WUHAN CITY, China, March 27, 2013 - 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 financial results for its fourth quarter and year ended December 31, 2012.
2012 Financial and Operating Highlights (comparisons are to 2011): Net sales increase 16.1% to $915.7 million Processed a total of 37.8 metric tons of 24-karat gold products, an increase of 26.0% compared to the 30.0 metric tons [one metric ton = 35,274 ounces] Net income attributable to common shareholders increased 24.7% to $32.7 million, or $0.60 per diluted share Book value per diluted share of $2.97 at December 31, 2012, compared to $2.51 Fourth Quarter 2012 Highlights (comparisons are to Fourth Quarter 2011): Net sales increased 19.5% to $201.4 million Processed a total of 7.6 metric tons of 24-karat gold products, an increase of 33.3% compared to 5.7 metric tons Net income attributable to common shareholders increased 133.3% to $7.4 million, or $0.14 per diluted shareSubsequent Operating Highlights Entered into Subscription Agreement for the sale of 7,000,000 shares of its common stock at a price of $1.80 per share, along with warrants to acquire up to an aggregate 2,800,000 additional shares of common stock at a price of $1.80 per share, for gross proceeds of $12.6 million Gained access to new sources of gold under agreements with China Construction Bank and Shanghai Pudong Development Bank Ltd., which are expected to help accelerate growth and achieve a greater balance in free cash flowOutlook for 2013 As a result of the recent increase in gold inventory and continued strong demand for the Company's jewelry and investment gold products, Kingold expects to process between 50 - 60 metric tons of 24-karat gold products in 2013Mr. Zhihong Jia, Chairman and CEO of Kingold, stated, "The last several months have been a strong period in our Company's history, as we finished 2012 by reporting solid financial results and strengthened our financial position considerably through the closing of our recent financing and securing new sources of gold. Kingold beat its previously announced volume guidance by over 7% and achieved year-over-year growth in volume, net sales, gross profit margin, and net income. We believe that gold design and processing companies like Kingold, with our developed distribution network, attractive designs and reliable product quality, are well-positioned to expand our brand and capture an increasing share of China's growing gold jewelry and investment market."
Operational Review
For 2012, Kingold processed a total of 37.8 metric tons of 24-karat gold products, a 26.0% increase over the 30 metric tons processed in 2011. In the fourth quarter of 2012, Kingold processed approximately 7.6 metric tons of 24-karat gold products, an increase of 33.3% over the 5.7 metric tons sold in the fourth quarter of 2011. During the quarter and year, the Company continued to see strong demand from major clients in jewelry products and increased sales of investment gold products from its partner commercial banks' retail branches in provinces throughout China.
Jewelry Business
Kingold offers a wide range of in-house designed jewelry products (launches approximately 10,000 each year) including, but not limited to, gold necklaces, rings, earrings, bracelets, and pendants. Kingold sells its jewelry products directly to distributors, retailers and other wholesalers, who then sell these products to consumers through retail counters located in both department stores and other traditional stand-alone jewelry stores. In 2012, the Company secured and deepened its sales relationship with leading wholesalers and retailers in China, including Shenzhen Tongxing Jewelry as well as Shanghai Lao Feng Xiang.
In 2012, the Company also expanded its business into new geographic regions in China. The Company's jewelry products are now being sold in 25 provinces and municipalities in China compared to 17 provinces at the end of 2011.
Investment Gold Business
Kingold's investment gold products primarily include gold bars and coins and other customized products specifically designed for use by commercial banks. Kingold distributes its investment gold products in partnered commercial banks' local retail branches across China. Pricing of products is made at the time of sale based upon the then-current price of gold, and Kingold then reports sales upon delivery.
By the end of 2012, Kingold signed agreements with four major Chinese banks: the Bank of Communications, China Merchant Bank, China CITIC Bank and Wuhan Rural Commercial Bank, and expects to seek additional partnerships throughout the coming year. In 2012, the Company worked diligently to widen the geographic reach of its investment gold business, and products produced by Kingold are now currently available in 366 retail bank branches across eight provinces in China.
Market Overview
The average international gold price per ounce remained relatively flat between 2011 and 2012. On an average basis, the price for gold was RMB338.5 per gram in 2012 and RMB 326.3 per gram in 2011, according to the World Gold Council. Kingold purchases gold directly from the Shanghai Gold Exchange, of which it has been a member since 2003. The membership grants the Company the privilege of purchasing gold directly from the Shanghai Gold Exchange.
Total consumer demand in China recently reached a record of 776.1 metric tons sold and processed in 2012, with jewelry accounting for 510.6 metric tons and investment gold 265.5 metric tons (World Gold Council). The Company is continuing to see consumers allocate greater sums of their available spendable income to gold investment and jewelry purchases. Kingold believes this is largely due to the continued urbanization of China's population, the dominance of 24-karat gold and its role as a savings proxy, and increasing availability of gold investment products to a populace with a growing awareness of gold's investment properties - particularly its role as an inflation hedge.
2012 Fourth Quarter Financial Review
Full-year 2012 Financial Review Balance Sheet and Cash Flow(in millions except for percentages)
Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories (principally gold). Other factors that may vary significantly include our accounts payable, purchases of gold and income taxes. The Company expects the net cash that it generates from operating activities to continue to fluctuate as its inventories, receivables, accounts payables and the other factors described above change with increased production and the purchase of larger quantities of raw materials (gold).
Outlook for 2013
Based on the Company's existing resources and capacity (which includes the Company's recent proceeds from its previously announced financing and gold lease agreements), Kingold believes gold processed will be between 50 metric tons and 60 metric tons during 2013. This guidance is based solely on current projected, organic growth, and would represent a 32.3% to 58.7% increase from the 37.8 metric tons processed in 2012.
Mr. Jia concluded, "We believe that Kingold is well-positioned and capitalized to safely expand on our strong market position in China's gold market. Our recent financing activities have provided Kingold with a strong capital base from which to rapidly expand production. With 100% percent of our resources focused on organic growth in our core jewelry and investment gold segments, we are focused on returning shareholder value by re-investing in our business and taking advantage of continued strong demand for gold products in China."
Conference Call
Kingold also announced that it will also discuss these results in a conference call tomorrow morning (March 28, 2013) at 8:30 a.m. ET. The dial-in numbers are:
Live Participant Dial In (Toll Free):Live Participant Dial In (International):
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. 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 - News), 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 Kingold's ability to accelerate growth and achieve greater balance in its free cash flow, the amount of gold to be processed in 2013, [Kingold's gross margins for 2013,] Kingold's ability to expand its brand and capture market share, the entry into additional partnerships for the investment gold business, consumer demand in China for gold, and fluctuations in net cash from operating activities. 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, Senior Vice President
(212) 836-9606
aprior@equityny.com
Katherine Yao, Associate
+86 10-6587-6435
kyao@equityny.com
CONSOLIDATED STATEMENTS OF INCOMEFor the three months ended December 31,For the years ended December 31,Selling, general and administrative INCOME FROM OPERATIONS BEFORE TAXESLess: net income attribute to the noncontrolling interestNET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERSOTHER COMPREHENSIVE INCOME (LOSS)Total foreign currency translation gains (loss)Less: foreign currency translation gainsattributable to noncontrolling interestForeign currency translation gains (loss)attributable to common stockholders
Weighted average number of shares
Other current assets and prepaid expensesLIABILITIES AND STOCKHOLDERS' EQUITYOther payables and accrued expensesPreferred stock, $0.001 par value, 500,000 shares authorized, none issued or outstandingas of December 31, 2012 and December 31, 2011Common stock $0.001 par value, 100,000,000 sharesauthorized, 54,521,140 and 53,107,343 shares issued and outstandingas of December 31, 2012 and December 31, 2011Accumulated other comprehensive income
CONSOLIDATED STATEMENT OF CASH FLOWSFor the years ended December 31,CASH FLOWS FROM OPERATING ACTIVITIESAdjusted to reconcile net income to cash used inAmortization of intangible assetsChanges in operating assets and liabilitiesOther current assets and prepaid expenses Other payables and accrued expensesNet cash used in operating activitiesCASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipmentNet cash used in investing activitiesCASH FLOWS FROM FINANCING ACTIVITIESNet Proceeds from Stock repurchase agreementProceeds from related party loanRepayments of related party loanNet proceeds from stock issuance in public offeringNet proceeds from exercise of warrantsNet cash provided by financing activitiesEFFECT OF EXCHANGE RATES ON CASH & CASH EQUIVALENTSNET DECREASE IN CASH AND CASH EQUIVALENTSCASH AND CASH EQUIVALENTS, BEGINNING OF YEARCASH AND CASH EQUIVALENTS, END OF YEARSUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest expense
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