WUHAN, China, Dec. 29, 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 released a letter to
shareholders from Kingold's Chairman and Chief Executive Officer,
Mr. Zhihong Jia. The letter updates
the Company's current activities and outlines its corporate
strategy for 2017 and is included in its entirety below:
To Our Shareholders:
I want to thank all of Kingold's customers and shareholders for
your continued support over the past year, which has been
monumental for the Company. I would like to take this
opportunity not only to provide you with some of our recent
developments and milestones, but also to provide details for our
2017 plans that I hope will answer many questions and validate your
long term investment in our Company. My goal is to release a
letter twice a year, including every December, as a thorough
measure of addressing the current year's activities, while also
setting the expectations for the coming year.
Review of Kingold's Accomplishments in 2016
We achieved strong financial and operating results throughout
2016, highlighted by growth in demand for our 24-karat gold jewelry
products that exceeded our expectations. We recently raised
our annual guidance as a result of this demand to processing
between 60 and 65 metric tons, compared with earlier guidance of
between 50 and 60 metric tons. The Company achieved this as a
result of continued expansion of many of the core tenets that led
to the formation of Kingold, including the dominance of 24-karat
gold and its role as both a luxury item and as a savings proxy and
the continued urbanization of the Chinese population.
We have grown to understand the changing nature of our customer
base, which is predominantly retail establishments and wholesale
distributors. Distributors and retailers have come to rely on
our highly intricate designs to meet very specific customer
requests, as well as our ability to deliver these products in a
timely fashion. We have long-standing relationships that marry
our expertise in gold-jewelry design with the ever-evolving needs
of our end customers.
During 2016, we also completed the sale our 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). We know the principles
behind Wuhan Lianfuda very well and share their vision for the
long-term potential of the Jewelry Park. We originally conceived
the idea of the Jewelry Park as a method of expanding Kingold's
exposure throughout China's
growing jewelry market. We wanted to create a one-stop shop
for all businesses in the industry to see as a central hub
throughout the country, and simultaneously create a destination
spot for customers. Over the course of three years, we
expended a considerable amount of resources and time to move the
project from inception to completion. As we got into this, we
appreciated gold industry as our core business more and more and
sale of the Jewelry Park was a way to return to our core business.
We were ultimately pleased to sell the property at a time that was
favorable from a return on investment perspective, but also
furthered our ultimate goal to see the Jewelry Park develop into
the special destination we all envisioned. We are excited to
benefit from our role in creating this active market that truly
will serve as a bridge between upstream and downstream jewelry
companies.
The ancillary benefit of our work on the Jewelry Park was that
it greatly enhanced Kingold's exposure across the entire
industry. As we move into 2017, we are dedicated to leveraging
this increased exposure and focusing our capital and personal
resources on expanding our core jewelry design and manufacturing
business.
Operational Plans in 2017 - Development of Gold Jewelry
Manufacturing Business
Since Kingold began trading as a public company in 2010, we have
achieved continued growth in the amount of gold the Company
processes. Our business model is not complex: we derive our
revenue from the sales of 24-karat jewelry and Chinese ornaments
and from design and processing fees we receive from other jewelry
companies that hire us and supply us with the gold to design and
produce 24-karat jewelry and Chinese ornaments. These are a
mix of rings, necklaces, pendants, earrings, bracelets, and range
in complexity from very simple bands or chains to highly intricate
designs. Some investors have inquired about potential scale,
and how our business could continue to grow at a reasonable rate
given that we do pride ourselves on the unique nature of our
products. This is one of our Company's biggest challenges,
that is balancing the need to generate favorable margins by
providing a higher level of detail on certain projects while also
utilizing our operational leverage to increase volume
production.
Kingold benefits from a senior group of designers who manage
this process, and we rely on these individuals to meet our
customers' demands and
expectations. We are diligent in researching and developing
new designs that we believe will fit the needs of our customers,
and benefit from years of testing, launching, successes, and in
some cases failure. How do you grow metric tons year over year
while still maintaining that balance? It is a mix of
experience, culture, and capacity. We have a large-scale
production base that includes a 74,933 square foot factory, a
dedicated design, sales, and marketing team, and trained employees.
We have received ISO 9001 accreditation from the International
Organization for Standardization attesting to our quality control
systems. Our production lines include automated jewelry
processing equipment and procedures that we can rapidly modify to
accommodate new designs and styles.
In 2017, we expect to continue to maintain a balance between the
branded products where the Company acquires gold from the Shanghai
Gold Exchange, and customized production where clients supply gold
to the Company for processing products that they have
commissioned. We generally have found that we can shift the
balance based on a number of factors, including customer demand and
fluctuations in gold prices. Our accounts receivables are very
low as a result of operating in predominantly a cash business, and
Kingold's net cash from operating activities can fluctuate due to
changes in our gold inventories.
How do we think about inventory management? As we have said
for years, our goal is not to act as a commodity-driven
company. We want to be paid as a designer and processor of
gold jewelry products, and our inventory balances are largely
driven by customer orders and timing that require
flexibility. While we do try to take advantage in the
short-term as we purchase inventory in advance of orders that are
pending delivery, we work to try and do so with a margin of safety
so that Kingold's commodity risk is minimized. In 2017, the
entirety of our focus will be on continuing to refine our processes
and continue to improve.
Experience of Management / Business Relationships
We believe that one of Kingold's core strengths is our
considerable experience and continuity of upper management and a
diverse Board of Directors. We have a group of professionals
who are experienced not only in our specific jewelry business but
also throughout all facets of business. We have also worked to
maintain a diverse group of Board members to ensure Kingold
benefits from a well-rounded perspective on the long-term growth
strategy of the business.
A recent item highlighted by a potential investor was a general
questioning about our managements' business dealings outside of
Kingold and their relation with each other. This includes my
involvement in other investments. It is very important to note
that my day-to-day activities and focus are entirely on the
development and continuing progression of Kingold's
business. I also feel very strongly about driving the
long-term health of the jewelry industry in China. Our mission
has been to grow at some point beyond simply being a well-respected
manufacturer in China into a
globally recognized company in the jewelry industry. It is
what drives our people on a day-to-day basis.
I do invest in businesses outside of Kingold. I do not
believe this is different from any other party involved in business
generally. In a recent story written about Kingold, there were
several loosely substantiated innuendos that the Company was
utilizing Kingold's balance sheet as a tool for exploring different
investment opportunities. This is not the case. We have
remained and will continue to remain transparent in our filings as
to all of our financial activities. We have spent a
considerable time operating as a public entity in disclosing
transactions that have a material impact on our financial
results. We are always willing to listen to investors'
opinions about ways to improve this communication, and one of our
principal goals in the coming year will be to further investors'
understanding of our business model, capabilities, and company
relationships.
Capital Market Activities in 2017
Despite the accomplishments of our Company in recent years, we
believe that the public market does not fully value the strength of
our operations or our position in the jewelry industry
marketplace. Many investors have explained to us that
Kingold's biggest challenge is not in its operations, but in its
consistency in communicating its plans and business model to
investors. We have generally taken the approach that our focus
must remain on enhancing our operations and the capital markets
will eventually grow to understand our model and value the Company
appropriately. However, we understand that to fully garner
the trust and attention of investors in the United States we must improve our investor
communication strategy. Periods of silence leads to
speculation, which in turn leads to negative reports on our
business, and ultimately, damages our reputation globally.
We expect to expand our outreach efforts to the investor
community in 2017.
Specifically, we expect to re-commence quarterly conference
calls throughout the year. We will continue to maintain a
consistent schedule of conference calls after close of the stock
market after periodic filings throughout 2017.
Personally, I have received a number of requests to host
investor meetings in the United
States in recent quarters. We have been very welcoming to
any investor willing to travel to meet with us here at our
headquarters in Wuhan,
China. I greatly enjoy those visits. I certainly
am more comfortable hosting a tour of our facilities so
investors can fully appreciate our business than struggling through
translated discussions of our gross margins in a New York conference room where I am not
speaking in my native language (this letter in of itself was a fun
process). However, I certainly understand that new and
existing investors will gain comfort from us being proactive in
visiting and updating everyone on the current status of
operations.
Our management team is committed to hosting a roadshow in
the United States by May 2017 and will also commit to another in the
fall. We expect to continue these stateside visits with
investors in the years ahead.
We also have other goals in relation to communications, such as
improving our website to better provide resource for investors to
gather necessary information as part of their diligence on our
Company. And finally, we intend to have two periods of
communicating our strategy and philosophy to investors through the
letters to shareholders. These letters include one as part of
the Annual Meeting and the other in December each year. As
always, we welcome any feedback or suggestions from
investors.
Conclusion
We continue to operate in an industry that is always changing,
and Kingold must evolve to meet the needs of the market. The
Company has a strong track record of earnings progression and we
recognize that one of the key areas of improvement for our team
will be to better communicate the various aspects of our business
to investors.
On behalf of our board of directors, management team, and over
550 employees, we thank you for your investment in our company and
your continued interest in Kingold.
Sincerely
Mr. Zhihong Jia,
Chairman and CEO
For a current review of the Company and a copy of this letter,
management invites you to access it at the Company's website
www.kingoldjewelry.com.
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. 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
kyao@equityny.com
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SOURCE Kingold Jewelry, Inc.