ZK International Announces Record Revenue of $54.9 million, a 22.1% Increase Year-Over-Year, for the Fiscal Year 2018

Gross profit increases 39.5% year-over-year to $18.3 million driven by an increase in gross profit margins to 33.3%

WENZHOU, China, Feb. 4, 2019 /PRNewswire/ -- ZK International Group Co., Ltd. (NASDAQ: ZKIN) ("ZKIN", "ZK International" or the "Company"), a designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products that require sophisticated water or gas pipeline systems, today announced its financial results for its fiscal year ended September 30, 2018. 

Financial Highlights for the Fiscal Year Ended September 30, 2018:

• Revenue increased 22.1% year-over-year to $54.9 million as compared to $45 million;
• Gross profit increased 39.5% year-over-year to $18.3 million as compared to $13.1 million;
• Gross profit margin increased to 33.3% as compared to 29.2% for the same period in the year prior;
• Net income attributable to ZK International Group Co., Ltd. totaled $7,018,114 or $0.52 per basic and $0.51 per diluted share, based on 13,610,046 basic and 13,629,517 diluted weighted average number of shares outstanding;
• As of September 30, 2018, net book value was $37.3 million or $2.25 per share based on 16,528,037 ordinary shares outstanding as of September 30, 2018.

Mr. Jiancong Huang, Chairman of ZK International, commented, "We are pleased with our record revenue growth and increased margins year-over-year. Our financial results in 2018 were largely driven by new supplier agreements with leaders in our industry including Changsha Water Group, Towngas China Company, and Shenzhen Water Group. The Chinese government also continues to focus on improving water and gas infrastructure. Recently the Ministry of Housing and Urban-Rural Development implemented a standard to upgrade existing water piping to stainless steel and incorporate stainless steel into new infrastructure. Our ability to work closely with the local government and provide sophisticated piping solutions for major projects is key to our continued growth trajectory."

Mr. Huang continued, "As the government continues to increase legislation to impose mandatory standards for water and gas infrastructure, we will continue to see new opportunities to enhance our leadership position and drive financial growth. In order to meet the growing demand for our proprietary products and enhance our competitive edge, it is imperative that we continue to invest in ourselves through strategic sales and marketing while continuing to expand our research and development capabilities."

Significant Contracts in Fiscal 2018 to Date:

• Selected by China Railway First Bureau Group Construction and Installation Engineering Co., Ltd. to supply its premium thin-walled, stainless steel products for the second phase of Beijing's Rail Transit Line 7 - valued at $580,000 (3.98 million yuan).
• Selected by Zhuhai Water Environment Holding Group Co., Ltd. ("Zhuhai Water"), one of China's top 40 most influential water group companies, as a leading supplier of stainless steel piping for updating the water supply infrastructure in Zhuhai, China. The total demand of stainless steel pipe by Zhuhai Water for the next year is estimated to be approximately $2-3 million.
• Selected as a major supplier during the annual bid with Changsha Water Group to supply stainless steel piping for the water supply infrastructure of Changsha, the capital and most populous city in Hunan Province. In November 2017, the municipal government of Changsha issued a regulation to immediately begin updating the existing water supply infrastructure pipeline to stainless steel.
• After a 400% increase in orders year-over-year, ZK International renewed its contract with Towngas China Company Limited ("Towngas China"), one of the largest public utility providers in China and one of the largest suppliers of gas in Asia.
• Signed agreement with Shenzhen Water Group Co., Ltd. in the amount of $3.0 million to deploy the Company's proprietary stainless steel pipes and fittings through the city's Community Pipeline Network Upgrade Program.
• Entered into $1.2 million contract with The XingRong Group, one of the largest water treatment and supply companies in Western China, to supply approximately 280,000 meters of piping and 280,000 pipe fittings over the course of one year.

Financial Results for the Fiscal Year Ended September 30, 2018:

Revenue for the fiscal year ended September 30, 2018 totaled $54,884,381, as compared to $44,951,740 for the fiscal year ended September 30, 2017, an increase of 22.1%. The increase in revenue is primarily due to an increase in market share of this industry and more governmental and infrastructural projects Company has taken to replace the underground pipes and to improve local water supply systems.

Total cost of revenue was $36,593,792 for the fiscal year ended September 30, 2018, compared to $31,843,337 for the fiscal year ended September 30, 2017. Total cost of revenue as a percentage of revenue decreased by 4.16% to 66.67% for the fiscal year ended September 30, 2018 compared to 70.84% for the fiscal year ended September 30, 2017. The decrease is primarily due to the improvement of its manufacturing technique, which lowered Company's defect rate and thus decreased the cost of the production.

Selling and marketing expenses for the fiscal year ended September 30, 2018 totaled $2,949,204, compared to $1,915,127 for the fiscal year ended September 30, 2017. This increase is primarily due to increases in freight expenses, advertising expenses, and compensation for the additional sales personnel Company has hired during the year.

General and administrative expenses for the fiscal year ended September 30, 2018 totaled $4,071,116, compared to $1,782,318 for the fiscal year ended September 30, 2017. The increase is primarily due to the increase in legal and other expenses related to SEC regulation compliance and the increase in consulting expenses related to financing and investing activities.

Research and development expenses for the fiscal year ended September 30, 2018 totaled $1,652,633, compared to $1,331,111 for the fiscal year ended September 30, 2017. The increase was primarily due to the increased research staff salary and expenses relating to the materials and equipment Company uses to conduct its research for its new products. Management is committed to expanding Company's research and development efforts to enhance competitive advantage.

As a result of the factors described above, operating income was $9,617,636 for the fiscal year ended September 30, 2018, compared to operating income of $8,079,847 for the fiscal year ended September 30, 2017, an increase of operating income of $1,537,789, or approximately 19%.

Net income attributable to ZK International Group Co., Ltd. totaled $7,018,114 for the fiscal year ended September 30, 2018 as compared to $5,874,276 for the same period the year prior. Earnings was $0.52 per basic and $0.51 per diluted share, based on 13,610,046 basic and 13,629,517 diluted weighted average number of shares outstanding.

Foreign currency translation loss for the fiscal year ended September 30, 2018 was $818,468. The currency translation loss was resulted due to the different exchange rates used during financial currency translation. When translating local financial reports of the Company's subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of operations and comprehensive income.

As of September 30, 2018, cash and cash equivalents were $7.7 million or $0.47 per share based on 16,528,037 ordinary shares outstanding as of September 30, 2018.

About ZK International Group Co., Ltd.

ZK International Group Co., Ltd. is a China-based designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products that require sophisticated water or gas pipeline systems. The Company owns 28 patents, 21 trademarks, 2 Technical Achievement Awards, and 10 National and Industry Standard Awards. ZK International is Quality Management System Certified (ISO9001), Environmental Management System Certified (ISO1401), and a National Industrial Stainless Steel Production Licensee that is focused on supplying steel piping for the multi-billion dollar industries of Gas and Water sectors.  ZK has supplied stainless steel pipelines for over 2,000 projects, including the Beijing National Airport, the "Water Cube" and "Bird's Nest", which were venues for the 2008 Beijing Olympics.  Emphasizing superior properties and durability of its steel piping, ZK International is providing a solution for the delivery of high quality, highly sustainable, environmentally sound drinkable water not only to the China market but to international markets such as Europe, East Asia, and Southeast Asia.  

For more information please visit www.ZKInternationalGroup.com. Additionally, please follow the Company on Twitter, Facebook, YouTube, and Weibo. For further information on the Company's SEC filings please visit www.sec.gov.

Safe Harbor Statement 

This news 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, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Without limiting the generality of the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate" or "continue" or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict and many of which are beyond the control of ZK International.  Actual results may differ from those projected in the forward-looking statements due to risks and uncertainties, as well as other risk factors that are included in the Company's filings with the U.S. Securities and Exchange Commission. Although ZK International believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking statements will be realized.  In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by ZK International or any other person that their objectives or plans will be achieved. ZK International does not undertake any obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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