WUHAN CITY, China, Aug. 10, 2018 /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 unaudited financial results for the second quarter and six months ended June 30, 2018.
2018 Second Quarter Financial Highlights (all results compared to prior year period)
Outlook for 2018
Management Commentary
Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased to deliver strong operating results in the second quarter of 2018 and continue to benefit from our gold investment which enabled us to further expand our production capacity and design capabilities. During the quarter, we have witnessed a strong growing demand for 24-karat gold jewelry and investment products in China, and our management quickly adjusted the product mix in response to market demand with additional trendy design jewelry products and value preserving investment gold products. We are dedicated to building the Kingold brand as an increasingly important participant in the gold industry in China, while quickly responding to market changes and adjusting operational strategies."
2018 SECOND QUARTER AND SIX MONTHS OPERATIONAL REVIEW
| Metric Tons of Gold Processed |
||||
| Three Months Ended: |
||||
| June 30, 2018 |
June 30, 2017 |
|||
| Volume |
% of Total |
Volume |
% of Total |
|
| Branded* |
16.9 |
61.1% |
12 |
46.2% |
| Customized** |
10.7 |
38.9% |
14 |
53.8% |
| Total |
27.6 |
100.0% |
26 |
100% |
| Six Months Ended: |
||||
| June 30, 2018 |
June 30, 2017 |
|||
| Volume |
% of Total |
Volume |
% of Total |
|
| Branded* |
29.8 |
58.6% |
20.1 |
47.7% |
| Customized** |
21.1 |
41.4% |
22.0 |
52.3% |
| Total |
50.9 |
100.0% |
42.1 |
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 June 30, 2018, the Company processed a total of 27.6 metric tons of gold, of which branded production was 16.9 metric tons, representing 61.1% of total gold processed, and customized production was 10.7 metric tons, representing 38.9% of total gold processed in the second quarter of 2018. In the second quarter of 2017, the Company processed a total of 26 metric tons, of which branded production was 12 metric tons, or 46.2% of the total gold processed, and customized production was 14 metric tons, or 53.8% of total gold processed.
For the six months ended June 30, 2018, the Company processed a total of 50.9 metric tons of gold, of which branded production was 29.8 metric tons, representing 58.6% of total gold processed, and customized production was 21.1 metric tons, representing 41.4% of total gold processed in the first half of 2018. In the first half of 2017, the Company processed a total of 42.1 metric tons, of which branded production was 20.1 metric tons, or 47.7% of the total gold processed, and customized production was 22 metric tons, or 52.3% of total gold processed.
CONSOLIDATED FINANCIAL AND OPERATING REVIEW
Net Sales
Net sales for the three months ended June 30, 2018 was $678.8 million, increased by 42.6% from $475.9 million for the same period in 2017. The increase in net sales was mainly the result of the higher sales volume for branded production sales.
For the six months ended June 30, 2018, the Company's net sales were $1,218.3 million, increased by 58.6% from $768.1 million in the first half of 2017. The increase in net sales was mainly the result of the higher sales volume for branded production sales.
Gross Profit
Gross profit for the three months ended June 30, 2018 was $63.8 million, increased by 33.4% from $47.8 million for the same period in 2017.
For the six months ended June 30, 2018, the Company's gross profit were $128 million increased by 97.3% from $64.9 million in the same period of 2017.
Gross Margin
The Company's gross margin was 9.4% for the three months ended June 30, 2018, compared to 10% in the prior year period. The slight decrease in gross margin was primarily due to the decreased average selling price of branded production, compensated by decreased unit cost of branded production during the three months ended June 30, 2018. The average selling price of branded production was RMB 252.34 per gram for the three months ended June 30, 2018, decreased by RMB 11.66 or 4.4%, from RMB 264 per gram for the same period in 2017. Meanwhile, the unit cost of branded production sales was RMB 232.43 per gram for the three months ended June 30, 2018, decreased by RMB 11.63, or 4.8%, from RMB 244.06 per gram for the same period in 2017. The decreases of both the average selling price and unit cost of branded production were mainly due to the weak gold price in the three months ended June 30, 2018.
For the six months ended June 30, 2018, the Company's gross margin was 10.5%, compared to 8.4% in the first half of 2017. The increase in gross margin was because the decrease in unit cost of branded production sales exceeded the decrease in the average selling price of branded production during the six months ended June 30, 2018. The unit cost of branded production sales was RMB 232.30 per gram for the six months ended June 30, 2018, decreased by RMB 8.1 or 3.4% from RMB 240.39 per gram for the same period in 2017. However, the average selling price of branded production was RMB 254.95 per gram for the six months ended June 30, 2018, decreased by RMB 1.72 or 0.7% from RMB 256.66 per gram for the same period in 2017.
Net Income
Net income for the three months ended June 30, 2018 was $13.6 million, or $0.20 per diluted share based on 66.2 million weighted average diluted shares outstanding, compared to net income of $8.0 million in the prior year period, or $0.12 per diluted share based on 66.4 million weighted average diluted shares outstanding in the prior year period.
For the six months ended June 30, 2018, the Company's net income was $26.8 million, or $0.40 per basic and diluted share, compared to net loss of $13.3 million, or $(0.20) per basic and diluted share, in the same period of 2017.
| Balance Sheet Highlights (USD in Millions) |
||||
| 6/30/2018 |
12/31/2017 |
Percentage Change |
||
| Cash and Cash Equivalents |
$0.24 |
$5.0 |
(95.2) % |
|
| Inventories |
$150 |
$135 |
11.1% |
|
| Working Capital (Current Assets -- Current Liabilities) |
$603 |
$768 |
(21.5) % |
|
| Stockholders' Equity |
$373 |
$390 |
(4.4) % |
|
Net cash provided by operating activities was $446.3 million for the six months ended June 30, 2018, compared with net cash used in operating activities of $257 million for the same period in 2017. The increase of net cash provided by operating activities was mainly due to the decrease in inventory purchases of $311 million because $349.4 million of gold for investment was released to inventory during the six months ended June 30, 2018, a decrease in value added tax receivable of $76.6 million, an increase in income taxable of $2.9 million and an increase in other payables and accrued liabilities of $1.3 million.
The Company's net cash from operating activities can fluctuate significantly due to change in inventories. Other factors that may vary significantly include accounts payable, purchase of gold and income taxes. The Company expects the net cash it generates from operating activities to continue to fluctuate as 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 (principally gold). These fluctuations could cause net cash from operating activities to decrease, even if net income grows as the Company continues to expand. Although the Company expects that net cash from operating activities will increase over the long term, it cannot predict how these fluctuations will affect Kingold's cash flow in any particular quarter.
OUTLOOK FOR 2018
Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company reiterates its expectation that gold processed will be between 100 metric tons and 110 metric tons during 2018.
Conference Call Details
Kingold also announced that it will discuss these financial results in a conference call on August 9, 2018 at 4:30 p.m. E.T.
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: http://kingoldjewelry.equisolvewebcast.com/q2-2018. 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 24-karat gold jewelry, ornaments, and investment-oriented products. The Company sells both directly to retailers as well as 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 2018 outlook for gold processing. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. 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 COUNSEL:
The Equity Group Inc.
Katherine Yao, Senior Associate Phone: +86-10-5661 7012
kyao@equityny.com
| KINGOLD JEWELRY, INC. |
||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
||||||||||||||||
| (IN US DOLLARS) |
||||||||||||||||
| (UNAUDITED) |
||||||||||||||||
| For the three months ended June 30, |
For the six months ended June 30, |
|||||||||||||||
| 2018 |
2017 |
2018 |
2017 |
|||||||||||||
| NET SALES |
$ |
678,796,263 |
$ |
475,891,200 |
$ |
1,218,320,318 |
$ |
768,155,277 |
||||||||
| COST OF SALES |
||||||||||||||||
| Cost of sales |
(614,775,972) |
(427,858,604) |
(1,089,741,556) |
(702,767,612) |
||||||||||||
| Depreciation |
(228,173) |
(210,888) |
(545,838) |
(505,331) |
||||||||||||
| Total cost of sales |
(615,004,145) |
(428,069,492) |
(1,090,287,394) |
(703,272,943) |
||||||||||||
| GROSS PROFIT |
63,792,118 |
47,821,708 |
128,032,924 |
64,882,334 |
||||||||||||
| OPERATING EXPENSES |
||||||||||||||||
| Selling, general and administrative expenses |
2,564,845 |
3,069,142 |
5,110,199 |
6,766,525 |
||||||||||||
| Stock compensation expenses |
5,364 |
11,143 |
10,728 |
22,286 |
||||||||||||
| Depreciation |
151,658 |
125,831 |
260,487 |
231,670 |
||||||||||||
| Amortization |
2,963 |
2,755 |
5,936 |
5,498 |
||||||||||||
| Total operating expenses |
2,724,830 |
3,208,871 |
5,387,350 |
7,025,979 |
||||||||||||
| INCOME FROM OPERATIONS |
61,067,288 |
44,612,837 |
122,645,574 |
57,856,355 |
||||||||||||
| OTHER INCOME (EXPENSES) |
||||||||||||||||
| Other Income |
- |
132 |
- |
65,497 |
||||||||||||
| Interest Income |
446,143 |
504,462 |
822,144 |
1,191,307 |
||||||||||||
| Interest expense, including amortization of debt |
(43,301,467) |
(38,980,626) |
(87,418,347) |
(76,570,122) |
||||||||||||
| Total other expenses, net |
(42,855,324) |
(38,476,032) |
(86,596,203) |
(75,313,318) |
||||||||||||
| INCOME (LOSS) FROM OPERATIONS BEFORE TAXES |
18,211,964 |
6,136,805 |
36,049,371 |
(17,456,963) |
||||||||||||
| INCOME TAX PROVISION (BENEFIT) |
||||||||||||||||
| Current |
4,169,121 |
5,218,082 |
7,426,595 |
5,218,082 |
||||||||||||
| Deferred |
479,046 |
(7,114,895) |
1,824,055 |
(9,402,844) |
||||||||||||
| Total income tax provision (benefit) |
4,648,167 |
(1,896,813) |
9,250,650 |
(4,184,762) |
||||||||||||
| NET INCOME (LOSS) |
13,563,797 |
8,033,618 |
26,798,721 |
(13,272,201) |
||||||||||||
| OTHER COMPREHENSIVE INCOME (LOSS) |
||||||||||||||||
| Unrealized gain (loss) related to investments in |
$ |
(19,350,626) |
$ |
(54,046,052) |
$ |
(37,973,323) |
$ |
48,861,337 |
||||||||
| Foreign currency translation gains (loss) |
(19,822,304) |
11,789,755 |
(6,002,603) |
8,362,338 |
||||||||||||
| Total Other comprehensive income (loss) |
$ |
(39,172,930) |
$ |
(42,256,297) |
$ |
(43,975,926) |
$ |
57,223,675 |
||||||||
| COMPREHENSIVE INCOME (LOSS) |
$ |
(25,609,133) |
$ |
(34,222,679) |
$ |
(17,177,205) |
$ |
43,951,474 |
||||||||
| Earnings (Loss) per share |
||||||||||||||||
| Basic |
$ |
0.21 |
$ |
0.12 |
$ |
0.41 |
$ |
(0.20) |
||||||||
| Diluted |
$ |
0.20 |
$ |
0.12 |
$ |
0.40 |
$ |
(0.20) |
||||||||
| Weighted average number of shares |
||||||||||||||||
| Basic |
66,113,502 |
66,018,867 |
66,113,502 |
66,018,867 |
||||||||||||
| Diluted |
66,229,658 |
66,415,601 |
66,395,251 |
66,018,867 |
||||||||||||
| KINGOLD JEWELRY, INC. |
||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
| (IN US DOLLARS) |
||||||||
| (UNAUDITED) |
||||||||
| June30, |
December 31, |
|||||||
| 2018 |
2017 |
|||||||
| ASSETS |
||||||||
| Cash |
$ |
240,453 |
$ |
4,997,125 |
||||
| Restricted cash |
6,965,467 |
5,534,551 |
||||||
| Accounts receivable |
- |
768,167 |
||||||
| Inventories |
150,437,622 |
135,042,713 |
||||||
| Investments in gold |
1,185,042,807 |
1,562,943,153 |
||||||
| Other current assets and prepaid expenses |
250,183 |
100,592 |
||||||
| Value added tax recoverable |
274,033,622 |
353,732,758 |
||||||
| Total current assets |
1,616,970,154 |
2,063,119,059 |
||||||
| Property and equipment, net |
6,517,129 |
7,299,643 |
||||||
| Restricted cash |
7,600,532 |
7,392,721 |
||||||
| Investments in gold |
908,899,905 |
957,124,267 |
||||||
| Other assets |
296,897 |
302,072 |
||||||
| Deferred income tax assets |
18,545,561 |
6,677,675 |
||||||
| Land use right |
416,840 |
429,915 |
||||||
| Total long-term assets |
942,276,864 |
979,226,293 |
||||||
| TOTAL ASSETS |
$ |
2,559,247,018 |
$ |
3,042,345,352 |
||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| CURRENT LIABILITIES |
||||||||
| Short term loans |
$ |
908,635,791 |
$ |
962,101,746 |
||||
| Other payables and accrued expenses |
19,906,196 |
18,913,863 |
||||||
| Related party loan |
75,530,983 |
307,389,647 |
||||||
| Due to related party |
3,420,269 |
2,630,301 |
||||||
| Income tax payable |
4,015,473 |
1,208,742 |
||||||
| Other taxes payable |
2,496,472 |
2,615,463 |
||||||
| Total current liabilities |
1,014,005,184 |
1,294,859,762 |
||||||
| Related party loans |
414,034,451 |
567,843,066 |
||||||
| Long term loans |
758,141,473 |
789,410,137 |
||||||
| TOTAL LIABILITIES |
2,186,181,108 |
2,652,112,965 |
||||||
| COMMITMENTS AND CONTINGENCIES |
||||||||
| EQUITY |
||||||||
| Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or |
- |
- |
||||||
| Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 |
66,113 |
66,113 |
||||||
| Additional paid-in capital |
80,388,177 |
80,377,449 |
||||||
| Retained earnings |
||||||||
| Unappropriated |
330,465,332 |
303,666,611 |
||||||
| Appropriated |
967,543 |
967,543 |
||||||
| Accumulated other comprehensive income (loss), net of tax |
(38,821,255) |
5,154,671 |
||||||
| Total Equity |
373,065,910 |
390,232,387 |
||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
2,559,247,018 |
$ |
3,042,345,352 |
||||
| KINGOLD JEWELRY, INC. |
||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
||||||||
| (IN US DOLLARS) |
||||||||
| (UNAUDITED) |
||||||||
| For the six months ended June 30, |
||||||||
| 2018 |
2017 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ |
26,798,721 |
$ |
(13,272,201) |
||||
| Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
806,325 |
737,001 |
||||||
| Amortization of intangible assets |
5,936 |
5,498 |
||||||
| Amortization of debt issuance costs included in interest expense |
4,560,420 |
6,403,986 |
||||||
| Share based compensation for services and warrants expense |
10,728 |
22,286 |
||||||
| Inventory valuation allowance |
- |
17,597,804 |
||||||
| Deferred tax provision (benefit) |
1,824,055 |
(9,402,844) |
||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
784,850 |
572,975 |
||||||
| Inventories |
331,036,274 |
(204,138,326) |
||||||
| Other current assets and prepaid expenses |
(157,286) |
587,453 |
||||||
| Value added tax recoverable |
76,550,155 |
(66,550,772) |
||||||
| Other payables and accrued expenses |
1,251,498 |
5,063,398 |
||||||
| Customer deposits |
(82,602) |
- |
||||||
| Income tax payable |
2,939,193 |
5,218,082 |
||||||
| Other taxes payable |
(77,119) |
123,225 |
||||||
| Net cash provided by (used in) operating activities |
446,251,148 |
(257,032,435) |
||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Purchases of property and equipment |
(453,522) |
(1,141,219) |
||||||
| Investments in gold |
- |
(270,889,242) |
||||||
| Net cash used in investing activities |
(453,522) |
(272,030,461) |
||||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Proceeds from other loans – short term |
- |
29,090,063 |
||||||
| Repayments of other loans – short term |
(301,624,503) |
(72,870,607) |
||||||
| Proceeds from other loans – long term |
240,479,892 |
95,997,207 |
||||||
| Repayments of other loans – long term |
- |
(101,815,220) |
||||||
| Proceeds from related party loans – short term |
- |
290,900,628 |
||||||
| Repayments of related party loans – short term |
(235,549,065) |
- |
||||||
| Proceeds from related party loans – long term |
334,479,672 |
690,888,992 |
||||||
| Repayments of related party loans – long term |
(484,255,723) |
(415,987,899) |
||||||
| Payments of loan origination fees |
(309,511) |
(1,998,723) |
||||||
| Repayment of third party loans |
- |
(29,090,063) |
||||||
| (Repayment of) borrowings from related party |
800,793 |
(3,988,513) |
||||||
| Net cash provided by (used in) financing activities |
(445,978,445) |
481,125,865 |
||||||
| EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH |
(2,937,126) |
1,732,785 |
||||||
| NET DECREASE IN CASH AND RESTRICTED CASH |
(3,117,945) |
(46,204,246) |
||||||
| CASH AND RESTRICTED CASH, BEGINNING OF PERIOD |
17,924,397 |
81,677,623 |
||||||
| CASH AND RESTRICTED CASH, END OF PERIOD |
$ |
14,806,452 |
$ |
35,473,377 |
||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
| Cash paid for interest expense |
$ |
81,761,918 |
$ |
56,674,744 |
||||
| Cash paid for income tax |
$ |
4,487,402 |
$ |
- |
||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES |
||||||||
| Investments in gold obtained in a lease from a related party and fully repaid |
$ |
- |
$ |
131,117,303 |
||||
| Investments in gold transferred to inventories |
$ |
389,112,590 |
$ |
180,786,694 |
||||
| Unrealized gain (loss) on investments in gold, net of tax |
$ |
(37,973,323) |
$ |
48,861,337 |
||||
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