Ossen Innovation Announces Full Year 2018 Financial Results

SHANGHAI, May 14, 2019 /PRNewswire/ -- Ossen Innovation Co., Ltd. ("Ossen Innovation" or the "Company") (Nasdaq: OSN), a China-based manufacturer of an array of plain surface, rare earth and zinc coated pre-stressed steel materials, today announced its financial results for the fiscal year ended December 31, 2018.

"Ossen Innovation had a strong 2018 both in top line and bottom line," commented Dr. Liang Tang, Chairman of Ossen Innovation. "During the year, we focused on zinc coated products, which had higher demand in China market, and contributed to our improved results and overall momentum."

For the twelve months ended December 31, 2018, revenues increased by $3.7 million, or 2.8%, to $136.1 million from $132.4 million for 2017. This increase was mainly attributable to a 124.0% increase in sales of zinc coated PC wires and PC strands, partially offset by an 8.1% decrease in rare earth coated products, a 20.3% decrease in plain surface products and a 43.4% decrease in other products.

The sales of coated PC steel materials, including both rare earth and zinc coated products, increased by $5.8 million, or 4.7%, to $130.2 million and accounted for 95.7% of total sales for the twelve months ended December 31, 2018 from $124.4 million, or 94.0% of total sales, for the same period of last year. This increase in sales of coated PC steel materials was the result of increase in sales for zinc coated products, partially offset by the decrease in sales of rare earth coated products.  Sales of rare earth coated products decreased by $9.0 million, or 8.1%, to $103.4 million for the twelve months ended December 31, 2018 from $112.4 million for the same period of last year. Sales of zinc coated products increased by $14.8 million, or 124.0%, to $26.8 million for the twelve months ended December 31, 2018 from $12.0 million for the same period of last year. The decrease of sales generated by rare earth coated products was due to decreased market demand and the Company focused on the production and sale of zinc coated products which had increased market demand in 2018. Sales of plain surface PC strands and PC wires decreased by $1.2 million, or 20.3%, to $4.8 million for the twelve months ended December 31, 2018 from $6.0 million for the same period of last year. The decrease of sales generated by plain surface PC strands and PC wires was primarily due to decreased market demand during 2018. Other sales were $1.1 million for the twelve months ended December 31, 2018, compared to $1.9 million for the same period of last year. This decrease was primarily due to fewer scrap materials sold in 2018 compared to 2017 and the decrease of service revenue.

The Company generated approximately 3.3% and 4.1%, respectively, of total revenues during the years ended December 31, 2018 and 2017 from sales to customers in international markets, including primarily Vietnam, South Korea, Japan, New Zealand, Australia, Bangladesh, Brunei, Costa Rica, South Africa, Egypt, and Amman, primarily for use in the construction of bridges.

Gross profit increased by $5.8 million, or 40.0%, to $20.5 million for the twelve months ended December 31, 2018 from $14.7 million for the same period of last year. Gross margin increased by 400 basis points to 15.1% for the twelve months ended December 31, 2018 from 11.1% for the same period of last year. The increase of gross margin was primarily due to the increase of the prices of our prestressed steel products.

Selling expenses decreased by $0.3 million, or 45.3%, to $0.3 million for the twelve months ended December 31, 2018 from $0.6 million for the same period of last year. The decrease was due to lower freight and sales commission for export sales and lower transportation cost for domestic sales as more projects were in closer proximity in 2018. General and administrative expenses decreased by $0.7 million, or 12.3%, to $5.3 million for the twelve months ended December 31, 2018 from $6.0 million for the same period of last year, mainly due to lower research and development cost in 2018. As a result, total operating expenses decreased by $1.0 million, or 15.3%, to $5.6 million for the twelve months ended December 31, 2018 from $6.6 million for the same period of last year.

Operating income increased by $6.8 million, or 85.4%, to $14.9 million for the twelve months ended December 31, 2018 from $8.1 million for the same period of last year. This increase was primarily due to higher gross profit and lower operating expenses. Operating margin was 11.0% for the twelve months ended December 31, 2018, compared to 6.1% for the same period of last year.

Net income increased by $5.5 million, or 93.0%, to $11.4 million for the twelve months ended December 31, 2018 from $5.9 million for the same period of last year.

After deducting net income attributable to non-controlling interest, net income attributable to Ossen Innovation increased by $5.1 million, or 94.2%, to $10.4 million for the twelve months ended December 31, 2018 from $5.3 million for the same period of last year. Earnings per ordinary share, both basic and diluted, were $0.52 for the twelve months ended December 31, 2018, compared to $0.27 for the same period of last year. Earnings per ADS (one ADS equals to three ordinary shares), both basic and diluted, were $1.56 and $0.81 for 2018 and 2017, respectively.

"In 2018, the PRC steel industry completed the process of reducing overcapacity which resulted in the increase of the average steel price," continued Dr. Tang. "We expect to continue being agile in responding to the market development and focusing on high demand products to continue the momentum."

Balance Sheet and Cash Flows

As of December 31, 2018, the Company had cash and restricted cash of $7.5 million, compared to $8.1 million at December 31, 2017. Accounts receivable were $60.6 million as of December 31, 2018, compared to $51.7 million at December 31, 2017. The average days of sales of outstanding (DSO) were 150 days for the twelve months ended December 31, 2018, compared to 123 days for the year 2017. The balance of prepayment to suppliers for raw materials totaled $70.0 million as of December 31, 2018, compared to $71.3 million at December 31, 2017. The Company had inventories of $17.2 million as of December 31, 2018, compared to $13.5 million at the end of 2017. Total working capital was $113.1 million as of December 31, 2018, compared to $114.7 million at December 31, 2017.

Net cash provided by operating activities was $7.6 million for the twelve months ended December 31, 2018, compared to $3.0 million of net cash used by operating activities for the same period of last year. This was mainly due to an increase in net income, an increase in customer deposits, partially offset by an increase in accounts receivable and an increase in inventories at the end of 2018. Net cash used in investing activities was $72,305 for the twelve months ended December 31, 2018, compared to $37,848 for the same period of last year. Net cash used in financing activities was $0.7 million for the twelve months ended December 31, 2018, compared to $3.8 million for the same period of last year. The decrease in cash used in financing activities was the result of an increase in proceeds from short-term bank loans, a decrease in repayment of notes payable, partially offset by a decrease in proceeds from notes payable.

Recent Developments

On August 15, 2018, Effectual Strength Enterprises Limited ("Effectual Strength"), a British Virgin Islands company controlled by the Company's chairman, Liang Tang, purchased 600,000 shares from Fascinating Acme Development Limited, an entity controlled by the spouse of Wei Hua, our Chief Executive Officer, at a price of $2.582 per ADS, each ADS representing three Ordinary Shares; and 600,000 shares from Gross Inspiration Development Limited, an entity controlled by the spouse of Xufeng Zhou, our senior manager, at a price of $2.582 per ADS.

On October 2, 2018, Acme Innovation Limited, a British Virgin Islands company ("Acme") wholly owned by Pujiang International Group Limited, a Cayman Islands company ("Pujiang"), purchased 13,050,000 of our ordinary shares from Effectual Strength in exchange for the issuance of 54,404 shares of Pujiang to a British Virgin Islands Company Elegant Kindness Limited ("Elegant Kindness"), an entity wholly owned by Dr. Liang Tang. Consequently, Acme now holds 13,050,000 of our ordinary shares.

On December 11, 2018, Pujiang, the parent entity of Acme, submitted an application to the Hong Kong Stock Exchange (the "HK Exchange"), seeking approval of a potential listing of Pujiang's shares on the HK Exchange following a proposed initial public offering of Pujiang's shares. Such application is subject to the review of the HK Exchange.

On November 20, 2018, the Company announced the completion of its 2018 annual general meeting of shareholders. At the Annual Meeting, the Company's shareholders re-elected seven directors, Dr. Liang Tang, Mr. Wei Hua, Mr. Junhong Li, Mr. Xiaobing Liu, Ms. Yingli Pan, and Mr. Zhongcai Wu to the Board of Directors and re-appointed BDO China Shu Lun Pan Certified Public Accountants LLP as the Company's independent registered accounting firm for the fiscal year ending December 31, 2018.

About Ossen Innovation Co., Ltd.

Ossen Innovation Co., Ltd. manufactures and sells a wide variety of plain surface pre-stressed steel materials and rare earth coated and zinc coated pre-stressed steel materials. The Company's products are mainly used in the construction of bridges, as well as in highways and other infrastructure projects. Ossen has two manufacturing facilities located in Ma'anshan, Anhui Province, and Jiujiang, Jiangxi Province.

Safe Harbor Statements

This press release may contain 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. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company's public filings with the Securities and Exchange Commission, including the Company's annual report on Form 20-F, as amended. All information provided in this press release is as of the date hereof. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

For more information, please contact:

Wei Hua, Chief Executive Officer
Email: [email protected]

Phone: +86-21-6888-8886
Web: www.osseninnovation.com

Investor Relations
GIC IR
Phone: +1-917-207-2173
Email: [email protected]

SOURCE Ossen Innovation Co., Ltd.