FUQI International gross profit up in Q2

13 Aug '08

6 min read

Mr. Yu Kwai Chong, Chairman of Fuqi International commented, ''We are very pleased with our results for the second quarter, which exceeded our expectations, despite some slowing in the growth rate of the Chinese economy, and the economic impact of the May earthquake in the Sichuan Province.

In spite of these issues, we continue to see increasing demand for our products, and larger orders from our existing customers. With our strong capital position, the right mix of products and distribution and a strong management team, Fuqi, along with our recent retail acquisition Temix, is poised to build the leading provider of luxury jewelry products in China.''

For the full year 2008, the Company is raising its 2008 revenue, net income and diluted earnings per share estimates. It now expects total revenue of approximately $325 - $333 million. This forecast is comprised of $315.5 - $323 million in expected wholesale revenue and $9.5 - $10 million in expected revenue from retail.

The Company also anticipates consolidated net income of $23.7 - $24.3 million, and diluted EPS of $1.07 - $1.09, based on a weighted average share count of 22.2 million shares.

In 2008, the Company expects long term wholesale gross margin of 10.5%, with additional gross margin upside as its branded retail business becomes more meaningful to overall sales.

For the third quarter, the Company anticipates total wholesale revenue of approximately $75 - $77 million, which would represent a year-over-year increase of approximately 108% - 114%, respectively.

Additionally, the Company expects retail revenue in the third quarter of approximately $3.8 - $4 million. Net income in the third quarter is expected to be in the range of $5.8 - $5.9 million, or $0.26 - $0.27 per diluted share, based on a weighted average share count of 22.1 million shares. Gross margin for the third quarter is expected to be approximately 10.5%, and net margin is expected to be approximately 7.3%.

Mr. Chong continued, ''We remain optimistic about the future growth of Fuqi, as evidenced by our increase in guidance. Our acquisition of Temix is complete and we are anticipating smooth execution of our integration plans.

We are well on track to meet our goals for the year of opening or acquiring 60-80 retail counters and 8 to 10 stores. We have been evaluating the marketplace and are excited about the opportunities we see ahead of us, and in fact have already identified other possible locations.

Our aggressive growth strategy combined with our strong capital position will allow us to quickly ramp up our retail business, while meeting the demand in our wholesale markets as well. We will continue to manage our balance sheet to be prepared to capitalize on opportunities we see in the marketplace.''

Mr. Chong concluded, ''As a result of the momentum we have built this year in our wholesale business, combined with our growing potential in the retail business, we are very encouraged about our future potential.

Our ability to eport strong growth in our second quarter - our seasonally mildest quarter while the growth in the Chinese economy slowed a bit and we faced some negative impact from the earthquake is a testament to our ability to grow this business even in relatively challenging quarters.

We are excited about the future of our wholesale and retail businesses and look forward to continuing on this growth trajectory to optimize value for our shareholders by making Fuqi the leading wholesale and retail company in our market.''

FUQI International Inc

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