Kingold Jewelry Reports Financial Results For The Second Quarter And Six Months Ended June 30, 2017
- Company to Hold Conference Call with Accompanying Slide Presentation at 5:30 p.m. E.T. on August 11, 2017
WUHAN, China, Aug. 11, 2017 /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 financial results for the second quarter and six months ended June 30, 2017.
2017 Second Quarter Financial Highlights (all results compared to prior year period)
- Net sales were $475.9 million, an increase of 22% from $390.3 million
- Proceeded a total of 26.0 metric tons of 24-karat gold products, increased 28.1% from 20.3 metric tons
- Net income was $8.0 million, or $0.12 per diluted share, compared to net income was $19.9 million, or $0.30 per diluted share
Outlook for 2017
- Company reiterates guidance of between 70 metric tons and 80 metric tons of 24-karat gold products in 2017
Management Commentary
Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "We were pleased to continue to deliver strong operating results in the second quarter of 2017, as we fully leveraged the higher gold price along with the strong growing demand and further expanded our production capacity. Meanwhile, we continue to watch market dynamics and gold price trends to be able to make timely adjustment of our business strategy. Based on our team's extensive experience in the gold industry, we will further explore upstream-downstream industries to establish an all-round strategic plan for Kingold's overall development."
2017 SECOND QUARTER OPERATIONAL REVIEW
| Metric Tons of Gold Processed |
||||
| Three Months Ended: |
||||
| June 30, 2017 |
June 30, 2016 |
|||
| Volume |
Volume |
Volume |
Volume |
|
| Branded* |
12 |
46.2% |
10.5 |
51.7% |
| Customized** |
14 |
53.8% |
9.8 |
48.3% |
| Total |
26 |
100.0% |
20.3 |
100% |
| Six Months Ended: |
||||
| June 30, 2017 |
June 30, 2016 |
|||
| Volume |
% of Total |
Volume |
% of Total |
|
| Branded* |
20.1 |
47.7% |
18.7 |
53.1% |
| Customized** |
22 |
52.3% |
16.5 |
46.9% |
| Total |
42.1 |
100% |
35.2 |
100% |
| * |
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, 2017, the Company sold a total of 26 metric tons of gold, of which branded production was 12 metric tons, representing 46.2% of total gold sold, and customized production was 14 metric tons, representing 53.8% of total gold sold in the second quarter of 2017. In the second quarter of 2016, the Company sold a total of 20.3 metric tons, of which branded production was 10.5 metric tons, or 51.7% of the total gold sold, and customized production was 9.8 metric tons, or 48.3% of total gold sold.
CONSOLIDATED FINANCIAL AND OPERATING REVIEW
Net Sales
Net sales for the three months ended June 30, 2017 was $475.9 million, representing an increase of $85.6 million, or 22%, from $390.3 million for the same period in 2016. The increase in net sales was primarily driven by the higher sales volume and the higher average selling price for branded production which increased from RMB 238.42 per gram in the three months ended June 30, 2016 to RMB 264 per gram in three months ended June 30, 2017.
For the six months ended June 30, 2017, the Company's net sales were $768.1 million, increased 14% from $672.4 million in the first half of 2016. The increase in net sales was mainly due to the higher sales volume and the higher average selling price for branded production which increased from RMB 231.34 per gram in the six months ended June 30, 2016 to RMB 256.66 per gram in six months ended June 30, 2017.
Gross Profit
Gross profit for the three months ended June 30, 2017 was $47.8 million, compared to $46.1 million for the same period in 2016.
For the six months ended June 30, 2017, the Company's gross profit was $64.9 million decreased from $74.6 million in the first half of 2016.
Gross Margin
The Company's gross margin was 10% for the three months ended June 30, 2017, compared to 11.8% in the prior year period. The decrease in gross margin was primarily because the increase in unit cost of branded production sales exceeded the increase of average selling price during the three months ended June 30, 2017.
For the six months ended June 30, 2017, the Company's gross margin was 8.4%, compared to 11.1% in the first half of 2016. The decrease in gross margin was primarily due to the increase in unit cost of our branded production sales exceeded the increase of average selling price of our branded production during the six months ended June 30, 2017.
Net Income ((Loss)
Net income for the three months ended June 30, 2017 was $8.0 million, or $0.12 per diluted share based on 66.4 million weighted average diluted shares outstanding, compared to net income of $19.9 million in the prior year period, or $0.30 per diluted share based on 66.3 million weighted average diluted shares outstanding in the prior-year period. The decrease in net income was primarily due to significant increase in interest expenses from $16.9 million in the three months ended June 30,2016 to $39 million in the three months ended June 30, 2017.
For the six months ended June 30, 2017, the Company's net loss was $13.3 million, or $(0.20) per basic and diluted share, compared to net income of $35.1 million, or $0.53 per basic and diluted share, in the same period of 2016. The decrease in net income was primarily due to significant increase in interest expenses from $21.5 million in the six months ended June 30,2016 to $75.3 million in the six months ended June 30, 2017.
| Balance Sheet Highlights (USD in Millions) |
||||
| 6/30/2017 |
12/31/2016 |
Percentage |
||
| Cash and Cash Equivalents |
$9.2 |
$21.3 |
(56.8) % |
|
| Inventories |
$309.6 |
$119.4 |
159 % |
|
| Working Capital |
$861.0 |
$460.0 |
87.2 % |
|
| Stockholders' Equity |
$326.5 |
$282.5 |
15.6 % |
|
Net cash used in operating activities was $257 million for the six months ended June 30, 2017, compared with net cash provided by operating activities of $185.5 million for the same period in 2016. The increase of net cash used in operating was mainly due to the increase in inventories of $204 million for the increased production to meet the sales demand.
OUTLOOK FOR 2017
Based on the Company's existing resources and capacity along with strong demand for 24-karat gold products in China, and its possession of 42.1 metric tons of 24-karat gold products in the first half of 2017, the Company reiterates its expectation that gold processed will be between 70 metric tons and 80 metric tons during 2017.
Conference Call Details
Kingold also announced that it will discuss these financial results in a conference call on August 11, 2017 at 5:30 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/q2-2017 . 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 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 2017 outlook for gold processing, its 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. 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, Senior Associate
Phone: +86-10-6587-6435
[email protected]
| 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, |
|||||||||||||||
| 2017 |
2016 |
2017 |
2016 |
|||||||||||||
| (Restated) |
(Restated) |
|||||||||||||||
| NET SALES |
$ |
475,891,200 |
$ |
390,260,645 |
$ |
768,155,277 |
$ |
672,448,702 |
||||||||
| COST OF SALES |
||||||||||||||||
| Cost of sales |
(427,858,604) |
(343,880,390) |
(702,767,612) |
(597,292,834) |
||||||||||||
| Depreciation |
(210,888) |
(291,683) |
(505,331) |
(582,365) |
||||||||||||
| Total cost of sales |
(428,069,492) |
(344,172,073) |
(703,272,943) |
(597,875,199) |
||||||||||||
| GROSS PROFIT |
47,821,708 |
46,088,572 |
64,882,334 |
74,573,503 |
||||||||||||
| OPERATING EXPENSES |
||||||||||||||||
| Selling, general and administrative expenses |
3,069,142 |
3,181,568 |
6,766,525 |
6,020,161 |
||||||||||||
| Stock compensation expenses |
11,143 |
11,142 |
22,286 |
22,285 |
||||||||||||
| Depreciation |
125,831 |
23,474 |
231,670 |
46,987 |
||||||||||||
| Amortization |
2,755 |
2,891 |
5,498 |
5,781 |
||||||||||||
| Total operating expenses |
3,208,871 |
3,219,075 |
7,025,979 |
6,095,214 |
||||||||||||
| INCOME FROM OPERATIONS |
44,612,837 |
42,869,497 |
57,856,355 |
68,478,289 |
||||||||||||
| OTHER INCOME (EXPENSES) |
||||||||||||||||
| Other Income |
132 |
130 |
65,497 |
130 |
||||||||||||
| Interest Income |
504,462 |
757,264 |
1,191,307 |
816,488 |
||||||||||||
| Interest expense, including $6,403,986 and $3,692,330 of |
(38,980,626) |
(16,883,371) |
(76,570,122) |
(22,287,496) |
||||||||||||
| Total other expenses, net |
(38,476,032) |
(16,125,977) |
(75,313,318) |
(21,470,878) |
||||||||||||
| INCOME (LOSS) FROM OPERATIONS BEFORE TAXES |
6,136,805 |
26,743,520 |
(17,456,963) |
47,007,411 |
||||||||||||
| INCOME TAX PROVISION (BENEFIT) |
||||||||||||||||
| Current |
5,218,082 |
6,849,780 |
5,218,082 |
11,660,784 |
||||||||||||
| Deferred |
(7,114,895) |
64 |
(9,402,844) |
255,738 |
||||||||||||
| Total income tax provision (benefit) |
(1,896,813) |
6,849,844 |
(4,184,762) |
11,916,522 |
||||||||||||
| NET INCOME (LOSS) |
8,033,618 |
19,893,676 |
(13,272,201) |
35,090,889 |
||||||||||||
| Add: net loss attributable to non-controlling interest |
- |
(268) |
- |
(1,465) |
||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO KINGOLD JEWELRY, INC. |
$ |
8,033,618 |
$ |
19,893,944 |
$ |
(13,272,201) |
$ |
35,092,354 |
||||||||
| OTHER COMPREHENSIVE INCOME (LOSS) |
||||||||||||||||
| Change in unrealized gain (loss) related to investments in gold |
$ |
(54,046,052) |
$ |
50,778,172 |
$ |
48,861,337 |
$ |
68,343,038 |
||||||||
| Total foreign currency translation gains (loss) |
11,789,755 |
(8,624,477) |
8,362,338 |
(6,661,783) |
||||||||||||
| Less: foreign currency translation gain attributable to non- |
- |
2,030 |
- |
1,576 |
||||||||||||
| Total Other comprehensive income (loss) attributable to |
$ |
(42,256,297) |
$ |
42,151,665 |
$ |
57,223,675 |
$ |
61,679,679 |
||||||||
| COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: |
||||||||||||||||
| KINGOLD JEWELRY, INC. |
$ |
(34,222,679) |
$ |
62,045,609 |
$ |
43,951,474 |
$ |
96,772,033 |
||||||||
| Non-controlling interest |
- |
1,762 |
- |
111 |
||||||||||||
| $ |
(34,222,679) |
$ |
62,047,371 |
$ |
43,951,474 |
$ |
96,772,144 |
|||||||||
| Earnings (Loss) per share |
||||||||||||||||
| Basic and diluted |
$ |
0.12 |
$ |
0.30 |
$ |
(0.20) |
$ |
0.53 |
||||||||
| Weighted average number of shares |
||||||||||||||||
| Basic |
66,018,867 |
65,964,110 |
66,018,867 |
65,963,806 |
||||||||||||
| Diluted |
66,415,601 |
66,273,246 |
66,018,867 |
65,970,164 |
||||||||||||
| KINGOLD JEWELRY, INC. |
||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
| (IN US DOLLARS) |
||||||||
| (UNAUDITED) |
||||||||
| June 30, |
December 31, |
|||||||
| 2017 |
2016 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS |
||||||||
| Cash |
$ |
9,181,584 |
$ |
21,333,193 |
||||
| Restricted cash |
17,940,508 |
52,786,257 |
||||||
| Accounts receivable |
106,205 |
670,878 |
||||||
| Inventories, net |
309,599,564 |
119,435,595 |
||||||
| Investments in gold - current |
963,585,694 |
281,895,403 |
||||||
| Other current assets and prepaid expenses |
119,521 |
698,217 |
||||||
| Prepaid income tax |
- |
3,330,468 |
||||||
| Value added tax recoverable |
347,085,125 |
272,835,051 |
||||||
| Total current assets |
1,647,618,201 |
752,985,062 |
||||||
| PROPERTY AND EQUIPMENT, NET |
7,592,339 |
7,224,698 |
||||||
| OTHER ASSETS |
||||||||
| Restricted cash |
8,351,285 |
7,558,173 |
||||||
| Investments in gold |
1,175,797,769 |
1,493,938,551 |
||||||
| Other assets |
289,993 |
283,003 |
||||||
| Deferred income tax assets |
8,258,042 |
- |
||||||
| Land use right |
418,302 |
413,662 |
||||||
| Total long-term assets |
1,200,707,730 |
1,509,418,087 |
||||||
| TOTAL ASSETS |
$ |
2,848,325,931 |
$ |
2,262,403,149 |
||||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| CURRENT LIABILITIES |
||||||||
| Short term loans, less unamortized debt issuance costs of $196,644 and $4,480,085 |
$ |
465,616,205 |
$ |
234,691,670 |
||||
| Third party loan |
- |
28,798,526 |
||||||
| Gold leases payable - Bank |
- |
7,167,391 |
||||||
| Other payables and accrued expense |
19,063,751 |
13,716,472 |
||||||
| Related parties loan |
295,098,415 |
- |
||||||
| Due to related party |
3,299,524 |
7,223,321 |
||||||
| Income tax payable |
1,880,651 |
- |
||||||
| Other taxes payable |
1,681,246 |
1,518,731 |
||||||
| Total current liabilities |
786,639,792 |
293,116,111 |
||||||
| Deferred income tax liability |
- |
1,249,622 |
||||||
| Related parties loan |
751,025,467 |
460,776,408 |
||||||
| Long term loans, less unamortized debt issuance costs of $4,383,067 and $4,350,348 |
984,196,625 |
1,224,770,721 |
||||||
| TOTAL LIABILITIES |
2,521,861,884 |
1,979,912,862 |
||||||
| COMMITMENTS AND CONTINGENCIES |
- |
- |
||||||
| EQUITY |
||||||||
| Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstanding as of June |
- |
- |
||||||
| Common stock $0.001 par value, 100,000,000 shares authorized, 66,018,867 shares issued and |
66,018 |
66,018 |
||||||
| Additional paid-in capital |
80,253,254 |
80,230,968 |
||||||
| Retained earnings |
||||||||
| Unappropriated |
264,201,758 |
277,473,959 |
||||||
| Appropriated |
967,543 |
967,543 |
||||||
| Accumulated other comprehensive deficit |
(19,024,526) |
(76,248,201) |
||||||
| Total stockholders' equity |
326,464,047 |
282,490,287 |
||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
2,848,325,931 |
$ |
2,262,403,149 |
||||
| KINGOLD JEWELRY, INC. |
||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS |
||||||||
| (IN US DOLLARS) |
||||||||
| (UNAUDITED) |
||||||||
| For the six months ended June 30, |
||||||||
| 2017 |
2016 |
|||||||
| (Restated) |
||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income (loss) |
$ |
(13,272,201) |
$ |
35,090,889 |
||||
| Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
737,001 |
629,352 |
||||||
| Amortization of intangible assets |
5,498 |
5,781 |
||||||
| Amortization of deferred financing costs |
6,403,986 |
3,692,330 |
||||||
| Share based compensation for services and warrants and shares issued for consulting services |
22,286 |
151,580 |
||||||
| Inventory valuation allowance |
17,597,804 |
- |
||||||
| Deferred tax provision (benefit) |
(9,402,844) |
255,738 |
||||||
| Changes in operating assets and liabilities |
||||||||
| (Increase) decrease in: |
||||||||
| Accounts receivable |
572,975 |
1,202,904 |
||||||
| Inventories |
(204,138,326) |
148,835,117 |
||||||
| Other current assets and prepaid expenses |
587,453 |
(4,128,476) |
||||||
| Value added tax recoverable |
(66,550,772) |
(72,157,904) |
||||||
| Increase (decrease) in: |
||||||||
| Other payables and accrued expenses |
5,063,398 |
(3,936,552) |
||||||
| Deposit payable, Jewelry Park, net |
- |
70,165,780 |
||||||
| Income tax payable |
5,218,082 |
5,649,770 |
||||||
| Other taxes payable |
123,225 |
67 |
||||||
| Net cash provided by (used in) operating activities |
(257,032,435) |
185,456,376 |
||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Purchases of property and equipment |
(1,141,219) |
(334,586) |
||||||
| Investments in gold |
(270,889,242) |
(651,747,004) |
||||||
| Construction in progress-Jewelry Park |
- |
(19,506,468) |
||||||
| Net cash used in investing activities |
(272,030,461) |
(671,588,058) |
||||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Proceeds from bank loans – short term |
29,090,063 |
611,580,106 |
||||||
| Repayments of bank loans – short term |
(72,870,607) |
(9,175,996) |
||||||
| Proceeds from bank loans – long term |
95,997,207 |
- |
||||||
| Repayments of bank loans – long term |
(101,815,220) |
- |
||||||
| Proceeds from related party loans – short term |
290,900,628 |
152,933,260 |
||||||
| Proceeds from related party loans – long term |
690,888,992 |
- |
||||||
| Repayments of related party loans – long term |
(415,987,899) |
- |
||||||
| Payments of loan origination fees |
(1,998,723) |
- |
||||||
| Proceeds from third party loans |
- |
37,631,334 |
||||||
| Repayment of third party loans |
(29,090,063) |
- |
||||||
| Restricted cash |
35,037,526 |
(208,544,198) |
||||||
| Due to related party |
(3,988,513) |
(2,157,701) |
||||||
| Proceeds from exercise of warrants |
- |
66,439 |
||||||
| (Repayment) proceeds from debt financing instruments under private placement |
- |
(61,173,304) |
||||||
| Net cash provided by financing activities |
516,163,391 |
521,159,940 |
||||||
| EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS |
747,896 |
(632,654) |
||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(12,151,609) |
34,395,604 |
||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
21,333,193 |
3,100,569 |
||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
9,181,584 |
$ |
37,496,173 |
||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
||||||||
| Cash paid for interest expense |
$ |
56,674,744 |
$ |
19,126,073 |
||||
| Cash paid for income tax |
$ |
- |
$ |
11,660,842 |
||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES |
||||||||
| Investments in gold obtained in a lease from a related party |
$ |
131,117,303 |
$ |
219,495,527 |
||||
| Investments in gold transferred to inventories |
$ |
180,786,694 |
$ |
- |
||||
| Unrealized gain on investments in gold |
$ |
48,861,337 |
$ |
68,343,038 |
||||
SOURCE Kingold Jewelry, Inc.
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