Sutor Technology Group Limited Announces Third Quarter Financial Results Of Fiscal 2009

DONGBANG TOWN, China, May 14 /PRNewswire-Asia-FirstCall/-- Sutor Technology Group Limited (Nasdaq: SUTR), a leading provider of fine finished steel products used by steel fabricators and other applications, today reported operating income of US$4.6 million in its third fiscal quarter ended March 31, 2009.

    Third Fiscal Quarter 2009 Financial Highlights:
   --  Total revenues were US$76.5 million, a decrease of 22.0 % over the
       third fiscal quarter of 2008.
   --  Gross margin was 8.6% for the third fiscal quarter of 2009, compared to
       12.1% for the third quarter of fiscal 2008.
   --  Net income was US$3.1 million, a decrease of 60.7 % over the third
       fiscal quarter of 2008.
   --  Fully-diluted earnings per common share for the third fiscal quarter
       2009 was US$0.08, compared to US$0.21 for the third quarter of fiscal
       2008.

Ms. Lifang Chen, Chairperson and CEO of Sutor said, "Like many companies in our industry, we are affected by the current global economic downtown. Despite the fact that we continued to face challenges during our third fiscal quarter, we nonetheless realized profits in the quarter while many companies in the steel industry suffered losses. Compared to the second fiscal quarter of 2009, our revenue increased by 8.0% in the third fiscal quarter, which we view as a positive sign and as validation of our development strategy and that our reaction to the volatile economic crisis has been swift and effective. We anticipate that we will continue to grow by taking advantage of a long-awaited resurgence in manufacturing and industrial development and activity and favorable economic results from the implementation of PRC government's active stimulus policies during the coming quarters."

Third Fiscal Quarter 2009 Financial Results:

Revenues. Revenues were US$76.5 million in the third quarter of fiscal 2009, compared to US$98.1 million for the third quarter of fiscal 2008, representing a decrease of 22.0%. The decrease was mainly attributable to the global economic slowdown which led to a softening of customer demand and the attendant decline of per unit sale price of our products.

Total Operating Expenses. Our total operating expenses increased to US$1.9 million in the third fiscal quarter of 2009, compared to US$1.6 million in the third fiscal quarter of 2008. This increase mainly caused by the large portion of smaller orders we received in the third fiscal quarter of 2009 as compared to large orders received in same period of last year, which led to less efficient and predictable operations and higher production costs. Additionally, we shouldered more transportation costs for our clients in this quarter as compared to the same quarter last year.

Gross Profit. Gross profit was US$6.6 million for the third quarter of fiscal 2009, a decrease of 44.5% from US$11.8 million for the same period in fiscal 2008. Gross margin decreased to 8.6% in the third quarter of fiscal 2009 from 12.1 % for the same period in fiscal 2008. The decreased margins mainly resulted from heightened pricing pressure which caused us to lower our per unit prices and from large portion of smaller orders we received in the third quarter of 2009 as compared to those received in the same period in fiscal 2008, which led to less efficient and predictable operations and higher costs of production and, ultimately, a compression in our gross margin.

Income from Operations. Income from operations for the third quarter of fiscal 2009 was US$4.6 million, a decrease of approximately 54.4% from US$10.2 million for the third quarter of fiscal 2008.

Income before Tax and Minority Interests. As a result of the foregoing, our income before tax and minority interests decreased by 58.3% to US$3.6 million for the third quarter of fiscal 2009 from US$8.7 million in the third quarter of fiscal 2008.

Net Income. Net income was US$3.1 million in the third quarter of fiscal 2009, a decrease of 60.7% from US$7.8 million for third quarter of fiscal 2008. The lower net income in our third fiscal quarter resulted primarily from decrease in revenue and per unit sale price of our products.

Financial Condition:

As of March 31, 2009, the Company had cash and cash equivalents of US$25.7 million, plus $58.0 million in restricted cash and working capital of US$79.6 million. Stockholders' equity increased 26.1% to US$150.9 million, compared to US$119.6 million as of March 31, 2008.

Functional Currency and Translating Press Release

The functional currency of the Company is the Chinese Yuan Renminbi ("RMB"); however, the accompanying financial information are expressed in United States Dollars. The accompanying consolidated balance sheets have been translated into U.S. Dollars at the exchange rates prevailing at each balance sheet date. The accompanying consolidated statements of operations and cash flows have been translated using the weighted-average exchange rates prevailing during the periods of each statement. Each transaction in the Company's equity securities has been recorded at the exchange rate existing at the time of the transaction.

About Sutor Technology Group Limited

Sutor (Nasdaq: SUTR) is one of the leading private manufacturers of fine finished steel products used by steel fabricators and other applications. Sutor utilizes a variety of processes and technological methodologies to convert steel manufactured by third parties into fine finished steel products, including hot-dipped galvanized steel, pre-painted galvanized steel, acid- pickled steel, and cold-rolled steel. To learn more about the Company, please visit http://www.sutorcn.com .

Forward-Looking Statements

This press release includes certain statements that are not descriptions of historical facts, but are forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, our future operating results, our expectations regarding the market for our steel finishing fabrication products, our expectations regarding the continued growth of the steel market, as well as all assumptions, expectations, predictions, intentions or beliefs about our relative strength and about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties, including developments in the world economy and in our industry, could cause our actual results to differ materially from those anticipated, expressed or implied in the forward-looking statements. These risks and uncertainties include, but not limited to, the factors mentioned in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended June 30, 2008, and other risks mentioned in our other reports filed with the Securities Exchange Commission, or SEC. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov . The words "believe," "expect," "anticipate," "project," "targets," "optimistic," "intend," "aim," "will" or similar expressions are intended to identify forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

    For more information, please contact:

     Company Contact (PRC):
     Mr. Jason. Wang
     Tel:   +86-512-52680988
     Email: investor_relations@sutorcn.com



                 SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                  March 31,          June 30,
                                                      2009              2008
                                                (unaudited)
    ASSETS
    Current Assets:
    Cash and cash equivalents                  $25,716,041       $11,806,101
    Restricted cash                             57,993,456        59,489,508
    Trade accounts receivable, net of
     allowance for doubtful accounts of
     $69,038 and $70,653, respectively           9,712,637         6,268,858

    Other receivables                              430,733           100,271
    Accounts receivable, related parties        42,623,415        76,118,544
    Advances to suppliers, net of
     allowance for doubtful accounts of
     $1,480,495 and $1,472,828,
     respectively                               28,638,328        28,035,815

    Inventory                                   46,062,853        51,315,521
    Notes receivable                                    --           130,970
    Deferred taxes                                 259,301           288,976
    Total Current Assets                       211,436,764       233,554,564
    Property and Equipment, net of
     accumulated depreciation of
     $15,915,429 and $12,019,445,
     respectively                               71,106,424        59,736,612

    Intangible Assets, net of accumulated
     amortization of $328,128 and
     $285,888, respectively                      3,064,104         3,238,931

    TOTAL ASSETS                              $285,607,292      $296,530,107

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
    Accounts payable                           $10,414,311        $6,003,898
    Advances from customers                      9,029,765        16,871,618
    Other payables and accrued expenses          4,077,259         3,265,860
    Short-term notes payable                    95,974,056       130,504,380
    Short-term notes payable - Principal
     Shareholder                                12,347,011                --
    Total Current Liabilities                  131,842,402       156,645,756

    Long-Term Liabilities:
    Long-Term Notes Payable - Principal
     Shareholder                                        --         7,099,998
    Long-Term Notes Payable                      2,859,996                --
    Total Liabilities                          134,702,398       163,745,754

    Minority Interest in Net Assets of
     Subsidiary                                         --            34,697
    Stockholders' Equity
    Undesignated preferred stock - $0.001
     par value; 1,000,000 shares
     authorized; no shares outstanding                  --                --

    Common stock - $0.001 par value;
     500,000,000 shares authorized;
     37,955,602 shares outstanding                  37,955            37,955
    Additional paid-in capital                  37,170,164        37,170,164
    Statutory reserves                          12,586,995        12,586,995
    Retained earnings                           83,385,108        65,772,975
    Accumulated other comprehensive
     income                                     17,724,672        17,181,567
    Total Stockholders' Equity                 150,904,894       132,749,656
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                   $285,607,292      $296,530,107



                 SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED STATEMENTS OF
                       OPERATIONS AND COMPREHENSIVE INCOME
                                   (unaudited)

                      Three Months Ended March 31,  Nine Months Ended March 31,
                            2009         2008          2009          2008
    Revenue:
    Revenue              $27,381,648  $45,258,150  $145,336,851  $168,865,930
    Revenue from related
     parties              49,075,289   52,843,085   103,734,052   143,617,418
                          76,456,937   98,101,235   249,070,903   312,483,348
    Cost of Revenue
    Cost of revenue       41,167,360   53,443,350   110,424,589   195,381,301
    Purchases from
     related parties      28,727,887   32,840,446   110,446,903    82,488,474
                          69,895,247   86,283,796   220,871,492   277,869,775
    Gross Profit           6,561,690   11,817,439    28,199,411    34,613,573

    Operating Expenses:
    Selling expense          493,253      550,291     1,655,649     2,085,784
    General and
     administrative
     expense               1,425,285    1,087,563     3,432,746     5,368,660
    Total Operating
     Expenses              1,918,538    1,637,854     5,088,395     7,454,444
    Income from
     Operations            4,643,152   10,179,585    23,111,016    27,159,129

    Other Income
     (Expense):
    Interest income          277,624      309,486     1,239,611       663,254
    Other income                  --       90,333            --       128,918
    Interest expense      (1,294,486)  (1,764,273)   (4,576,544)   (3,936,756)
    Other expense                 --     (113,008)           --      (343,262)
    Total Other Income
     (Expense)            (1,016,862)  (1,477,462)   (3,336,933)   (3,487,846)

    Income before Taxes
     and Minority
     Interest              3,626,290    8,702,123    19,774,083    23,671,283

    Provision for income
     taxes                  (561,592)    (903,606)   (2,161,949)   (2,568,011)
    Minority interest in
     loss of
     consolidated
     subsidiary                   --       (6,259)           --        (3,232)

    Net Income            $3,064,698   $7,792,258   $17,612,134   $21,100,040

    Basic and Diluted
     Earnings per Common
     Share                     $0.08        $0.21         $0.46         $0.56

    Net Income            $3,064,698   $7,792,258   $17,612,134   $21,100,040
    Foreign currency
     translation
     adjustment              197,361    4,972,227       543,105     9,173,606
    Comprehensive Income  $3,262,059  $12,764,485   $18,155,239   $30,273,646



                 SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                           For the Nine Months Ended March 31,
                                                2009               2008
    Cash Flows from Operating Activities:
    Net income                                  $17,612,134       $21,100,040
    Adjustments to reconcile net income
     to net cash provided by operating
     activities
    Depreciation and amortization                 4,161,563         2,703,957
    Minority interest in loss of
     consolidated subsidiary                             --             3,232
    Deferred income taxes                            30,757                --
    Gain on sale of assets                         (161,410)           (2,722)
    Changes in current assets and
     liabilities:
    Trade accounts receivable, net               (3,467,616)       14,187,846
    Other receivables, net                         (329,891)          (20,977)
    Advances to suppliers                          (544,163)        6,746,811
    Inventory                                     5,440,752       (28,808,894)
    Accounts payable                              4,488,304         3,006,624
    Advances from customers                      (7,900,263)        2,375,369
    Other payables and accrued expenses             875,602          (177,945)
    Related party receivables or payables        34,111,105        (9,373,474)
    Net Cash Provided by Operating
     Activities                                  54,316,874        11,739,867

    Cash Flows from Investing Activities:
    Collection of notes receivable                  116,772           203,059
    Changes in notes receivable - related
     parties                                        973,151                --
    Purchase of property and equipment,
     net of value added tax refunds
     received                                   (16,249,207)       (6,469,417)
    Proceeds from sale of assets                    782,719            10,139
    Net change in restricted cash                 1,722,391       (13,152,963)
    Net Cash Used in Investing Activities       (12,654,174)      (19,409,182)

    Cash Flows from Financing Activities:
    Proceeds from issuance of notes
     payable                                    122,230,308        66,032,525
    Payments on notes payable                  (155,277,962)      (67,666,600)
    Proceeds from issuance of notes
     payable - Principal Shareholder              5,247,013         7,099,998
    Payment on short-term loans - related
     party                                               --        (2,211,931)
    Net Cash (Used in) Provided by
     Financing Activities                       (27,800,641)        3,253,992

    Effect of Exchange Rate Changes on
     Cash                                            47,881           477,483

    Net Change in Cash                           13,909,940        (3,937,840)
    Cash and Cash Equivalents at
     Beginning of Period                         11,806,101         8,832,942
    Cash and Cash Equivalents at End of
     Period                                     $25,716,041        $4,895,102

    Supplemental Cash Flow Information
    Cash paid during the period for
     interest                                    $4,576,544        $3,936,756
    Cash paid during the period for taxes         2,357,109         2,715,920

SOURCE Sutor Technology Group Limited

RELATED LINKS
http://www.sutorcn.com