Huadi International Group Co., Ltd. Announces the First six Months of Fiscal Year 2023 Financial Results

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

BEIJING , Sept. 6, 2023 /PRNewswire/ -- 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 first six months of fiscal year 2023. Financial Highlights for the First Six Months of Fiscal Year 2023 For the Six Months Ended March 31 (in $ millions, except earnings per share; differences due to rounding) 2023 2022 % Change Sales $ 38.0 $ 36.8 3.2 % Gross profit 5.7 5.9 (3.6 %) Gross margin 15.1 % 16.2 % (1.1 percentagepoints) Operating Income 1.5 0.7 122.0 % Net income 1.5 (0.0) (15,991.7 %) Net earnings per share – Basic and Diluted 0.10 (0.00) (15,044.8 %) Revenue increased by 3.2% to $38.0 million for the six months ended March 31, 2023 , from $36.8 million for the six months ended March 31, 2022 . Gross profit decreased by 3.6% to $5.7 million for the six months ended March 31, 2023 , from $5.9 million for the six months ended March 31, 2022 . Operating income increased by 122% to $1.5 million for the six months ended March 31, 2023 , from $0.7 million for the six months ended March 31, 2022 Net income for the six months ended March 31, 2023 , was $1.5 million compared to net loss of $9,000 for the six months ended March 31, 2022 . Mr. Di Wang , Chairman of the Company, commented: "During the first half of year 2023, we continue to enhance our cost structure, deliver high-quality services and products to maintain and expand our existing client base, resulting in the Company's sales growth of over 3% and turnaround for net income of $1.5 million in the first half of fiscal year 2023. Despite a challenging economic situation resulted by Covid-19 pandemic during the last quarter of 2022, we closed $25 million registered direct offering. Though slow recovery from the impact of Covid-19 pandemic during the first quarter of 2023, we continued to record progresses on our operations and entered into strategic partnership with China Huanqiu Contracting & Engineering Co., Ltd. , leading to our recognition as a significant supplier for large-scale stainless steel seamless pipes and tubes projects. Also, we are chosen to serve as the chief executive entity of the Belt and Road Enterprise Development Association , which will aid us in exploring and cultivating new business prospects for sustainable growth in the future. All these developments during the six months ended March 31, 2023 bolster our confidence in implementing our strategic plan to seek sustainable growth for the full year 2023." Financial Results for the First Six Months of Fiscal year 2023 Revenue For the six months ended March 31, 2023 , revenue increased slightly by approximately $1.2 million or 3.2%, to approximately $38.0 million from approximately $36.8 million for the six months ended March 31, 2022 . The revenue denominated in RMB increased by approximately 30.4 million (equivalent to $4.4 million , using the average conversion rate for current period) or 13.0%. The increase in revenues was primarily driven by our sales growth in domestic market as a result of the end of control measures on COVID-19 since the end of 2022. Gross profit Gross profit decreased slightly by approximately $0.2 million , or 3.58%, to approximately $5.7 million for the six months ended March 31, 2023 , from approximately $5.9 million for the six months ended March 31, 2022 . Gross profit denominated in RMB increased by approximately 2.1 million (equivalent to approximately $0.3 million , using the average conversion rate for current period) or 5.61%, the increase of gross profit was in line with the Company's growth of revenue. Gross profit margin was 15.1% for the six months ended March 31, 2023 , as compared to 16.2% for the six months ended March 31, 2022 . Selling, general and administrative ("SGA") expenses Selling, general and administrative expenses decreased by approximately $0.3 million , or 7.5% to approximately $3.7 million for the six months ended March 31, 2023 as compared to approximately $4.0 million for the six months ended March 31, 2022 . The decrease of SGA expenses was primarily attributable to the depreciation RMB against USD, compared to an average exchange rate of 1 USD = 6.3712 RMB for the six months ended March 31, 2022 to an average exchange rate of 1 USD = 6.9761 for the six months ended March 31, 2023 . The decrease in SGA expenses denominated in RMB was only 0.3 million (equivalent to approximately $47,000 , using the average conversion rate for current period) or 1.28%. Research and development ("R&D") expenses Research and development expenses decreased slightly by approximately $0.1 million , or 6.7% to approximately $1.1 million for the six months ended March 31, 2023 as compared to approximately $1.2 million for the six months ended March 31, 2022 . Foreign currency transaction gains The Company incurred foreign currency transaction gains of approximately $0.6 million for the six months ended March 31, 2023 , compared to foreign currency transaction loss approximately $36,000 for the six months ended March 31, 2022 . The increase was mainly due to the depreciation RMB against USD, compared to an average exchange rate of 1 USD = 6.3712 RMB for the six months ended March 31, 2022 to an average exchange rate of 1 USD = 6.9761 for the six months ended March 31, 2023 . Income from operations As a result of the factors described above, the Company incurred operating income approximately $1.5 million for the six months ended March 31, 2023 , compared to operating income approximately $0.7 million for the six months ended March 31, 2022 , representing an increase of operating income of approximately $0.8 million . Other income and expense Total other income (expense), net increased by approximately $0.8 million , or 121.64% to other income approximately $0.1 million for the six months ended March 31, 2023 , compared to other expense approximately $0.7 million for the six months ended March 31, 2022 . The increase was mainly attributable to $0.7 million decrease of interest expense as a result of the decrease of short-term borrowings and long-term borrowings and an increase of other income of $0.1 million . Income tax provision Income tax expense for the six months ended March 31, 2023 increased by approximately $0.1 million , compared to the corresponding period in 2022 due to the increase in taxable income. Net income (loss) As a result of the combination of factors described above, the Company's net income increased by approximately $1.5 million to net income of $1.5 million for the six months ended March 31, 2023 , compared to net loss of approximately $9,000 for the six months ended March 31, 2022 . Cash and Cash Equivalents As of March 31, 2023 and September 30, 2022 , we had cash and cash equivalents of $19.8 million and $13.2 million respectively. Recent development On June 15, 2023 , Hong Kong Branch, a wholly-owned subsidiary of the Company, established Huadi Holdings (Songyang) Co., Ltd. under the laws of the PRC, the registered capital is $15 million . On July 5, 2023 , Huadi (Songyang) Co., Ltd. a wholly-owned subsidiary of the Company, has entered into an investment agreement with Songyang County local government owned enterprise in Zhejiang Province . The Agreement aims to start an advanced " Future Factory " construction project in the Chishou Industrial Zone of southwestern Zhejiang Province in China . The factory will occupy approximately 50 acres with a total investment of approximately RMB 1 billion , including fixed asset investments of over RMB 620 million . Huadi Songyang has officially obtained the rights to use the first portion of 26 acres of land from Songyang Economic Development Zone on June 30, 2023 , for the construction of the Future Factory project. 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 DepartmentEmail: [email protected] Investor Relations: Janice Wang Wealth Financial Services LLC Phone: +86 13811768559+1 628 283 9214Email: [email protected] HUADI INTERNATIONAL GROUP CO., LTD. CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2023 AND SEPTEMBER 30, 2022 ( UNAUDITED, IN U.S. DOLLARS, EXCEPT SHARE DATA) 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 19,754,552 $ 13,195,999 Restricted cash 915,242 1,347,246 Accounts receivable, net of allowance for doubtful accounts of $2,342,732 and $2,197,396 , respectively 19,390,619 19,658,188 Notes receivable 4,810,805 1,410,613 Inventories 29,840,861 24,867,708 Advances to suppliers, net 2,185,565 3,369,468 Other receivables 474,332 552,633 Total current assets 77,371,976 64,401,855 Property, plant and equipment, net 5,878,107 5,989,136 Land use rights, net 1,093,078 1,069,891 Long-term investments 13,296,552 12,836,916 Deferred tax assets 360,495 338,729 TOTAL ASSETS $ 98,000,208 $ 84,636,527 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,563,412 $ 919,492 Accounts payable - related parties 3,922,725 2,439,105 Accrued expenses and other current liabilities 1,799,794 1,771,245 Notes payable 82,998 548,253 Advances from customers 4,230,712 4,005,942 Advance from customers - related parties 409,659 395,498 Due to related parties 337,497 606,986 Short-term borrowings 72,806 11,888,662 Long-term borrowings - current portion 43,683 - Taxes payable 3,890,310 3,126,778 Total current liabilities 17,353,596 25,701,961 Long-term borrowings 4,318,830 9,300,625 TOTAL LIABILITIES 21,672,426 35,002,586 COMMITMENTS AND CONTIGENCIES Shareholders' equity: Common stock, $0.0002 par value, 250,000,000 shares authorized, 14,239,182 and 13,239,182 shares issued and outstanding at March 31, 2023 and September 30, 2022 2,848 2,648 Additional paid-in capital 67,221,113 44,211,313 Statutory reserves 637,882 494,223 Retained earnings 5,095,191 3,802,265 Accumulated other comprehensive income 3,080,515 873,059 Total equity attributable to Huadi International Group Co., Ltd. 76,037,549 49,383,508 Equity attributable to non-controlling interests 290,233 250,433 Total shareholders' equity 76,327,782 49,633,941 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 98,000,208 $ 84,636,527 HUADI INTERNATIONAL GROUP CO., LTD. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED MARCH 31, 2023 AND 2022 (UNAUDITED, IN U.S. DOLLARS, EXCEPT SHARE DATA) 2023 2022 Sales $ 37,333,555 $ 35,875,136 Production service revenue 618,897 912,205 Cost of sales (32,222,729) (30,844,955) Gross profit 5,729,723 5,942,386 Operating expenses: Selling, general and administrative 3,726,022 4,029,179 Research and development 1,141,874 1,223,213 Foreign currency transaction gains (590,132) 36,021 Total operating expenses 4,277,764 5,288,413 Operating income 1,451,959 653,973 Other income (expense): Interest income (expenses), net (268,260) (952,644) Other income 411,762 289,521 Total other income (expense), net 143,502 (663,123) Income (loss) before income taxes 1,595,461 (9,150) Income tax provision (141,374) - Net income (loss) 1,454,087 (9,150) Net income (loss) attributable to non-controlling interests 17,502 (92) Net income (loss) attributable to Huadi International Group Co., Ltd. $ 1,436,585 $ (9,058) Net income (loss) $ 1,454,087 $ (9,150) Other comprehensive income: Foreign currency translation adjustment 2,229,754 658,742 Total comprehensive income 3,683,841 649,591 Comprehensive income attributable to non-controlling interests 39,800 6,495 Comprehensive income attributable to Huadi International Group Co., Ltd. $ 3,644,041 $ 643,096 Basic and diluted earnings (loss) per share Basic $ 0.10 $ -(0.00) Diluted $ 0.10 $ -(0.00) Weighted average numbers of common shares outstanding Basic 14,028,071 13,192,232 Diluted 14,028,071 13,192,232 View original content: https://www.prnewswire.com/news-releases/huadi-international-group-co-ltd-announces-the-first-six-months-of-fiscal-year-2023-financial-results-301918885.html SOURCE Huadi International Group Co., Ltd.

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