omniture

Kingold Jewelry Reports Financial Results for The Fourth Quarter and Year Ended December 31, 2018

Company to Hold Conference Call with Accompanying Slide Presentation at 8:30 a.m. ET on April 3, 2019
2019-04-03 04:05 10562

WUHAN CITY, China, April 3, 2019 /PRNewswire/ -- Kingold Jewelry, Inc. ("Kingold" or "the Company") (NASDAQ: KGJI), one of China's leading manufacturers and designers of high quality 24-karat gold jewelry, ornaments and investment-oriented products, today announced its financial results for the fourth quarter and year ended December 31, 2018.

2018 Financial and Operating Highlights (all results are compared to prior year)

  • Net sales were approximately $2.48 billion, increased by 41% from approximately $2.01 billion.
  • Processed a total of 114.2 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products in 2018, an increase of 10.4% compared to 103.4 metric tons. This result exceeded the Company's previously announced estimate of between 100 metric tons and 110 metric tons.
  • Gross profit increased by 32% to $264.3 million from $199.9 million.
  • Gross margin was 10.7% compared to 9.9%.
  • Net income was $49.5 million, or $0.75 per diluted share, increased by 89% from $26.2 million, or $0.39 per diluted share.
  • Book value per diluted share was $9.64 at December 31, 2018, compared to $5.91 at December 31, 2017.

2018 Fourth Quarter Financial Highlights (all results compared to prior year period)

  • Net sales were $631.2 million, compared to $657.1 million.
  • Processed a total of 33.7 metric tons of 24-karat gold products, compared to 31.2 metric tons.
  • Net income was $9.5 million, or $0.14 per diluted share, compared to $10.5 million, or $0.15 per diluted share.

Outlook for 2019

  • The Company expects to process between 110 metric tons and 120 metric tons of 24-karat gold products in 2019.

Management Commentary

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We are proud to have achieved all aspects of financial and operational growth for the year 2018 and surpassed our previously provided processing volume while gaining double-digit percentage growth in all indices. According to the World Gold Council, in 2018 the annual jewelry demand in China increased by 3% as the retail industry continued to expand and innovate. Based on the management's analysis on the gold market trend, Kingold intends to continue to expand market coverage by diversifying our sales channels for gold jewelry and investment products and continue to explore gold investment to further implement our strategic expansion. Meanwhile, Kingold expects to explore both upstream and downstream markets to optimally utilize resources within China's gold industry, thus to advance our Company's position as a leader in furtherance of the gold industry development, along with our peers."

2018 OPERATIONAL REVIEW

Metric Tons of Gold Processed


Three Months Ended:


December 31, 2018

December 31, 2017


Volume

% of Total

Volume

% of Total

Branded*

16.4

48.7%

16.8

53.8%

Customized**

17.3

51.3%

14.4

46.2%

Total

33.7

100.0%

31.2

100%


Year Ended:


December 31, 2018

December 31, 2017


Volume

% of Total

Volume

% of Total

Branded*

62.9

55.1%

51.5

49.8%

Customized**

51.3

44.9%

51.9

50.2%

Total

114.2

100.0%

103.4

100.0%


*

Branded Production:

The Company acquires gold from the Shanghai Gold Exchange to produce branded products.

**

Customized Production:

Clients who purchase customized products supply gold to the Company for processing.


For the three months ended December 31, 2018, the Company processed a total of 33.7 metric tons of gold, of which branded production was 16.4 metric tons, representing 48.7% of total gold processed, and customized production was 17.3 metric tons, representing 51.3% of total gold processed in the fourth quarter of 2018. In the fourth quarter of 2017, the Company processed a total of 31.2 metric tons, of which branded production was 16.8 metric tons, or 53.8% of the total gold processed, and customized production was 14.4 metric tons, or 46.2% of total gold processed.

For the year ended December 31, 2018, Kingold processed a total of 114.2 metric tons of gold, of which branded production was 62.9 metric tons, or 55.1% of total gold processed, and customized production was 51.3 metric tons, or 44.9% of total gold processed. In 2017, the Company processed a total of 103.4 metric tons of gold, of which branded production was 51.5 metric tons, or 49.8% of the total, and customized production was 51.9 metric tons, or 50.2% of the total.

2018 FINANCIAL REVIEW

Net Sales

Net sales for the three months ended December 31, 2018 was approximately $631.2 million, representing a decrease of approximately $26 million, or 3.9%, from approximately $657.1 million for the same period in 2017.

Net sales for the year ended December 31, 2018 was approximately $2.48 billion, an increase of 41% from approximately $2.01 billion reported in the year of 2017. The overall increase was mainly due to the following combined factors: (1) the total sales volume (in terms of quantity sold) for branded production increased from 51.5 metric tons in 2017 to 62.9 metric tons in 2018, causing 11.4 metric tons or 22.1% of increase. However, the average unit selling price for branded production remained stable in 2018, which was RMB 254.8 per gram in 2018, compared to RMB 257.2 per gram in 2018, resulting in a slightly decrease of 0.9%. (2) The total sales volume (in terms of quantity sold) for customized production remained stable in 2018, which was 51.3 metric tons in 2018, compared to 51.8 metric tons in 2017. However, the average unit selling price for customized production increased from RMB 6.38 per gram in 2017 to RMB 6.89 per gram in 2018, causing an 8.1% increase.

Gross Profit

Gross profit for the three months ended December 31, 2018 was approximately $75.1 million, compared to $56.4 million for the same period in 2017.

Gross profit was approximately $264.3 million for the year ended December 31, 2018, compared to approximately $199.9 million for year of 2017. The increase in gross profit was mainly due to the following factors: (1) the increased sales volume from 103.4 metric tons in 2017 to 114.2 metric tons in 2018, which has impacted the Company's gross profit and gross margin for the year ended December 31, 2018; and (2) the increase in unit selling price of customized productions, which has impacted the gross margin.

Gross Margin

The Company's gross margin was 11.9% for the three months ended December 31, 2018, compared to 8.6% in the prior year period.

The Company's gross margin for the year ended December 31, 2018 was 10.7%, compared to 9.9% in the prior year period. The slight increase was due to above reasons.

Net Income

Net income for the three months ended December 31, 2018 was approximately $9.5 million, or $0.14 per diluted share based on 66.1 million weighted average diluted shares outstanding, compared to net income of $10.5 million in the prior year period, or $0.15 per diluted share based on 66.8 million weighted average diluted shares outstanding in the prior year period.

Net income for the year ended December 31, 2018 was approximately $49.5 million, or $0.75 per diluted share based on 66.2 million weighted average diluted shares outstanding, compared to net income of approximately $26.2 million in the prior year, or $0.39 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior year.

Balance Sheet and Cash flow


(in millions except for percentages)

12/31/2018

12/31/2017

% Changed





Cash

$                      0.23

$                  5.0

(95.4)%

Inventories (gold)

$                    127.0

$              135.0

(5.9)%

Working Capital

$                    837.3

$              768.3

9.0%

Stockholders' Equity

$                    638.3

$              390.2

63.6%


The net cash provided by operating activities for the year ended December 31, 2018 was approximately $365.7 million, compared to approximately $25.7 million of net cash used in operating activities in 2017. The increase of net cash provided by operating was mainly due to the increase in net income, the decrease in inventory purchased of approximately $205.2 million because approximately $769.3 million of gold for investment was released to inventory and processed during the year ended December 31, 2018, collections from value added tax recoverable of $78.0 million, an increase in income tax payable of $17.6 million, offset by our decrease in other payable and accrued expense of $3.7 million.

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories. Other factors that may vary significantly include our accounts payable, purchases of gold and income taxes. The Company expects the net cash that it generates from operating activities to continue to fluctuate as the Company's inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger or smaller quantities of raw materials. These fluctuations could cause net cash from operating activities to decrease, even if Kingold's net income grows as the Company continue to expand.

OUTLOOK FOR 2019

Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company believes that its gold sales are expected to be between 110 metric tons and 120 metric tons during 2019. This guidance is based solely on current projected, organic growth.

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on April 3, 2019, at 8:30 a.m. ET. The dial-in numbers are:

Live Participant Dial In (Toll Free): 877-407-9038
Live Participant Dial In (International): 201-493-6742

The conference call will also be webcast live. To listen to the call, please go to the Investor Relations section of Kingold's website at www.kingoldjewelry.com, or click on the following link: https://78449.themediaframe.com/dataconf/productusers/kgji/mediaframe/29332/indexl.html.

The Company will also have an accompanying slide presentation available in PDF format on its homepage prior to the conference call.

About Kingold Jewelry, Inc.

Kingold Jewelry, Inc. (NASDAQ: KGJI), centrally located in Wuhan City, one of China's largest cities, was founded in 2002 and today is one of China's leading designers and manufacturers of high quality 24-karat gold jewelry, ornaments, and investment-oriented products. The Company sells its products both directly to retailers and through major distributors across China. Kingold has received numerous industry awards and has been a member of the Shanghai Gold Exchange since 2003. For more information, please visit www.kingoldjewelry.com.

Business Risks and Forward-Looking Statements

This press release contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. You can identify these forward -looking statements by words such as "expects," "believe," "project," "anticipate," or similar expressions. The forward-looking statements in this release include statements regarding Kingold's outlook with respect to its 2019 outlook for gold processing and investment. Forward-looking statements are subject to a number of risks, including those contained in Kingold's SEC filings available at www.sec.gov, including Kingold's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. Kingold undertakes no obligation to update or revise any forward-looking statements for any reason.

COMPANY CONTACT
Kingold Jewelry, Inc.
Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
bl@kingoldjewelry.com

INVESTOR RELATIONS
The Equity Group Inc.
Katherine Yao, Senior Associate
Phone: +86-10-5661-7012
kyao@equityny.com

 

 

 

KINGOLD JEWELRY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN U.S. DOLLARS)

UNAUDITED



For the three months ended December 31,


2018


2017

NET SALES

$

631,174,702


$

657,065,727

COST OF SALES






Cost of sales


(555,777,346)



(600,235,997)

Depreciation


(337,266)



(387,406)

Total cost of sales


(556,114,612)



(600,623,403)







GROSS PROFIT


75,060,090



56,442,324







OPERATING EXPENSES






Selling, general and administrative expenses


3,966,740



2,897,969

Stock compensation expenses


5,364



5,364

Depreciation


169,878



77,185

Amortization, other


2,723



2,858

    Total operating expenses


4,144,705



2,983,376







INCOME FROM OPERATIONS


70,915,385



53,458,948







OTHER INCOME (EXPENSES)






Other income, net


(984)



484

Interest income


379,157



427,048

Interest expense (Amortization of debt issuance costs $12,247,690)

$490,870 of amortization of financing costs for the years ended December 31, 2017, 2016 and 2015


(43,794,691)



(39,790,115)

    Total other expenses, net


(43,416,518)



(39,362,583)







INCOME FROM OPERATIONS BEFORE TAXES


27,498,867



14,096,365







INCOME TAX PROVISION (BENEFIT)






Current


17,757,847



4,682,155

Deferred


240,531



(1,063,593)

    Total income tax provision


17,998,378



3,618,562







NET INCOME


9,500,489



10,477,803







OTHER COMPREHENSIVE INCOME (LOSS)






Unrealized gain related to investments in gold, net of tax


137,914,883



(17,285,438)

Total foreign currency translation gain (loss)


(7,285,556)



9,934,925

Total Other comprehensive gain


54,640,188



(7,350,513)







COMPREHENSIVE INCOME

$

130,629,327


$

3,127,290







Earnings per share






Basic

$

0.14


$

0.16

Diluted

$

0.14


$

0.16







Weighted average number of shares






Basic


66,113,502



66,113,502

Diluted


66,113,502



66,773,097

 

 

KINGOLD JEWELRY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN U.S. DOLLARS)



For the years ended December 31,


2018


2017

NET SALES

$

2,475,666,092


$

2,009,732,643

COST OF SALES






Cost of sales


(2,210,204,664)



(1,808,612,014)

Depreciation


(1,138,650)



(1,193,453)

Total cost of sales


(2,211,343,314)



(1,809,805,467)







GROSS PROFIT


264,322,778



199,927,176







OPERATING EXPENSES






Selling, general and administrative expenses


11,564,285



13,444,222

Stock compensation expenses


21,456



33,014

Depreciation


576,840



444,297

Amortization, other


11,426



11,188

    Total operating expenses


12,174,007



13,932,721







INCOME FROM OPERATIONS


252,148,771



185,994,455







OTHER INCOME (EXPENSES)






Other income, net


63,449



66,642

Interest income


1,763,595



2,251,972

Interest expense, including $12,247,690 and $10,958,016 of amortization of financing costs for the years ended December 31, 2018 and 2017


(172,692,768)



(152,945,558)

    Total other expenses, net


(170,865,724)



(150,626,944)







INCOME FROM OPERATIONS BEFORE TAXES


81,283,047



35,367,511







INCOME TAX PROVISION (BENEFIT)






Current


26,972,159



17,678,757

Deferred


4,764,174



(8,503,898)

    Total income tax provision


31,736,333



9,174,859







NET INCOME


49,546,714



26,192,652







OTHER COMPREHENSIVE INCOME (LOSS)






Unrealized gain related to investments in gold, net of tax


81,006,008



58,650,446

Total foreign currency translation gain (loss)


(26,365,820)



22,752,426

Total Other comprehensive gain


54,640,188



81,402,872







COMPREHENSIVE INCOME

$

104,186,902


$

107,595,524







Earnings per share






Basic

$

0.75


$

0.40

Diluted

$

0.75


$

0.39







Weighted average number of shares






Basic


66,113,502



66,050,498

Diluted


66,192,537



66,472,046

 

 

KINGOLD JEWELRY, INC.

CONSOLIDATED BALANCE SHEETS

(IN U.S. DOLLARS)



December 31,


December 31,


2018


2017





ASSETS












  Cash

$

233,391


$

4,997,125

  Restricted cash


4,798,185



5,534,551

  Accounts receivable


451,059



768,167

  Inventories


127,034,673



135,042,713

  Investments in gold


1,593,557,391



1,562,943,153

  Other current assets and prepaid expenses


87,590



100,592

  Value added tax recoverable


259,582,324



353,732,758

Total current assets


1,985,744,613



2,063,119,059







   Property and equipment, net


5,395,330



7,299,643

  Restricted cash


7,766,372



7,392,721

  Investments in gold


700,225,896



957,124,267

  Other assets


285,768



302,072

  Deferred income tax assets


-



6,677,675

  Land use right


395,719



429,915

Total long-term assets


714,069,085



979,226,293

TOTAL ASSETS

$

2,699,813,698


$

3,042,345,352







LIABILITIES AND STOCKHOLDERS' EQUITY












CURRENT LIABILITIES












  Short term loans

$

1,034,947,774


$

962,101,746

  Other payables and accrued expenses


15,749,564



18,913,863

  Related party loan


72,699,779



307,389,647

  Due to related party, shareholder


3,976,742



2,630,301

  Income tax payable


18,504,197



1,208,742

  Other taxes payable


2,577,102



2,615,463

Total current liabilities


1,148,455,158



1,294,859,762

Deferred income tax liability


24,218,911



-

Related party loans


373,327,862



567,843,066

Long term loans


515,477,020



789,410,137

TOTAL LIABILITIES


2,061,478,951



2,652,112,965

COMMITMENTS AND CONTINGENCIES






EQUITY






Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of December 31, 2018 and 2017


-



-

Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding as of December 31, 2018 and 2017


66,113



66,113

Additional paid-in capital


224,292,907



80,377,449

Retained earnings






    Inappropriate


353,213,325



303,666,611

    Appropriated


967,543



967,543

Accumulated other comprehensive income, net of tax


59,794,859



5,154,671

    Total Equity


638,334,747



390,232,387







TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

2,699,813,698


$

3,042,345,352


 

 

 

KINGOLD JEWELRY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN U.S. DOLLARS)



For the years ended December 31,


2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES






Net income

$

49,546,714


$

26,192,652

Adjusted to reconcile net income to cash provided by (used in) operating activities:






Depreciation


1,715,490



1,637,750

Amortization of intangible assets


11,426



11,188

Share based compensation for services


21,456



33,014

Amortization of debt issuance costs included in interest expense


12,247,690



10,958,016

Deferred tax (benefit) provision


4,764,174



(7,683,962)

Changes in operating assets and liabilities






Accounts receivable


286,534



(50,154)

Inventories


205,234,765



(7,279,205)

Other current assets and prepaid expenses


7,900



620,730

Value added tax recoverable


78,022,977



(60,195,642)

Other payables and accrued expenses


(3,736,015)



4,143,958

Customer deposits


(144,978)



185,434

Income tax payable


17,585,797



4,718,786

Other taxes payable


106,862



957,521

Net cash provided by (used in) operating activities


365,670,792



(25,749,914)

CASH FLOWS FROM INVESTING ACTIVITIES






Purchases of property and equipment


(145,507)



(1,241,172)

Investments in gold


-



(551,958,950)

Net cash used in investing activities


(145,507)



(553,200,122)

CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from other loans - short term


214,833,064



170,341,868

Repayments of other loans - short term


(749,080,980)



(304,869,025)

Proceeds from other loans - long term


423,197,255



319,668,492

Proceeds from related parties loans – short term


-



295,989,344

Proceeds from related parties loans – long term


545,924,459



821,370,431

Repayments of related parties loans


(791,834,472)



(748,170,175)

Payments of loan origination fees


(11,959,140)



(9,572,415)

Repayment of third parties loans


-



(29,598,934)

(Repayments of) borrowings from related party


1,346,835



(4,738,508)

Proceeds from exercise of warrants


-



113,562

Net cash (used in) provided by financing activities


(367,572,979)



510,534,640

EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH


(3,078,755)



4,662,170

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH


(5,126,449)



(63,753,226)

CASH AND RESTRICTED CASH, BEGINNING OF YEAR


17,924,397



81,677,623

CASH AND RESTRICTED, END OF YEAR

$

12,797,948


$

17,924,397







SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION






Cash paid for interest expense

$

163,182,925


$

128,823,958

Cash paid for income tax

$

10,262,316


$

13,091,812







NON-CASH INVESTING AND FINANCING ACTIVITIES






Investments in gold obtained in a lease from a related party

$

-


$

133,721,408

Investments in gold transferred to inventories

$

769,308,629


$

417,937,474

Unrealized gain on investments in gold

$

81,006,008


$

58,650,446

Forgiveness of debt by shareholder allocated to capital contribution

$

143,894,002


$

-


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Source: Kingold Jewelry, Inc.
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