Armco Metals Holdings Announces Financial Results for the Third Quarter of 2014

SAN MATEO, CA--(Marketwired - Nov 14, 2014) - Armco Metals Holdings, Inc. ("Armco Metals Holdings") (NYSE MKT: AMCO), a U.S. based company that engages in the import, sale, and distribution of metal ore and non-ferrous metals in the People's Republic of China, recycles scrap metals used by steel mills in the production of recycled steel and provides sourcing and pricing services for various metals to its network of customers, today announced its financial results for the third quarter of 2014.

Third Quarter of 2014 Financial Results

For the third quarter of 2014 ended September 30, 2014, net revenue was $32.2 million, a 57% increase compared to net revenue of $20.5 million recorded in the third quarter of 2013. The increase in revenue in the third quarter of 2014 was due to an increase of $20.0 million in revenue from our recycling business partially offset by a decrease of $8.5 million in sales from our trading business. Our recycling business generated revenue of $32.1 million while our trading business generated revenue of $0.1 million. Revenue from our recycling business continued to strengthen from Q2 2014 revenues of $26.2 million. Gross profit for the third quarter of 2014 was $8.4 million as compared to negative gross profit of ($1.9) million in the third quarter of 2013. Gross margin in the third quarter of 2014 was 26.1% compared to (9.1%) in the third quarter of 2013. The significant increase in gross profit and gross margin was largely due to a considerable improvement in revenues and our ability to sort out high margin non-ferrous scrap from raw materials acquired at lower prices and a $1.5 million reversal in inventory reserve in the quarter.

Total operating expenses for the third quarter of 2014 were $1.1 million, a 6% decrease as compared to the third quarter of 2013. We recorded income from operations of $7.3 million in the third quarter of 2014 compared to loss from operations of ($3.1) million in the third quarter of 2013. Our operations in the third quarter of 2014 resulted in net income of $4.8 million, or $0.09 per basic and diluted share on 55.0 million and 55.3 million weighted average basic and diluted shares outstanding respectively. This compared to a net loss of ($3.5) million or ($0.14) per basic and diluted share on 24.7 million weighted average shares outstanding in the same period of 2013.

First Nine Months of 2014 Financial Results

Armco Metals' revenues in the first nine months of 2014 reached $75 million, an increase of 20% compared to revenues of $62.5 million recorded in the first nine months of 2013. The increase was primarily due to a significant increase in sales from our recycling business partially offset by a decline in revenue from our trading business. Gross profit for the first nine months of 2014 was $10.3 million and gross margin was 13.7% compared to gross profit of $1.1 million and gross margin 1.8% in the 2013 period. The increase in gross margin was partially attributable to a $1.9 million reversal in inventory reserve in the period.

Operating expenses for the first nine months of 2014 increased to $4.7 million from $4.2 million in the comparable 2013 period, primarily due to increased professional fees, general and administrative expenses and selling expenses. For the first nine months of 2014 our operations resulted in net income of $0.4 million or $0.01 per basic and diluted share on 45.3 million and 45.2 million weighted average basic and diluted shares outstanding respectively. This compares to a net loss of ($3.7) million or ($0.15) per basic and diluted share recorded in the first nine months of 2013 on 24.2 million weighted average basic and diluted shares outstanding.

In reviewing the financial performance for the third quarter of 2014, Mr. Kexuan Yao, Chairman and CEO of Armco Metals, remarked that, "In the third quarter of 2014 we continued to gain momentum in our metal recycling business and recorded strong revenue growth and profitability despite a continued weak environment in our end markets. Through effective management of the recycling process we were able to extract a substantial amount of additional value from our raw materials helping us to significantly improve our financial performance. We also were able to recover some of the previous write downs of inventory. We are excited to return to profitability, not only in the quarter but for the first nine months as well, and we will look to build on that profitability in the fourth quarter. We will also focus on opportunistically improving performance in our trading business in a challenging global environment. One of the ways we believe we can accomplish this is through our recent agreement with a supplier in Chile to purchase and distribute wood chips. We believe this new opportunity can provide healthy gross margins and help to diversify our trading business to reduce volatility. We look forward to providing additional updates as to our progress in this new opportunity in the coming quarters as we set the stage for 2015 and beyond."

Select Balance Sheet Items

As of September 30, 2014, the Company had $0.5 million in cash and cash equivalents, compared to $0.6 million at year-end 2013. The Company's current ratio improved to 1.24:1 at September 30, 2014 as compared to 1.02:1 on December 31, 2013. As of September 30, 2014, shareholders' equity improved to $52.7 million compared to $42.6 million at December 31, 2013.

Draco Acquisition

In light of recent developments disclosed in the Company's Form 8K filing with the SEC on November 2, 2014, the Company believes the vote to acquire an interest in Draco Resources and the election of Songqiang Chen to its board of directors which is scheduled to take place on November 17, 2014 should be deferred. A detailed description of the matter can be found in that filing. 

ABOUT ARMCO METALS HOLDINGS, INC.

Armco Metals Holdings, Inc. is engaged in the sale and distribution of metal ore and non-ferrous metals throughout China and is in the recycling business in China. Armco Metals' customers include some of the fastest growing steel producing mills and foundries throughout China. Raw materials are acquired from a global group of suppliers located in various countries, including, but not limited to, Brazil, India, Indonesia, Ukraine and the United States. Armco Metals' product lines include ferrous and non-ferrous ore, iron ore, chrome ore, nickel ore, magnesium, copper ore, manganese ore, steel billet and recycled scrap metals. For more information about Armco Metals, please visit http://www.armcometals.com.

SAFE HARBOR STATEMENT

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Armco Metals Holdings, Inc., is hereby providing cautionary statements identifying certain important factors that could cause our actual results to differ materially from those projected in forward-looking statements (as defined in such act). Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, indicated through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans," "believes" and "projects") are forward-looking and involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. These statements include, but are not limited to, our expectations regarding our net revenues and production related to our scrap metal recycling operations, including our ability to operate the facility efficiently and profitability, the sufficiency of our working capital, pricing and volatile demand for our product lines, the extent of government imposed energy and monetary policy restrictions and resulting blackouts and associated impact on our trading and recycling operations, our ability to consummate the pending acquisition of Draco Resources, Inc., risks associated with the success of its future business and operations, and the significant dilution to our stockholders if the acquisition of Draco Resources, Inc. is closed.

We caution that investors should not place undue reliance on any forward-looking statements herein. Further, any forward-looking statement speaks only as of the date on which such statement is made. We qualify all of our forward-looking statements in this press release by these cautionary statements including those made in Part II, Item 1A. Risk Factors appearing in our Quarterly Report on Form 10-Q for the period ended March 31, 2014, as well as in Part I. Item 1A. Risk Factors appearing in our Annual Report on Form 10-K for the year ended December 31, 2013 and our other filings with the Securities and Exchange Commission. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.