WUHAN CITY, China, March 28, 2016 /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 fourth quarter and year ended December 31, 2015. 

2015 Financial and Operating Highlights (all results are compared to prior year period)

2015 Fourth Quarter Financial Highlights (all results are compared to prior year period)

Outlook for 2016

Mr. Zhihong Jia, Chairman and CEO of the Company, commented, “In 2015 we faced challenges from declining market price of gold which negatively impacted the Company’s customers’ purchase of gold and the pressure from delayed construction progress of our Jewelry Park due to harsh weather along with the Chinese New Year. We anticipate that the Jewelry Park will be finished in April 2016, and the Jewelry Park will serve as a platform to further accelerate Kingold towards the goal of becoming a leading 24-karat gold products designer, manufacturer, and a sizable supplier in Greater China.”

UPDATE ON Kingold Jewelry cultural industry Park

In October 2015, the Company signed a supplemental agreement with the construction company Wuhan Wansheng to amend the original acquisition agreement dated October 23, 2013. Pursuant to this supplemental agreement, Wuhan Wansheng agreed to fully complete the construction and deliver the completed real estate property to the Company before January 15, 2016. However, due to the cold weather conditions and construction worker leave during the holiday season, the construction work on the Jewelry Park has been further delayed. In January 2016, based on the actual construction progress, the Company and Wuhan Wansheng reached a further amendment stipulating that the completion time for the construction was extended to April 2016.

2015 OPERATIONAL REVIEW

For the three months ended December 31, 2015, the Company sold a total of 16.2 metric tons of gold, of which branded production was 8.6 metric tons, representing 53.1% of total gold sold, and customized production was 7.6 metric tons, representing 46.9% of total gold sold in the fourth quarter of 2015. In the fourth quarter of 2014, the Company sold a total of 13.2 metric tons, of which branded production was 5.7 metric tons, or 43.2% of the total gold sold, and customized production was 7.5 metric tons, or 56.8% of total gold sold.

For the year ended December 31, 2015, Kingold sold a total of 56.5 metric tons of gold, of which branded production was 28.9 metric tons, or 51.2% of total gold sold, and customized production was 27.6 metric tons, or 48.8% of total gold sold. In 2014, the Company sold a total of 60.1 metric tons of gold, of which branded production was 28.8 metric tons, or 47.9% of the total, and customized production was 31.3 metric tons, or 52.1% of the total.

2015 FINANCIAL REVIEW

Net Sales

Net sales for the three months ended December 31, 2015 was $280.8 million, representing a increase of $71.5 million or 34.2% from $209.3 million for the same period in 2014. The increase in sales is largely due to increased sales volume from 14.3 metric tons in the three months ended December 31, 2014 to 16.2 metric tons for the three months ended December 31, 2015, The increase in market price of gold in late 2015 positively impacted consumers’ perception of gold investment and they increased the gold purchase during the holiday seasons.

Net sales for the year ended December 31, 2015 was $1,000.2 million, a decrease of 9.7% from the $1,107.6 million reported in the year of 2014. The decrease in net sales was primarily driven by the decrease in total sales volume, decrease in the average unit selling price and loss in currency exchange rate.  

Gross Profit

Gross profit for the three months ended December 31, 2015 was $9.6 million, compared to $13.9 million for the same period in 2014.  

Gross profit was $38.3 million year ended December 31, 2015, compared to $76.3 million for year of 2014. The decrease in gross profit was due to the decrease in total sales volume, the decrease in unit selling price of the products, and the decrease in sales volume for customized production and the decrease in the unit selling price in customized products.

Gross Margin

The Company’s gross margin was 3.4% for the three months ended December 31, 2015, compared to 6.7% in the prior year period.  

The Company’s gross margin for the 2015 fiscal year was 3.8%, compared to 6.9% in the prior year period. The decrease in gross margin was because (1) the Company purchased a large quantity of gold inventory at year end of 2013 and beginning of 2014 at market prices, which were much lower than in 2015, making 2014 production costs much lower than normal; (2) the Company’s average unit selling price decreased by 3.8% compared to 2014; and (3) the sales orders from customized production segment decreased due to declined market price of gold in 2015.  

Net Income

Net income for the three months ended December 31, 2015 was $5.6 million, or $0.09 per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $8.1 million in the prior year period, 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 year of 2015 was $21.6 million, or $0.33 per diluted share based on 66.0 million weighted average diluted shares outstanding, compared to net income of $47.3 million in the prior year, or $0.72 per diluted share based on 66.0 million weighted average diluted shares outstanding, in the prior-year. The decrease was primarily due to the same reasons described above regarding the decrease of gross margin from 2014 to 2015.  

Balance Sheet and Cash Flow

Net cash used in operating activities was $(62.2) million for the year of 2015, compared with net cash provided by operating activities of $20.3 million for the year of 2014. The change was mainly because of the decrease in net income which fell from $47.3 million in the year of 2014 to $21.6 million in the year of 2015, and increase in spending on purchase of inventory of $62.4 million when market price of gold was low.

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 along with strong demand for 24-karat gold products in China, the Company believes that its gold sales is expected to be between 50 metric tons and 60 metric tons during 2016. This guidance is based solely on current projected, organic growth. The Company anticipates narrowing this guidance throughout the year, along with providing additional metrics for investors in the coming months.

Conference Call Details

Kingold also announced that it will discuss these financial results in a conference call on March 28, 2016, at 6 p.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: http://kingoldjewelry.equisolvewebcast.com/q4-2015. 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 2015 outlook for gold processing, its 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. 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  

SOURCE Kingold Jewelry, Inc.