|August 12, 2016|
Kingold Jewelry Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2016
Company to Hold Conference Call with Accompanying Slide Presentation on Friday, August 12, 2016, at 5:00 PM ET
WUHAN CITY, China, August 12, 2016 - 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, 2016.
2016 Second Quarter Financial Highlights (all results are compared to prior year comparative period)
2016 SECOND QUARTER OPERATIONAL REVIEW
On July 29, 2016, Kingold announced that it sold all of its interest in the Shanghai Creative Industry Park, or the Kingold Jewelry Cultural Industry Park (the "Jewelry Park") to Wuhan Lianfuda Investment Management Co., Ltd. ("Wuhan Lianfuda") for RMB 1.14 billion (approximately US $171 million). In connection with the sale, Kingold leased space in the Jewelry Park for its new headquarter office and exhibit center for an aggregate of annual rent of RMB 1,718,400 (approximately US $258,600).
Wuhan Lianfuda has paid Wuhan Kingold the total consideration of RMB 1.14 billion (approximately US $171 million), pursuant to a contract to transfer the contractual rights and obligations (the "Transfer Contract") entered between Wuhan Kingold and Wuhan Lianfuda. In addition, Kingold transfers and Wuhan Lianfuda receives, all the rights and obligations in an acquisition agreement (the "Acquisition Agreement") signed among Kingold, Wuhan Wansheng and Wuhan Huayuan Science and Technology Development Limited Company ("Wuhan Huayuan") on October 23, 2013, including 60% stock rights of Wuhan Huayuan. Wuhan Lianfuda will undertake the remaining payment obligation of RMB 360 million (approximately US$54.2 million) stipulated in the Acquisition Agreement. According to an evaluation report issued by an independent evaluation agency, the evaluated value of the Jewelry Park on June 18, 2016 was approximately RMB 1.48 billion (approximately US $221 million).
Chairman Jia continued, "Our management team decided that it was in our best interest for Kingold to focus our capital and personal resources on expanding our core jewelry design and manufacturing business. We expect to use the proceeds to continue to grow both within China and internationally."
CONSOLIDATED FINANCIAL AND OPERATING REVIEW
Net sales for the three months ended June 30, 2016 increased 56.5% to $390.3 million from $249.4 million for the same period in 2015. The increase was primarily due to an increase in sales volume, the increase of average unit selling price for the Company's branded production, and offset by a loss from currency translation.
The average unit selling price for the Company's branded production sales increased from RMB 212.5 per gram in the three months ended June 30, 2015 to RMB 238.4 per gram in the three months ended June 30, 2016. As a result, approximately $29.5 million increase in brand production revenue was affected by the increase in our selling price, partially offset against the decrease in customized production revenue to certain extent.
For the six months ended June 30, 2016, the Company's net sales were $672.4 million, increased 47.6% from $455.6 million in the first half of 2015.
Gross profit for the three months ended June 30, 2016 increased 1,821% to $46.1 million from $2.4 million for the same period in 2015.
For the six months ended June 30, 2016, the Company's Gross profit were $74.6 million increased from $13.2 million in the first half of 2015.
The Company's gross margin was 11.8% for the three months ended June 30, 2016, compared to 1.0% in the prior year period. The substantial increase was due to the increase of the unit price of branded production sales during the period mentioned above.
For the six months ended June 30, 2016, the Company's gross margin was 11.1%, compared to 2.9% for the same period of 2015.
Net income for the three months ended June 30, 2016 was $19.8 million, or $0.30 per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $0.6 million, or $0.01 per diluted share based on 66.0 million weighted average diluted shares outstanding in the prior-year period.
For the six months ended June 30, 2016, the Company's net income was $35.0 million, or $0.53 per basic and diluted share, compared to net income of $7.2 million, or $0.11 per basic and diluted share, in the same period of 2015.
Balance Sheet and Cash Flow (UNAUDITED)
Net cash used in operating activities was $466.3 million for the six months ended June 30, 2016, compared with net cash used in operating activities of $23.6 million for the same period in 2015. The significant increase in net cash used in operating activities was mainly due to spending on purchase of inventory of $502.9 million in anticipation of the increased production and sales demand when the Jewelry Park is completed which may stimulate our sales starting from the second half of 2016. In addition, in connection with Kingold's significant bank borrowings during the quarter ended June 30, 2016, the Company was required to pledge approximately 22 metric tons of gold with the banks as collateral, which also led the Company to increase the inventory purchases and stockpile. On the other hand, in connection with the Jewelry Park Transfer Transaction, the Company received $90.1 million cash payment from Wuhan Lianfuda for the Jewelry Park transfer and at the same time the Company transferred back approximately $22.1 million customer deposit to the Jewelry Park property buyers, which led to a net change of deposit payable of $70.2 million. Such amount will be adjusted when the Company delivers the Jewelry Park to Wuhan Lianfuda in the near future. The overall increase in cash used in operating activities for the six months ended June 30, 2016 is reflected in the above mentioned factors.
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 2016
Based on its existing resources and capacity, the Company reiterates its expectation that gold processed will be between 50 metric tons and 60 metric tons during 2016.
Conference Call Details
Kingold also announced that it will discuss these financial results in a conference call on Friday, August 12, 2016, at 5:00 PM ET.
The dial-in numbers are:
Live Participant Dial In (Toll Free): +1 877-407-9038
Live Participant Dial In (International): +1 201-493-6742
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/q2-2016. 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 statements regarding Kingold's outlook with respect to its 2016 outlook for gold processing, its expectations with respect to completion of transferring the Jewelry Park. 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.
Kingold Jewelry, Inc.
Bin Liu, CFO
Phone: +1-847-660-3498 (US) / +86-27-6569-4977 (China)
INVESTOR RELATIONS COUNSEL:
The Equity Group Inc.
Katherine Yao, Senior Associate
KINGOLD JEWELRY, INC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN U.S. DOLLARS) (UNAUDITED)
KINGOLD JEWELRY, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS) (UNAUDITED)
KINGOLD JEWELRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN U.S. DOLLARS) (UNAUDITED)
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