Sutor Technology Group Limited Reports Fourth Quarter and Fiscal Year 2010 Financial Results
CHANGSHU, China, Sept. 28 /PRNewswire-Asia-FirstCall/ -- Sutor Technology Group Limited (the "Company", "Sutor") (Nasdaq: SUTR), a leading China-based manufacturer and distributor of high-end fine finished steel products and welded steel pipes used by a variety of downstream applications, today announced its financial results for the fourth quarter and fiscal year ended June 30, 2010.
Fiscal Fourth quarter results highlights:
4Q 2010 4Q 2009 Change
Revenues (million): $125.3 $109.8 14.1%
Gross profit (million): $10.5 $6.3 66.7%
Net income (million): $3.4 $1.8 88.9%
EPS: $0.08 $0.05 60.0%
Fiscal year 2010 results highlights:
FY2010 FY2009 Change
Revenues (million): $478.7 $429.8 11.4%
Gross profit (million) $32.8 $36.3 -9.6%
Net income (million) $11.3 $18.7 -39.6%
EPS $0.29 $0.49 -40.8%
Commenting on Sutor's operations, Ms. Lifang Chen, Chairwoman and CEO, said, "We are pleased with our performance in the fiscal fourth quarter which demonstrated significant improvement over the same period last year. The record high annual revenues were the result of our continued effort to expand our markets despite the uncertainties during economic recovery. In the fourth quarter sales volume increased approximately 3.9% over the same period last year. For the fiscal year, sales volume was approximately 27.1% higher than fiscal year 2009. Demand for our products remained strong as our products are extensively used in almost all major sectors of the economy. Last fiscal year was a year of consolidation and stabilization and hence we are optimistic about the overall performance in fiscal year 2011."
Ms. Chen continued, "We are pleased to see the continued increase in annual revenue attributable to our efforts to expand market share in both domestic and overseas markets. Although the record annual revenue did not transform to increased annual net income as a result of rising production costs and increased selling expenses, the widened sales channels have laid a solid foundation to expand future sales. Additionally, we made significant efforts to differentiate ourselves from other competitors through investing in research and development. We applied for 15 patents in fiscal year 2010, two of which have been approved. As of June 30, 2010, we held 23 patents and had 36 patent applications pending and believe our R&D initiatives will enhance Sutor's long-term competitive edge."
"Looking to fiscal year 2011, our priority is to maximize the capacity utilization rate, especially for our 400,000 MT hot-dip galvanization production lines that began operations at the end of September 2008. While we expect lingering uncertainty regarding general economic conditions, we will focus on generating cash from operations, reducing expenses, and improving operations to grow Sutor from both the top and bottom line. In addition, we aim to take advantage of the overcapacity situation in the upstream segment of the Chinese steel industry and reduce the costs of production. Further, we plan to expand our research center to develop high-performance and high margin steel sheets and composite steel sheets to enhance our product offerings and profitability. Finally, even though we believe our current corporate transactions are transparent, we will take additional measures to further improve corporate transparency and earnings quality. We will continue to pursue our vision of becoming the largest private fine processed steel manufacturer and contribute to the on-going industrial upgrading and urbanization processes in China," concluded Ms. Chen.
Fourth Fiscal Quarter 2010 Financial Results
Revenue. Revenue was US$125.3 million in the fourth fiscal quarter 2010, compared to US$109.8 million revenue in the fourth fiscal quarter 2009, an increase of 14.1%. The increase was mainly due to strong sales to both domestic and international markets. Sales volume increased by approximately 3.9% in the fourth fiscal quarter 2010 to approximately 176,900 metric tons as compared to the same period last year.
Gross Profit. Gross profit was US$10.5 million in the fourth fiscal quarter 2010, a 66.7% increase compared to US$6.3 million in the fourth fiscal quarter 2009. Gross margin was 8.4% in the fourth fiscal quarter 2010, compared to 5.7% in the fourth fiscal quarter 2009. The increase in gross margin was the result of an increase in the Company's average selling price year-over-year.
General and Administrative Expenses. General and administrative expenses increased US$0.8 million to US$1.9 million, or 1.5% of revenue, in the fourth fiscal quarter 2010 from US$1.1 million, or about 1% of revenue, in the same period last year.
Selling Expenses. Selling expenses increased US$2.1 million to US$3.6 million, or 2.9% of revenue, in the fourth fiscal quarter 2010 from US$1.5 million, or 1.4% of revenue, in the same period last year. The increase was mainly attributable to the increase in transportation costs due to higher international sales.
Income from Operations. Income from operations was US$5.0 million in the fourth fiscal quarter 2010, compared to US$3.6 million in the fourth fiscal quarter 2009, an increase of 38.9%. Operating margin for the fourth fiscal quarter 2010 was 4.0%, up from 3.3% in the fourth fiscal quarter 2009.
Net Income. Net income was US$3.4 million, or US$0.08 per diluted share, for the fourth fiscal quarter 2010 compared to US$1.9 million, or US$0.05 per diluted share, for fourth fiscal quarter 2009.
Fiscal Year 2010 Results
Revenue. For the fiscal year ended June 30, 2010, revenue was US$478.7 million compared to US$429.8 million during the same period last year, an increase of 11.4%. Sales volume increased by approximately 27.1% in fiscal year 2010 to approximately 746,000 metric tons as compared to the same period last year. The increase in revenue was primarily due to increased sales from the Company's new 400,000 MT HDG steel production lines of approximately US$99.8 million. Also benefiting revenue was the further implementation of the Chinese government's stimulus package and the rebound of downstream industries, which led to higher demand for fine processed steel products.
On a geographic basis, revenue generated from outside of China was US$53.7 million, or 11.2% of our total revenue for fiscal year 2010, as compared to US$45.4 million, or 10.6% of our total revenue for fiscal year 2009. This increase was mainly due to our efforts to expand product penetration into new markets and acceptance of our high value added anti-septic and anti- fingerprint products in international markets.
Gross Profit. Gross profit for the 2010 fiscal year was US$32.8 million, or 6.9% of revenue, compared to US$36.3 million, or 8.4% of revenue during the same period last year. The decrease in gross margin was mainly attributable to higher production costs caused by a larger proportion of smaller orders we received in fiscal year 2010. Further, lower capacity utilization ratio of our new HDG production lines also adversely affected the gross margin.
General and Administrative Expenses. General and administrative expenses increased US$0.9 million to US$6.4 million, or 1.3% of revenue, in fiscal year 2010 from US$5.5 million, or 1.3% of revenue, in fiscal year 2009.
Selling Expenses. Selling expenses increased 72.3%, to US$8.1 million, or 1.7% of total revenue, in fiscal year 2010 from US$4.7 million, or 1.1% of total revenue, in fiscal year 2009. The increase was mainly attributable to the rising costs of international sales.
The Company increased efforts on marketing and product promotion in the first fiscal quarter of 2010. In addition, transportation costs increased in the second half of fiscal year 2010 due to the increased percentage of international sales and freight costs.
Income from Operations. Income from operations in fiscal 2010 was US$18.4 million, a 29.8% decrease compared to US$26.2 million during the same period last year.
Net Income. Net income was US$11.3 million, or US$0.29 per diluted share, a decrease of 40.8%, compared to net income of US$18.7 million, or US$0.49 per diluted share, during the same period last year.
Financial Condition and Liquidity
The Company's cash, restricted cash and cash equivalents as of June 30, 2010 were US$61.7 million, compared to US$75.5 million as of June 30, 2009. As of June 30, 2010, the Company had working capital of approximately US$100.1 million. Stockholders' equity increased 7.9% to US$170.8 million, compared to US$158.3 million as of June 30, 2009.
In September 2010, Sutor established a non-binding strategic cooperation framework with China Construction Bank. With the cash and cash equivalents on the balance sheet and existing lines of credit, the management expects to have sufficient liquidity to carry out normal operations in fiscal year 2011.
Conference Call Information
Sutor's management will host an earnings conference call today, September 28, 2010, at 9:00 a.m. Eastern time. Listeners may access the call by dialing US: +1-877-847-0047, CN: 800 876 5011, HK +852 30068101, access code: SUTR. A recording of the call will be available shortly after the call for through October 28, 2010. Listeners may access it by dialing US: +1-866-572-7808, CN: 800 876 5013, HK: +852 3012 8000 access code: 480651.
Functional Currency and Translating Press Release
The functional currency of the Company is the Chinese Yuan Renminbi ("RMB"); however, the accompanying financial information has been expressed in United States Dollars ("USD"). The accompanying consolidated balance sheets have been translated into USD 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. Transactions in the Company's equity securities have been recorded at the exchange rate existing at the time of the transaction.
About Sutor Technology Group Limited
Sutor (Nasdaq: SUTR) is a leading China-based manufacturers and distributors of high end fine finished steel products and welded steel pipes used by a variety of downstream applications. The Company utilizes a variety of in-house developed processes and technologies to convert steel manufactured by third parties into fine finished steel products, including hot-dip galvanized steel, pre-painted galvanized steel, acid-pickled steel, cold- rolled steel and welded steel pipe products. To learn more about the Company, please visit http://www.sutorcn.com/en/index.php .
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, liquidity and strategic and operational plans, our future operating results, our expectations regarding the market for our products, our expectations regarding the steel market,, as well as all assumptions, expectations, predictions, intentions or beliefs 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 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, 2010, 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:
Mr. Jason Wang
Director of IR
Sutor Technology Group Limited
Tel: +86-512-5268-0988
Email: [email protected]
Financial Tables:
Sutor Technology Group Limited And Subsidiaries Consolidated
Balance Sheets
June 30, June 30,
2010 2009
ASSETS
Current Assets:
Cash and cash equivalents $ 13,336,736 $ 10,653,438
Restricted cash 48,315,962 64,811,741
Trade accounts receivable, net of allowance
for doubtful accounts of
$498,620 and $816,268, respectively 10,913,736 12,107,602
Other receivables 929,507 463,916
Advances to suppliers, related parties 96,776,181 76,391,552
Advances to suppliers, net of allowance of
$542,490 and $816,268, respectively 8,304,246 25,039,763
Inventory, net of allowance for impairment
of $102,028 and $0, respectively 40,179,358 44,163,502
Notes receivable 73,437 178,237
Deferred income taxes 329,414 397,998
Total Current Assets 219,158,577 234,207,749
Property and Equipment, net of accumulated
depreciation of $25,914,352
and $18,799,673, respectively 70,018,522 77,242,707
Intangible Assets, net of accumulated
amortization of $415,178 and
$345,130, respectively 2,995,488 3,047,498
TOTAL ASSETS $ 292,172,587 $ 314,497,954
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 23,954,009 $ 40,183,304
Advances from customers 6,769,481 18,805,901
Other payables and accrued expenses 4,688,324 3,810,075
Other payables - related parties 352,495 140,252
Short-term notes payable 82,128,484 80,232,845
Short-term notes payable - related parties 587,492 9,900,727
Total Current Liabilities 118,480,285 153,073,104
Long-Term Notes Payable 2,859,995 2,859,995
Long-Term Notes Payable - Related Parties -- 249,996
Total Liabilities 121,340,280 156,183,095
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, 40,715,602 and
37,955,602 shares
outstanding, respectively 40,715 37,955
Additional paid-in capital 42,465,581 42,233,307
Statutory reserves 12,629,151 12,601,921
Retained earnings 96,164,928 84,865,780
Accumulated other comprehensive income 19,531,932 18,575,896
Total Stockholders' Equity 170,832,307 158,314,859
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 292,172,587 $ 314,497,954
Sutor Technology Group Limited And Subsidiaries Consolidated Statements of
Operations And Comprehensive Income
For The Years Ended
June 30
2010 2009
Revenue:
Revenue $ 234,633,835 $ 238,043,282
Revenue from related parties 244,053,884 191,710,186
478,687,719 429,753,468
Cost of Revenue
Cost of revenue 216,663,282 185,988,885
Cost of revenue from related
party sales 229,216,965 207,458,120
445,880,247 393,447,005
Gross Profit 32,807,472 36,306,463
Operating Expenses:
Selling expense 8,066,336 4,668,095
General and administrative expense 6,358,399 5,484,802
Total Operating Expenses 14,424,735 10,152,897
Income from Operations 18,382,737 26,153,566
Other Income (Expense):
Interest income 1,106,114 1,502,168
Other income 448,465 229,602
Interest expense (5,840,518) (6,064,680)
Other expense (366,926) (729,302)
Total Other Income (Expense) (4,652,865) (5,062,212)
Income Before Taxes 13,729,872 21,091,354
Provision for income taxes (2,403,494) (2,412,243)
Net Income $ 11,326,378 $ 18,679,111
Basic and Diluted Earnings per $ 0.29 $ 0.49
Common Share
Basic Weighted Shares Outstanding 38,804,588 37,955,602
Diluted Weighted Shares Outstanding 38,806,363 37,955,602
Net Income $ 11,326,378 $ 18,679,111
Foreign currency translation
adjustment 956,036 587,942
Comprehensive Income $ 12,282,414 $ 19,267,053
Sutor Technology Group Limited And Subsidiaries Consolidated Statements of
Cash Flows
For The Years Ended
June 30
2010 2009
Cash Flows from Operating Activities:
Net income 11,326,378 $ 18,679,111
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 7,117,592 6,299,498
Deferred income taxes 70,410 (107,829)
Stock based compensation 36,663 --
Loss (gain) on sale of assets 3,550 (161,458)
Changes in current assets and liabilities:
Trade accounts receivable, net 1,253,074 143,247
Other receivable, net (461,222) 389,688
Advances to suppliers 16,863,747 16,158,584
Inventories 4,201,631 19,893,366
Accounts payable (14,370,322) (40,565,903)
Advances from customers (12,085,352) (1,986,380)
Other payables and accrued expenses 716,464 (283,571)
Other payables - related parties 351,048 --
Advances to suppliers - related parties (19,856,665) (16,535,974)
Net Cash Provided By (Used in) Operating
Activities (4,833,004) 1,922,379
Cash Flows from Investing Activities:
Changes in notes receivable 105,314 7,301
Purchase of property and equipment, net
of value added tax refunds received (1,519,153) (17,433,620)
Proceeds from sale of assets -- 783,033
Net change in restricted cash 16,771,227 (2,247,589)
Net Cash Provided By (Used in) Investing
Activities 15,357,388 (18,890,875)
Cash Flows from Financing Activities:
Proceeds from issuance of notes payable 100,047,386 116,797,110
Payments on notes payable (97,999,281) (102,544,496)
Proceeds from issuance of notes payable-
related parties 199,932 3,354,441
Payments on notes payable - related
parties (10,352,520) (2,520,812)
Distribution to certain shareholders in
connection with the reorganization of
Ningbo (6,615,825) --
Net proceeds from issuance of common
stock and warrants 6,814,196 --
Proceeds from issuance of notes payable -
principal shareholder -- --
Net Cash (Used in) Financing Activities (7,906,112) 15,086,243
Effect of Exchange Rate Changes on Cash 65,026 41,352
Net Change in Cash 2,683,298 (1,840,901)
Cash and Cash Equivalents at Beginning
of Year 10,653,438 12,494,339
Cash and Cash Equivalents at End of Year $ 13,336,736 $ 10,653,438
Supplemental Non-Cash Financing
Activities
Offset of notes payable to related party
against receivable from related parties $ 9,687,935 $ --
Supplemental Cash Flow Information
Cash paid during the year for interest $ 5,305,877 $ 4,330,148
Cash paid during the year for income
taxes $ 1,761,019 $ 3,131,154
SOURCE Sutor Technology Group Limited
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