Investors focus on Earnings Release – Kingold Jewelry, Inc (NASDAQ:KGJI)

Kingold Jewelry, Inc (NASDAQ:KGJI) has market worth of 86.26M along 64.37M outstanding shares. The stock moved -1.47% to $1.34 in recent session. The recent traded volume was 313055 shares. The stock had closed at $1.36 on the previous day.

Kingold Jewelry, Inc (NASDAQ:KGJI) recently declared its financial results for the fourth quarter and year ended December 31, 2017.

2017 FINANCIAL REVIEW

Net Sales

Net sales for the three months ended December 31, 2017 was $657.1 million, representing an increase of $299.5 million, or 83.8%, from $357.6 million for the same period in 2016.

Net sales for the year ended December 31, 2017 was $2,009.7 million, an increase of 41% from the $1,420.6 million reported in the year of 2016. The increase in net sales was primarily driven by increase in total sales volume from 75.3 metric tons in 2016 to 103.4 metric tons in 2017, the increase in the average unit selling price for branded production from RMB 241.33 per gram in 2016 to RMB 257.20 per gram in 2017, as well as the increase in average unit selling price for customized production increased from RMB 4.26 per gram in 2016 to RMB 6.38 per gram in 2017.

Gross Profit

Gross profit for the three months ended December 31, 2017 was $56.4 million, compared to $21.4 million for the same period in 2016.

Gross profit was $199.9 million for the year ended December 31, 2017, compared to $146.4 million for year of 2016. The increase in gross profit was due to the increase in total sales volume from 75.3 metric tons in 2016 to 103.4 metric tons in 2017, and the increase in unit selling prices.

Gross Margin

The Company’s gross margin was 8.6% for the three months ended December 31, 2017, compared to 6.0% in the prior year period.

The Company’s gross margin for the year ended December 31, 2017 was 9.9%, compared to 10.3% in the prior year period. The slight decrease was due to higher proportional increase in unit cost than unit price for the branded production sales.

Net Income

Net income for the three months ended December 31, 2017 was $10.5 million, or $0.16 per diluted share based on 66.8 million weighted average diluted shares outstanding, compared to net income of $42.0 million in the prior year period, or $0.63 per diluted share based on 66.5 million weighted average diluted shares outstanding in the prior-year period.

Net income for the year ended December 31, 2017 was $26.2 million, or $0.39 per diluted share based on 66.5 million weighted average diluted shares outstanding, compared to net income of $92.9 million in the prior year, or $1.40 per diluted share based on 66.3 million weighted average diluted shares outstanding, in the prior-year. The decrease was mainly due to one-time sales gain on sale of Jewelry Park of 63.2 million in 2016, and increase in interest expenses in 2017.

Balance Sheet and Cash flow

Net cash used in operating activities was $25.7 million for the year ended December 31, 2017, compared with net cash provided by operating activities of $74 million for the year of 2016. The change was mainly due to the decrease in net income, increase in value added tax recoverable of $60.2 million, increase in inventories of $7.3 million for the increased production to meet sales demand, offset by the increase in other payable and accrued expense of $4.1 million and increase in income tax payable of $4.7 million.

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 or smaller quantities of raw materials (principally gold). These fluctuations could cause net cash from operating activities to decrease, even if the net income grows as the Company continues to expand. Although the Company expects that net cash from operating activities will increase over the long term, but cannot predict how these fluctuations will affect Kingold’s cash flow in any particular accounting period.

OUTLOOK FOR 2018

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 are expected to be between 100 metric tons and 110 metric tons during 2018. This guidance is based solely on current projected, organic growth.

Performance Update

The stock has recorded a weekly performance of -8.84% and monthly performance is -20.71%. Shares have moved -36.79% over the last quarter and changed -27.57% over the recent six months. The shares registered yearly performance at 15.52% and YTD move seen at -33.66%. In terms of profitability, Kingold Jewelry, Inc. has a gross margin of 9.60%, an operating margin of 12.80% and a net profit margin of 3.40%. Return on assets come to 2.10% and return on investment coming to 7.40% while Return on equity come to 17.00%.

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