Kingold Jewelry Reports Financial Results for the First Quarter Ended March 31, 2015

WUHAN CITY, China, May 15, 2015 /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 first quarter ended March 31, 2015.

2015 First Quarter Financial Highlights (all results are compared to prior year period)

• Net sales was $206.2 million, a decrease of 32.9% compared to $307.5 million, largely due to a slowdown in the Chinese economy in recent weeks
• Processed a total of 12.3 metric tons of 24-karat gold products, compared to 14.5 metric tons
• As a result of lower gold prices, the Company incurred a $3.0 million write-down on the value of its inventory
• Gross profit decreased to $10.8 million compared to $26.8 million, and gross margin was 5.2% compared to 8.7%, largely as a result of the write-down of inventory combined with the fact that the prior year period was particularly strong
• Net income was $6.6 million, or $0.10 per diluted share, compared to $16.1 million, or $0.24 per diluted share

Outlook for 2015

• Company reiterates 2015 guidance of between 70 and 80 metric tons of 24-karat gold processed in 2015, while noting that a protracted period of lesser demand may require a reassessment as the Company progresses further in the year.

RECENT SIGNIFICANT EVENTS

• April 6, 2015: The Company announced that it has entered into a convertible note purchase agreement with a majority-owned subsidiary of Fosun International Limited ("Fosun") pursuant to which the Company will issue and sell to Fosun a $15 million aggregate principal amount 6.0% Senior Secured Convertible Note due 2018, subject to customary closing conditions, and which must close prior to May 31, 2015.
• May 6, 2015: The Company announced that it has recently launched an online retail flagship store on Tmall.com, a large business-to-consumer online retail platform owned by Alibaba Group.

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased to maintain profitability during the first quarter of 2015 despite the unusually weak market conditions associated with the slowdown of the Chinese economy and drop in the price of gold. Our net sales decreased due to larger customers delaying purchases during this period, and our investment gold business was also significantly affected. We have taken a proactive approach to reach out to new clients as well as deepen relationships with our key customers. We have recently launched our online retail flagship store on Tmall.com, leveraging our team's experience from Kingold's past online efforts to create a convenient and consumer friendly platform at minimal operating expense. We see it as a strong step in diversifying our revenue and expanding into a higher margin, direct retail business."

Chairman Jia continued, "Recently, we announced the proposed $15 million strategic investment from a majority-owned subsidiary of Fosun International, which owns one of the nation's top gold mining companies and a top gold retailer in China. We anticipate utilizing the proceeds from this strategic investment to accelerate the development of our Kingold Jewelry Cultural Industry Park. Assuming we can meet the remaining closing conditions prior to May 31, 2015, we expect to close the transaction this month and we look forward to long-term strategic partnership with Fosun international in the future."

UPDATE ON Kingold Jewelry cultural industry Park ("Jewelry park")

Chairman Jia stated, "We continue to progress on all fronts surrounding the Jewelry Park, as we are now solely focused on completing all exterior and interior design elements. We are seeking sales opportunities for the properties under development and have been successful to date in achieving the necessary financing to progress with the project. We are still on track for a December 2015 opening and feel very confident that the endeavor will ultimately deliver a strong return-on-investment for Kingold and its stockholders."

2015 FIRST QUARTER OPERATIONAL REVIEW

• For the three months ended March 31, 2015, Kingold processed approximately 12.3 metric tons of 24-karat gold products, compared to 14.5 metric tons processed in the first quarter of 2014.

• For the three months ended March 31, 2015, the Company processed a total of 12.3 metric tons of gold, of which branded production was 5.6 metric tons, representing 45.5% of total gold processed, and customized production was 6.7 metric tons, representing 54.5% of total gold processed in the first quarter of 2015. In the first quarter of 2014, the Company processed a total of 14.5 metric tons, of which branded production was 7.9 metric tons, or 54.5% of the total gold processed, and customized production was 6.6 metric tons, or 45.5% of total gold processed.

2015 FIRST QUARTER FINANCIAL REVIEW

Net Sales

Net sales for the three months ended March 31, 2015 was $206.2 million, a decrease of $101.3 million, or 32.9% from $307.5 million for the same period in 2014. Of the $101.3 million decrease in net sales, approximately $85.9 million was due to decreased production as a result of decreased demand, $13.2 million was due to drop in the price of gold and the remainder was due to currency exchange translation.

Gross Profit

Gross profit for the three months ended March 31, 2015 was $10.8 million, a decrease of $16.0 million, or 59.8%, from $26.8 million for the same period in 2014.

Gross Margin

The Company's gross margin was 5.2% for the three months ended March 31, 2015, compared to 8.7% in the prior year period.

The substantial decrease was due to the fact that the Company purchased large quantities of gold inventory at year end 2013 and beginning of 2014 at low market prices, making the first quarter 2014 production at a cost much lower than normal. Additionally, the Company had a $3.0 million write-down of inventory due to the decrease in the price of gold in the first quarter of 2015.

Net Income

Net income for the three months ended March 31, 2015 was $6.6 million, or $0.10 per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $16.1 million in the prior year period, or $0.24 per diluted share based on 66.6 million weighted average diluted shares outstanding in the prior-year period.

Balance Sheet and Cash Flow

Net cash provided by operating activities was $9.4 million for the three months ended March 31, 2015, compared with net cash used in operating activities of $18.8 million for the same period in 2014. The change was mainly because of the decrease in inventory as a result of decreased production as a result of weaker demand.

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include the Company's purchases of gold and income taxes. The Company expects that the net cash it generates from operating activities will 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 quantities of raw materials (principally gold).

OUTLOOK FOR 2015

Based on its existing resources and capacity, the Company reiterates that its gold processed is expected to be between 70 metric tons and 80 metric tons during 2015.

Chairman Jia, concluded, "We remain confident that the delay in our customers' purchasing habits is a matter of a short-term reaction to the lower gold pricing. With our efforts towards diversifying revenue streams, we still feel confident in achieving our previously stated volume totals. However, we certainly note that a protracted period of lesser demand may require a reassessment as the Company progresses further in the year."

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on Friday, May 15, 2015, at 5:00 PM ET.

The dial-in numbers are:

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/q1-2015. 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, but are not limited to, statements regarding Kingold's outlook with respect to its 2015 gold processing, expectations with respect to expansion into a higher margin, direct retail business through the online retail store, expectations with respect to completion of construction of the Jewelry Park and planned grand opening, as well as its ability to engage in presales and finance the remaining construction, and its expectations with respect to a long-term partnership with Fosun. 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)
[email protected]  

INVESTOR RELATIONS
The Equity Group Inc.
Katherine Yao, Associate
+86 10-6587-6435
[email protected]

SOURCE Kingold Jewelry, Inc.