Gross profit increases 39.5% year-over-year to $18.3 million driven by an increase in gross
profit margins to 33.3%
WENZHOU, China, Feb. 4, 2019 /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 its fiscal year ended September
30, 2018.
Financial Highlights for the Fiscal Year Ended September 30, 2018:
- Revenue increased 22.1% year-over-year to $54.9 million as compared to $45 million;
- Gross profit increased 39.5% year-over-year to $18.3 million as compared to $13.1 million;
- Gross profit margin increased to 33.3% as compared to 29.2% for
the same period in the year prior;
- Net income attributable to ZK International Group Co., Ltd.
totaled $7,018,114 or $0.52 per basic and $0.51 per diluted share, based on 13,610,046
basic and 13,629,517 diluted weighted average number of shares
outstanding;
- As of September 30, 2018, net
book value was $37.3 million or
$2.25 per share based on 16,528,037
ordinary shares outstanding as of September
30, 2018.
Mr. Jiancong Huang, Chairman of
ZK International, commented, "We are pleased with our record
revenue growth and increased margins year-over-year. Our financial
results in 2018 were largely driven by new supplier agreements with
leaders in our industry including Changsha Water
Group, Towngas China Company, and Shenzhen Water Group.
The Chinese government also continues to focus on improving water
and gas infrastructure. Recently the Ministry of Housing and
Urban-Rural Development implemented a standard to upgrade existing
water piping to stainless steel and incorporate stainless steel
into new infrastructure. Our ability to work closely with the local
government and provide sophisticated piping solutions for major
projects is key to our continued growth trajectory."
Mr. Huang continued, "As the government continues to increase
legislation to impose mandatory standards for water and gas
infrastructure, we will continue to see new opportunities to
enhance our leadership position and drive financial growth. In
order to meet the growing demand for our proprietary products and
enhance our competitive edge, it is imperative that we continue to
invest in ourselves through strategic sales and marketing while
continuing to expand our research and development
capabilities."
Significant Contracts in Fiscal 2018 to Date:
- Selected by China Railway First Bureau Group Construction and
Installation Engineering Co., Ltd. to supply its premium
thin-walled, stainless steel products for the second phase of
Beijing's Rail Transit Line 7 -
valued at $580,000 (3.98 million yuan).
- Selected by Zhuhai Water Environment Holding Group Co., Ltd.
("Zhuhai Water"), one of China's
top 40 most influential water group companies, as a leading
supplier of stainless steel piping for updating the water supply
infrastructure in Zhuhai, China.
The total demand of stainless steel pipe by Zhuhai Water for the
next year is estimated to be approximately $2-3 million.
- 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 Year Ended
September 30, 2018:
Revenue for the fiscal year ended September 30, 2018 totaled $54,884,381, as compared to $44,951,740 for the fiscal year ended
September 30, 2017, an increase of
22.1%. The increase in revenue is primarily due to an increase in
market share of this industry and more governmental and
infrastructural projects Company has taken to replace the
underground pipes and to improve local water supply systems.
Total cost of revenue was $36,593,792 for the fiscal year ended
September 30, 2018, compared to
$31,843,337 for the fiscal year ended
September 30, 2017. Total cost of
revenue as a percentage of revenue decreased by 4.16% to 66.67% for
the fiscal year ended September 30,
2018 compared to 70.84% for the fiscal year ended
September 30, 2017. The decrease is
primarily due to the improvement of its manufacturing technique,
which lowered Company's defect rate and thus decreased the cost of
the production.
Selling and marketing expenses for the fiscal year ended
September 30, 2018 totaled
$2,949,204, compared to $1,915,127 for the fiscal year ended September 30, 2017. This increase is primarily
due to increases in freight expenses, advertising expenses, and
compensation for the additional sales personnel Company has hired
during the year.
General and administrative expenses for the fiscal year ended
September 30, 2018 totaled
$4,071,116, compared to $1,782,318 for the fiscal year ended September 30, 2017. The increase is primarily due
to the increase in legal and other expenses related to SEC
regulation compliance and the increase in consulting expenses
related to financing and investing activities.
Research and development expenses for the fiscal year ended
September 30, 2018 totaled
$1,652,633, compared to $1,331,111 for the fiscal year ended September 30, 2017. The increase was primarily
due to the increased research staff salary and expenses relating to
the materials and equipment Company uses to conduct its research
for its new products. Management is committed to expanding
Company's research and development efforts to enhance competitive
advantage.
As a result of the factors described above, operating income was
$9,617,636 for the fiscal year ended
September 30, 2018, compared to
operating income of $8,079,847 for
the fiscal year ended September 30,
2017, an increase of operating income of $1,537,789, or approximately 19%.
Net income attributable to ZK International Group Co., Ltd.
totaled $7,018,114 for the fiscal
year ended September 30, 2018 as
compared to $5,874,276 for the same
period the year prior. Earnings was $0.52 per basic and $0.51 per diluted share, based on 13,610,046
basic and 13,629,517 diluted weighted average number of shares
outstanding.
Foreign currency translation loss for the fiscal year ended
September 30, 2018 was $818,468. The currency translation loss was
resulted due to the different exchange rates used during financial
currency translation. When translating local financial reports of
the Company's subsidiaries into US dollar, assets and liabilities
are translated at the exchange rates at the balance sheet date,
equity accounts are translated at historical exchange rates and
revenue, expenses, gains and losses are translated at the average
rate for the period. Translation adjustments are reported as
cumulative translation adjustments and are shown as a separate
component of other comprehensive income in the statements of
operations and comprehensive income.
As of September 30, 2018, cash and cash equivalents were
$7.7 million or $0.47 per share based on 16,528,037 ordinary
shares outstanding as of September 30,
2018.
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 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.
ZK INTERNATIONAL GROUP CO.,
LTD
CONSOLIDATED BALANCE SHEETS
(IN U.S.
DOLLARS)
|
|
As of September
30,
|
|
|
|
2018
|
|
|
2017
|
|
Assets
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,682,589
|
|
|
$
|
11,278,475
|
|
Restricted
cash
|
|
|
-
|
|
|
|
529,837
|
|
Short-term
Investment
|
|
|
850,829
|
|
|
|
|
|
Accounts receivable,
net of allowance for doubtful accounts of $1,997,310 and
$1,817,050,
respectively
|
|
|
27,134,237
|
|
|
|
21,261,609
|
|
Notes
receivable
|
|
|
414,352
|
|
|
|
214,999
|
|
Other
receivables
|
|
|
2,624,022
|
|
|
|
1,514,545
|
|
Due from Related
Parties
|
|
|
22,278
|
|
|
|
-
|
|
Inventories
|
|
|
17,792,187
|
|
|
|
10,048,568
|
|
Advance to
suppliers
|
|
|
7,826,679
|
|
|
|
9,630,518
|
|
Total current
assets
|
|
|
64,347,173
|
|
|
|
54,478,551
|
|
Property, plant and
equipment, net
|
|
|
6,280,412
|
|
|
|
5,645,724
|
|
Intangible assets,
net
|
|
|
938,221
|
|
|
|
463,171
|
|
Deferred tax
assets
|
|
|
299,596
|
|
|
|
272,557
|
|
Long-term
Deposit
|
|
|
4,229,827
|
|
|
|
|
|
Other long-term
assets
|
|
|
303,334
|
|
|
|
313,066
|
|
TOTAL
ASSETS
|
|
$
|
76,398,563
|
|
|
$
|
61,173,069
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,670,427
|
|
|
$
|
717,272
|
|
Accrued expenses and
other current liabilities
|
|
|
5,934,733
|
|
|
|
4,457,170
|
|
Accrued payroll and
welfare
|
|
|
887,201
|
|
|
|
325,675
|
|
Advance from
customers
|
|
|
3,410,322
|
|
|
|
1,983,713
|
|
Related party
payables
|
|
|
3,694,469
|
|
|
|
7,911,720
|
|
Short-term bank
borrowings
|
|
|
19,270,530
|
|
|
|
21,335,938
|
|
Income tax
payable
|
|
|
4,263,289
|
|
|
|
3,074,635
|
|
TOTAL
LIABILITIES
|
|
$
|
39,130,971
|
|
|
$
|
39,806,123
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Common stock, no par
value, 50,000,000 shares authorized, 16,528,037 and 13,068,346
shares
issued and outstanding, respectively
|
|
|
|
|
|
|
-
|
|
Additional paid-in
capital
|
|
|
17,998,933
|
|
|
|
8,382,876
|
|
Statutory surplus
reserve
|
|
|
2,031,775
|
|
|
|
1,173,363
|
|
Retained
earnings
|
|
|
17,138,593
|
|
|
|
10,978,891
|
|
Accumulated other
comprehensive income (loss)
|
|
|
(127,456)
|
|
|
|
681,788
|
|
Total equity
attributable to ZK International Group Co., Ltd.
|
|
|
37,041,845
|
|
|
|
21,216,918
|
|
Equity attributable
to non-controlling interests
|
|
|
225,747
|
|
|
|
150,028
|
|
Total
equity
|
|
|
37,267,592
|
|
|
|
21,366,946
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
$
|
76,398,563
|
|
|
$
|
61,173,069
|
|
ZK INTERNATIONAL GROUP CO.,
LTD
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
(IN U.S. DOLLARS)
|
|
For the year ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Revenues
|
|
$
|
54,884,381
|
|
|
$
|
44,951,740
|
|
|
$
|
36,809,094
|
|
Cost of
sales
|
|
|
(36,593,792)
|
|
|
|
(31,843,337)
|
|
|
|
(25,333,318)
|
|
Gross
profit
|
|
|
18,290,589
|
|
|
|
13,108,403
|
|
|
|
11,475,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
|
2,949,204
|
|
|
|
1,915,127
|
|
|
|
957,990
|
|
General and
administrative expenses
|
|
|
4,071,116
|
|
|
|
1,782,318
|
|
|
|
1,599,743
|
|
Research and
development costs
|
|
|
1,652,633
|
|
|
|
1,331,111
|
|
|
|
1,302,022
|
|
Total operating
expenses
|
|
|
8,672,953
|
|
|
|
5,028,556
|
|
|
|
3,859,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
9,617,636
|
|
|
|
8,079,847
|
|
|
|
7,616,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expenses
|
|
|
(1,239,170)
|
|
|
|
(1,245,385)
|
|
|
|
(1,417,745)
|
|
Interest
income
|
|
|
10,702
|
|
|
|
24,459
|
|
|
|
51,058
|
|
Other income,
net
|
|
|
112,099
|
|
|
|
69,772
|
|
|
|
158,797
|
|
Total other
expenses, net
|
|
|
(1,116,369)
|
|
|
|
(1,151,154)
|
|
|
|
(1,207,890)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income taxes
|
|
|
8,501,267
|
|
|
|
6,928,693
|
|
|
|
6,408,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
provision
|
|
|
(1,398,210)
|
|
|
|
(995,005)
|
|
|
|
(1,105,440)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
7,103,057
|
|
|
$
|
5,933,688
|
|
|
$
|
5,302,691
|
|
Net income
attributable to non-controlling interests
|
|
|
(84,943)
|
|
|
|
(59,412)
|
|
|
|
(53,154)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to ZK International Group Co., Ltd.
|
|
|
7,018,114
|
|
|
|
5,874,276
|
|
|
$
|
5,249,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
7,103,057
|
|
|
$
|
5,933,688
|
|
|
$
|
5,302,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(818,468)
|
|
|
|
272,237
|
|
|
|
(403,865)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
$
|
6,284,589
|
|
|
$
|
6,205,925
|
|
|
$
|
4,898,826
|
|
Comprehensive loss
(income) attributable to non-controlling interests
|
|
|
(75,719)
|
|
|
|
(61,100)
|
|
|
|
3,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
attributable to ZK International Group Co., Ltd.
|
|
$
|
6,208,870
|
|
|
$
|
6,144,825
|
|
|
$
|
4,902,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.52
|
|
|
$
|
0.56
|
|
|
$
|
0.59
|
|
Diluted
|
|
|
0.51
|
|
|
|
0.56
|
|
|
|
0.59
|
|
Weighted average
number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
13,610,046
|
|
|
|
10,970,000
|
|
|
|
9,000,000
|
|
Diluted
|
|
|
13,629,517
|
|
|
|
10,973,674
|
|
|
|
9,000,000
|
|
ZK INTERNATIONAL GROUP CO.,
LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN
U.S. DOLLARS)
|
|
For the year ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$ 7,103,05
7
|
|
|
$
|
5,933,688
|
|
|
$
|
5,302,691
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
395,604
|
|
|
|
425,696
|
|
|
|
442,793
|
|
Amortization
expense
|
|
|
12,137
|
|
|
|
12,705
|
|
|
|
13,248
|
|
Bad debt
expense
|
|
|
286,606
|
|
|
|
160,944
|
|
|
|
691,156
|
|
Deferred tax
benefits
|
|
|
(37,311)
|
|
|
|
(24,142)
|
|
|
|
(103,673)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(7,151,260)
|
|
|
|
2,419,491
|
|
|
|
(10,200,868)
|
|
Other
receivables
|
|
|
(1,215,167)
|
|
|
|
411,554
|
|
|
|
(381,751)
|
|
Notes
receivable
|
|
|
(216,478)
|
|
|
|
(121,937)
|
|
|
|
(76,531)
|
|
Inventories
|
|
|
(9,065,712)
|
|
|
|
(3,505,158)
|
|
|
|
(775,275)
|
|
Advance to
suppliers
|
|
|
1,580,700
|
|
|
|
(6,153,011)
|
|
|
|
(805,016)
|
|
Accounts
payable
|
|
|
861,192
|
|
|
|
(417,453)
|
|
|
|
796,189
|
|
Accrued expenses and
other current liabilities
|
|
|
1,698,015
|
|
|
|
791,312
|
|
|
|
412,894
|
|
Accrued payroll and
welfare
|
|
|
600,619
|
|
|
|
(49,512)
|
|
|
|
50,897
|
|
Advance from
customers
|
|
|
1,563,693
|
|
|
|
282,817
|
|
|
|
1,400,622
|
|
Income tax
payable
|
|
|
1,349,310
|
|
|
|
979,288
|
|
|
|
2,031,515
|
|
Net cash provided
(used in) operating activities
|
|
|
(2,234,995)
|
|
|
|
1,146,282
|
|
|
|
(1,201,109)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of
property, plant and equipment
|
|
|
(467,138)
|
|
|
|
(155,152)
|
|
|
|
(123,945)
|
|
Disposal of
Intangible Asset
|
|
|
257,863
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of
intangible assets
|
|
|
(501,000)
|
|
|
|
(6,704)
|
|
|
|
|
|
Net cash used in
investing activities
|
|
|
(710,275)
|
|
|
|
(161,856)
|
|
|
|
(123,945)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from
issuance of shares deduct related costs
|
|
|
(380,000)
|
|
|
|
5,582,099
|
|
|
|
-
|
|
Short-term
Investment
|
|
|
(893,945)
|
|
|
|
-
|
|
|
|
15,306
|
|
Net proceeds released
from (placed into) long-term deposit
|
|
|
(4,444,170)
|
|
|
|
-
|
|
|
|
|
|
Net proceeds released
from (placed into) restricted cash
|
|
|
539,381
|
|
|
|
2,651,704
|
|
|
|
(206,633)
|
|
Proceeds from
short-term bank borrowings
|
|
|
24,056,279
|
|
|
|
(499,904)
|
|
|
|
2,148,310
|
|
Repayments of
short-term bank borrowings
|
|
|
(25,529,488)
|
|
|
|
(3,816,458)
|
|
|
|
(2,602,037)
|
|
Net
proceeds from related parties
|
|
|
5,665,914
|
|
|
|
6,051,523
|
|
|
|
1,485,555
|
|
Net cash provided by
financing activities
|
|
|
(986,029)
|
|
|
|
9,968,964
|
|
|
|
840,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
|
|
335,413
|
|
|
|
201,436
|
|
|
|
(18,589)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
|
|
(3,595,886)
|
|
|
|
11,154,826
|
|
|
|
(503,142)
|
|
Cash and cash
equivalents at the beginning of year
|
|
|
11,278,475
|
|
|
|
123,649
|
|
|
|
626,791
|
|
Cash and cash
equivalents at the end of year
|
|
$
|
7,682,589
|
|
|
$
|
11,278,475
|
|
|
$
|
123,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flows information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
financing activities
|
|
$
|
9,842,676
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income
taxes
|
|
$
|
38,218
|
|
|
$
|
54,215
|
|
|
$
|
108,825
|
|
Cash paid for
interest expenses
|
|
$
|
1,218,757
|
|
|
$
|
1,233,066
|
|
|
$
|
939,914
|
|
View original
content:http://www.prnewswire.com/news-releases/zk-international-announces-record-revenue-of-54-9-million-a-22-1-increase-year-over-year-for-the-fiscal-year-2018--300788886.html
SOURCE ZK International Group Co., Ltd.