basic Weighted Shares Outstanding


40,726,123


38,804,588

Diluted Weighted Shares Outstanding


40,726,123


38,806,363






Net Income

$

14,005,173

$

11,326,378

Foreign currency translation adjustment


10,537,629


956,036

Comprehensive Income

$

24,542,802

$

12,282,414









SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS




For The Years Ended



June 30



2011


2010

Cash Flows from Operating Activities:





Net income

$

14,005,173

$

11,326,378

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





Depreciation and amortization


7,684,071


7,117,592

Deferred income taxes


(16,086)


70,410

Foreign currency exchange gain


(48,495)


-

Stock based compensation


119,423


36,663

(Gain)/loss on sale of assets


(4,481)


3,550

Changes in current assets and liabilities:





Trade accounts receivable, net


7,291,694


1,253,074

Other receivable and prepayment


(559,428)


(461,222)

Advances to suppliers


(32,494,098)


16,863,747

Advances to suppliers - related parties


(13,399,681)


(19,856,665)

Inventory


(3,757,906)


4,201,631

Accounts payable


29,686,859


(14,370,322)

Advances from customers


4,525,550


(12,085,352)

Other payables and accrued expenses


(438,981)


716,464

Other payables - related parties


217,267


351,048

Net Cash Provided by/(Used In) Operating Activities


12,810,881


(4,833,004)






Cash Flows from Investing Activities:





Changes in notes receivable


(88,423)


105,314

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


(12,908,403)


(1,519,153)

Proceeds from sale of assets


6,067


-

Net change in restricted cash


(20,899,568)


16,771,227

Net Cash Used In Investing Activities


(33,890,327)


15,357,388






Cash Flows from Financing Activities:





Proceeds from issuance of notes payable


149,159,704


100,047,386

Payments on notes payable


(120,718,568)


(97,999,281)

Proceeds from issuance of notes payable - related parties


-


199,932

Payments on notes payable - related parties


-


(10,352,520)

Distribution to shareholders


-


(6,615,825)

Net proceeds from issuance of common stock and warrants


-


6,814,196

Net Cash Provided By Financing Activities


28,441,136


(7,906,112)






Effect of Exchange Rate Changes on Cash


626,505


65,026






Net Change in Cash


7,988,195


2,683,298

Cash and Cash Equivalents at Beginning of Year


13,336,736


10,653,438

Cash and Cash Equivalents at End of Year

$

21,324,931

$

13,336,736






Supplemental Non-Cash Financing Activities:





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

$

10,051,691

$

9,687,935

Supplemental Cash Flow Information:





Cash paid during the year for interest

$

7,441,918

$

5,305,877

Cash paid during the year for income taxes

$

2,118,597

$

1,761,019









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



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