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RAPAPORT...
Kingold Jewelry Inc. reported that revenue fell 32.9 percent year on year to $206.2 million in the first quarter that ended on March 31. The company contended that sales were dramatically reduced, falling by a total of $101.3 million, due to weak demand for gold products, which accounted for $85.9 million of the total decline, and lower gold prices. Kingold also took a $3 million write-down on inventory due to the decrease in gold prices during the period. Gross margin fell to 5.2 percent compared with 8.7 percent one year earlier. Profit declined 59 percent to $6.6 million or 10 cents per share.
During the first quarter, Kingold processed 12.3 metric tons of 24-karat gold products, compared with 14.5 metric tons one year earlier. Nonetheless, the company reiterated its fiscal-year guidance of producing between 70 metric tons and 80 metric tons of 24-karat gold products, while observing that a "protracted period of lesser demand" could alter the outlook later in the year.
Zhihong Jia, the chairman and CEO of Kingold, said, "We were pleased to maintain profitability during the first quarter of 2015 despite the unusually weak market conditions associated with the slowdown of the Chinese economy and drop in the price of gold. Our net sales decreased due to larger customers delaying purchases during this period and our investment gold business was also significantly affected. We have taken a proactive approach to reach out to new clients as well as deepen relationships with our key customers. We have recently launched our online retail flagship store on Tmall.com, leveraging our team's experience from Kingold's past online efforts to create a convenient and consumer-friendly platform at minimal operating expense. We see it as a strong step in diversifying our revenue and expanding into a higher margin, direct retail business." In an update on the company's Jewelry Park, Jia confirmed that progress continues and the company is solely focused on completing all exterior and interior design elements. "We are seeking sales opportunities for the properties under development and have been successful to date in achieving the necessary financing to progress with the project. We are still on track for a December 2015 opening and feel very confident that the endeavor will ultimately deliver a strong return on investment for Kingold and its stockholders," Jia stated.
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