Kingold Jewelry Inc, one of China's leading manufacturers and designers of high quality 24-karat gold jewellery, ornaments and investment-oriented products, posted strong financial results for the first quarter ended March 31, 2012. Revenue rose 42.6 percent compared to the same quarter last year, the company reported.
In the first quarter of 2012, Kingold processed approximately 8.84 metric tonnes of 24-karat gold products, an increase of 17.6 percent over the 7.52 metric tonnes processed in the same quarter last year. Kingold also processed approximately 970,000 pieces of jewellery, gold bars and coins, with the majority being necklaces and rings (roughly 250,000 pieces for each category).
The revenue for the first quarter rose to $225 million, up 42.6 percent from $157.7 million in the comparative quarter last year. The increase in net sales was primarily driven by increased branded production as well as by the increase in the price of gold. Of the $67.3 million increase in net sales, approximately $35.3 million was attributable to increased branded production and approximately $25.2 million to the increase in the price of gold and the remaining is due to the gain from exchange rate fluctuations.
The company expects a higher percent of its revenue in future quarters to be derived from its investment gold business, which generated incremental $9.9 million of revenue in the first quarter of 2012.
Gross profit for the first quarter was $11.6 million, an increase of 29 percent from $9 million in the prior-year period. The company's gross margin for the period was 5.1 percent compared to 5.7 percent from the prior year period. Gross margin was lower for the period primarily because gold prices increased nearly 9 percent while the company could not raise its processing fee proportionally. However, Kingold's gross margin improved over the gross margin of 4.1 percent reported in the fourth quarter of 2011.
Kingold reported net income attributable to shareholders for the first quarter of 2012 of $7.3 million, or $0.13 per diluted share based on 54.4 million weighted average diluted shares outstanding, compared to net income of $5.3 million, or $0.11 per diluted share based on 49.7 million weighted average diluted shares outstanding, in the prior-year period.
"We continued to see strong growth in our sales volume during the first quarter of 2012, particularly from our investment gold business. We continue to gradually shift resources to support demand from our bank partners, and were pleased that this has helped serve as a new driver for sales," said Chairman and CEO Zhihong Jia. "We are now distributing products from the investment gold business to several provinces and municipal locations throughout China, including Beijing, Hubei, Jiangsu, Jiangxi, Liaoning, Zhejiang, Henan and Sichuan."
"In our jewelry business, we have continued to build upon and expand our customer base over the past year, with new clients including Harbin Hengyuan Gold Corp, Hangzhou Xingya Jewelry, Wuxi Yinglou and Datong Jintai Jewelry. We were also pleased to receive a AAA credit rating from the Gems & Jewelry Trade Association of China, which we feel is a testament to our reputation in China's jewelry industry and strong financial position. We feel that the long-term demand drivers in the jewellery business, such as a rising middle class, growing disposable income and culture (weddings and child births) will continue to provide stable growth for the Company," Jia added.
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