CHANGSHU, China, Feb. 7, 2013 /PRNewswire-FirstCall/ — Sutor Technology Group Limited (the “Company” or “Sutor”) (Nasdaq: SUTR), a leading China-based manufacturer and distributor of high-end fine finished steel products and welded steel pipes used by a variety of downstream applications, today announced its financial results for fiscal 2013 second quarter ended December 31, 2012.

Second quarter fiscal 2013 results highlights:

Discussing second quarter fiscal 2013 results, Lifang Chen, Chairwoman and CEO of Sutor, commented, “We are pleased to report that we substantially improved our top and bottom lines, expanded our product offering, introduced new products and services, and further diversified our customer base.”

Second Quarter FY2013 vs. Second Quarter FY2012 Highlights

• The 46.3% increase in revenue was mainly due to an 87.0% increase in sales volume, partially offset by a 21.7% decrease in the average selling price (ASP) primarily due to lower costs of raw materials. As the Chinese economy continues to gradually regain its strength, we anticipate stable or higher steel product prices in the coming quarters.
• Revenue generated from domestic sales increased by 49.2% to $139.6 million, while revenue generated from international sales increased by 27.5% to $18.3 million. As a percentage of total revenue, international sales accounted for 11.6%, as compared to 13.3% in the same quarter of fiscal 2012.
• Our gross margin decreased due to changes in the product mix, as we sold more acid pickled steel products which have lower gross margin as compared to other products.
• Total operating expenses (selling expenses and general and administrative expenses) slightly decreased despite higher revenue, mainly due to cost control measures.
• Higher revenue, lower operating expenses, lower interest expenses and higher interest income contributed to a 71.4% increase in net income.

Liquidity

• Operating activities provided approximately $6.2 million of cash in the six months ended December 31, 2012. As of December 31, 2012, cash and cash equivalents (excluding restricted cash) were $17.8 million and restricted cash were $99.4 million.
• Sutor’s major sources of liquidity are borrowings through short-term bank loans. As of December 31, 2012, short-term loans totaled approximately $112.9 million, and the current portion of long-term loans was $30.8 million. The Company also had approximately $3.4 million long-term loans.
• As of December 31, 2012, Sutor had an unused line of credit with banks of approximately $34.7 million which entitles the Company to draw bank loans for general corporate purposes.  Sutor expects sufficient liquidity to carry out normal operations for fiscal 2013.

Recent Business Developments

• The new high precision cold-rolled steel production line with a designed annual capacity of 500,000 metric tons (MT) is expected to start trial operations in the first half of calendar year 2013. Once operational, we expect this new line will increase our cold-rolled steel capacity to 750,000 MT. Cold-rolled steel products are used as raw materials to manufacture hot-dip galvanized and pre-painted galvanized steel products, for which we have a capacity of 700,000 MT and 200,000 MT, respectively.
• We are making progress on our recently established electronic commerce B2B platform, a complementary business to our existing capital intensive and asset heavy steel processing business. We believe that this platform has significant upside potential. We are currently using it to promote and sell our own products to existing customers. Additionally, we plan to introduce this platform to other companies in the heavy industry to promote and sell their products.
• We recently started commercial production of galvolume steel plates. Derived from hot-dip aluminum galvanization and hot-dip zinc galvanization technology, our galvolume steel plates possess exceptional anti-corrosion, anti-oxidation and electric-chemical properties, which make it less prone to rust and corrosion. As a result, this product can be used in a variety of industries such as construction, household appliances, automobiles, machinery and shipping.

Ms. Chen concluded, “We have well positioned our Company to take advantage of additional opportunities arising from China’s expected economic recovery. Sutor’s business is strong and competitive, and should continue to profitably grow in fiscal 2013.”

Conference Call Information

Sutor’s management will host an earnings conference call today, February 7, 2013, at 9:00 a.m. U.S. Eastern time/10:00 pm Beijing/Hong Kong time. Listeners may access the call by dialing US: +1877 847 0047, CN: 800 876 5011, HK +852 3006 8101, access code: SUTR. A recording of the call will be available shortly after the call through March 9, 2013. Listeners may access it by dialing US: +1866 572 7808, CN: 800 876 5013, HK: +852 3012 8000, access code: 689245.

Functional Currency

The reporting currency of the Company is the United States Dollar (“USD”). Sutor and Sutor BVI maintain their books and records in USD, their functional currency. The PRC subsidiaries maintain their books and records in its local currency, the Renminbi Yuan (“RMB”), which is their functional currency as being the primary currency of the economic environment in which these entities operate. In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not USD are translated into USD, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiaries are recorded as a separate component of accumulated other comprehensive income.

About Sutor Technology Group Limited

Sutor is one of the leading China-based manufacturers and distributors of high-end fine finished steel products and welded steel pipes used by a variety of downstream applications. The Company utilizes a variety of in-house developed processes and technologies to convert steel manufactured by third parties into fine finished steel products, including hot-dip galvanized steel, pre-painted galvanized steel, acid-pickled steel, cold-rolled steel and welded steel pipe products. To learn more about the Company, please visit http://www.sutorcn.com/en/index.php.

Forward-Looking Statements

This press release includes certain statements that are not descriptions of historical facts, but are forward-looking statements.  Such statements include, among others, those concerning our expected financial performance, liquidity and strategic and operational plans, our future operating results, our expectations regarding the market for our products, our expectations regarding the steel market, as well as all assumptions, expectations, predictions, intentions or beliefs about future events.  You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause our actual results to differ materially from those anticipated, expressed or implied in the forward-looking statements.  These risks and uncertainties include, but not limited to, the factors mentioned in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended June 30, 2012, and other risks mentioned in our other reports filed with the Securities Exchange Commission (“SEC”).  Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis retrieval system (EDGAR) at http://www.sec.gov.  The words “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,” “aim,” “will” or similar expressions are intended to identify forward-looking statements.  All statements other than statements of historical fact are statements that could be deemed forward-looking statements.  The Company assumes no obligation and does not intend to update any forward-looking statements, except as required by law.

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Financial Tables Below: