News Releases

 November 14, 2016

Kingold Jewelry Reports Financial Results For The Third Quarter And Nine Months Ended September 30, 2016

The Company Raises its Gold Processed Guidance to Between 60 Tons and 65 Tons from Between 50 Tons to 60 Tons


WUHAN CITY, China, November 14, 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 unaudited financial results for the third quarter and nine months ended September 30, 2016.

2016 THIRD QUARTER FINANCIAL HIGHLIGHTS (ALL RESULTS ARE COMPARED TO PRIOR YEAR PERIOD)

  • Net sales were $390.5 million, an increase of $126.8 million, or 48.1%, compared to $263.8 million. The increase in net sales was primarily due to increased sales volume in the Company’s branded gold product production.
  • Processed a total of 20.6 metric tons of 24-karat gold products, an increase of 53.0%, compared to 13.5 metric tons.
  • Gross profit increased to $50.4 million, an increase of $34.9 million, or 223.9%, compared to $15.6 million, and gross margin was 12.9% compared to 5.9% for the same period in 2015.
  • Net income increased 79.3% to $15.7 million, or $0.24 per diluted share, compared to $8.8 million, or $0.13 per diluted share.

OUTLOOK FOR 2016

  • Company raises its guidance of 24-karat gold processed in 2016 to between 60 and 65 metric tons.

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, “We were pleased to deliver strong operating results in the first nine months of 2016, as we took full advantage of the increase in the gold price and growing gold demand in China. In the third quarter, we were more focused on corporate developments to further increase our production capacity, design capability and sales marketing initiatives. We understand Kingold operates in a capital-intensive industry, and sufficient free cash flow is a prerequisite for gold production Company to ensuring quality and timely customer delivery to stay competitive. We feel this is a benefit of having the access to capital to leverage our production and to remain our market leading position.”

2016 THIRD QUARTER OPERATIONAL REVIEW
In the third quarter of 2016, the Company processed a total of 20.6 metric tons of gold, of which branded production was 10 metric tons, representing 48.3% of total gold processed, and customized production was 10.6 metric tons, representing 51.7% of total gold processed.  In the third quarter of 2015, the Company processed a total of 13.5 metric tons, of which branded production was 7.8 metric tons, or 58.0% of the total gold processed, and customized production was 5.7 metric tons, or 42.0% of total gold processed.

Metric Tons of Gold Processed
  Three Months Ended:
  September 30, 2016 September 30, 2015

 

Volume % of Total Volume % of Total
Branded* 10.0 48.3% 7.8 58.0%
Customized** 10.6 51.7% 5.7 42.0%
Total 20.6 100% 13.5 100.0%
  Nine Months Ended:
  September 30, 2016 September 30, 2015
  Volume % of Total Volume % of Total
Branded* 28.6 51.4% 20.3 50.4%
Customized** 27.1 48.6% 20.0 49.6%
Total 55.7 100.0% 40.3 100.0%

 *  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.

2016 THIRD QUARTER FINANCIAL REVIEW

Net Sales
Net sales for the three months ended September 30, 2016 were $390.5 million, an increase of $126.7 million, or 48.1%, from net sales of $263.8 million for the three months ended September 30, 2015. Net sales increased primarily as a result of increase in total sales volume in amount of $84.7 million, the increase in the average unit selling price for branded production in amount of $63.2 million, offset by approximately $17.1 million of foreign currency translation loss.

Net sales for the nine months ended September 30, 2016 were $1,063 million, an increase of $343.6 million, or 47.8%, from net sales of $719.4 million for the nine months ended September 30, 2015. The increase in net sales was primarily driven by increase in total sales volume in amount of $308.9 million, the increase in the average unit selling price for branded production in amount of $91.5 million, partially offset the decreased sales in customized production, and offset by approximately a $45.9 million foreign currency translation loss.

Gross Profit
Gross profit for the three months ended September 30, 2016 was $50.4 million, an increase of $34.9 million from $15.6 million for the same period in 2015.

Gross profit for the nine months ended September 30, 2016 was $125.0 million, an increase of $96.2 million from $28.8 million for the same period in 2015.

Gross Margin
Gross margin for the three months ended September 30, 2016 was 12.9%, compared to 5.9% for the same period in 2015. The substantial increase in gross margin was because: 1) the unit price of branded production sales increased from RMB 206.7 per gram for the three months ended September 30, 2015 to RMB 257.1 per gram in the same period of 2016; 2) the percentage increase of the unit price is smaller than the increase in the sales as the unit cost of branded production increased from RMB 197.2 per gram for the three months ended September 30, 2015 to RMB 227.6 per gram in the same period in 2016; 3) the Company purchased a significant quantity of gold in prior periods at relatively low prices, making the production costs for three months ended September 30, 2016 much lower than normal.

Gross margin for the nine months ended September 30, 2016 was 11.8%, compared to 4.0% for the same period in 2015. The substantial increase in gross margin was because: 1) the unit price of branded production sales increased from RMB 212.5 per gram for the nine months ended September 30, 2015 to RMB 240.3 per gram in the same period of 2016; 2) the percentage increase of the unit price is smaller than the increase in the sales as the unit cost of branded production increased from RMB 209.2 per gram for the nine months ended September 30, 2015 to RMB 215.3 per gram in the same period in 2016; 3) the Company purchased a significant quantity of gold in prior periods at relatively low prices, making the production costs for nine months ended September 30, 2016 much lower than normal.

Net Income

For the three months ended September 30, 2016, net income increased 79.3% to $15.7 million, or $0.24 per diluted share, based on 66.7 million weighted average diluted shares outstanding, compared to $8.8 million for the same period in 2015, or $0.13 per diluted share, based on 66.0 million weighted average diluted shares outstanding in the prior-year period.

Net income for the nine months ended September 30, 2016 increased 218.9% to $50.7 million, or $0.76 per diluted share based on 66.3 million weighted average diluted shares outstanding, compared to $15.9 million, or $0.24 per diluted share, based on 66.0 million weighted average diluted shares outstanding in the same period of 2015.

Balance Sheet Highlights

(in millions except for percentages) 9/30/2016 12/31/2015
  (Unaudited)  
Cash $129.6 $3.1
Inventories (gold) 1,097.1 298.3
Working Capital (Current Assets -- Current Liabilities) 1,017.7 174.9
Stockholders’ Equity 308.6 265.7

Net cash used in operating activities was $726.3 million for the nine months ended September 30, 2016, compared with net cash used in operating activities of $34.0 million for the same period in 2015. The significant increase in net cash used in operating was mainly due to purchase of inventory of $817.8 million in anticipation of the increased production and sales demand when the Jewelry Park is completed which may stimulate Kingold’s sales starting from the second half 2016. In addition, in connection with the Company’s significant bank borrowings during the nine months ended September 30, 2016, the Company was required to pledge significant 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 Contract, the Company received net proceeds of $151.4 million cash payment from Wuhan Lianfuda for the Jewelry Park transfer, 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 nine months ended September 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 other factors described above change with increased production and purchase of larger quantities of raw materials (principally gold).

OUTLOOK FOR 2016
Based on 2016 first nine months results, its existing resources and capacity (which includes the Company's recent proceeds from its previously announced financing and gold lease agreements) along with strong demand for 24-karat gold products in China, the Company raised its guidance for gold processed during 2016 from between 50 metric tons and 60 metric tons to between 60 metric tons and 65 metric tons.  

Investor Conference Calls
The Company has elected to discontinue hosting live quarterly conference calls at this time.  An open line of communication with investors and analysts remains a top priority of the Company and management is readily available for discussions with investors on a one on one basis.  Investors and analysts wishing to speak with management are urged to contact the Company’s investor relations representatives at The Equity Group at +86 10-6587-6435 or .

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, but are not limited to, statements regarding Kingold’s outlook with respect to its 2015 gold processing, expectations with respect to expansion into a higher margin, direct retail business through the online retail store, 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, and its expectations with respect to a long-term partnership with Fosun.  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)
bl@kingoldjewelry.com 

INVESTOR RELATIONS
The Equity Group Inc.
Katherine Yao, Senior Associate
Phone: +86 10-6587-6435

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,  
    2016     2015     2016     2015  
                         
NET SALES   $ 390,547,042     $ 263,762,713     $ 1,062,995,744     $ 719,378,985  
                                 
COST OF SALES                                
Cost of sales     (339,845,689)       (247,894,654 )     (937,138,523)       (689,700,092 )
Depreciation     (286,710)       (304,849 )     (869,075)       (924,958 )
Total cost of sales     (340,132,399)       (248,199,503 )     (938,007,598)       (690,625,050 )
                                 
GROSS PROFIT     50,414,643       15,563,210       124,988,146       28,753,935  
                                 
OPERATING EXPENSES                                
Selling, general and administrative expenses     3,931,214       3,247,362       13,643,705       7,130,925  
Stock compensation expenses     11,143       102,344       33,428       417,471  
Depreciation     25,102       24,776       72,089       75,204  
Amortization     2,836       3,034       8,617       9,203  
Total operating expenses     3,970,295       3,377,516       13,757,839       7,632,803  
                                 
INCOME FROM OPERATIONS     46,444,348       12,815,694       111,230,307       21,121,132  
                                 
OTHER INCOME (EXPENSES)                                
Other Income (expenses)     (75,748)       3,209       (75,618)       9,740  
Interest Income     1,216,697       (575)       1,900,120       150,497  
Interest expense     (26,551,667)       (273,953)       (45,146,833)       (656,106)  
Total other expenses, net     (25,410,718)       (271,319)       (43,322,331)       (495,869)  
                                 
INCOME FROM OPERATIONS BEFORE TAXES     21,033,630       11,914,375       67,907,976       20,625,263  
                                 
INCOME TAX PROVISION (BENEFIT)                                
Current     25,230,923       71,176       36,891,707       3,357,451  
Deferred     (19,909,244)       3,078,209       (19,653,506)       1,348,181  
Total income tax provision     5,321,679       3,149,385       17,238,201       4,705,632  
                                 
NET INCOME     15,711,951       8,764,990       50,669,775       15,919,631  
Add: net loss attributable to non-controlling interest     445       448       1,910       636  
                                 
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS     $ 15,712,396       $ 8,765,438       $ 50,671,685       $ 15,920,267  
                                 
OTHER COMPREHENSIVE INCOME (LOSS)                                
Total foreign currency translation gains (loss)   $ $   (1,330,413)       $(10,487,596)       $   (7,990,100)       $(8,899,780)  
Less: foreign currency translation gain attributable to non-controlling interest     271       2,821       1,847       2,739  
Foreign currency translation gains (loss) attributable to common stockholders     $   (1,330,684)       $(10,484,775)       $(7,991,947)       $(8,897,041)  
                                 
COMPREHENSIVE INCOME ATTRIBITABLE TO:                           
Common stockholders   $ $   14,381,712     $ $     (1,719,337)       $   42,679,738       $      7,023,226  
Non-controlling interest     (174)         -       (63)       -  
      $   14,381,538       $      (1,719,337)       $   42,679,675       $      7,023,226  
                                 
                                 
Earnings per share                                
Basic   $ 0.24     $ 0.13     $ 0.77     $ 0.24  
Diluted   $ 0.24     $ 0.13     $ 0.76     $ 0.24  
Weighted average number of shares                                
Basic     66,018,867       65,963,502       65,982,294       65,963,502  
Diluted     66,740,085       65,963,502       66,291,236       65,963,502  

KINGOLD JEWELRY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN US DOLLARS)
(UNAUDITED)

  September 30, 2016 December 31, 2015
ASSETS    
CURRENT ASSETS    
Cash $129,649,710 $3,100,569
Restricted cash                                       111,471,928                              26,649,687
Accounts receivable                                              803,371                                1,624,323
Inventories                                    1,097,089,498                            298,303,185
Other current assets and prepaid expenses                                           4,766,011                                1,046,032
Value added tax recoverable                                       130,914,603                              15,526,002
Total current assets 1,474,695,121 346,249,798
     
PROPERTY AND EQUIPMENT, NET                                           7,684,808                                7,622,509
OTHER ASSETS    
Deposit on land use right - Jewelry Park                                           9,047,947                                9,296,763
Construction in progress- Jewelry Park                                       152,867,231                            105,844,259
Other assets                                              144,733                                   148,713
Land use right                                              433,524                                   454,180
Deferred income tax assets                                         17,660,837  -
Total long-term assets                                       187,839,080                            123,366,424
TOTAL ASSETS                                    1,662,534,201                            469,616,222
     
     
LIABILITIES AND STOCKHOLDERS’ EQUITY    
CURRENT LIABILITIES    
Short term loans $195,195,961 $55,455,428
Debts payable, net - 61,471,962
Construction payables-Jewelry Park 53,971,233 23,876,642
Deposit payable-Jewelry Park 170,908,906 22,182,171
Other payables and accrued expenses 9,935,272 6,355,979
Due to related party 1,041,634 200,059
Income tax payable 24,962,897 1,119,918
Other taxes payable 977,152 710,104
Total current liabilities 456,993,055 171,372,263
Deferred income tax liability - 1,774,993
Long term loans 896,971,914 30,808,571
TOTAL LIABILITIES 1,353,964,969 203,955,827
COMMITMENTS AND CONTINGENCIES    
     
EQUITY    
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued or
outstanding as of September 30, 2016 and December 31, 2015 - - Common stock $0.001 par value, 100,000,000 shares authorized, 66,018,867 and 65,963,502 shares issued and outstanding as of September 30, 2016 and
December 31, 2015
66,018 65,963
Additional paid-in capital 80,219,824 79,990,717
Retained earnings    
  Unappropriated 235,235,832 184,564,147
  Appropriated 967,543 967,543
Accumulated other comprehensive income (deficit) (7,993,196) (1,249)
Total stockholders' equity 308,496,021 265,587,121
Non-controlling interest 73,211 73,274
  Total Equity 308,569,232 265,660,395
     
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,662,534,201 $469,616,222

KINGOLD JEWELRY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN US DOLLARS)
(UNAUDITED)

    For the nine months ended September 30,
    2,016     2,015
CASH FLOWS FROM OPERATING ACTIVITIES              
Net income   $ 50,669,775     $ 15,919,631
Adjustments to reconcile net income to cash used in operating activities:              
Depreciation     941,164       1,000,162
Amortization of intangible assets     8,617       9,203
Amortization of deferred financing costs     143,227       162,322
Share based compensation     229,162       417,471
Deferred tax provision (benefit)     (19,653,506)       1,348,181
Changes in operating assets and liabilities              
(Increase) decrease in:              
Accounts receivable     788,112       307,315
Inventories     (817,804,500)       (69,261,230)
Other current assets and prepaid expenses     (3,799,223)       (134,535)
Value added tax recoverable     (117,388,028)       (9,744,403)
Increase (decrease) in:              
Other payables and accrued expenses     3,673,428       2,438,517
Deposit payable ,Jewelry Park, net     151,362,720       23,374,347
Income tax payable     23,499,156       (886,440)
Other taxes payable     990,281       1,052,294
Net cash used in operating activities     (726,339,615)       (33,997,165)
               
CASH FLOWS FROM INVESTING ACTIVITIES              
Purchase of property and equipment     (306,652)       (59,406)
Cash payment in construction in progress-Jewelry Park     (20,440,112)       (26,111,485)
Net cash used in investing activities     (20,746,764)       (26,170,891)
               
CASH FLOWS FROM FINANCING ACTIVITIES              
Capital contribution from minority interest for the new subsidiary     -       73,045
Proceeds from bank loans     1,076,863,691       55,189,430
Repayments of bank loans     (54,861,388)       (16,232,185)
Restricted cash     (86,705,385)       (14,250,445)
Proceeds from related party loan     842,226       -
Proceeds from exercise of warrants     66,439       -
(Repayment) proceeds from debt financing instruments under private placement     (60,788,241)       64,928,741
Deferred financing costs     -       (649,287)
               
Net cash provided by financing activities     875,417,342       89,059,299
               
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS     (1,781,822)       (608,719)
               
NET INCREASE IN CASH AND CASH EQUIVALENTS     126,549,141       28,282,524
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     3,100,569       1,331,658
               
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 129,649,710     $ 29,614,182
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION              
Cash paid for interest expense   $ 45,155,522     $ 3,751,584
Cash paid for income tax   $ 12,692,294     $ 4,243,891



 
 

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