Armco Metals

Armco Metals Holdings Announces Financial Results for the First Quarter of 2015

 

SAN MATEO, Calif., May 15, 2015  -- Armco Metals Holdings, Inc. ("Armco Metals Holdings" or "the Company") (NYSE MKT:AMCO), a U.S. based company that engages in the import, sale, and distribution of metal ore and non-ferrous metals in the People's Republic of China, recycles scrap metals used by steel mills in the production of recycled steel and provides sourcing and pricing services for various metals to its network of customers, today announced its financial results for the first  quarter of 2015.

 

First Quarter 2015 Results

 

 

Q1 2015

 

Q1 2014

Net Revenues

 

$43.1 million

 

$9.9 million

Gross Profit (Loss)

 

$(3.9) million

 

$(1.2) million

Net Income (Loss)

 

$(1.0) million

 

$(3.6) million

EPS (Fully Diluted) (Loss)

 

$(0.18)

 

$(1.20) 

 

First Quarter of 2015 Financial Results

For the first quarter of 2015, ended March 31, 2015, net revenue was $43.1 million, a 334% increase compared to net revenue of $9.9 million recorded in the first quarter of 2014. The significant increase in revenue in the first quarter of 2015 was primarily due to $15.8 million in the sales of barley, an increase of $13.8 million in the sales of scrap metals, $8.8 million in the sales of raw wood, and an increase of $2.2 million in the sales of steel billet, partially offset by a decrease of $1.3 million in the sales of chrome ore and a decrease of $5.9 million in the sales of manganese ore. By business section, during the quarter, our recycling business and trading business generated revenue of $15.0 million and $28.1 million, increased by $12.3 million or 469% and $20.8 million or 286%, respectively, compared to same period of last year. The significant increase in recycling sales was due to the increased production and operation of our recycling facility compared to comparable period of last year. The increase in trading business revenue was primary due to the new products, wood and barley, brought into this quarter which contributed total $24.6 million of revenue.

Gross profit for the first quarter of 2015 was $(3.9) million as compared to gross profit of $(1.2) million in the first quarter of 2014.  Gross margin (loss) in the first quarter of 2014 was ( 9.0%) compared to (11.7%) in the first quarter of 2014. The  negative gross profit and gross margin was largely due to a significant increase in cost of goods sold in our recycling business as a result of the decline in scrap metal prices and a approximately $1.4 million inventory write off  during the quarter. The negative gross margin of recycling business in the first quarter was also due to the scraps sold  in the quarter was all the scraps with low value, while the non-ferrous scraps with higher margin was just delivered in the second quarter although the contracts were entered into in the first quarter.

Total operating expenses for the first quarter of 2015 decreased to approximately $1.4 million compared to $2.3 million for the same period in 2014, resulted from a decrease of $0.55 million in general and administrative expenses, a decrease of $0.14 million in professional fees, a decrease in of $0.09 million in selling expenses, and a decrease of $0.08 million in operating cost of idle manufacturing facility.

Operating loss for the first quarter of 2015 was $5.3 million compared to an operating loss of $3.5 million in the first quarter of 2014.

Net loss for the first quarter of 2015 was $1.03 million, or $0.18 loss per diluted share, compared to net loss $3.62 million or $1.20 loss per share for the same period last year. The weighted average diluted shares outstanding increased from 3.0 million in the first quarter of 2014 to 5.8 million in the first quarter of 2015, due to equity issuance for capital raise, payment and compensation and converted debt after the end of first quarter of 2014 . 

Mr. Kexuan Yao, Chairman and CEO of Armco Metals, stated, “China's steel output and demand both fell in the first quarter of the year as the economy grew at the slowest pace since the global recession. Our business was adversely affected by the market, combining with seasonal factors, resulting in a net loss during the quarter. However, both of our recycling and trading business revenue increased significantly as result of increased production and sales and new products. We believe our solid and sound foundation in the industry, our strong relationship with our customers and suppliers around the world, and the strategy we have developed will enable us to overcome various challenges and fully leverage our operating model to generate incremental revenue and profitability, especially, recently in the second quarter we sold more recycled nonferrous metal scraps which is expected to generate higher gross profit and substantially improve our gross margin. Also with the recent favorable export tariff change for steel products, we have exported more steel products in the second quarter and seek to grow our exporting business as new sources of our business growth.”

Financial Conditions

As of March 31, 2015, the Company had $0.18 million in cash and cash equivalents, compared to $1.9 million at the end of 2014. Working capital was $15.4 million and a current ratio of 1.43:1 on March 31, 2015 compared to 15.6 million and 1.38:1 on December 31, 2014. Total accounts receivable decreased $10.6 million to $32.6 million at the end of the first quarter of 2015 compared to $43.2 million at the year end of 2014 primarily due to the payment we received in the first quarter for our sales made during 2014. Inventories increased $1.46 million at March 31, 2015 from December 31, 2014, primarily due to the increase of scrap metal inventories for increased production. As of March 31, 2015, shareholders' equity was $54.6 million, essentially flat from December 31, 2014.

Cash decreased $1.7 million during the first quarter of 2015 as compared to an increase of $0.4 million during the comparable period in 2014. During the first quarter the Company had a $36,159 of cash inflow from investing activities, and used cash of $1.35 million in operating activities and cash of $0.41 million in financing activities.

The Company has bank facilities, which provide for cash borrowings or the issuance of commercial letters of credit required in its metal ore trading business, aggregating $79.9 million.  Approximately $70.8 million was available under these facilities at March 31, 2015.

Business Updates

The Company's trading business revenue increased to approximately $28.1 million during the first quarter of 2015 compared to $7.3 million in the same period in 2014 primary due to sales in new products of raw wood and barley, as well as the increased sales in steel billet. In the second quarter of 2015 so far, the Company has delivered approximately 5,000 metric tons of steel billet to a client in Korea at contract value of approximately $1.9 million with gross margin of approximately 2%. And for the second quarter so far the Company also has sales orders of raw wood at contract value of approximately $22 million to be delivered in the second quarter.

During the first quarter of 2015, despite the Chinese New Year holiday and the weak demand and market, both production and revenues of recycling business continued to increase compared to the same period of last year. In the second quarter so far, the Company has delivered non-ferrous scrap metals of approximately  2,455 metric tons and  expect to generate estimated gross profit of  approximately $4.9 million from the sales which sales contracts were signed in the first quarter. In addition, so far the Company has delivered approximately 15,000 metric tons scrap metals at contract amounted to approximately $4.1 million  in the second quarter. 

 

 

 

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