Huadi International Group Co., Ltd. Announces Fiscal Year 2022 Financial Results

About this update from Huadi International Group Co., Ltd.

BEIJING , Feb. 15, 2023 (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 financial results for the fiscal year ended September 30, 2022 . Financial Highlights for the Fiscal Year 2022 For the Fiscal Years Ended September 30 (in $ millions, except earnings per share; differences due to rounding) 2022 2021 % Change Sales $ 76.4 $ 70.3 8.7 % Gross profit 11.1 11.3 1.6 % Gross margin 14.9 % 16.1 % (1.2 percentage points) Net income 1.9 2.6 (23.8 %) Net earnings per share – Basic and Diluted 0.15 0.21 (28.6 %) Revenue increased by 8.7% to $76.4 million For the year ended September 30, 2022 from $70.3 million for the year ended September 30, 2021 . Gross profit decreased by 1.6% to$11.1 million for the year ended September 30, 2022 , from $11.3 million for the year ended September 30, 2021 . Net income for the fiscal year ended September 30, 2022 was $1.9 million compared to net income of $2.6 million for the fiscal year ended September 30, 2021 , Mr. Di Wang , Chairman of the Company commented: “The Company continues to focus its strategy on providing high-quality services and products to maintain and expand HUDI’s existing and prospective client base, which is shown by the Company’s nearly 9% sales growth during the fiscal year ended September 30, 2022 . Despite a challenging year amid supply chain disruptions and rising material costs, the Company is pleased to deliver resilient performance during the past fiscal year and is prepared to keep implementing current strategic plan to seek sustainable growth in the coming year.” Financial Results for the Fiscal year 2022 Sales For the year ended September 30, 2022 , revenues increased by approximately $6.1 million or 8.7%, to approximately $76.4 million from approximately $70.3 million for the year ended September 30, 2021 . The increase in revenues was primarily driven by the following factors: During the fiscal year 2022, the Company observed an increase of raw materials price, especially the price of nickel which is an important component of stainless steel. To minimize the impact the rise of raw material price, we increased our weighted average selling price (“ASP”) during the fiscal year 2022. As a result of domestic shortage of construction materials and recovery of construction market, the Company’s domestic sales increased over 21.9% compared to the last fiscal year. The Company’s international sales revenue during fiscal year 2022 amounted to approximately $11.7 million , a decrease of 31.6% compared to last fiscal year. Gross profit Our gross profit decreased by approximately $0.2 million , or 1.6%, to approximately $11.1 million for the year ended September 30, 2022 from approximately $11.3 million for the year ended September 30, 2021 . Gross profit margin was 14.9% for the year ended September 30, 2022 , as compared to 16.1% for the year ended September 30, 2021 . The slight decrease of gross profit margin was mainly due to increased raw material prices which drove up the cost of sales. Selling, general and administrative (“SGA”) expenses Selling, general and administrative expenses decreased by approximately $0.2 million , or 3.5% to approximately $6.5 million for the year ended September 30, 2022 as compared to approximately $6.7 million for the year ended September 30, 2021 . The decrease of SGA expenses was mainly due to decreased freight expenses for the Company’s international and domestic sales, and increased travelling and agency expenses related to the increased sales activities. Research and development (“R&D”) expenses Research and development expenses increased by approximately $0.3 million , or 13.3% to approximately $2.3 million for the year ended September 30, 2022 as compared to approximately $2.1 million for the year ended September 30, 2021 . Net Income As a result of the factors described above, the Company’s net income for the fiscal year ended September 30, 2022 was approximately $2.0 million compared to net profit of $2.6 million for the fiscal year ended September 30, 2021 , a decrease in profit of approximately $0.6 million , or approximately 23.8%. Recent development On November 9, 2022 , the Company closed a registered direct offering for the sale of 1,000,000 ordinary shares. The Company received gross proceeds from the sale of the shares of approximately $25 million before deducting placement agent fees and other offering expenses. On December 8, 2022 , Ms. Qin Li tendered her resignation as the Chief Financial officer the Company, effective on December 8, 2022 . On the same day, at the recommendation of the Nominating Committee and the Compensation Committee, the Board of Directors approved and confirmed the appointment of Mr. Jianping Xiang as the succeeding Chief Financial Officer of the Company, effective December 8, 2022 . 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: [email protected] Investor Relations: Wealth Financial Services LLC Email: [email protected] HUADI INTERNATIONAL GROUP CO., LTD. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2022 AND 2021 ( IN U.S. DOLLARS, EXCEPT SHARE DATA) 2022 2021 Assets Current assets: Cash and cash equivalents $ 13,195,999 $ 15,350,197 Restricted cash 1,347,246 1,304,518 Accounts receivable, net of allowance for doubtful accounts of $2,197 ,396 and $3,066,937 , respectively 19,658,188 21,297,261 Accounts receivable – related parties - 3,981,697 Notes receivable 1,410,613 2,593,018 Inventories 24,867,708 22,721,265 Advances to suppliers 3,369,468 3,806,420 Advances to suppliers – related parties - 5,550,504 Other receivables 552,633 475,793 Total current assets 64,401,855 77,080,673 Property, plant and equipment, net 5,989,136 7,208,705 Land use rights, net 1,069,891 1,234,636 Long-term investments 12,836,916 14,171,928 Deferred tax assets 338,729 549,921 TOTAL ASSETS $ 84,636,527 $ 100,245,863 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 919,492 $ 1,713,716 Accounts payable - related parties 2,439,105 - Accrued expenses and other current liabilities 1,771,245 2,048,979 Notes payable 548,253 2,312,556 Advances from customers 4,401,440 4,667,084 Due to related parties 606,986 514,913 Short-term borrowings 11,888,662 33,459,043 Tax payable 3,126,778 4,051,158 Total current liabilities 25,701,961 48,767,449 Long-term borrowing 9,300,625 - TOTAL LIABILITIES 35,002,586 48,767,449 COMMITMENTS AND CONTINGENCIES Shareholders’ equity: Common stock, $0 .0002 par value, 250,000,000 shares authorized, 13,239,182 and 13,127,000 shares issued and outstanding, respectively 2,648 2,625 Additional paid-in capital 44,211,313 44,211,336 Statutory surplus reserves 494,223 255,705 Retained earnings 3,802,265 2,116,581 Accumulated other comprehensive income 873,059 4,627,661 Total equity attributable to Huadi International Group Co., Ltd. 49,383,508 51,213,908 Equity attributable to non-controlling interests 250,433 264,506 Total shareholders’ equity 49,633,941 51,478,414 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 84,636,527 $ 100,245,863 HUADI INTERNATIONAL GROUP CO., LTD. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED SEPTEMBER 30, 2022 , 2021 AND 2020 (IN U.S. DOLLARS, EXCEPT SHARE DATA) 2022 2021 2020 Sales $ 74,702,625 $ 67,006,655 $ 57,767,081 Production service revenue 1,663,523 3,239,956 1,370,197 Cost of sales (65,230,521 ) (58,926,675 ) (48,473,061 ) Gross profit 11,135,627 11,319,936 10,664,217 Operating expenses: Selling, general and administrative 6,452,173 6,684,410 3,938,511 Research and development 2,330,913 2,057,547 2,120,649 Total operating expenses 8,783,086 8,741,957 6,059,160 Operating income 2,352,541 2,577,979 4,605,057 Other income (expenses): Interest expenses, net (1,629,642 ) (2,058,461 ) (2,162,589 ) Other income, net 1,398,173 1,948,527 1,132,780 Total other expenses, net (231,469 ) (109,934 ) (1,029,809 ) Income before income taxes 2,121,071 2,468,045 3,575,248 Income tax benefit/(provision) (173,017 ) 89,000 (218,949 ) Net income 1,948,054 2,557,045 3,356,299 Net income attributable to non-controlling interests 23,852 25,570 33,563 Net income attributable to Huadi International Group Co., Ltd. $ 1,924,202 $ 2,531,475 $ 3,322,736 Net income $ 1,948,054 $ 2,557,045 $ 3,356,299 Other comprehensive income (loss): Foreign currency translation adjustment (3,792,527 ) 1,452,328 1,225,301 Total comprehensive income (1,844,473 ) 4,009,373 4,581,600 Comprehensive income attributable to non-controlling interests (14,073 ) 40,093 45,816 Comprehensive income attributable to Huadi International Group Co., Ltd. $ (1,830,400 ) $ 3,969,280 $ 4,535,784 Basic and diluted earnings per share Basic $ 0.15 $ 0.21 $ 0.34 Diluted $ 0.15 $ 0.21 $ 0.34 Weighted average numbers of common shares outstanding Basic 13,239,182 12,116,079 10,000,000 Diluted 13,239,182 12,116,079 10,000,000 HUADI INTERNATIONAL GROUP CO., LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2022 , 2021 AND 2020 (IN U.S. DOLLARS) 2022 2021 2020 Cash Flows from Operating Activities: Net income $ 1,948,054 $ 2,557,045 $ 3,356,299 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 792,888 735,333 723,586 Amortization 32,087 32,349 30,048 Bad debt expense reverse (564,283 ) (153,676 ) - Deferred tax benefits (expenses) 173,017 (89,000 ) - Loss (gain) on disposal of fixed assets - 1,767 (654,138 ) Changes in operating assets and liabilities: Accounts receivable 4,080,722 (8,823,928 ) (260,202 ) Notes receivable 1,018,351 (1,987,871 ) (10,332 ) Inventories (4,653,336 ) (756,588 ) (1,987,737 ) Advances to suppliers 19,092 (2,727,661 ) 366,087 Advances to suppliers – related party 5,457,504 78,283 180,333 Other receivables (132,062 ) 2,006,975 3,303,687 Accounts payable 1,960,756 (238,638 ) 650,988 Accrued expenses and other current liabilities (91,961 ) 372,155 (387,358 ) Notes payable (1,678,680 ) 707,021 (2,301,375 ) Advances from customers 188,878 3,040,106 222,805 Tax payable (589,163 ) (402,478 ) (28,401 ) Net cash provided by (used in) operating activities 8,027,856 (5,648,806 ) 3,204,290 Cash Flows from Investing Activities: Purchases of property, plant and equipment (206,175 ) (917,539 ) (664,996 ) Proceeds from disposition of property, plant and equipment - 20,285 724,782 Net cash (used in) provided by investing activities (206,175 ) (897,254 ) 59,786 Cash Flows from Financing Activities: Proceeds from short-term borrowings 21,719,160 35,820,322 38,620,077 Repayments on short-term borrowings (41,712,446 ) (35,265,552 ) (40,488,791 ) Proceeds from long-term borrowings 10,095,831 - - Proceeds from stock offering, net of offering costs - 21,680,341 - Advances from related parties 305,226 6,223,875 3,068,965 Repayments to related parties (152,628 ) (7,182,813 ) (5,889,557 ) Net cash (used in) provided by financing activities (9,744,857 ) 21,276,173 (4,689,306 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash (188,294 ) 219,398 113,762 Net (decrease) increase in cash and cash equivalents and restricted cash (2,111,470 ) 14,949,511 (1,311,468 ) Cash and cash equivalents and restricted cash at the beginning of year 16,654,715 1,705,204 3,016,672 Cash and cash equivalents and restricted cash at the end of year $ 14,543,245 $ 16,654,715 $ 1,705,204 Supplemental disclosures of cash flows information: Cash paid for income taxes $ 64,016 $ 480,495 $ 135,262 Cash paid for interest $ 1,151,567 $ 1,550,082 1,951,622 Source: HUADI INTERNATIONAL GROUP CO., LTD.

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