omniture

Kingold Jewelry Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2019

2019-08-10 04:05 8306

WUHAN CITY, China, Aug. 10, 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 unaudited financial results for the second quarter and six months ended June 30, 2019.

2019 Second Quarter Financial Highlights (all results compared to prior year period)

  • Net sales were approximately $598.0 million, compared to $678.8 million.
  • Processed a total of 27.9 metric tons of 24-karat gold products, compared to 27.6 metric tons.
  • Net income was approximately $12.6 million, or $0.19 per diluted share, compared to net income of $13.6 million, or $0.20 per diluted share

Outlook for 2019

  • The Company reiterates guidance of between 110 metric tons and 120 metric tons of 24-karat gold products in 2019.

2019 SECOND QUARTER AND SIX MONTHS OPERATIONAL REVIEW

Metric Tons of Gold Processed

Three Months Ended:


June 30, 2019

June 30, 2018


Volume

% of Total

Volume

% of Total

Branded*

14.8

53.0%

16.8

61.1%

Customized**

13.1

47.0%

10.8

38.9%

Total

27.9

100.0%

27.6

100.0%

Six Months Ended:


           June 30, 2019

June 30, 2018


Volume

% of Total

Volume

% of Total

Branded*

26.0

52.1%

29.9

58.6%

Customized**

23.9

47.9%

21.0

41.4%

Total

49.9

100.0%

50.9

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, 2019, the Company processed a total of 27.9 metric tons of gold, of which branded production was 14.8 metric tons, representing 53.0% of total gold processed, and customized production was 13.1 metric tons, representing 47.0% of total gold processed in the second quarter of 2019. In the second quarter of 2018, the Company processed a total of 27.6 metric tons of gold, of which branded production was 16.8 metric tons, representing 61.1% of total gold processed, and customized production was 10.8 metric tons, representing 38.9% of total gold processed.

For the six months ended June 30, 2019, the Company processed a total of 49.9 metric tons of gold, of which branded production was 26.0 metric tons, representing 52.1% of total gold processed, and customized production was 23.9 metric tons, representing 47.9% of total gold processed in the first half of 2019. In the first half of 2018, the Company processed a total of 50.9 metric tons of gold, of which branded production was 29.9 metric tons, representing 58.6% of total gold processed, and customized production was 21.0 metric tons, representing 41.4% of total gold processed.

CONSOLIDATED FINANCIAL AND OPERATING REVIEW

Net Sales

Net sales for the three months ended June 30, 2019 was approximately $598.0 million, decreased by 11.9% from $678.8 million for the same period in 2018. Net sales decreased primarily as a result of decrease in sales volume of branded production in amount of approximately $76.3 million, and foreign currency translation loss of approximately $48.4 million, offset by increase in sales volume of customized production in amount of approximately $2.2 million and increase in average unit selling price of approximately $41.5 million.

For the six months ended June 30, 2019, the Company's net sales were approximately $1.05 billion, decreased by 13.7% from $1.22 billion in the first half of 2018. Net sales decreased primarily as a result of decrease in total sales volume in amount of approximately $142.4 million, and foreign currency translation loss of approximately $82.3 million, offset by increase in average unit selling price of approximately $57.9 million.

Gross Profit

Gross profit for the three months ended June 30, 2019 was approximately $69.5 million, increased by 9.0% from $63.8 million for the same period in 2018. The increase in gross profit was primarily due to the increase in average unit selling price for branded production sales by 6.6% and the increase in average unit selling price for customized production by 3.9%.

For the six months ended June 30, 2019, the Company's gross profit was approximately $124.8 million, decreased by 2.5% from $128.0 million in the same period of 2018. The decrease was mainly the result of decreased sales volume and increase in unit cost of raw material, as the unit cost for branded production sales was RMB 241.63 per gram for the six months ended June 30, 2019 while the unit cost for branded production sales was RMB 232.3 per gram in the same period of 2018. And the unit cost for customized production sales was RMB 0.30 per gram for the six months ended June 30, 2019, compared to the unit cost for customized production sales of RMB 0.29 per gram in the same period of 2018.

Gross Margin

The Company's gross margin was 11.6% for the three months ended June 30, 2019, compared to 9.4% in the prior year period.

For the six months ended June 30, 2019, the Company's gross margin was 11.9%, compared to 10.5% in the first half of 2018. The increase was mainly due to the increased average selling price for branded production and customized production sales. The average selling price for branded production was RMB 267.97 per gram for the six months ended June 30, 2019, increased by RMB 13.02 or 5.1%, from RMB 254.95 per gram for the same period in 2018. As well as the average selling price for customized production sales was RMB 7.06 per gram for the six months ended June 30, 2019, increased by RMB 0.20, or 3.0%, from RMB 6.86 per gram for the same period in 2018.

Net Income

Net income for the three months ended June 30, 2019 was approximately $12.6 million, or $0.19 per diluted share based on 66.1 million weighted average diluted shares outstanding, compared to net income of $13.6 million in the prior year period, or $0.20 per diluted share based on 66.2 million weighted average diluted shares outstanding in the prior year period.

For the six months ended June 30, 2019, the Company's net income was approximately $19.0 million, or $0.29 per basic and diluted share, compared to net income of $26.8 million, or $0.40 per basic and diluted share, in the same period of 2018.

Balance Sheet Highlights (USD in Millions)


6/30/2019

12/31/2018

Percentage
Change

Cash and Cash Equivalents

$114.7

$0.23

490.6%

Inventories

$262.8

$127.0

106.8%

Working Capital (Current Assets -- Current Liabilities)

$1,221.1

$837.8

45.8%

Stockholders' Equity

$809.6

$638.3

26.8%

The Company had approximately $132.3 million of net cash used in operating activities for the six months ended June 30, 2019, compared with approximately $446.3 million of net cash provided by operating activities for the same period in 2018. The decrease of the operating cash flows was mainly due to the increase in gold purchases of approximately $129.4 million (RMB 887 million) in order to meet the production demand when the Company anticipated more sales orders will be fulfilled in the second half of fiscal year 2019. At the same time, the Company also increased purchase of gold of approximately $175.9 million (RMB 1,182.9 million) in order to pledge such gold as collateral with various financial institutions to obtain additional loans. In connection with the purchase of gold for investment, the Company also reported an unrealized gain of approximately $154.1 million for the six months ended June 30, 2019. The overall increase in inventory of approximately $150.3 million as included in the statements of cash flows reflected the above factors.  The decrease in the cash flows from operating activities was also affected by an increase in value added tax receivable of approximately $1.1 million and a decrease in other tax payable by approximately $2.6 million.

The Company's net cash from operating activities can fluctuate significantly due to changes in the inventories. Other factors that may vary significantly include accounts payable, purchases of gold and income taxes.  The Company expects that the net cash that generated 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. These fluctuations could cause net cash from operating activities to decrease, even if the 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 be predicted how these fluctuations will affect Kingold's cash flow in any particular quarter.

OUTLOOK FOR 2019

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 110 metric tons and 120 metric tons during 2019.

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 visitwww.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. 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,


2019


2018


2019


2018













NET SALES

$

598,008,324


$

678,796,263


$

1,051,547,424


$

1,218,320,318













COST OF SALES













Cost of sales


(528,233,860)



(614,775,972)



(926,225,754)



(1,089,741,556)


Depreciation


(242,888)



(228,173)



(488,628)



(545,838)



Total cost of sales


(528,476,748)



(615,004,145)



(926,714,382)



(1,090,287,394)













GROSS PROFIT


69,531,576



63,792,118



124,833,042



128,032,924













OPERATING EXPENSES













Selling, general and administrative expenses


6,733,404



2,497,488



9,351,596



4,975,276


Stock compensation expenses


-



5,364



5,364



10,728


Depreciation


82,731



151,658



165,672



260,487


Lease expenses


21,105



67,357



42,443



134,923


Amortization


2,770



2,963



5,571



5,936



Total operating expenses


6,840,010



2,724,830



9,570,646



5,387,350













INCOME FROM OPERATIONS


62,691,566



61,067,288



115,262,396



122,645,574













OTHER INCOME (EXPENSES)













Interest Income


298,499



446,143



637,112



822,144


Interest expense, including amortization of debt issuance costs of $2,227,896 and $2,305,354 for the three months, and $4,550,860 and $4,560,420 for the six months ended June 30, 2019 and 2018, respectively


(46,041,324)



(43,301,467)



(90,341,429)



(87,418,347)



Total other expenses, net


(45,742,825)



(42,855,324)



(89,704,317)



(86,596,203)













INCOME FROM OPERATIONS BEFORE TAXES


16,948,741



18,211,964



25,558,079



36,049,371













INCOME TAX PROVISION (BENEFIT)













Current


7,048,016



4,169,121



10,810,187



7,426,595


Deferred


(2,688,462)



479,046



(4,221,874)



1,824,055



Total income tax provision


4,359,554



4,648,167



6,588,313



9,250,650















NET INCOME


12,589,187



13,563,797



18,969,766



26,798,721













OTHER COMPREHENSIVE INCOME (LOSS)













Unrealized gain (loss) related to investments in gold, net of tax

$

183,487,051


$

(19,350,626)


$

154,071,011


$

(37,973,323)


Foreign currency translation loss


(18,447,260)



(19,822,304)



(1,795,522)



(6,002,603)


Total Other comprehensive income (loss)

$

165,039,791


$

(39,172,930)


$

152,275,489


$

(43,975,926)















COMPREHENSIVE INCOME (LOSS)

$

177,628,978


$

(25,609,133)


$

171,245,255


$

(17,177,205)

Earnings per share













Basic

$

0.19


$

0.21


$

0.29


$

0.41


Diluted

$

0.19


$

0.20


$

0.29


$

0.40

Weighted average number of shares













Basic


66,113,502



66,113,502



66,113,502



66,113,502


Diluted


66,113,502



66,229,658



66,113,502



66,395,251

 

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN US DOLLARS)

(UNAUDITED)










June 30,


December 31,



2019


2018



(Unaudited)




ASSETS














Cash


$

114,723,841


$

233,391

Restricted cash



14,337,042



4,798,185

Accounts receivable



264,158



451,059

Inventories



262,763,620



127,034,673

Investments in gold



2,215,449,367



1,593,557,391

Value added tax recoverable



258,933,954



259,582,324

Prepaid expenses and other current assets



82,629



87,590


Total current assets



2,866,554,611



1,985,744,613








Property and equipment, net



4,924,793



5,395,330

Restricted cash



1,747,539



7,766,372

Investments in gold



246,949,601



700,225,896

Land use right



390,837



395,719

Other noncurrent assets



492,637



285,768


Total long-term assets



254,505,407



714,069,085

TOTAL ASSETS


$

3,121,060,018


$

2,699,813,698








LIABILITIES AND STOCKHOLDERS' EQUITY














CURRENT LIABILITIES














Short term loans


$

1,532,528,884


$

1,034,947,774

Related party loan



72,593,313



72,699,779

Due to related party



4,383,039



3,976,742

Income tax payable



18,955,285



18,504,197

Other taxes payable



2,150,167



2,577,102

Accrued expenses and other payables



14,855,067



15,749,564


Total current liabilities



1,645,465,755



1,148,455,158










Deferred tax liabilities



71,400,016



24,218,911


Other long-term liability



160,190



-


Related party loans



419,694,803



373,327,862


Long term loans



174,753,888



515,477,020

TOTAL LIABILITIES



2,311,474,652



2,061,478,951








COMMITMENTS AND CONTINGENCIES







SHAREHOLDERS' EQUITY







Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of June 30, 2019 and December 31, 2018 



-



-

Common stock $0.001 par value, 100,000,000 shares authorized, 66,113,502 shares issued and outstanding as of June 30, 2019 and December 31, 2018



66,113



66,113

Additional paid-in capital



224,298,271



224,292,907

Retained earnings








Unappropriated



372,183,091



353,213,325


Appropriated



967,543



967,543

Accumulated other comprehensive income, net of tax



212,070,348



59,794,859


Total Shareholders' Equity



809,585,366



638,334,747

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$

3,121,060,018


$

2,699,813,698

 

 

 

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)








For the six months ended June 30,


2019


2018







CASH FLOWS FROM OPERATING ACTIVITIES







Net income

$

18,969,766


$

26,798,721


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








Depreciation and amortization


654,300



806,325



Amortization of intangible assets


5,571



5,936



Amortization of debt issuance costs included in interest expense


4,550,860



4,560,420



Share based compensation for services and warrants expense


5,364



10,728



Deferred tax provision (benefit)


(4,221,874)



1,824,055


Changes in operating assets and liabilities








Accounts receivable


189,855



784,850



Inventories


(150,267,161)



331,036,274



Other current assets and prepaid expenses


(203,732)



(157,286)



Value added tax recoverable


1,069,281



76,550,155



Other payables and accrued expenses


(843,629)



1,168,896



Income tax payable


445,595



2,939,193



Other taxes payable


(2,612,043)



(77,119)


Net cash provided by (used in) operating activities


(132,257,847)



446,251,148







CASH FLOWS FROM INVESTING ACTIVITIES







Purchases of property and equipment


(324,284)



(453,522)


Net cash used in investing activities


(324,284)



(453,522)







CASH FLOWS FROM FINANCING ACTIVITIES







Proceeds from other loans – short term


326,509,078



-


Repayments of other loans – short term


(305,237,937)



(301,624,503)


Proceeds from other loans – long term


132,633,813



240,479,892


Repayments of related party loans – short term


(223,449)



(235,549,065)


Proceeds from related party loans – long term


137,886,112



334,479,672


Repayments of related party loans – long term


(91,558,511)



(484,255,723)


Payments of loan origination fees


(2,188,458)



(309,511)


(Repayment of) borrowings from related party


465,421



800,793


Net cash provided by (used in) financing activities


198,286,069



(445,978,445)







EFFECT OF EXCHANGE RATES ON CASH AND RESTRICTED CASH


52,306,536



(2,937,126)

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH


118,010,474



(3,117,945)

CASH AND RESTRICTED CASH, BEGINNING OF PERIOD


12,797,948



17,924,397

CASH AND RESTRICTED CASH, END OF PERIOD

$

130,808,422


$

14,806,452







SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION







Cash paid for interest expense

$

86,976,537


$

81,761,918


Cash paid for income tax

$

10,364,592


$

4,487,402








NON-CASH INVESTING AND FINANCING ACTIVITIES







Investments in gold transferred to inventories

$

425,343,494


$

389,112,590


Inventories transferred to investments in gold


387,102,692



291,819,372


Unrealized gain (loss) on investments in gold, net of tax

$

154,071,011


$

(37,973,323)


Right-of-use assets obtained in exchange for operating lease obligations

$

206,419


$

-

 

Cision View original content:http://www.prnewswire.com/news-releases/kingold-jewelry-reports-financial-results-for-the-second-quarter-and-six-months-ended-june-30-2019-300899566.html

Source: Kingold Jewelry, Inc.
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