Armco Metals Holdings, based in San Mateo, California, reports that revenue for the second quarter of 2015, ended June 30, was up 12 percent from the second quarter of 2014 to $36.9 million. However, the company says it also recorded an operating loss of $9.2 million for the second quarter, resulting from a large inventory writeoff in the recycling business.
The U.S.-based scrap metals recycling company imports, markets and distributes metals and other commodities throughout China.
The company says the increase in revenue results from a $9.2 million increase in sales of raw wood, partially offset by a $2.7 million decrease in sales of chrome ore, a $1.3 million decrease in sales of scrap metals and a $1 million decrease in sales of billet.
Further, the company reports that its recycling business generated revenue of $25.7 million, down 15 percent from the second quarter of 2014, while its trading business generated revenue of $11.2 million, accounting for 70 percent and 30 percent of total revenue, respectively. The company says trading revenue was up by 330 percent compared with the same period of the prior year, primarily in light of sales from the new product, raw wood, brought into the trading business this year.
The company reported gross profits for the quarter of negative $8 million compared with gross profit of $3.1 million in the second quarter of 2014. Gross margin in the second quarter of 2015 was negative 21.8 percent compared with 9.3 percent in the second quarter of 2014. The significant decrease in gross profit and gross margin was because of a large inventory write-down of $10.6 million in the recycling business, the company reports.
In reviewing the financial performance for the second quarter of 2015, Kexuan Yao, chairman and CEO of Armco Metals, remarks, “In the second quarter of 2015, we experienced a substantial adverse market change in our metal recycling business result[ing] in a large inventory write-down and the worst quarterly financial result for our company so far. While the market is expected to remain weak, management further believe that the implementation of our ‘platform strategy’ sales model in this business is the right strategy for the company.”
Armco reported in July 2015 that it plans to create on online-to-offline (OTO) platform for the scrap recycling business.