GlobeNewswire Inc | Aug 26, 2021 07:30AM EDT

August 26, 2021

WENZHOU, China, Aug. 26, 2021 (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 inChina, today announced its interim financial results for six months ended March 31, 2021.

Financial Highlights for the First-Half 2021

For Half-Year EndedMarch 31($ millions, except per share data) 2021 2020 % ChangeRevenue $29.89 $25.56 16.94%Gross profit $5.35 $6.30 -15.08%Gross margin 17.90% 24.65% -17.65%Operating income $0.68 $3.51 -80.63%Net income (loss) attributable toHuadi $0.64 $2.65 -75.85%InternationalDiluted earnings (loss) per share $0.06 $0.27 -77.78%

-- Revenue increased by 16.94% to$29.89 millionfor the six months ended March 31, 2021 from $25.56 million for the same period in 2020, primarily due to the growth in the number of domestic clients and sales -- Gross profit decreased by 15.08% to $5.35 million for the six months ended March 31, 2021 from $6.30 million for the same period in 2020. The decrease of gross profit was primarily due to that we lowered the price of our products sold to attract new clients -- Operating income was$0.68 million for the six months ended March 31, 2021, compared to $3.51 millionfor the six months ended March 31, 2020 -- Net income attributable toHuadi Internationalduring the six months ended March 31, 2021 was$0.64 million, compared to $2.65 million for the same period last year -- Basic and diluted earnings per share was $0.06 for the six months ended March 31, 2021, compared to $0.27 million for the same period in 2020

"We accelerated our growth momentum during the six months ended March 31, 2021, growing our total revenue by 16.94% as compared with the same period of last year. We are firmly committed to carrying out our corporate mission, meticulous execution of growth strategies, methodical expansion in both overseas and domestic markets, proactive engagement of Huadi clients through innovative products, and prudent investment in sales and marketing initiatives. Going forward, we plan to refine our competitive edge, deepen our expertise in stainless steel seamless pipes and tubes products, and expand our brand influence among our clients on a global basis, commentedMr. Di Wang, Chairman ofHuadi International Group Co., Ltd.

Financial Results for the Six Months Ended March 31, 2021

Revenue

For the half-year ended March 31, 2021, revenue increased by $4.33 million or 16.94% to $29.89 million from $25.56 million for the same period in 2020. The increase was primarily due to the growth in the number of our domestic clients and sales.

Gross Profit

Gross profit decreased by $0.95 million or 15.08% to $5.35 million for the six months ended March 31, 2021 from $6.30 million for the same period in 2020. The decrease of gross profit was mainly due to that we lowered the price of our products sold to attract new customers in order to expand our market share.

Operating Expenses

Selling, general and administrative expenses increased by$1.79 million, or 91.79%, to$3.74 millionfor the six months ended March 31, 2021 from$1.95 millionfor the same period in 2020. The increase in SG&A expenses was primarily due to 1) increase of expenses related to our initial public offering completed in January 2021. 2) increase of one-off cash compensation and performance bonuses that we paid to our core employees during the reporting period.

Research and development expenses increased by$0.10 million, or 12.05%, to$0.93 millionfor the half year ended March 31, 2021 from$0.83 millionfor the same period in 2020.

Total operating expenses increased by$1.88 million, or 67.38%, to$4.67 millionfor the half-year ended March 31, 2021 from$2.79 millionfor the same period in 2020.

Total Operating Income

Total operating income was $0.68 million for the six months ended March 31, 2021, decreased by $2.83 million or 80.63% from $3.51 million during the same period in 2020. The decrease was primarily due to the increase in SG&A expenses.

Other Income (Expenses)

Interest expenses were$0.93 millionfor the half-year ended March 31, 2021, compared to$1.04 millionfor the same period during the prior year. Other net income was$0.96 millionfor the half-year ended March 31, 2021, compared to $0.55 million for the same period during the prior year. As a result, total net other expenses were$0.03 millionfor the half-year ended March 31, 2021, compared to total net other expenses of $0.49 million for the same period during the prior year.

Net Income (loss) and earnings (loss) per share

As a result of the factors described above, our net income was$0.64 million for the half-year ended March 31, 2021, compared to a net income of $2.68 million for the same period during the prior year.

After deducting for non-controlling interests, net income attributable toHuadi Internationalwas$0.64 million, or basic and diluted earnings of$0.06per share, for the six months ended March 31, 2021. This compared to net income attributable toHuadi Internationalof$2.65 million, or$0.27 per share, for the same period in the prior year.

Financial Condition

As ofMarch 31, 2021, cash and cash equivalents totaled$19.71 million, compared to$0.80 millionas of September 30, 2020. Short-term bank borrowings were$32.35 millionas ofMarch 31, 2021, compared to$31.22 millionas ofSeptember 30, 2020.

Net accounts receivable was$14.20million as ofMarch 31, 2021, compared to$13.62 millionas ofSeptember 30, 2020. Inventories were$23.62 millionas ofMarch 31, 2021, compared to$20.84 millionas of September 30, 2020. Accounts payable was$1.30 millionas ofMarch 31, 2021, compared to$1.86 millionas ofSeptember 30, 2020.

Total current assets and current liabilities were$68.74million and$43.74million, respectively, leading to a current ratio of 1.57 as of March 31, 2021. Total current assets and current liabilities were$47.35 millionand$43.33 million, respectively, leading to a current ratio of 1.09 as ofSeptember 30, 2020.

Recent Developments

On April 9, 2021, the Company was awarded stainless steel seamless pipe order contracts that worth RMB 20.65 million (approximately US $3.2 million) after winning the bid for a mining project in Gansu province, China.

OnMarch 17, 2021, the Company announced that it was awarded stainless steel seamless pipe order contracts that worthRMB 10.2 million(approximately US$1.6 million) after winning bid for a mining project inChinaGansuprovince.

OnMarch 3, 2021, the Company announced that it has been awardedRMB 12.45 million(approximatelyUS $1.95 million) stainless pipe order contracts after winning bids for two chemical-related projects.

InJanuary 2021, the Company completed an initial public offering on theNASDAQ stock exchangemarket and raised$25 millionby offering 3.1 million shares at$8.00per share, the high end of the range of$7to$8. At pricing, the Company commanded a market value of$106 million.

AboutHuadi 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 inChinaand across international steel pipes industry. It offers a broad range of products exported to twenty countries and regions such asUnited States,Mexico,Thailand,Australia,Argentina,Taiwan,India,the Philippines,UAEandCanada. 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 Companys expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Companys goals and strategies; the Companys 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 inChinaand assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with theSEC. 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 Companys filings with theSEC, which are available for review atwww.sec.gov. The Company undertakes no obligation to publicly revise these forwardlooking statements to reflect events or circumstances that arise after the date hereof. For more information, please contact:

The Company:IR DepartmentEmail:IR@huadigroup.com

Investor Relations: Dong Cao, CFAEverGreen Consulting Inc.Email:IR@changqingconsulting.comPhone: +86 13502048965

HUADI INTERNATIONAL GROUP CO., LTD.CONSOLIDATED BALANCE SHEETSAS OF MARCH 31, 2021 AND SEPTEMBER 30, 2020(UNAUDITED, IN U.S. DOLLARS, EXCEPT SHARE DATA)

March 31, September 2021 30, 2020 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $ 19,713,319 $ 796,794 Restricted cash 947,422 908,410 Accounts receivable, net of allowance fordoubtful accounts of $3,016,194 and 14,200,426 13,618,697 $2,910,554, respectivelyAccounts receivable ? related parties 1,462,527 1,914,380 Notes receivable 1,918,182 555,612 Inventories 23,615,683 20,837,594 Advances to suppliers 1,683,511 998,123 Advances to suppliers ? related parties 4,582,050 5,342,512 Other receivables 619,310 2,375,031 Total current assets 68,742,430 47,347,153 Property, plant and equipment, net 7,216,025 6,687,642 Intangible assets, net 2,375,128 1,202,687 Long-term investments 13,937,452 13,449,305 Deferred tax assets 452,429 436,583 TOTAL ASSETS $ 92,723,464 $ 69,123,370 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Accounts payable $ 1,299,469 $ 1,855,047 Accrued expenses and other current 1,589,502 1,587,826 liabilitiesNotes payable 1,785,769 1,517,026 Advances from customers 2,253,984 1,515,452 Due to related parties 506,394 1,407,711 Short-term borrowings 32,354,467 31,221,280 Tax payable 3,947,312 4,230,328 TOTAL LIABILITIES 43,736,897 43,334,670 COMMITMENTS AND CONTIGENCIES Shareholders? equity: Common stock, $0.0002 par value, 250,000,000shares authorized, 13,125,000 and 10,000,000 2,625 2,000 shares issued and outstanding, respectivelyAdditional paid-in capital 44,211,336 22,531,620 Retained earnings (Accumulated deficit) 476,719 (159,189 )Accumulated other comprehensive income 4,058,041 3,189,856 Total equity attributable to Huadi 48,748,721 25,564,287 International Group Co., Ltd.Equity attributable to non-controlling 237,846 224,413 interestsTotal shareholders? equity 48,986,567 25,788,700 TOTAL LIABILITIES AND SHAREHOLDERS? EQUITY $ 92,723,464 $ 69,123,370

HUADI INTERNATIONAL GROUP CO., LTD.CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFOR THE SIX MONTHS ENDED MARCH 31, 2021 AND 2020(UNAUDITED, IN U.S. DOLLARS, EXCEPT SHARE DATA)

For the Six Months Ended March 31, 2021 2020 Sales $ 29,887,244 $ 25,557,407 Cost of sales (24,534,360 ) (19,259,740 )Gross profit 5,352,884 6,297,667 Operating expenses: Selling, general and administrative 3,742,726 1,953,069 Research and development 928,582 834,351 Total operating expenses 4,671,308 2,787,420 Operating income 681,576 3,510,247 Other income (expenses): Interest expenses, net (926,237 ) (1,042,184 )Other income, net 956,618 554,456 Total other expenses, net 30,381 (487,728 ) Income before income taxes 711,957 3,022,519 Income tax provision (69,626 ) (341,280 ) Net income $ 642,331 $ 2,681,239 Net income attributable to 6,423 26,812 non-controlling interests Net income attributable to Huadi $ 635,908 $ 2,654,427 International Group Co., Ltd. Net income $ 642,331 $ 2,681,239 Other comprehensive income: Foreign currency translation 875,195 174,202 adjustment Total comprehensive income 1,517,526 2,855,441 Comprehensive income attributable to 8,752 1,742 non-controlling interests Comprehensive income attributable to $ 1,508,774 $ 2,853,699 Huadi International Group Co., Ltd. Basic and diluted earnings per share Basic $ 0.06 $ 0.27 Diluted $ 0.06 $ 0.27 Weighted average number of shares outstandingBasic 11,041,667 10,000,000 Diluted 11,041,667 10,000,000