ZK International Group Co., Ltd. Announces Record Revenue of $42.89 Million, an Increase of 1.71% for the First Half of Fiscal Year 2022

Rhea-AI Summary

For the six months ending March 31, 2022, ZK International Group (ZKIN) reported a revenue increase of 1.71% to $42.89 million, driven primarily by higher sales of stainless steel coil and nickel materials. However, gross profit fell by 15.73% to $3.97 million due to a shift to lower-margin products. Operating income improved significantly to $0.24 million from a loss of $1.65 million. Despite a net income of $0.001 million, overall financial health showed concern with a decrease in cash reserves from $16.16 million to $5.56 million.

Positive

• Revenue growth of 1.71% to $42.89 million.
• Operating income increased to $0.24 million from a previous loss of $1.65 million.
• Net loss improved significantly from $1.92 million to $0.001 million.
• Reduction in selling and marketing expenses by 66.42%.

Negative

• Gross profit decreased by 15.73% to $3.97 million.
• Gross margin fell from 11.16% to 9.25%.
• Cash and cash equivalents declined from $16.16 million to $5.56 million.
• Net cash used in operating activities increased to $5.86 million.

WENZHOU, China, Sept. 28, 2022 /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, 2022.

Financial Highlights for the First Half of Fiscal Year 2022

		For the Six Months Ended March 31,
($ millions, except per share data)		2022		2021		% Change
Revenue		$42.89		$42.17		1.71 %
Gross profit		$3.97		$4.71		-15.73 %
Gross margin		9.25 %		11.16 %		-1.91% pp*
Income (loss) from operations		$0.24		$(1.65)		114.81 %
Operating margin		0.57 %		-3.91 %		4.48% pp*
Net income (loss)		$0.001		$(1.92)		100.07 %
Diluted earnings per share		$0.00		$(0.03)		100 %
Net book value per share		$3.10		$3.11		0.32 %
* pp: percentage point(s)

• Revenue increased 1.71% to a record $42.89 million due to increased market demand over our stainless steel coil and nickel material. During six months ended March 31, 2022, the sales of stainless steel coil and nickel material accounts for approximately 65.36% of our total revenue, as compared to 53.85% of our total revenue during six months ended March 31, 2021.
• Gross profit decreased by 15.73% to $3.97 million. Gross margin was 9.25%, compared to 11.16% for the same period of the prior fiscal period. The decrease of gross profit was primarily due to increased sales percentage of low margin products such as stainless steel coil products and decreased sales percentage of high-margin products such as water and gas piping products.
• Income from operations was $0.24 million, compared to loss from operations of $1.65 million for the same period of the prior fiscal year. Operating margin was 0.57%, compared to -3.91% for the same period of the prior fiscal year. The decrease of operating margin was primarily due to decreased selling and marketing expenses and research and development expenses.
• Net income was $0.001 million. This compared to net loss of $1.92 million for the same period of the prior fiscal year.
• Net book value per share was $3.10 as of March 31, 2022, compared to $3.08 as of September 30, 2021.

Mr. Jiancong Huang, Chairman and Chief Executive Officer of ZK International, commented, "Bucking the trend of a declining economy during the first quarter of 2022 as countries including China battled the inflation and the rise of material prices, we are pleased to report record revenue increase for the first half of fiscal year 2022. During first half of fiscal year 2022, we successfully executed our spent-cut program which aims to reduce operating expenses without impacting sales performance. With operating expenses declined 41.41%, revenue increased by 1.71% and our first half of fiscal year 2022 results underscore continuing order strength for our proprietary stainless steel and carbon steel pipe products. We are proud of what the Company and the staff has achieved for the first half of fiscal year 2022. Looking forward, we expect revenue to continue to grow for the second half of the fiscal year 2022.

Financial Results for the First Half of Fiscal Year 2022

Revenue

Revenue increased by $721,834 or 1.71%, to $ 42,890,657 for the six months ended March 31, 2022 from $42,168,823 for the six months ended March 31, 2021. The increase in revenues was primarily driven by our increased sales of stainless steel coil and nickel material as compared to our stainless steel piping and fitting products. During six months ended March 31, 2022, the sales of stainless steel coil and strip accounts for approximately 65.36% of our total revenue, as compared to 53.85% of our total revenue during six months ended March 31, 2021.

Gross Profit

Our gross profit decreased by $740,649, or 15.73%, to $3,967,109 for the six months ended March 31, 2022 from $4,707,758 for the six months ended March 31, 2021. Gross profit margin was 9.25% for the six months ended March 31, 2022, as compared to 11.16% for the six months ended March 31, 2021. The decrease of gross profit was primarily due to increased weighted average selling prices of our water and gas piping products as the result of domestic demand recovery of construction materials and piping infrastructure. The gross profit of stainless steel coil products is approximately 0.57% due to the decrease of average selling price of stainless steel coil products, while our water and gas piping products generally have gross margin of 22.67% during six months ended March 31, 2022.

Selling and Marketing Expenses

We incurred $930,052 in selling and marketing expenses for the six months ended March 31, 2022, compared to $2,769,264 for the six months ended March 31, 2021. Selling and marketing expenses decreased by $1,839,212, or 66.42%, during the six months ended March 31, 2022 compared to the six months ended March 31, 2022. This decrease is primarily due to decreased marketing expenses paid for the marketing and promoting services provided to xSigma Corporation, a subsidiary of the Company. During the six months ended March 31, 2021, the Company entered into a Consultancy Agreement (the "Agreement") with Dentoro Alliance LP, a company incorporated in the Republic of Ireland (the "Consultant"). Pursuant to the Agreement, the Consultant agreed to provide marketing services for the business development of xSigma Corporation, including website development, social media and community management, content creation and public relations management. In exchange for the Consultant's services, the Company agreed to pay the Consultant 250,000 ordinary shares of the Company. The shares are valued at $3.58/share.

General and Administrative expenses

We incurred $2,232,863 in general and administrative expenses for the six months ended March 31, 2022, compared to $1,166,210 for the six months ended March 31, 2021. General and administrative expenses increased by $1,066,653, or 91.46%, for the six months ended March 31, 2022 compared to the same period in 2021. The increase is primarily due to decrease in travelling expenses and administrative staff salary.

Research and Development Expenses

We incurred $560,216 in research and development expenses for the six months ended March 31, 2022, compared to $2,419,355 for the six months ended March 31, 2021. R&D expenses decreased by $1,859,139, or 76.84%, for the six months ended March 31, 2022 compared to the same period in 2021. During the six months ended March 31, 2021, our various subsidiaries developed a DeFi exchange, a cryptocurrency trading platform, and an NFT platform, while those platforms were in late-stage development during the six months ended March 31, 2022 and therefore the related expenses decreased significantly.

Income (loss) from Operations

As a result of the factors described above, we incurred operating income of $243,977 for the six months ended March 31, 2022, compared to operating loss of $1,647,071 for the six months ended March 31, 2021, an increase of operating income of $1,891,048.

Other Income (Expenses)

Our interest income and expenses were $4,493 and $465,466, respectively, for the six months ended March 31, 2022, compared to interest income and expenses of $9,543 and $528,598, respectively, for the six months ended March 31, 2021. The decrease of interest expense is primarily due to the decrease of bank loan incurred during fiscal half year of 2022. 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 $1,281 for the six months ended March 31, 2022, compared to net loss of $1,916,893 for the six months ended March 31, 2021, a increase in profit of $1,918,174.

Financial Condition

As of March 31, 2022, cash and cash equivalents, restricted cash and short-term investments totaled $5.56 million, compared to $16.16 million as of September 30, 2021. Short-term bank borrowings were $18.91 million as of March 31, 2022, compared to $21.39 million as of September 30, 2021.

Accounts receivable was $29.55 million as of March 31, 2022, compared to $27.12 million as of September 30, 2021. Inventories were $23.78 million as of March 31, 2022, compared to $20.69 million as of September 30, 2021. Accounts payable was $3.32 million as of March 31, 2022, compared to $2.16 million as of September 30, 2021.

Total current assets and current liabilities were $72.09 million and $38.04 million, respectively, leading to a current ratio of 1.90 as of March 31, 2022. This compared to total current assets and current liabilities were $78.70 million and $44.51 million, respectively, and current ratio of 1.77 as of September 30, 2021.

Net cash used in operating activities was $5.86 million for the six months ended March 31, 2022, compared to net cash used in operating activities of $4.23 million for the same period of the prior fiscal year. Net cash used in investing activities was $0.17 million for the six months ended March 31, 2022, compared to net cash provided by investing activities of $0.06 million for the same period of the prior fiscal year. Net cash used in financing activities was $1.65 million for the six months ended March 31, 2022, compared to net cash provided in financing activities of $23.82 million for the same period of the prior fiscal year.

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, 2022 and 2021 (Unaudited)
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
		For the Six Months Ended  March 31,
		2022				2021
Revenues			42,890,657			$	42,168,823
Cost of sales			38,923,548				37,461,065
Gross profit			3,967,109				4,707,758
Operating expenses:
Selling and marketing expenses			930,052				2,769,264
General and administrative expenses			2,232,863				1,166,210
Research and development costs			560,216				2,419,355
Total operating expenses			3,723,132				6,354,829
Operating Income (loss)			243,977				(1,647,071)
Other income (expenses):
Interest expenses			(465,466)				(528,598)
Interest income			4,493				9,543
Other income (expenses), net			218,277				325,539
Total other income (expenses), net			(242,696)				(193,516)
Income (Loss) before income taxes			1,281				(1,840,587)
Income tax provision			-				(76,306)
Net income (loss)			1,281			$	(1,916,893)
Net income (loss) attributable to non-controlling interests			(9,635)				(1,334,346)
Net income (loss) attributable to ZK International Group Co., Ltd.			(8,354)			$	(582,547)
Net income (loss)			1,281			$	(1,916,893)
Other comprehensive income:
Foreign currency translation adjustment			871,641				1,863,153
Total comprehensive income (loss)			872,922				(53,740)
Comprehensive income (loss) attributable to non-controlling interests			(15,437)				(1,315,874)
Comprehensive income attributable to ZK International Group Co., Ltd.			857,485				1,262,134
Basic and diluted earnings per share
Basic			-				(0.03)
Diluted			-				(0.03)
Weighted average number of shares outstanding
Basic							19,243,252
Diluted							21,743,252

 

 

 

ZK International Group Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2022 and September 30, 2021 (Unaudited)
(IN U.S. DOLLARS)
		2022 (Unaudited)			2021
Assets
Current assets
Cash and cash equivalents		$	5,244,796		$	13,525,298
Restricted cash			79,170			77,906
Short-term Investment			236,619			2,560,760
Accounts receivable, net of allowance for doubtful accounts of $2,258,356 and $2,221,870, respectively			29,545,643			27,124,959
Notes receivable			—			—
Other receivables			5,229,288			2,158,120
Due from related parties			368,214			—
Inventories			26,784,418			20,689,252
Advance to suppliers			4,602,336			12,567,368
Total current assets			72,090,484			78,703,663
Property, plant and equipment, net			7,896,620			8,004,855
Right-of use asset			123,042			54,166
Intangible assets, net			9,563,588			8,749,987
Deferred tax assets			359,265			353,460
Long-term deposit			12,677,668			12,472,847
Long-term investment			25,328,632			25,323,323
TOTAL ASSETS		$	128,039,299		$	133,662,301
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	3,323,532		$	2,159,731
Accrued expenses and other current liabilities			5,629,919			6,875,769
Lease liability - current portion			-			26,332
Accrued payroll and welfare			1,776,071			1,853,019
Advance from customers			2,492,270			5,666,214
Due to related parties			441,359			1,072,335
Convertible debentures			2,823,364			2,823,364
Short-term bank borrowings			18,912,183			21,394,761
Other borrowing - short term portion			288,418			283,758
Income tax payable			2,354,910			2,354,832
Total current liabilities			38,042,025			44,510,115
Lease liability - long term portion			-			27,834
TOTAL LIABILITIES		$	38,042,025		$	44,537,949
Equity
Common stock, no par value, 50,000,000 shares authorized, 28,918,177 and 16,558,037 shares issued and outstanding, respectively
Additional paid-in capital			63,374,085			63,374,085
Statutory surplus reserve			2,916,539			2,914,602
Subscription receivable			(125,000)			(125,000)
Retained earnings			19,727,213			19,737,504
Accumulated other comprehensive income (loss)			3,764,433			2,898,594
Total equity attributable to ZK International Group Co., Ltd.			89,657,270			88,799,785
Equity attributable to non-controlling interests			340,004			324,567
Total equity			89,997,274			89,124,352
TOTAL LIABILITIES AND EQUITY		$	128,039,299		$	133,662,301

 

 

 

ZK International Group Co., Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended March 31, 2022 and 2021 (Unaudited)
(IN U.S. DOLLARS)
		For the Six Months Ended  March 31,
		2022				2021
Cash Flows from Operating Activities:
Net income		$	1,281			$	(1,916,893)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense			340,666				264,887
Amortization expense			(938)				6,605
Non-cash expenses			166,907				894,167
Changes in operating assets and liabilities:
Accounts receivable			(1,965,921)				6,755,242
Other receivables			(3,021,383)				2,420,300
Notes receivable			(366,474)				38,197
Inventories			(5,728,222)				428,946
Advance to suppliers			8,132,790				(9,053,966)
Accounts payable			1,123,002				(4,379,215)
Notes payable			-				(45,783)
Accrued expenses and other current liabilities			(1,185,431)				(2,084,882)
Accrued payroll and welfare			(106,869)				(466,248)
Advance from customers			(3,251,552)				2,907,425
Income tax payable			-				(3,111)
Net cash provided (used in) operating activities			(5,862,144)				(4,234,329)
Cash Flows from Investing Activities:
Proceed from disposal of property, plant and equipment			-				62,728
Purchases of property, plant and equipment			(165,772)				(4,871)
Net cash used in investing activities			(165,772)				57,857
Cash Flows from Financing activities:
Net proceeds from stock offering			-				27,340,977
Net proceeds released from (placed into) bank acceptance notes			15				-
Net proceeds released from short-term investment			2,355,010				305,222
Net proceeds from (repayment to) short-term bank borrowings			(2,820,517)				351,006
Net repayment of other borrowing			(539,337)				(156,929)
Repayments of loans of related parties			(645,521)				(1,138,134)
Cash advance to related parties			-				(2,878,572)
Net cash provided by (used in) financing activities			(1,650,350)				23,823,569
Effect of exchange rate changes on cash			87,415				386,231
Net change in cash and cash equivalents			(7,590,851)				20,033,328
Cash and cash equivalents at the beginning of year			12,835,647				3,759,535
Cash and cash equivalents at the end of year		$	5,244,796			$	23,792,863
Supplemental disclosures of cash flows information:
Cash paid for income taxes		$	-			$	167,862
Cash paid for interest expenses		$	465,465			$	524,217

 

CONTACT: 
Di Chen
Cell Number: +86 15057357883
Email: super.di@live.cn

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SOURCE ZK International Group Co., Ltd.

FAQ

What were ZK International's revenue figures for the first half of fiscal year 2022?

ZK International reported revenue of $42.89 million for the six months ended March 31, 2022.

How did ZK International's net income change in the first half of fiscal year 2022?

Net income improved to $0.001 million from a net loss of $1.92 million in the same period of the previous year.

What caused the decline in ZK International's gross profit?

The decline in gross profit was primarily due to a shift towards lower-margin products.

What was the cash position of ZK International by March 31, 2022?

By March 31, 2022, ZK International had cash and cash equivalents of $5.56 million, down from $16.16 million.

What does ZK International expect for revenue in the second half of fiscal year 2022?

ZK International expects revenue to continue to grow in the second half of fiscal year 2022.