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Huadi International (HUDI)

Filed: 2 Feb 22, 4:49pm

Exhibit 99.1

 

Huadi International Group Co., Ltd. Announces Fiscal Year 2021 Financial Results

 

WENZHOU, China, Feb. 02, 2022 (GLOBE NEWSWIRE) -- Huadi International Group Co., Ltd. (“HUDI” or the “Company”) (NASDAQ: HUDI), a leading developer and manufacturer of industrial stainless steel seamless pipes and tubes products in China, today announced its audited financial results for the fiscal year ended September 30, 2021.

 

Financial Highlights for the Fiscal Year 2021

 

  For the fiscal year ended September 30, 
($ millions, except per share data) 2021  2020  % Change 
Revenue $70.25  $59.14   18.79%
Gross profit $11.32  $10.66   6.15%
Gross margin  16.11%  18.03%  (1.92) percentage points 
Operating income $2.58  $4.61   (44.02)%
Operating income margin  3.67%  7.79%  (4.12) percentage points 
Net income attributable to Huadi International $2.53  $3.32   (23.8)%
Diluted earnings per share $0.21  $0.34   (38.24)%

 

Revenue increased by 18.79% to $70.25 million primarily due to: 1) the increased market demand of construction materials and shortage of supply on the current market; 2) the growth in the number of domestic and international clients and sales.

 

Gross profit increased by 6.15% to $11.32 million. The increase of gross profit was consistent with the increase of revenues for fiscal 2021 as compared to fiscal 2020. Gross margin was 16.11%, compared to 18.03% for the prior fiscal year. The decrease of gross profit margin was mainly due to increased raw material cost caused by the supply shortage of steel materials and increased international fright expenses.

 

Operating income was $2.58 million, compared to $4.61 million for the prior fiscal year. Operating margin was 3.67%, compared to 7.79% for the prior fiscal year.

 

Net income attributable to Huadi International was $2.53 million, or net earnings of $0.21 per share. This compared to net income attributable to Huadi International of $3.32 million, or $0.34 per share, for the prior fiscal year.

 

“We are pleased with our business performance for the fiscal year 2021, generated $70.25 million revenue and $11.32 million gross profit for the fiscal year 2021, increased 18.79% and 6.15%, respectively, compared to the last fiscal year, our domestic and international sales increased by 12.40% and 44.2%, respectively. The significant growth shows our great efforts to sustainably develop our business operation, and the market recognizing the quality of our products and the brand awareness of Huadi. Looking ahead to the fiscal year 2022, we will continue to execute our growth strategies and improve our brand influence, while the demand for the construction materials continues to grow, our strong business operation performance positions us well to increase market share in this industry that will continue to consolidate, and create more benefits to all of our shareholders in the future,” commented Mr. Di Wang, Chairman of Huadi International Group Co., Ltd.

 

 

 

 

Financial Results for the Fiscal year 2021

 

Revenue

 

The following table presents revenue by geographic areas for the years ended September 30, 2021 and 2020 respectively. 

 

  September 30, 2021  September 30, 2020 
Top 5 International Markets: Sales Amount
($ millions)
  As %
of Sales
  Sales Amount
($ millions)
  As %
of Sales
 
China $53.13   81.22% $47.27   79.93%
US  5,.74   8.78%  3.0   5.07%
India  4.19   6.41%  5.08   8.59%
Australia  0.55   0.84%  1.33   2.24%
Switzerland  0.51   0.79%  -   -%
Other foreign countries  6.12   1.96%  2.46   4.17%

 

For the year ended September 30, 2021, revenues increased by approximately $11.11 million or 18.79%, to approximately $70.25 million from approximately $59.14 million for the year ended September 30, 2020. The increase in revenues was primarily driven by the following factors:

 

1)Due to increased market demand of construction materials and shortage of supply on the current market, particularly the piping systems in the real estate sector, we observed an increase of weighted average selling price (“ASP”) during the fiscal year 2021.
2)As a result of global shortage of construction materials, our domestic sales increased over 12.40% compared to the last fiscal year. Our international sales revenue during fiscal year 2021 amounted to $17.12 million, an increase of $5.25 million, or 44.2%, compared to last fiscal year

 

Gross Profit

 

Our gross profit increased by approximately $0.66 million, or 6.15%, to approximately $11.32 million for the year ended September 30, 2021 from approximately $10.66 million for the year ended September 30, 2020. The increase of gross profit was consistent with the increase of revenues for fiscal 2021 as compared to fiscal 2020. Gross profit margin was 16.11% for the year ended September 30, 2021, as compared to 18.03% for the year ended September 30, 2020. The decrease of gross profit margin was mainly due to increased raw material cost caused by the supply shortage of steel materials and increased international fright expenses.

 

Operating Expenses

 

Selling, general and administrative expenses increased by approximately $2.75 million, or 69.72% to approximately $6.68 million for the year ended September 30, 2021 as compared to approximately $3.94 million for the year ended September 30, 2020. The increase of SGA expenses was mainly due to increased consulting and compliance expenses in relation to our initial public offering and increased freight expenses incurred during fiscal year 2021.

 

Research and development expenses decreased by approximately $0.06 million, or 2.98% to approximately $2.06 million for the year ended September 30, 2021 as compared to approximately $2.12 million for the year ended September 30, 2020. Management is committed to expanding our research and development activities.

 

Total operating expenses increased by $2.68 million, or 44.28%, to $8.74 million for the fiscal year 2021 from $6.06 million for the prior fiscal year. As a percentage of sales, total operating expenses was 12.4% for the fiscal year 2020, compared to 10.2% for the prior fiscal year.

 

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Total Operating Income

 

Operating income was $2.58 million for the fiscal year ended September 30, 2021, compared to income from operations of $4.61 million for the prior fiscal year. Operating margin was 3.67%, compared to operating profit margin of 7.79% for the prior fiscal year.

 

Interest expenses

 

Our interest expense (net) decreased by approximately $0.10 million, or 4.81% to approximately $2.06 million for the year ended September 30, 2021, from approximately $2.16 million for the year ended September 30, 2020. The decrease of interest expense was mainly due to decreased bank loan the Company borrowed from the banks.

 

Other Income

 

We had net other income of approximately $1.95 million, which mainly attributable to dividend income received from invested company and government grant received during fiscal year 2021, comparing to net other income of approximately $1.13 million, which mainly attributable to dividend income received from invested company and government grant received during fiscal year 2020.

 

Net Income and earnings per share

 

As a result of the factors described above, net income was $2.56 million for the fiscal year 2021, compared to net income of $3.36 million for the prior fiscal year. Net income margin was 3.6% for the fiscal year 2021, compared to net profit margin of 5.8% for the prior fiscal year.

 

After deducting for non-controlling interests, net income attributable to Huadi International was $2.53 million, or net earnings of $0.21 per share, for the fiscal year 2021. This compared to net income attributable to Huadi International of $3.32 million, or $0.34 per share, for the prior fiscal year.

 

Financial Condition

 

As of September 30, 2021, cash and cash equivalents totaled $15.35 million, compared to $0.80 million as of September 30, 2020. Short-term bank borrowings were $33.46 million as of September 30, 2021, compared to $31.22 million as of September 30, 2020.

 

Accounts receivable net of allowance was $25.28 million as of September 30, 2021, compared to $15.53 million as of September 30, 2020. Inventories were $22.72 million as of September 30, 2021, compared to $20.84 million as of September 30, 2020. Accounts payable was $1.71 million as of September 30, 2021, compared to $1.86 million as of September 30, 2020.

 

Total current assets and current liabilities were $77.08 million and $48.77 million, respectively, leading to a current ratio of 1.58 as of September 30, 2021. This compared to total current assets and current liabilities were $47.35 million and $43.33 million, respectively, and current ratio of 1.09 as of September 30, 2020.

 

Net cash used in operating activities was $5.65 million for the fiscal year 2021, compared to net cash provided by operating activities was $3.20 million for the prior fiscal year. Net cash used in investing activities was $0.90 million for the fiscal year 2021, compared to net cash provided by investing activities of $0.06 million for the prior fiscal year. Net cash provided by financing activities was $21.28 million for the fiscal year 2021, compared to net cash used in financing activities of $4.69 million for the prior fiscal year.

 

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Recent Developments

 

On November 10, 2021, the Company entered into a strategic cooperation framework agreement on October 28, 2021 with Zhejiang Lanneng Gas Equipment Limited to jointly develop and produce high-pressure hydrogen storage tank stainless steel pipe.

 

On November 1, 2021, the Company was awarded stainless steel seamless pipe order contracts worth $3.26 million in total.

 

About Huadi International Group Co., Ltd.

 

Huadi International Group Co., Ltd. is a leading manufacturer of industrial stainless steel seamless pipes and tubes products with extensive distribution facilities and network for over twenty provinces in China and across international steel pipes industry. It offers a broad range of products exported to twenty countries and regions such as United States, Mexico, Thailand, Australia, Argentina, Taiwan, India, the Philippines, UAE and Canada. Its products are widely used in the oil & gas transmission, chemistry engineering, food processing, medical devices, aeronautics and astronautics, boiler, irrigation works construction, electricity, automobile, naval architecture, paper mill and mechanical industries. For more information about the Company, please visit: http://www.huadi.cc.

 

Forward-Looking Statement

 

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s goals and strategies; the Company’s future business development; financial condition and results of operations; product and service demand and acceptance; reputation and brand; the impact of competition and pricing; changes in technology; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the SEC. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. 

 

For more information, please contact:

 

The Company:
IR Department
Email: IR@huadigroup.com

 

Investor Relations:
Dong Cao, CFA
EverGreen Consulting Inc.
Email: IR@changqingconsulting.com
Phone: +86 13502048965

 

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HUADI INTERNATIONAL GROUP CO., LTD.

 

CONSOLIDATED BALANCE SHEETS

 

AS OF SEPTEMBER 30, 2021 AND 2020

 

(IN U.S. DOLLARS, EXCEPT SHARE DATA)

 

  2021  2020 
Assets      
Current assets:      
Cash and cash equivalents $15,350,197  $796,794 
Restricted cash  1,304,518   908,410 
Accounts receivable, net of allowance for doubtful accounts of $3,066,937 and $2,910,554, respectively  21,297,261   13,618,697 
Accounts receivable – related parties  3,981,697   1,914,380 
Notes receivable  2,593,018   555,612 
Inventories  22,721,265   20,837,594 
Advances to suppliers  3,806,420   998,123 
Advances to suppliers – related parties  5,550,504   5,342,512 
Other receivables  475,793   2,375,031 
Total current assets  77,080,673   47,347,153 
Property, plant and equipment, net  7,208,705   6,687,642 
Land use rights, net  1,234,636   1,202,687 
Long-term investments  14,171,928   13,449,305 
Deferred tax assets  549,921   436,583 
TOTAL ASSETS $100,245,863  $69,123,370 
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Accounts payable $1,713,716  $1,855,047 
Accrued expenses and other current liabilities  2,048,979   1,587,826 
Notes payable  2,312,556   1,517,026 
Advances from customers  4,667,084   1,515,452 
Due to related parties  514,913   1,407,711 
Short-term borrowings  33,459,043   31,221,280 
Tax payable  4,051,158   4,230,328 
TOTAL LIABILITIES  48,767,449   43,334,670 
         
COMMITMENTS AND CONTINGENCIES        
         
Shareholders’ equity:        
Common stock, $0.0002 par value, 250,000,000 shares authorized, 13,127,000 and 10,000,000 shares issued and outstanding, respectively  2,625   2,000 
Additional paid-in capital  44,211,336   22,531,620 
Statutory surplus reserves  255,705   - 
Retained earnings (Accumulated deficit)  2,116,581   (159,189)
Accumulated other comprehensive income  4,627,661   3,189,856 
Total equity attributable to Huadi International Group Co., Ltd.  51,213,908   25,564,287 
Equity attributable to non-controlling interests  264,506   224,413 
Total shareholders’ equity  51,478,414   25,788,700 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $100,245,863  $69,123,370 

 

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HUADI INTERNATIONAL GROUP CO., LTD.

 

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

FOR THE YEARS ENDED SEPTEMBER 30, 2021 AND 2020
(IN U.S. DOLLARS, EXCEPT SHARE DATA)

 

  2021  2020 
Sales $67,006,655  $57,767,081 
Production service revenue  3,239,956   1,370,197 
Cost of sales  (58,926,675)  (48,473,061)
Gross profit  11,319,936   10,664,217 
         
Operating expenses:        
Selling, general and administrative  6,684,410   3,938,511 
Research and development  2,057,547   2,120,649 
Total operating expenses  8,741,957   6,059,160 
         
Operating income  2,577,979   4,605,057 
         
Other income (expenses):        
Interest expenses, net  (2,058,461)  (2,162,589)
Other income, net  1,948,527   1,132,780 
Total other expenses, net  (109,934)  (1,029,809)
         
Income before income taxes  2,468,045   3,575,248 
         
Income tax provision  89,000   (218,949)
         
Net income  2,557,045   3,356,299 
Net income attributable to non-controlling interests  25,570   33,563 
         
Net income attributable to Huadi International Group Co., Ltd. $2,531,475  $3,322,736 
         
Net income $2,557,045  $3,356,299 
         
Other comprehensive income (loss):        
Foreign currency translation adjustment  1,452,328   1,225,301 
         
Total comprehensive income  4,009,373   4,581,600 
Comprehensive income attributable to non-controlling interests  40,093   45,816 
         
Comprehensive income attributable to Huadi International Group Co., Ltd. $3,969,280  $4,535,784 
         
Basic and diluted earnings per share        
Basic $0.21  $0.34 
Diluted $0.21  $0.34 
Weighted average numbers of common shares outstanding        
Basic  12,116,079   10,000,000 
Diluted  12,116,079   10,000,000 

 

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HUADI INTERNATIONAL GROUP CO., LTD.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE YEARS ENDED SEPTEMBER 30, 2021 AND 2020

 

(IN U.S. DOLLARS)

 

  2021  2020 
Cash Flows from Operating Activities:      
Net income $2,557,045  $3,356,299 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation  735,333   723,586 
Amortization  32,349   30,048 
Bad debt expense reverse  (153,676)  - 
Deferred tax benefits (expenses)  (89,000)  - 
Loss (gain) on disposal of fixed assets  1,767   (654,138)
Changes in operating assets and liabilities:        
Accounts receivable  (8,823,928)  (260,202)
Notes receivable  (1,987,871)  (10,332)
Inventories  (756,588)  (1,987,737)
Advances to suppliers  (2,727,661)  366,087 
Advances to suppliers – related party  78,283   180,333 
Other receivables  2,006,975   3,303,687 
Accounts payable  (238,638)  650,988 
Accrued expenses and other current liabilities  372,155   (387,358)
Notes payable  707,021   (2,301,375)
Advances from customers  3,040,106   222,805 
Tax payable  (402,478)  (28,401)
Net cash provided by operating activities  (5,648,806)  3,204,290 
         
Cash Flows from Investing Activities:        
Purchases of property, plant and equipment  (917,539)  (664,996)
Proceeds from disposition of property, plant and equipment  20,285   724,782 
Net cash provided by (used in) investing activities  (897,254)  59,786 
         
Cash Flows from Financing Activities:        
Proceeds from short-term borrowings  35,820,322   38,620,077 
Repayments on short-term borrowings  (35,265,552)  (40,488,791)
Proceeds from stock offering, net of offering costs  21,680,341   - 
Advances from related parties  6,223,875   3,068,965 
Repayments to related parties  (7,182,813)  (5,889,557)
Net cash provided by (used in) financing activities  21,276,173   (4,689,306)
         
Effect of exchange rate changes on cash and cash equivalents and restricted cash  219,398   113,762 
         
Net increase (decrease) in cash and cash equivalents and restricted cash  14,949,511   (1,311,468)
Cash and cash equivalents and restricted cash at the beginning of year  1,705,204   3,016,672 
Cash and cash equivalents and restricted cash at the end of year $16,654,715  $1,705,204 
         
Supplemental disclosures of cash flows information:        
Cash paid for income taxes $480,495  $135,262 
Cash paid for interest $1,550,082  $1,951,622 

 

 

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