EXHIBIT 99.1
Published on September 29, 2023
Exhibit 99.1
ZK International Group Co., Ltd. Announces Record Revenue of $49.66 Million, an Increase of 15.77% for the First Half of Fiscal Year 2023
WENZHOU, China, September 29, 2023 -- ZK International Group Co., Ltd. (ZKIN) ("ZK International" or the "Company"), a designer, engineer, manufacturer, and supplier of patented high-performance stainless steel and carbon steel pipe products primarily used for water and gas supplies, today announced its unaudited financial results for the six months ended March 31, 2023.
Financial Highlights for the First Half of Fiscal Year 2023
| For the Six Months Ended March 31, | ||||||||||||
| ($ millions, except per share data) | 2023 | 2022 | % Change | |||||||||
| Revenue | $ | 49.66 | $ | 42.89 | 15.77 | % | ||||||
| Gross profit | $ | 3.17 | $ | 3.97 | -20.13 | % | ||||||
| Gross margin | 6.38 | % | 9.25 | % | -2.87 | % pp* | ||||||
| Income from operations | $ | 0.14 | $ | 0.24 | -41.91 | % | ||||||
| Operating margin | 0.29 | % | 0.57 | % | -0.28 | % pp* | ||||||
| Net income (loss) | $ | (0.06 | ) | $ | 0.001 | 0.00 | % | |||||
| Diluted earnings per share | $ | 0.00 | $ | 0.00 | 0.00 | % | ||||||
| Net book value per share | $ | 2.85 | $ | 2.89 | -1.45 | % | ||||||
* pp: percentage point(s)
| · | Revenue increased 15.77% to a record $49.66 million for the six months ended March 31, 2023 from approximately $42.89 million for the six months ended March 31, 2022. During the first fiscal half of 2023, we observed an increase of raw materials, especially the price of nikel which is an important component of stainless steel. To minimize the impact the rise of raw material price, we increased our weighted average selling price (“ASP”) during the period. The increase of sales is also attributable to the recovery of domestic demand and we achieved an overall increase in sales volume during the six months ended March 31, 2022. |
| · | Gross profit decreased by 20.13% to $3.17 million. Gross margin was 6.38%, compared to 9.25% for the same period of the prior fiscal period. The decrease of gross profit was primarily due to increased raw material cost, especially the cost of stainless steel coil which is the main material for our products. Though we have increased ASP of our products, we supplied to certain customers on fixed price basis that cannot be adjusted until the existing contract expires. |
| · | Income from operations was $0.14 million, compared to income from operations of $0.24 million for the same period of the prior fiscal year. Operating margin was 0.29%, compared to 0.57% for the same period of the prior fiscal year. The decrease of operating margin was primarily due to decreased gross margin of our sales. |
| · | Net loss was $0.06 million. This compared to net income of $0.001 million for the same period of the prior fiscal year. |
| · | Net book value per share was $2.85 as of March 31, 2023, compared to $2.89 as of September 30, 2022. |
Financial Results for the First Half of Fiscal Year 2023
Revenue
Revenue increased by $6,764,742 or 15.77%, to $49,655,399 for the six months ended March 31, 2023 from $42,890,657 for the six months ended March 31, 2022. During the first fiscal half of 2023, we observed an increase of raw materials, especially the price of nikel which is an important component of stainless steel. To minimize the impact the rise of raw material price, we increased our weighted average selling price (“ASP”) during the period. The increase of sales is also attributable to the recovery of domestic demand and we achieved an overall increase in sales volume during the six months ended March 31, 2022.
Gross Profit
Our gross profit decreased by $798,467, or 20.13%, to $3,168,642 for the six months ended March 31, 2023 from $3,967,109 for the six months ended March 31, 2022. Gross profit margin was 6.38% for the six months ended March 31, 2023, as compared to 9.25% for the six months ended March 31, 2022. The decrease of gross profit was primarily due to increased raw material cost, especially the cost of stainless steel coil which is the main material for our products. Though we have increased ASP of our products, we supplied to certain customers on fixed price basis that cannot be adjusted until the existing contract expires.
Selling and Marketing Expenses
We incurred $963,655 in selling and marketing expenses for the six months ended March 31, 2023, compared to $930,052 for the six months ended March 31, 2022. Selling and marketing expenses increased by $33,602, or 3.61%, during the six months ended March 31, 2023 compared to the six months ended March 31, 2022. This slight increase is primarily due to increased marketing expenses to promote our product portfolio.
General and Administrative expenses
We incurred $1,443,743 in general and administrative expenses for the six months ended March 31, 2023, compared to $2,232,863 for the six months ended March 31, 2022. General and administrative expenses decreased by $789,120, or 35.34%, for the six months ended March 31, 2023 compared to the same period in 2022. The decrease is primarily due to decrease in consulting expenses.
Research and Development Expenses
We incurred $619,511 in research and development expenses for the six months ended March 31, 2023, compared to $560,216 for the six months ended March 31, 2022. R&D expenses increased by $59,295, or 10.58%, for the six months ended March 31, 2023 compared to the same period in 2022.
Income (loss) from Operations
As a result of the factors described above, we incurred operating income of $141,734 for the six months ended March 31, 2023, compared to operating loss of $243,977 for the six months ended March 31, 2022, a decrease of operating income of $102,243.
Other Income (Expenses)
Our interest income and expenses were $25,123 and $386,527, respectively, for the six months ended March 31, 2023, compared to interest income and expenses of $4,493 and $465,466, respectively, for the six months ended March 31, 2022. The decrease of interest expense is primarily due to the decrease of bank loan interest rate during fiscal half year of 2023. Other income mainly consists of government grant for financial support to the Company under local government’s innovation incentive programs.
Net Income (loss)
As a result of the factors described above, we incurred net loss of $57,080 for the six months ended March 31, 2023, compared to net income of $1,281 for the six months ended March 31, 2022, a decrease in profit of $58,361.
Financial Condition
As of March 31, 2023, cash and cash equivalents, restricted cash and short-term investments totaled $2.63 million, compared to $8.53 million as of September 30, 2022. Short-term bank borrowings were $18.21 million as of March 31, 2023, compared to $16.26 million as of September 30, 2022.
Accounts receivable was $20.17 million as of March 31, 2023, compared to $28.36 million as of September 30, 2022. Inventories were $21.98 million as of March 31, 2023, compared to $21.14 million as of September 30, 2022. Accounts payable was $2.41 million as of March 31, 2023, compared to $10.07 million as of September 30, 2022.
Total current assets and current liabilities were $58.26 million and $34.63 million, respectively, leading to a current ratio of 1.68 as of March 31, 2023. This compared to total current assets and current liabilities were $72.09 million and $38.04 million, respectively, and current ratio of 1.90 as of September 30, 2022.
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.
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income (Loss)
For the Six Months Ended March 31, 2023 and 2022 (Unaudited)
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| For the Six Months Ended March 31, |
||||||||
| 2023 | 2022 | |||||||
| Revenues | 49,655,399 | $ | 42,890,657 | |||||
| Cost of sales | 46,486,756 | 38,923,548 | ||||||
| Gross profit | 3,168,642 | 3,967,109 | ||||||
| Operating expenses: | ||||||||
| Selling and marketing expenses | 963,655 | 930,052 | ||||||
| General and administrative expenses | 1,443,743 | 2,232,863 | ||||||
| Research and development costs | 619,511 | 560,216 | ||||||
| Total operating expenses | 3,026,909 | 3,723,132 | ||||||
| Operating Income | 141,734 | 243,977 | ||||||
| Other income (expenses): | ||||||||
| Interest expenses | (386,527 | ) | (465,466 | ) | ||||
| Interest income | 25,123 | 4,493 | ||||||
| Other income (expenses), net | 162,590 | 218,277 | ||||||
| Total other income (expenses), net | (198,814 | ) | (242,696 | ) | ||||
| Income (Loss) before income taxes | (57,080 | ) | 1,281 | |||||
| Income tax provision | - | - | ||||||
| Net income (loss) | (57,080 | ) | $ | 1,281 | ||||
| Net income (loss) attributable to non-controlling interests | 1,663 | (9,635 | ) | |||||
| Net income (loss) attributable to ZK International Group Co., Ltd. | (55,417 | ) | $ | (8,354 | ) | |||
| Net income (loss) | (57,080 | ) | $ | 1,281 | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustment | (1,912,369 | ) | 871,641 | |||||
| Total comprehensive income (loss) | (1,969,449 | ) | 872,922 | |||||
| Comprehensive income (loss) attributable to non-controlling interests | (10,076 | ) | (15,437 | ) | ||||
| Comprehensive income attributable to ZK International Group Co., Ltd. | (1,979,525 | ) | 857,485 | |||||
| Basic and diluted earnings per share | ||||||||
| Basic | - | - | ||||||
| Diluted | - | - | ||||||
| Weighted average number of shares outstanding | ||||||||
| Basic | 30,392,940 | 29,305,828 | ||||||
| Diluted | 30,518,893 | 29,431,781 | ||||||
ZK International Group Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2023 and September 30, 2022 (Unaudited)
(IN U.S. DOLLARS)
|
2023 (Unaudited) |
2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 2,633,940 | $ | 7,515,147 | ||||
| Restricted cash | - | 101,992 | ||||||
| Short-term Investment | - | 915,616 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $266,794 and $255,322, respectively | 20,174,212 | 28,362,933 | ||||||
| Notes receivable | 121,731 | 49,611 | ||||||
| Other receivables | 4,005,929 | 2,360,539 | ||||||
| Due from related parties | 1,868,394 | - | ||||||
| Inventories | 21,976,401 | 21,141,501 | ||||||
| Advance to suppliers | 7,481,315 | 6,322,592 | ||||||
| Total current assets | 58,261,921 | 66,769,930 | ||||||
| Property, plant and equipment, net | 7,919,580 | 7,124,587 | ||||||
| Right-of use asset | 32,108 | 30,998 | ||||||
| Intangible assets, net | 11,398,673 | 11,415,452 | ||||||
| Deferred tax assets | 331,628 | 320,164 | ||||||
| Long-term prepaid expenses | 10,898,646 | 10,447,395 | ||||||
| Long-term accounts receivable | 7,427,498 | 7,522,188 | ||||||
| Long-term investment | 25,303,352 | 25,292,866 | ||||||
| TOTAL ASSETS | $ | 121,573,407 | $ | 128,923,580 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,409,043 | $ | 10,066,758 | ||||
| Accrued expenses and other current liabilities | 6,300,282 | 6,949,772 | ||||||
| Lease liability - current portion | - | 10,754 | ||||||
| Accrued payroll and welfare | 1,771,644 | 1,880,377 | ||||||
| Advance from customers | 1,740,309 | 1,758,800 | ||||||
| Due to related parties | - | 2,052,403 | ||||||
| Convertible debentures | 3,291,981 | 3,352,311 | ||||||
| Short-term bank borrowings | 18,208,690 | 16,257,820 | ||||||
| Notes payables | - | 702,889 | ||||||
| Income tax payable | 910,808 | 817,059 | ||||||
| Total current liabilities | 34,632,757 | 43,848,943 | ||||||
| Lease liability - long term portion | 21,762 | 10,256 | ||||||
| TOTAL LIABILITIES | $ | 34,654,519 | $ | 43,859,199 | ||||
| Equity | ||||||||
| Common stock, no par value, 50,000,000 shares authorized, 30,392,940 and 30,392,940 shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | 70,872,765 | 70,872,765 | ||||||
| Statutory surplus reserve | 3,185,983 | 3,176,556 | ||||||
| Subscription receivable | (125,000 | ) | (125,000 | ) | ||||
| Retained earnings | 13,325,184 | 13,394,137 | ||||||
| Accumulated other comprehensive income (loss) | (716,645 | ) | (2,640,753 | ) | ||||
| Total equity attributable to ZK International Group Co., Ltd. | 86,542,287 | 84,677,705 | ||||||
| Equity attributable to non-controlling interests | 376,600 | 386,676 | ||||||
| Total equity | 86,918,887 | 85,064,381 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 121,573,407 | $ | 128,923,580 | ||||