WENZHOU, China, Sept. 18, 2018 /PRNewswire/ -- ZK International
Group Co., Ltd. (NASDAQ: ZKIN) ("ZKIN", "ZK International" or the
"Company"), a designer, engineer, manufacturer, and supplier of
patented high-performance stainless steel and carbon steel pipe
products that require sophisticated water or gas pipeline systems,
today announced its financial results for the fiscal first six
months ended March 31, 2018.
Financial Highlights for the Fiscal Six Months Ended
March 31, 2018:
- Revenue increased 29.2% year-over-year to $26.6 million as compared to $20.6 million;
- Gross profit increased 44.6% year-over-year to $8.6 million as compared to $5.9 million;
- Gross profit margin increased to 32.4% as compared to 29% for
the same period in the year prior;
- Comprehensive net income attributable to ZK International
increased 80.04% to $3.82
million;
- Net income increased 29.3% year-over-year to $3.6 million as compared to $2.8 million;
- Earnings per share for the fiscal first half of 2018 was
$0.29, based on 13,175,841 shares
total outstanding as of the fiscal period.
Mr. Jiancong Huang, Chairman of
ZK International, commented, "During the fiscal first six months of
2018 we focused on growth and investment. We have not only
successfully increased our manufacturing capacity, but also
significantly bolstered our sales and marketing capabilities. In
doing so, we increased top and bottom line approximately 29%
year-over-year, largely driven by new contracts, growth
internationally, and new service offerings. Our increased capacity
has allowed the Company to meet the demand of the Chinese
government to implement mandatory standards for water and gas
infrastructure improvements."
Mr. Huang continued, "As we continue to build our brand and
cultivate new customer relationships, it is equally important that
we remain forward thinkers and innovators. Our investment in
research and development has yielded our company the opportunity to
one day introduce the Intelligent Piping System to the market which
combines revolutionary new aspects to our industry such as the
remote water testing sensors and blockchain-based information
distribution system. We will continue to invest in ourselves for
not only growth today, but for years to come."
Operational Highlights for Fiscal First Half of 2018:
- Strategically focused on providing premium pipeline products
and engineering and design solutions to water and gas pipe
infrastructure sector that has seen increasing governmental
investment to supply clean water and safe gas through stainless
steel and carbon steel pipe network to accommodate fast paced
urbanization of China. As a result
of the market trend and sales network expansion, the revenue
generated from sale of pipeline products and engineering and design
solutions, which yields higher gross profit than the stainless
steel coil business line, increased from 66.7% to 88.4% as a
percentage of sales and thus gross profit margin increased from 29%
to 32.4%.
- Expanded business operations into the emerging multi-billion
dollar metal pipe market located in Africa, initially targeting Uganda, one of the leading countries in
East Africa, for its growth in the
Oil and Gas sectors. ZK International is looking to expand its
business operations in Uganda as
it eyes the Ugandan government's oil and gas initiative to build a
1,445 KM pipeline from Lake Albert in Uganda to the Port of Tanga in Tanzania.
- ZK International and its subsidiary, xSigma Corporation, have
begun the implementation of its patent pending software and
blockchain technologies into its manufacturing process and supply
chain management system. In addition, the two companies are working
together to develop remote water testing system that can test the
quality of water that flows through the Company's pipe using water
testing sensors.
- Increased sales force in retail piping division from 15 to 49
professionals in 37 cities and 16 provinces, which have allowed the
Company to sell products directly to the interior design firms and
home owners and build new customer relationships.
Significant Contracts in Fiscal First Half of 2018:
- Selected as a major supplier during the annual bid with
Changsha Water Group to supply stainless steel piping for the water
supply infrastructure of Changsha,
the capital and most populous city in Hunan Province. In November 2017, the municipal government of
Changsha issued a regulation to
immediately begin updating the existing water supply infrastructure
pipeline to stainless steel.
- After a 400% increase in orders year-over-year, ZK
International renewed its contract with Towngas China Company
Limited ("Towngas China"), one of the largest public utility
providers in China and one of the
largest suppliers of gas in Asia.
- Signed agreement with Shenzhen Water Group Co., Ltd. in the
amount of $3.0 million to deploy the
Company's proprietary stainless steel pipes and fittings through
the city's Community Pipeline Network Upgrade Program.
- Entered into $1.2 million
contract with The XingRong Group, one of the largest water
treatment and supply companies in Western
China, to supply approximately 280,000 meters of piping and
280,000 pipe fittings over the course of one year.
Financial Results for the Fiscal Six Months Ended
March 31, 2018:
For the fiscal first half of 2018, revenue increased by 29.2% to
$26.6 million as compared to
$20.6 million during the fiscal first
half of 2017. The increase in revenue is primarily attributable to
the increase in capital expenditure by the government in
China to build healthier and safer
clean water supply infrastructure in urban areas. Additionally, the
Company increased international sales in China by 61.5% during the fiscal first half of
2018 as compared to the same period in 2017.
Gross profit for the fiscal first half of 2018 increased 44.6%
to $8.6 million as compared to
$5.9 million during the fiscal first
half of 2017. Gross profit margin increased to 32.4% for the fiscal
first half of 2018 as compared to 29% for the fiscal first half of
2017. Gross profit margin increased primarily due to an increase in
the Company's sales of premium pipeline products and engineering
and design solutions for client construction projects, which yield
higher gross margin, increased from 66.7% to 88.4% as a percentage
of sales year-over-year. During the fiscal first half of 2018 lower
margin stainless steel coil product sales decreased from 33.3% to
11.6% as a percentage of sales year-over-year.
Operating expenses increased 82.8% year-over-year to
$3.7 million as compared to
$2.1 million year-over-year. The
increase is mainly due to an increase in selling and marketing
expense. The increase reflected higher Selling and Marketing
Expenses related to the sales growth, increased general and
administrative expenses ("G&A") and higher research and
development ("R&D") costs. During the period, the Company
increased its sales force by 227% from 15 to 49 professionals in 37
cities and 16 provinces throughout China to strategically target the consumer
plumbing market. As a percentage of revenue, operating expenses
were 14.1% in the fiscal first half of 2018, compared with 9.9% in
the fiscal first half of 2017.
Income from operations increased 24.6% to $4.8 million in the fiscal first half of 2018 as
compared with $3.9 million in the
fiscal first half of 2017. As a percentage of revenue, income from
operations was 18.3% during the fiscal first half of 2018 as
compared to 18.9% in the 2017 for the same period the year
prior.
Net income attributable to ZK International for the fiscal first
half of 2018 totaled $3.6 million as
compared to $2.9 million in the
fiscal first half of 2017. Earnings per share for the fiscal first
half of 2018 was $0.29, based on
13,175,841 shares total outstanding as of the fiscal period.
Comprehensive net income attributable to ZK International for
the fiscal first half of 2018 increased 80.04% to $3.8 million as compared with $2.1 million in the fiscal first half of 2017.
The increase was mainly due to the increase of net income and
appreciation of Chinese Yuan against US Dollar which led to
comprehensive gain on currency translation.
About ZK International Group Co., Ltd.
ZK International Group Co., Ltd. is a China-based designer,
engineer, manufacturer, and supplier of patented high-performance
stainless steel and carbon steel pipe products that require
sophisticated water or gas pipeline systems. The Company owns 28
patents, 21 trademarks, 2 Technical Achievement Awards, and 10
National and Industry Standard Awards. ZK International is
preparing to capitalize on the $850 billion commitment made by
the Chinese Government to improve the quality of water, which in
its current supply state is 70% unfit for human contact. ZK
International is Quality Management System Certified (ISO9001),
Environmental Management System Certified (ISO1401), and a National
Industrial Stainless Steel Production Licensee that is focused on
supplying steel piping for the multi-billion dollar industries of
Gas and Water sectors. ZK has supplied stainless steel
pipelines for over 2,000 projects, including the Beijing National
Airport, the "Water Cube" and "Bird's Nest", which were venues for
the 2008 Beijing Olympics. Emphasizing superior properties
and durability of its steel piping, ZK International is providing a
solution for the delivery of high quality, highly sustainable,
environmentally sound drinkable water not only to
the China market but to international markets such
as Europe, East Asia, and Southeast Asia.
For more information please
visit www.ZKInternationalGroup.com. Additionally,
please follow the Company
on Twitter, Facebook, YouTube,
and Weibo. For further information on the Company's SEC
filings please visit www.sec.gov.
Safe Harbor Statement
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
and as defined in the U.S. Private Securities Litigation Reform Act
of 1995. Without limiting the generality of the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate" or "continue" or the negative or other
variations thereof or comparable terminology are intended to
identify forward-looking statements. In addition, any statements
that refer to expectations, projections or other characterizations
of future events or circumstances are forward-looking statements.
These forward-looking statements are not guarantees of future
performance and are subject to certain risks, uncertainties, and
assumptions that are difficult to predict and many of which are
beyond the control of ZK International. Actual results may
differ from those projected in the forward-looking statements due
to risks and uncertainties, as well as other risk factors that are
included in the Company's filings with the U.S. Securities and
Exchange Commission. Although ZK International believes that
the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated
in forward-looking statements will be realized. In light of
the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information
should not be regarded as a representation by ZK International or
any other person that their objectives or plans will be achieved.
ZK International does not undertake any obligation to revise the
forward-looking statements contained herein to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Investor Contact:
KCSA Strategic Communications
Valter Pinto, Managing Director
PH: +1 (212) 896-1242
ZKInternational@KCSA.com
ZK International
Group Co., Ltd. and Subsidiaries
|
|
Consolidated
Statements of Income and Comprehensive Income (Loss)
|
|
For the Six Months
Ended March 31, 2018 and 2017 (Unaudited)
|
|
|
|
|
|
For The Six Months
Ended Mar 31,
|
|
|
2018
|
2017
|
|
Revenues
|
26,599,838
|
$20,588,991
|
|
Cost of
sales
|
17,971,991
|
14,623,906
|
|
Gross
profit
|
8,627,848
|
5,965,084
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
Selling and marketing
expenses
|
1,725,830
|
692,252
|
|
General and
administrative expenses
|
1,306,653
|
742,775
|
|
Research and
development costs
|
722,331
|
619,380
|
|
Total operating
expenses
|
3,754,814
|
2,054,407
|
|
|
|
|
|
Operating
Income
|
4,873,034
|
3,910,678
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
Interest
expenses
|
(571,973)
|
(523,939)
|
|
Interest
income
|
4,857
|
8,566
|
|
Other income
(expenses), net
|
9,358
|
36,632
|
|
Total other
expenses, net
|
(557,758)
|
(478,741)
|
|
|
|
|
|
Income before
income taxes
|
4,315,276
|
3,431,937
|
|
|
|
|
|
Income tax
provision
|
628,372
|
488,525
|
|
|
|
|
|
Net
income
|
3,686,904
|
$2,943,412
|
|
Net income
attributable to non-controlling interests
|
39,219
|
31,447
|
|
|
|
|
|
Net income
attributable to ZK International Group Co., Ltd.
|
3,647,684
|
$2,911,965
|
|
|
|
|
|
Net income
|
3,686,904
|
$2,943,412
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
Foreign currency
translation adjustment
|
180,714
|
(782,893)
|
|
|
|
|
|
Total
comprehensive income
|
3,867,618
|
2,160,519
|
|
Comprehensive income
attributable to non-controlling interests
|
47,005
|
38,413
|
|
Comprehensive income
attributable to ZK International Group Co.,
Ltd.
|
3,820,613
|
2,122,106
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
Basic
|
0.29
|
0.21
|
|
Diluted
|
0.29
|
0.21
|
|
Weighted average
number of shares outstanding
|
|
|
|
Basic
|
13,147,929
|
10,166,667
|
|
Diluted
|
13,175,841
|
10,166,667
|
|
|
|
|
|
ZK International
Group Co., Ltd. and Subsidiaries
|
Consolidated
Balance Sheets
|
As of March 31,
2017 and 2018 (Unaudited)
|
|
|
|
Balance
Sheet
|
|
As of March
31,
|
|
|
2018
USD
|
|
2017
USD
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
2,866,835
|
|
$2,308,705
|
Restricted
cash
|
|
|
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
|
27,595,376
|
|
14,029,873
|
Notes
receivable
|
|
337,046
|
|
76,420
|
Other
receivables
|
|
|
|
2,463,775
|
Inventories
|
|
12,379,704
|
|
10,831,964
|
Advance to
suppliers
|
|
14,211,330
|
|
7,278,889
|
Deferred tax assets,
current portion
|
|
288,755
|
|
239,309
|
Total current
assets
|
|
57,679,046
|
|
37,228,935
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
5,988,442
|
|
5,505,493
|
Intangible assets,
net
|
|
1,586,104
|
|
446,875
|
Other long-term
assets
|
|
1,012,380
|
|
310,405
|
TOTAL
ASSETS
|
|
$66,265,972
|
|
$43,491,708
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
778,494
|
|
$478,872
|
Accrued expenses and
other current liabilities
|
|
3,743,743
|
|
1,259,374
|
Accrued payroll and
welfare
|
|
340,331
|
|
246,771
|
Advance from
customers
|
|
2,087,656
|
|
1,876,922
|
Related party
payables
|
|
9,814,413
|
|
2,980,595
|
Short-term bank
borrowings
|
|
20,152,169
|
|
21,103,137
|
Notes
payable
|
|
-
|
|
|
Income tax
payable
|
|
3,828,865
|
|
2,514,097
|
TOTAL
LIABILITIES
|
|
$40,745,671
|
|
$30,459,768
|
|
|
|
|
|
COMMOTMENTS AND
CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
Common
stock, no par value, 50,000,000 shares authorized,
13,068,346 shares issued and outstanding
|
|
|
|
|
Additional paid-in
capital
|
|
8,668,614
|
|
4,093,277
|
Statutory surplus
reserve
|
|
1,565,557
|
|
936,646
|
Retained
earnings
|
|
14,235,225
|
|
8,250,377
|
Accumulated other
comprehensive income
|
|
853,872
|
|
(375,700)
|
Total equity
attributable to ZK International Group Co., Ltd.
|
|
25,323,269
|
|
12,904,600
|
Equity attributable
to non-controlling interests
|
|
197,033
|
|
127,341
|
Total
equity
|
|
25,520,302
|
|
$13,031,941
|
TOTAL LIABILITIES
AND EQUITY
|
|
$66,265,972
|
|
$43,491,708
|
|
|
|
|
|
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SOURCE ZK International Group Co., Ltd.