Armco Metals
Holdings, a U.S.-based company engaged in the import, sale, and distribution of
metal ore and non-ferrous metals in the People’s Republic of China, the
recycling of scrap metals, and sourcing and pricing services for various
metals, today reported financial results for its Q4 and fiscal year ended
December 31, 2013, reflecting strong sales growth for both periods.
Weaker steel prices
impacted Armco’s performance, though the company has countered the challenge
with strength in its recycling business and a route of growth for the future.
“2013 proved to be
another very challenging year for the China steel industry,” Kexuan Yao,
chairman and CEO of China Armco, stated in the news release. “While we made
significant sales gains and reduced overall expenses, we suffered the effects
of rapidly declining prices in the second half of 2013, which negatively
impacted gross margins in both metal trading and metal recycling. The recycling
business continued to be our largest source of revenue and we continue to
believe the metal recycling business will continue to be the major growth
driver for our company.”
Revenue for Q4 2013
increased 74 percent to $66.2 million, compared to $1.1 million in the same
period in 2012. The company attributes the increase to strength in sales of its
metal trading business, which contributed $40.0 million to total revenues.
Gross profit for Q4 2013 was $2.2 million, as compared to $4.4 million in Q4
2012. The company reported a Q4 2013 net loss of $0.4 million, or $0.01 per diluted
share, as compared to net income of $0.6 million, or $0.03 per diluted share,
in the comparable quarter of the prior year.
Full-year 2013 net
revenues increased 21 percent to $128.7 million, compared to revenues of $106.6
million in 2012. Armco’s recycling business accounted for approximately 50.4
percent of total revenue and topped the company’s metal trading business as the
largest source of net revenue. Gross profit for the full year 2013 was $3.3
million, compared to $8.5 million for the year ended December 31, 2012. The
company reported a full-year net loss of $4.1 million, compared to net loss of
$2.6 million in 2012. The company attributes the increase in net loss primarily
to a decrease in gross profit of $5.2 million as a result of a decline in gross
margin, which was partially offset by a decrease in total operating expenses of
$1.7 million, a decrease in other expenses of $1.6 million, and a decrease in
tax expense of $0.31 million.
As of December 31,
2013, Armco had $0.6 million in cash and cash equivalents, compared to $1.4
million at year-end 2012.
Armco’s growth
strategy will start with focused improvement on cost control, developing and
streamlining its supply chain, and establishing long-term strategic partnership
with key clients.
“As we position the
company for a cyclical recovery in the steel industry we will continue our
efforts to obtain additional qualifications and licenses to increase our
business, and build our brand in the industry. We have driven sales growth in a
very challenging environment while reducing costs significantly. We believe
this will serve as a springboard for significant financial improvement when our
end markets improve,” Yao stated.
Looking forward, the
company sees several opportunities for growth and improvement, in both the
short and long term. While Armco anticipates a slow-down in China’s steel
demand, the company expects that low income housing construction, ongoing
urbanization, and increasing domestic consumption in China to offset declines
and support the growth of the steel industry. The company also expects its
recycling business to benefit from the Chinese government’s 12th Five Year Plan
(2011-2015), under which the nation looks to restructure its iron and steel
industry to enhance energy efficiency and to increase environmental protection
by adopting and developing advanced technology.
In regards to its
metal recycling business, the company said, “We intend to devote a significant
amount of our resources towards the improvement of our operations and if
appropriate, its expansion. At the same time, we will continue to pursue our
strategy to create a local network of raw material suppliers for our recycling
facility and expand our oversea supply channels. In addition, we will continue
to develop our new sale and operation model in recycling business described
above to obtain more customers and business opportunities under the model in
the coming years.”
Furthermore, Armco
intends to explore potential merger and acquisition opportunities within the
steel industry to diversify its revenue streams and leverage the strength of
its current customer base. As of March 2014, Armco has entered into
negotiations with one such candidate for a potential merger opportunity.
For more
information, visit www.armcometals.com
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