WENZHOU, China, Sept. 17,
2019 /PRNewswire/ -- ZK International Group Co.,
Ltd. (ZKIN) ("ZK International" or the "Company"), a
designer, engineer, manufacturer, and supplier of patented
high-performance stainless steel and carbon steel pipe products
primarily used for water and gas supplies, today announced its
unaudited financial results for the six months ended March 31, 2019.
- Revenue increased 18.6% year-over-year to
$31.54 million as compared to
$26.60 million
- Net income attributable to ZK International increased 5.3%
year-over-year to $3.84 million
as compared to $3.65 million
- Gross profit decreased 6.4% year-over-year to $8.08 million as compared to $8.63 million; Gross margin decreased to
25.6% as compared to 32.4% for the same period of the last
fiscal year
- Income from operations decreased by 7.1% year-over-year to
$4.53 million as compared to
$4.87 million; Operating margin
decreased to 14.4% as compared to 18.3% for the same period of the
last fiscal year
- A debt settlement with Jiancong
Huang, the CEO and Chairman of the Board of the Company, by
issuance of 3,280,525 shares of ordinary share at $2.83 per share on August
15, 2018
- Earnings per share was $0.23 for the six months ended March 31, 2019, compared to $0.29 for the same period of the last fiscal
year
Financial Highlights for the six months ended March 31, 2019
|
|
For the Six Months
Ended March 31,
|
($ millions,
except per share data)
|
|
2019
|
|
2018
|
|
%
Change
|
Revenue
|
|
$31.54
|
|
$26.60
|
|
18.6%
|
Gross
profit
|
|
$8.08
|
|
$8.63
|
|
-6.4%
|
Gross
margin
|
|
25.6%
|
|
32.4%
|
|
-6.8 percentage
points
|
Income from
operations
|
|
$4.53
|
|
$4.87
|
|
-7.1%
|
Operating
margin
|
|
14.4%
|
|
18.3%
|
|
-3.9 percentage
points
|
Net income
attributable to ZK International
|
|
$3.84
|
|
$3.65
|
|
5.3%
|
Total comprehensive
income
|
|
$4.27
|
|
$3.87
|
|
10.45%
|
Mr. Jiancong Huang, Chairman and
Chief Executive Officer of ZK International, commented, "Our first
half of fiscal year 2019 results reflected the continued strength
in sales volume partially offset by decreased weighted average
selling prices ("ASP") for our products and the depreciation of RMB
against US$. As measured in RMB, revenue increased by 23.06%
year-over-year to RMB215.4 million despite decrease in blended
ASP."
Mr. Huang continued, "Despite continuing headwinds with
challenging pricing environment and depreciation of RMB against US
Dollar during the second half of fiscal year 2019, our orders book
remains strong and we expect it to continue to drive double digits
growth in both sales volume and revenue in the second half of
fiscal year 2019 as we continue to expand our product portfolio,
build our brands and cultivate new customer relations".
Financial Results for the Six Months Ended March 31, 2019
Revenue
For the six months ended March 31,
2019, revenue increased by $4.94 million, or 18.6%, to $31.54 million from $26.60 million for the same period of the last
fiscal year. The increase in revenue is primarily attributable
to the increased sales volume of stainless steel
coil products, partially offset by 5.4% depreciation of RMB
against US$. As measured in RMB, revenue increased by 23.06%
year-over-year to RMB215.4 million, thanks to continued growth
in overall sales volume that more than offset the decrease in
blended ASP as prices for steel strips and coils dropped during six
months ended March 31, 2019.
Gross Profit
Gross profit decreased by $0.55
million, or 6.4%, to $8.08
million for the six months ended March 31, 2019 from $8.63
million for the same period of last fiscal year. As a
result, gross margin decreased by 6.82 points to 25.6% for the six
months ended March 31, 2019 from
32.4% for the same period of last fiscal year. The decrease in
gross margin was primarily due to decreased percentage of sales
from higher margin, premium pipe products versus increased
percentage of sales from lower margin stainless steel coil
products.
Operating Expenses
Selling and marketing expenses decreased by $0.38 million, or 22.2%, to $1.34 million for the six months ended
March 31, 2019 from $1.73 million for the same period of last fiscal
year. As a percentage of sales, selling and marketing expenses was
5.1% for the six months ended March 31,
2019, compared to 6.5% for the same period of last fiscal
year.
General and administrative expenses increased by $0.15 million, or 11.3%, to $1.45 million for the six months ended
March 31, 2019 from $1.31 million for the same period of last fiscal
year. As a percentage of sales, general and administrative expenses
was 5.6% for the six months ended March 31,
2019, compared to 4.9% for the same period of last fiscal
year.
Research and development expenses was $0.75 million for the six months ended
March 31, 2019, compared to
$0.72 million for the same period of
last fiscal year. As a percentage of sales, research and
development expenses was 2.9% for the six months ended March 31, 2019, compared to 2.7% for the same
period of last fiscal year.
Total operating expenses decreased by $0.20 million, or 5.4%, to $3.55 million for the six months ended
March 31, 2019 from $3.75 million for the same period of last fiscal
year. As a percentage of sales, total operating expenses was 13.6%
for the six months ended March 31,
2019, compared to 14.1% for the same period of last fiscal
year.
Income from Operations
Income from operations decreased by $0.35
million, or 7.1%, to $4.53
million for the six months ended March 31, 2019 from $4.87
million for the same period of last fiscal year. As a
result, operating margin decreased by 4.0 points to 14.4% for the
six months ended March 31, 2019 from
18.3% for the same period of last fiscal year. The decrease in
operating margin was primarily due to decreased gross margin and
was partially offset by lowered operating expenses as a percentage
of sales.
Other Income (Expenses)
Interest expenses was $0.63
million for the six months ended March 31, 2019, compared to $0.57 million for the same period of last fiscal
year. Other income was $0.63 million
for the six months ended March 31,
2019, compared to $0.01
million for the same period of last fiscal year. As a
result, total net other income was $6,666 for the six months ended March 31, 2019, compared to total net other
expenses of $0.56 million for the
same period of last fiscal year.
Income before Income Taxes
Income before income taxes increased by $0.22 million, or 5.1%, to $4.53 million for the six months ended
March 31, 2019 from $4.32 million for the same period of last fiscal
year. The increase in income before income taxes was primarily
related to increased other income.
Net Income and EPS
Net income increased by $0.19
million, or 5.3%, to $3.88
million for the six months ended March 31, 2019 from $3.69
million for the same period of last fiscal year. Net margin
decreased by 1.55 percentage points to 12.3% for the six months
ended March 31, 2019 from 13.9% for
the same period of last fiscal year.
After deducting for non-controlling interests, net income
attributable to ZK International was $3.84
million, or $0.23 per basic
and diluted share for the six months ended March 31, 2019, compared to $3.65 million, or $0.29 per basic and diluted share for the same
period of last fiscal year. Weighted average number of shares
outstanding was 16,528,037 for the six months ended March 31,2019, compared to 13,175,841 (diluted)
for the same period of last fiscal year. The increase of shares
outstanding was primarily attributable to the debt settlement with
Jiancong Huang, the CEO and Chairman
of the Board of the Company, by issuance of 3,280,525 shares of
ordinary share at $2.83 per share on
August 15, 2018.
Financial Condition
As of March 31, 2019, cash and
cash equivalents and short-term investments totaled $2.70 million, compared to $8.53 million as of September 30, 2018. Short-term bank borrowings
were $19.30 million as of
March 31, 2019, compared to
$19.27 million as of September 30, 2018.
Accounts receivable was $26.09
million as of March 31, 2019,
compared to $27.13 million as of
September 30, 2018. Inventories were
$20.34 million as of March 31, 2019, compared to $17.79 million as of September 30, 2018. Accounts payable was
$2.26 million as of March 31, 2019, compared to $1.67 million as of September 30, 2018.
Total current assets and current liabilities were $63.63 million and $34.93
million, respectively, leading to a current ratio of 1.78 as
of March 31, 2019. This compared to
total current assets and current liabilities were $64.35 million and $39.13
million, respectively, and current ratio of 1.64 as of
September 30, 2018.
Recent Developments
On August 20, 2019, the Company
announced that the Chinese government started implementing a new
Assessment Standard for Green Buildings ('the New Standard") this
month, which the Company believes provides a favorable catalyst for
the stainless steel pipe industry for years to come and could
potentially benefit companies such as ZK International. The New
Standard, coded with National Standard No.: GB/T50378-2019, was
promulgated by the Ministry of Housing and Urban-Rural Development
and the State Administration for Market Regulation on March 13, 2019 (Notice No. 61) and went into
effect on August 1, 2019. As part of
the New Standard, it requires the mandatory use of stainless steel
or copper pipes over more traditional PPR, synthetic plastic or
galvanized pipes for water supply.
On April 17, 2019, the Company
provided revenue guidance for the fiscal year 2019, anticipating
revenue to increase by $13.7 million,
or 25%, to approximately $68.6
million for the fiscal year ending September 30, 2019 from $54.9 million for the fiscal year ended
September 30, 2018.
On December 11, 2018, the Company
announced that it was selected by China Railway First Bureau Group
Construction and Installation Engineering Co., Ltd. to supply its
premium thin-walled, stainless steel piping products for Phase II
of Beijing's Rail Transit Line 7.
The bid, valued at $580,000
(RMB 3.98 million), marked the
Company's entry into China's
$116 billion rail transportation
infrastructure market.
On October 9, 2018, the Company
announced that it won leading bid to supply up to $3 million of stainless steel piping to Zhuhai
Water Environment Holding Group Co., Ltd., one of China's Top 40 Most Influential Water
Companies.
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 33 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 also 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 guarantee 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:
Tony Tian, CFA
Weitian Group LLC
Phone: +1 (732) 910-9692
Email: ttian@weitianco.com
ZK International
Group Co., Ltd. and Subsidiaries
Consolidated
Statements of Income and Comprehensive Income (Loss)
For the Six Months
Ended March 31, 2019 and 2018 (Unaudited)
(IN
U.S. DOLLARS, EXCEPT SHARE DATA)
|
|
|
For the Six
Months
Ended March 31,
|
|
2019
|
|
2018
|
Revenues
|
$
|
31,536,768
|
|
$
|
26,599,838
|
Cost of
sales
|
|
23,458,744
|
|
|
17,971,990
|
Gross
profit
|
|
8,078,024
|
|
|
8,627,848
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Selling and marketing
expenses
|
|
1,341,875
|
|
|
1,725,830
|
General and
administrative expenses
|
|
1,454,760
|
|
|
1,306,653
|
Research and
development costs
|
|
754,315
|
|
|
722,331
|
Total operating
expenses
|
|
3,550,950
|
|
|
3,754,814
|
|
|
|
|
|
|
Operating
Income
|
|
4,527,074
|
|
|
4,873,034
|
|
|
|
|
|
|
Other income
(expenses):
|
|
|
|
|
|
Interest
expenses
|
|
(626,036)
|
|
|
(571,973)
|
Interest
income
|
|
4,856
|
|
|
4,857
|
Other income
(expenses), net
|
|
627,846
|
|
|
9,358
|
Total other
expenses, net
|
|
6,666
|
|
|
(557,758)
|
|
|
|
|
|
|
Income before
income taxes
|
|
4,533,740
|
|
|
4,315,276
|
|
|
|
|
|
|
Income tax
provision
|
|
652,859
|
|
|
628,372
|
|
|
|
|
|
|
Net
income
|
$
|
3,880,881
|
|
$
|
3,686,904
|
Net income
attributable to non-controlling interests
|
|
41,453
|
|
|
39,219
|
|
|
|
|
|
|
Net income
attributable to ZK International Group Co., Ltd.
|
$
|
3,839,428
|
|
$
|
3,647,684
|
|
|
|
|
|
|
Net income
|
$
|
3,880,881
|
|
$
|
3,686,904
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
390,711
|
|
|
180,714
|
|
|
|
|
|
|
Total
comprehensive income
|
|
4,271,592
|
|
|
3,867,618
|
Comprehensive income
attributable to non-controlling interests
|
|
(43,914)
|
|
|
47,005
|
Comprehensive income
attributable to ZK International Group Co., Ltd.
|
|
4,227,678
|
|
|
3,820,613
|
|
|
|
|
|
|
Basic and diluted
earnings per share
|
|
|
|
|
|
Basic
|
|
0.23
|
|
|
0.29
|
Diluted
|
|
0.23
|
|
|
0.29
|
Weighted average
number of shares outstanding
|
|
|
|
|
|
Basic
|
|
16,528,037
|
|
|
13,147,929
|
Diluted
|
|
16,528,037
|
|
|
13,175,841
|
ZK International
Group Co., Ltd. and Subsidiaries
Consolidated
Balance Sheets
As of March 31,
2019 and September 30, 2018 (Unaudited)
(IN U.S.
DOLLARS)
|
|
|
March
31,
|
September
30,
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,943,185
|
|
$
|
7,682,589
|
Short-term
Investment
|
|
752,630
|
|
|
850,829
|
Accounts receivable,
net of allowance for doubtful accounts of $1,997,310 and
$1,817,050, respectively
|
|
26,094,921
|
|
|
27,134,237
|
Notes
receivable
|
|
1,147,248
|
|
|
414,352
|
Other
receivables
|
|
5,413,916
|
|
|
2,624,022
|
Due from Related
Parties
|
|
-
|
|
|
22,278
|
Inventories
|
|
20,339,133
|
|
|
17,792,187
|
Advance to
suppliers
|
|
7,938,260
|
|
|
7,826,679
|
Total current
assets
|
|
63,629,293
|
|
|
64,347,173
|
Property, plant and
equipment, net
|
|
6,762,456
|
|
|
6,280,412
|
Intangible assets,
net
|
|
951,259
|
|
|
938,221
|
Deferred tax
assets
|
|
306,596
|
|
|
299,596
|
Long-term
Deposit
|
|
4,328,652
|
|
|
4,229,827
|
Other long-term
assets
|
|
486,247
|
|
|
303,334
|
TOTAL
ASSETS
|
$
|
76,464,503
|
|
$
|
76,398,563
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
$
|
2,256,469
|
|
$
|
1,670,427
|
Accrued expenses and
other current liabilities
|
|
6,253,267
|
|
|
5,934,733
|
Accrued payroll and
welfare
|
|
1,131,590
|
|
|
887,201
|
Advance from
customers
|
|
1,055,186
|
|
|
3,410,322
|
Related party
payables
|
|
-
|
|
|
3,694,469
|
Short-term bank
borrowings
|
|
19,303,552
|
|
|
19,270,530
|
Income tax
payable
|
|
4,925,256
|
|
|
4,263,289
|
TOTAL
LIABILITIES
|
$
|
34,925,320
|
|
$
|
39,130,971
|
|
|
|
|
|
|
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
|
|
|
17,998,933
|
Statutory surplus
reserve
|
|
2,447,154
|
|
|
2,031,775
|
Retained
earnings
|
|
20,562,641
|
|
|
17,138,593
|
Accumulated other
comprehensive income (loss)
|
|
260,794
|
|
|
(127,456)
|
Total equity
attributable to ZK International Group Co., Ltd.
|
|
41,269,522
|
|
|
37,041,845
|
Equity attributable
to non-controlling interests
|
|
269,661
|
|
|
225,747
|
Total
equity
|
|
41,539,183
|
|
|
37,267,592
|
TOTAL LIABILITIES
AND EQUITY
|
$
|
76,464,503
|
|
$
|
76,398,563
|
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SOURCE ZK International Group Co., Ltd.