Kingold Jewelry Reports Financial Results for The First Quarter 2019

WUHAN, China, May 15, 2019 /PRNewswire/ -- 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 first quarter ended March 31, 2019.

2019 First Quarter Financial Highlights (all results compared to prior year period)

• Net sales were approximately $453.5 million, compared to approximately $539.5 million in the prior year period.
• Processed a total of 22 metric tons of 24-karat gold products, compared to 23.3 tons in the first quarter 2018.
• Net income was approximately $6.4 million, or $0.10 per diluted share, compared to net income of approximately $13.2 million, or $0.20 per diluted share in the prior year period.

Outlook for 2019

• The Company reiterates its guidance of processing between 110 metric tons and 120 metric tons of 24-karat gold products in 2019.

Management Commentary

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, "In the first quarter of 2019, both of Kingold's operational and financial performances were affected by China's economic slowdown, which negatively impacted our customers' purchases of gold products and it was not until the end of the first quarter that the market gradually warmed up. Every time when Kingold encounters the impact from challenging environment, we have always maintained a positive attitude and focused on our product research and development. We believe in our ability of providing good quality products to meet consumer demand once the market picks up, which is a key strength of Kingold." 

2019 FIRST QUARTER OPERATIONAL REVIEW

For the three months ended March 31, 2019, the Company processed a total of 22.0 metric tons of gold, of which branded production was 11.2 metric tons, representing 50.9% of total gold processed, and customized production was 10.8 metric tons, representing 49.1% of total gold processed in the first quarter of 2019. In the first quarter of 2018, the Company processed a total of 23.3 metric tons, of which branded production was 13.0 metric tons, or 55.8% of the total gold processed, and customized production was 10.3 metric tons, or 44.2% of total gold processed.

2019 FIRST QUARTER FINANCIAL REVIEW

Net Sales

Net sales for the three months ended March 31, 2019 was $453.5 million, a decrease of approximately $86.0 million, or 15.9%, from net sales of $539.5 million for the three months ended March 31, 2018.

The decrease in net sales was mainly due to the decrease in sales volume of 1.3 metric tons resulting in a revenue decrease of approximately $73.4 million, the currency translation loss of approximately $29.5 million, offset by the revenue increase of approximately $17.0 million as a result of the increase in average unit selling price. The average unit selling price for brand production sales increased from RMB 258.32 per gram in three months ended March 31, 2018 to RMB 266.65 per gram in three months ended March 31, 2019. The average unit selling price for customized production sales increased from RMB 6.84 per gram in three months ended March 31, 2018 to RMB 6.96 per gram in three months ended March 31, 2019.

Gross Profit

Gross profit for the three months ended March 31, 2019 was $55.3 million, compared to $64.2 million for the same period in 2018.

The decrease in gross profit was mainly due to the decrease in sales volume, and the increase in unit cost of raw materials used in production reduced gross profit for the three months ended March 31, 2019 as compared to the same period of 2018. The unit cost of branded production sales was RMB 239.7 per gram for the three months ended March 31, 2019 while the unit cost of branded production sales was RMB 232.12 per gram for three months ended March 31, 2018. The unit cost of customized production sales was RMB 0.34 per gram for the three months ended March 31, 2019 while the unit cost of customized production sales was RMB 0.31 per gram for three months ended March 31, 2018.

Gross Margin

The Company's gross margin was 12.2% for the three months ended March 31, 2019, compared to 11.9% in the prior year period.

The increase in gross margin was mainly due to the increased average selling price of branded production and customized production sales. The average selling price of branded production was RMB 266.65 per gram for the three months ended March 31, 2019, increased by RMB 8.33 or 3.2%, from RMB 258.32 per gram for the same period in 2018. The average selling price of customized production sales was RMB 6.96 per gram for the three months ended March 31, 2019, increased by RMB 0.12, or 1.7%, from RMB 6.84 per gram for the three months ended March 31, 2018 to RMB 6.96 per gram for the three months ended March 31, 2019.

Net Income

Net income for the three months ended March 31, 2018 was $6.4 million, or $0.10 per diluted share based on 66.1 million weighted average diluted shares outstanding, compared to net income of $13.2 million, or $0.20 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior-year period.

Balance Sheet and Cash Flow

Net cash used in operating activities was $96.7 million for the year ended March 31, 2019, compared with net cash provided by operating activities of $211.4 million for the same period in 2018. The decrease of operating cash flows was mainly due to the increase in gold purchases of approximately $33.5 million in order to meet the production demand, the increased gold purchases of approximately $55.8 million in order to pledge such gold as collateral with various financial institutions to obtain additional loans, and the increase in value added tax receivable of $11.7 million and a decrease in income tax payable of approximately $1.2 million and decrease in other tax payable by approximately $2.6 million. 

Kingold's net cash from operating activities can fluctuate significantly due to changes in inventories. Other factors that may vary significantly include accounts payable, purchases of gold and income taxes. Looking forward, the Company expects the net cash that it generates from operating activities to 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 or smaller quantities of raw materials. These fluctuations could cause net cash from operating activities to decrease, even if Kingold's net income grows as the Company continue to expand. Although the Company expects that net cash from operating activities will increase over the long term, it cannot predict how these fluctuations will affect its cash flow in any particular quarter.

OUTLOOK FOR 2019

Based on its existing resources and capacity along with strong demand for 24-karat gold products in China, the Company reiterates its expectation that gold processed will be between 110 metric tons and 120 metric tons during 2019. 

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on May 16, 2019, at 8:30 a.m. ET. The dial-in numbers are:

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: https://78449.themediaframe.com/dataconf/productusers/kgji/mediaframe/30429/indexl.html. 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 high quality 24-karat gold jewelry, ornaments, and investment-oriented products. The Company sells its products both directly to retailers and 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 for gold processing and investment in 2019. 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)
[email protected]

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

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SOURCE Kingold Jewelry, Inc.