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Kingold Jewelry Reports Unaudited 2012 Third Quarter and Nine Month Financial Results

Date : 11/14/2012 @ 3:30AM
Source : PR Newswire (US)
Stock : Kingold Jewelry Inc. (MM) (KGJI)
Quote : 1.18  0.01 (0.85%) @ 5:40AM
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Kingold Jewelry Reports Unaudited 2012 Third Quarter and Nine Month Financial Results

Kingold Jewelry Inc. (MM) (NASDAQ:KGJI)
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Kingold Jewelry Reports Unaudited 2012 Third Quarter and Nine Month Financial Results

  • 9.5 metric tons of 24-karat gold products processed, an increase of 44%
  • Net sales increased 4.8% to $220.8 million
  • Gross profit margin was 5.7% compared to 6.6% for 2011
  • Net income attributable to common shareholders of $8.4 million, or $0.15 per diluted share
  • Company reiterates guidance of approximately 35 tons processed during 2012

WUHAN CITY, China, Nov. 13, 2012 /PRNewswire/ -- Kingold Jewelry, Inc. (NASDAQ: KGJI), one of China's leading manufacturers and designers of high quality 24-karat gold jewelry, ornaments and investment-oriented products, today announced financial results for the third quarter and nine-months ended September 30, 2012.

Mr. Zhihong Jia, Chairman and CEO of Kingold Jewelry, Inc. ("Kingold" or the "Company") stated, "In the third quarter of 2012 we delivered top line growth of 4.8%, with a 44% increase in tons of gold processed while maintaining competitive operating margins. We remain focused on developing and expanding our investment gold business while utilizing and expanding our existing sales network in jewelry markets to continue delivering on our strategic objective of profitably growing our business."

Investment Gold Business

"We continue to move forward and have made considerable progress in our investment gold business. We are now partnered with some of the largest banks in China and distributing gold bars and coins to eight different provinces and municipal locations throughout China. The investment gold business is becoming a significant part of our business, and in the third quarter of 2012 generated approximately $17.9 million of revenue and $46.4 million in the first nine months of 2012, which represented 8.1% and 6.5% of our total revenue in those periods. We remain confident in our decision to enter into the investment gold business, and recognize we have much more work ahead of us to reach our objectives for improved productivity and profitability."

Jewelry Business

"We remain dedicated to growing our market share in China's gold jewelry designing and manufacturing through expanding our customer base and production capabilities. During the third quarter of 2012, we signed a major gold-processing agreement with a leading Shanghai Stock Exchange listed gold jewelry retailer in China, Shanghai Laofengxiang. Under this agreement, we expect to process at least 5 tons, or approximately 176,370 ounces, of jewelry products through December 31, 2013. We believe this new arrangement will increase our brand recognition within the industry as well as with end-customers as Shanghai Laofengxiang covers approximately 98% of the market and distributes its products through 700 plus chain-stores and a 2000 member sales network across China. Kingold had previously partnered with Shanghai Laofengxiang and processed 2 tons of jewelry products in 2011, and we believe that Shanghai Laofengxiang's decision to return reflects our high quality and advanced processing techniques."

2012 Third Quarter Operational and Financial Review

  • In the third quarter of 2012, Kingold processed a total of 9.5 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products, an increase of 44.0% compared to the 6.6 metric tons processed in the third quarter of 2011.
  • The Company reported revenues for the 2012 third quarter of $220.8 million, an increase of $10.1 million, or 4.8%, from $210.7 million in the third quarter of 2011. Of the $10.1 million increase in net sales, approximately $17.1 million was attributable to increased production, which was partially offset by approximately $9.0 million due to the decrease in the price of gold during the period as compared to the prior period, and the remaining is due to the gain from exchange rate fluctuations.
  • The Company expects a higher percent of its revenue in future quarters to be derived from its investment gold business, which generated $17.9 million of revenue in the third quarter of 2012. The Company's investment gold consists of products such as gold coins, bars and certain gold gift products, which are sold to individual branch locations under that bank's specific brand. The Company typically expects a higher margin from its investment gold products than its branded jewelry and ornament production.
  • Gross profit for the 2012 third quarter was $12.7 million, a decrease of 9.4% from $14.0 million in the prior-year period. The Company's gross margin for the period was 5.7% compared to 6.6% from the prior year period. Gross margin decreased primarily because we processed more high-margin, high-end products in July and September 2011, which lead to margins being higher than normal in the third quarter of 2011 compared to the remainder of 2011 and the first nine months of 2012.
  • The Company reported net income attributable to Kingold shareholders for the third quarter of 2012 of $8.4 million, or $0.15 per diluted share based on 54.2 million weighted average diluted shares outstanding, compared to net income of $9.3 million, or $0.18 per diluted share based on 50.7 million weighted average diluted shares outstanding, in the prior-year period.

Fiscal 2012 Nine Month Operational and Financial Review

  • In the nine months ended September 30, 2012, Kingold processed a total of 30.2 metric tons [one metric ton = 35,274 ounces] of 24-karat gold products, an increase of 24.8% compared to the 24.3 metric tons processed in the first nine months of 2011.
  • Revenues for the nine months ended September 30, 2012 were $714.3 million, an increase of $93.8 million, or 15.1%, from $620.5 million in the same period of the prior year. The increase in net sales was primarily driven by increased production as well as by the increase in the price of gold. Of the $93.8 million increase in net sales, approximately $39.0 million was attributable to increased production, approximately $38.7 million to the increase in the price of gold and the remaining is due to the gain from exchange rate fluctuations.
  • For the nine months ended September 30, 2012, the Company generated approximately $46.4 million of revenue from its investment gold business.
  • Gross profit for the nine months ended September 30, 2012 was $39.2 million, an increase of 10.7% from $35.4 million in the prior-year period. The Company's gross margin for the nine months ended September 30, 2012 was 5.5% compared to 5.7% for the prior year period. The reason for the decrease in our gross margin is because the price of gold increased significantly in the first nine months of 2012 and we were not able to raise the processing fees we charge our customers proportionally.
  • The Company reported net income attributable to Kingold shareholders for the nine months ended September 30, 2012 of $25.3 million, or $0.47 per diluted share based on 54.2 million weighted average diluted shares outstanding, compared to net income of $23.0 million, or $0.46 per diluted share based on 50.5 million weighted average diluted shares outstanding, in the prior-year period.

Balance Sheet and Cash Flow Highlights

(in millions except for percentages)


9/30/2012


12/31/2011

% Change

Cash and Cash Equivalents

$

1.6

$

8.8

(81.8%)

Inventories (gold)


142.3


108.1

31%

Working Capital


141.3


113.4

24.6%

Short Term Loans


6.4


6.3

2%

Total Long-term Debt


0


0

N/A

Stockholders' Equity


154.1


127.0

21.3%

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold).

Market and Business Outlook

Despite the fluctuation in gold prices and concerns over the global economic climate (particularly in Europe), China's gold consumption has remained strong during 2012. A recent report in July 2012 by the World Gold Council noted that while sales were expected to slow in the second quarter after a record first quarter, it estimates China's gold demand "should expand 13% to 870 metric tons in 2012."  The report projected jewelry demand growing 7.7% to 550 tons in 2012, and bars and coins up 24% to 320 tons in 2012.

Kingold reaffirms its 2012 guidance that the Company will process approximately 35 tons of gold product. This guidance is based solely on its current organic growth projections.

Chairman Jia concluded, "We were pleased with our results and development during the first nine months of 2012, we continue to see strong demand for 24 karat gold products in China. We executed our growth strategy in the third quarter by expanding our customer base by seeking major large jewelry retailer and wholesalers in our jewelry products business, and partnering with major banks in our investment gold products business."

Conference Call

Kingold will discuss these results in a conference call tomorrow morning (November 14, 2012) at 8:30 a.m. ET.

The dial-in numbers are:

Live Participant Dial In (Toll Free):

877-407-0778

Live Participant Dial In (International):

201-689-8565

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://www.investorcalendar.com/IC/CEPage.asp?ID=170179

The Company will also post an accompanying slide presentation available in PDF format on its Website prior to the conference call.

About Kingold Jewelry, Inc.

Kingold Jewelry, Inc. (NASDAQ: KGJI), centrally located in Wuhan City, China's fourth largest city, 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 and the Securities Exchange Act of 1934. These include statements regarding the development and expansion of the investment gold business, expanding the sales network of the jewelry business, growth in the investment gold business, processing of gold for Shanghai Laofengxiang, China's gold demand and guidance regarding Kingold's gold processing in 2012. Readers are cautioned that actual results could differ materially from those expressed in any forward-looking statements. In addition, please refer to the risk factors 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: bl@kingoldjewelry.com

INVESTOR RELATIONS

The Equity Group Inc.
Adam Prior, Vice President
(212) 836-9606
aprior@equityny.com

Katherine Yao, Account Executive
+86 10-6587-6435
kyao@equityny.com

KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)







For the three months ended September 30,


For the nine months ended September 30,






2012


2011


2012


2011

NET SALES


$

220,836,949

$

210,710,516

$

714,290,183

$

620,533,358

COST OF SALES











Cost of sales



(207,868,634)


(196,453,806)


(674,193,265)


(584,246,090)


Depreciation



(296,524)


(265,488)


(890,419)


(872,125)



Total cost of sales



(208,165,158)


(196,719,294)


(675,083,684)


(585,118,215)

GROSS PROFIT



12,671,791


13,991,222


39,206,499


35,415,143

OPERATING EXPENSES











Selling, general and administrative expenses


756,674


789,820


3,165,658


2,550,526


Stock compensation expenses


379,450


62,500


1,047,355


257,500


Depreciation



36,710


66,214


104,584


98,325


Amortization



2,983


3,000


8,958


8,781



Total Operating Expenses


1,175,817


921,534


4,326,555


2,915,133













INCOME FROM OPERATIONS


11,495,974


13,069,689


34,879,944


32,500,010

OTHER INCOME (EXPENSES)




-






Other Income



-


227


-


18,234


Other Expense



-


5,758


(1,559)


5,758


Interest expense



(113,298)


-


(336,212)


(120,811)



Total Other Expenses, net


(113,298)


5,985


(337,771)


(96,819)

INCOME FROM OPERATIONS BEFORE TAXES


11,382,676


13,075,674


34,542,173


32,403,192













PROVISION FOR INCOME TAXES


(3,016,059)


(3,353,879)


(9,280,633)


(8,347,773)

NET INCOME


$

8,366,617

$

9,721,795

$

25,261,540

$

24,055,419


Less: net income attribute to the noncontrolling interest


-


(406,584)


-


(1,039,754)

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

8,366,617

$

9,315,211

$

25,261,540

$

23,015,665

OTHER COMPREHENSIVE INCOME










Total foreign currency translation gains


1,700,761


1,288,912


752,777


3,333,579


Less: foreign currency translation gains











attributable to noncontrolling interest


-


(4,708)


-


(49,612)


Foreign currency translation gains











attributable to common stockholders


1,700,761


1,284,204


752,777


3,283,967

COMPREHENSIVE INCOME

$

10,067,377

$

10,599,415

$

26,014,317

$

26,299,632

Earnings per share











Basic


$

0.16


0.19

$

0.47

$

0.47


Diluted


$

0.15


0.18

$

0.47

$

0.46

Weighted average number of shares










Basic



53,578,218


49,998,706


53,286,072


49,391,647


Diluted



54,246,563


50,744,359


54,200,552


50,480,880

KINGOLD JEWELRY, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


(IN US DOLLARS)


(UNAUDITED)




















September 30,

2012


December 31,

2011



















ASSETS











CURRENT ASSETS









Cash and cash equivalents



$

1,625,205

$

8,810,173


Accounts receivable




379,164


896,949


Inventories





142,255,205


108,088,420


Other current assets and prepaid expenses




69,694


72,333


Value added tax recoverable




7,788,203


4,750,847



Total Current Assets




152,117,471


122,618,722











PROPERTY AND EQUIPMENT, NET




12,132,635


12,942,902











OTHER ASSETS









Other assets





153,587


153,102


Intangible assets, net




508,153


515,543



Total other assets




661,740


668,645

TOTAL ASSETS




$

164,911,846

$

136,230,269











LIABILITIES AND STOCKHOLDERS' EQUITY











CURRENT LIABILITIES








Short term loans




$

6,363,651

$

6,343,578


Other payables and accrued expenses




966,177


870,454


Income tax payable




3,040,105


1,451,929


Other taxes payable




477,960


562,027



Total Current Liabilities




10,847,893


9,227,988











COMMITMENTS AND CONTINGENCIES



-


-











EQUITY









Preferred stock, $0.001 par value, 500,000 shares








authorized, none issued or outstanding









as of September 30, 2012 and December 31, 2011


-


-


Common stock $0.001 par value, 100,000,000 shares







authorized, 53,671,140 and 53,107,343 shares issued and outstanding







as of September 30, 2012 and December 31, 2011


53,671


53,108


Additional paid-in capital




56,774,801


55,728,009


Retained earnings









  Unappropriated





85,197,660


59,936,120


  Appropriated





967,543


967,543


Accumulated other comprehensive income




11,070,278


10,317,501



Total Equity





154,063,953


127,002,281











TOTAL LIABILITIES AND EQUITY



$

164,911,846

$

136,230,269



















KINGOLD JEWELRY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(IN US DOLLARS)

(UNAUDITED)









For the Nine months ended September 30,









2012


2011

CASH FLOWS FROM OPERATING ACTIVITIES








Net income




$

25,261,540

$

24,055,419


Adjusted to reconcile net income to cash used in









operating activities:










Depreciation





995,002


970,450



Amortization of intangible assets




8,958


8,781



Share based compensation





1,047,355


257,500


Changes in operating assets and liabilities








(Increase) decrease in:










Accounts receivable





517,022


1,010,099



Inventories





(33,590,814)


(46,100,293)



Other current assets and prepaid expenses




15,269


51,215



Value added tax recoverable





(3,001,419)


(1,525,536)


Increase (decrease) in:










Other payables and accrued expenses




81,959


(740,083)



Income tax payable





1,572,629


1,056,705



Other taxes payable





(85,251)


(494,451)



Net cash used in operating activities




(7,177,750)


(21,450,194)












CASH FLOWS FROM INVESTING ACTIVITIES








Purchase of property and equipment




(149,666)


(64,723)



Net cash used in investing activities




(149,666)


(64,723)

CASH FLOWS FROM FINANCING ACTIVITIES








Deferred offering costs





-


666,364


Repayments of bank loans





-


(6,194,845)


Proceeds from related party loan




-


2,574,082


Repayments of related party loan




-


(2,168,196)


Net proceeds from stock issuance in public offering



-


20,144,255


Net proceeds from exercise of warrants




-


49,800



Net cash provided by financing activities




-


15,071,460












EFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTS


142,448


526,517












NET DECREASE IN CASH AND CASH EQUIVALENTS




(7,184,968)


(5,916,940)












CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD



8,810,173


9,151,536












CASH AND CASH EQUIVALENTS, END OF PERIOD



$

1,625,205

$

3,234,596












SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

















Cash paid for interest expense




$

354,686

$

121,933


Cash paid for income tax




$

7,708,004

$

7,291,068

SOURCE Kingold Jewelry, Inc.

Copyright 2012 PR Newswire



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