Huadi International Group Co., Ltd. Announces the First six Months of Fiscal Year 2023 Financial Results

BEIJING, Sept. 6, 2023 /PRNewswire/ -- Huadi International Group Co., Ltd. ("HUDI" or the "Company") (NASDAQ: HUDI), a leading developer and manufacturer of industrial stainless steel seamless pipes and tubes products in China, today announced its financial results for the first six months of fiscal year 2023.

Financial Highlights for the First Six Months of Fiscal Year 2023

• Revenue increased by 3.2% to $38.0 million for the six months ended March 31, 2023, from $36.8 million for the six months ended March 31, 2022.
• Gross profit decreased by 3.6% to $5.7 million for the six months ended March 31, 2023, from $5.9 million for the six months ended March 31, 2022.
• Operating income increased by 122% to $1.5 million for the six months ended March 31, 2023, from $0.7 million for the six months ended March 31, 2022
• Net income for the six months ended March 31, 2023, was $1.5 million compared to net loss of $9,000 for the six months ended March 31, 2022.

Mr. Di Wang, Chairman of the Company, commented: "During the first half of year 2023, we continue to enhance our cost structure, deliver high-quality services and products to maintain and expand our existing client base, resulting in the Company's sales growth of over 3% and turnaround for net income of $1.5 million in the first half of fiscal year 2023. Despite a challenging economic situation resulted by Covid-19 pandemic during the last quarter of 2022, we closed $25 million registered direct offering. Though slow recovery from the impact of Covid-19 pandemic during the first quarter of 2023, we continued to record progresses on our operations and entered into strategic partnership with China Huanqiu Contracting & Engineering Co., Ltd., leading to our recognition as a significant supplier for large-scale stainless steel seamless pipes and tubes projects. Also, we are chosen to serve as the chief executive entity of the Belt and Road Enterprise Development Association, which will aid us in exploring and cultivating new business prospects for sustainable growth in the future. All these developments during the six months ended March 31, 2023 bolster our confidence in implementing our strategic plan to seek sustainable growth for the full year 2023."

Financial Results for the First Six Months of Fiscal year 2023

Revenue

For the six months ended March 31, 2023, revenue increased slightly by approximately $1.2 million or 3.2%, to approximately $38.0 million from approximately $36.8 million for the six months ended March 31, 2022. The revenue denominated in RMB increased by approximately 30.4 million (equivalent to $4.4 million, using the average conversion rate for current period) or 13.0%. The increase in revenues was primarily driven by our sales growth in domestic market as a result of the end of control measures on COVID-19 since the end of 2022.

Gross profit

Gross profit decreased slightly by approximately $0.2 million, or 3.58%, to approximately $5.7 million for the six months ended March 31, 2023, from approximately $5.9 million for the six months ended March 31, 2022. Gross profit denominated in RMB increased by approximately 2.1 million (equivalent to approximately $0.3 million, using the average conversion rate for current period) or 5.61%, the increase of gross profit was in line with the Company's growth of revenue. Gross profit margin was 15.1% for the six months ended March 31, 2023, as compared to 16.2% for the six months ended March 31, 2022.

Selling, general and administrative ("SGA") expenses

Selling, general and administrative expenses decreased by approximately $0.3 million, or 7.5% to approximately $3.7 million for the six months ended March 31, 2023 as compared to approximately $4.0 million for the six months ended March 31, 2022. The decrease of SGA expenses was primarily attributable to the depreciation RMB against USD, compared to an average exchange rate of 1 USD = 6.3712 RMB for the six months ended March 31, 2022 to an average exchange rate of 1 USD = 6.9761 for the six months ended March 31, 2023. The decrease in SGA expenses denominated in RMB was only 0.3 million (equivalent to approximately $47,000, using the average conversion rate for current period) or 1.28%.

Research and development ("R&D") expenses

Research and development expenses decreased slightly by approximately $0.1 million, or 6.7% to approximately $1.1 million for the six months ended March 31, 2023 as compared to approximately $1.2 million for the six months ended March 31, 2022. 

Foreign currency transaction gains

The Company incurred foreign currency transaction gains of approximately $0.6 million for the six months ended March 31, 2023, compared to foreign currency transaction loss approximately $36,000 for the six months ended March 31, 2022. The increase was mainly due to the depreciation RMB against USD, compared to an average exchange rate of 1 USD = 6.3712 RMB for the six months ended March 31, 2022 to an average exchange rate of 1 USD = 6.9761 for the six months ended March 31, 2023. 

Income from operations

As a result of the factors described above, the Company incurred operating income approximately $1.5 million for the six months ended March 31, 2023, compared to operating income approximately $0.7 million for the six months ended March 31, 2022, representing an increase of operating income of approximately $0.8 million. 

Other income and expense

Total other income (expense), net increased by approximately $0.8 million, or 121.64% to other income approximately $0.1 million for the six months ended March 31, 2023, compared to other expense approximately $0.7 million for the six months ended March 31, 2022. The increase was mainly attributable to $0.7 million decrease of interest expense as a result of the decrease of short-term borrowings and long-term borrowings and an increase of other income of $0.1 million. 

Income tax provision

Income tax expense for the six months ended March 31, 2023 increased by approximately $0.1 million, compared to the corresponding period in 2022 due to the increase in taxable income.

Net income (loss)

As a result of the combination of factors described above, the Company's net income increased by approximately $1.5 million to net income of $1.5 million for the six months ended March 31, 2023, compared to net loss of approximately $9,000 for the six months ended March 31, 2022.

Cash and Cash Equivalents

As of March 31, 2023 and September 30, 2022, we had cash and cash equivalents of $19.8 million and $13.2 million respectively.

Recent development

On June 15, 2023, Hong Kong Branch, a wholly-owned subsidiary of the Company, established Huadi Holdings (Songyang) Co., Ltd. under the laws of the PRC, the registered capital is $15 million.

On July 5, 2023, Huadi (Songyang) Co., Ltd. a wholly-owned subsidiary of the Company, has entered into an investment agreement with Songyang County local government owned enterprise in Zhejiang Province. The Agreement aims to start an advanced "Future Factory" construction project in the Chishou Industrial Zone of southwestern Zhejiang Province in China. The factory will occupy approximately 50 acres with a total investment of approximately RMB 1 billion, including fixed asset investments of over RMB 620 million. Huadi Songyang has officially obtained the rights to use the first portion of 26 acres of land from Songyang Economic Development Zone on June 30, 2023, for the construction of the Future Factory project.

About Huadi International Group Co., Ltd.

Huadi International Group Co., Ltd. is a leading manufacturer of industrial stainless steel seamless pipes and tubes products with extensive distribution facilities and network for over twenty provinces in China and across international steel pipes industry. It offers a broad range of products exported to twenty countries and regions such as United States, Mexico, Thailand, Australia, Argentina, Taiwan, India, the Philippines, UAE and Canada. Its products are widely used in the oil & gas transmission, chemistry engineering, food processing, medical devices, aeronautics and astronautics, boiler, irrigation works construction, electricity, automobile, naval architecture, paper mill and mechanical industries. For more information about the Company, please visit: http://www.huadi.cc.

Forward-Looking Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as "may, "will, "intend," "should," "believe," "expect," "anticipate," "project," "estimate" or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company's expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company's goals and strategies; the Company's future business development; financial condition and results of operations; product and service demand and acceptance; reputation and brand; the impact of competition and pricing; changes in technology; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company's filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward–looking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

The Company:
IR Department
Email: IR@huadigroup.com

Investor Relations:
Janice Wang
Wealth Financial Services LLC
Phone: +86 13811768559
+1 628 283 9214
Email: services@wealthfsllc.com