Sutor Technology Group Limited, a leading China based manufacturer and distributor of high end fine finished steel products and welded steel pipes used by a variety of downstream applications, has announced its financial results for the third quarter of fiscal year 2011 ended March 31st 2011.

In USD million except EPS

Ms Chen chairwoman & CEO of Sutor said that "We are pleased to report another quarter of consistent profit and improved gross margin. The decline in total revenue was primarily due to our strategic decision to reduce our steel trading business. In addition, as the steel industry in China becomes more competitive and lower end products become more of a commodity, we are working hard to shift some of our high end capacity to more specialized, higher margin products. Our goal is to separate ourselves from the industry at the highest levels and to work as efficiently as possible. As a result of this transition over the past quarter, we experienced a decrease from our overall pre-painted galvanized products. Going forward, we anticipate favorable top line growth on a year over year basis beginning next fiscal year. We are encouraged by the fact that demand for our products remained strong and the prices for our products increased between approximately 6.5% and 19% in the third fiscal quarter this year over the same quarter last year."

She added that "Our priority continues to be pursuing quality of product and services and profitability. At the same time, we are taking proactive and prudent measures to address growth issues. We are constructing a cold rolling facility with an annual designed capacity of 500,000 tonnes which will supplement our existing cold rolling production line which has a designed annual capacity of 250,000 tonnes and has been running at more than 100% of its designed capacity lately. We expect that the new facility will alleviate our current capacity constraint, contribute to higher gross margins, and enhance our product offerings. The integrated new facility will include an annealing process and can process wider steel strips than the existing cold rolling production line. The new facility is expected to commence operation in the first half of calendar year 2012. We continue to explore other corporate strategic initiatives including seeking strategic partners and or investors when appropriate. We will prudently implement these measured growth strategies in order to maintain financial strengths, liquidity and protect and improve shareholder value. We are excited about the future of Sutor as management and as shareholders."

Revenues were USD 101.4 million in the third fiscal quarter of 2011 as compared to USD 114.5 million for the same period last year, a decrease of USD 13.1 million or approximately 11.4%. The decrease was primarily attributable to significantly reduced steel trading business at our subsidiary Ningbo Zhehua Heavy Steel Pipe Manufacturing Co Limited. During the quarter, revenue from Ningbo Zhehua decreased by approximately USD 9.2 million from approximately USD 16 million for the three months ended March 31st 2010 to USD 6.8 million for the three months ended March 31st 2011. This accounted for most of our decreased revenues. In addition, reduced production volume for our PPGI products also contributed to lower revenue due to a shift in product mix.

Gross profit was USD 8.6 million in the third fiscal quarter of 2011, compared to USD 9.3 million in the same period last year, a decrease of USD 0.7 million, or approximately 7.5%. Gross margins increased to 8.5% for the third fiscal quarter of 2011 from 8.1% for the same period last year. The increased gross margin mainly resulted from changes in product mix and significantly reduced lower margin steel trading business. In addition, we also improved capacity utilization at our subsidiary Jiangsu Cold Rolled Technology Co Limited by moving more HDG production from our subsidiary Changshu Huaye Steel Strip Co Limited to Jiangsu Cold Rolled as the HDG production lines at the latter are newer and more efficient.