Sutor Reports Second Fiscal Quarter 2008 Results

CHANGSHU, China, Feb. 14 /Xinhua-PRNewswire/ -- Sutor Technology Group
Limited ("Sutor" or the "Company") (Nasdaq: SUTR), a leading provider of
steel finishing fabrication products in China, today announced its
unaudited financial results for the second quarter ended December 31, 2007.



Second Fiscal Quarter 2008 Financial Highlights:
-- Total net revenues increased 46.15 % over the second fiscal quarter
2007 to US$114.89 million
-- Income from operations increased 68.6% over the second fiscal quarter
of 2007 to US$8.66 million
-- Net income increased 49.8% over the second fiscal quarter of 2007 to
US$6.69 million
-- Fully-diluted earnings per common share for the second fiscal quarter
2008 was US$0.18, compared to US$0.14 for the second fiscal quarter
2007
"Our strong second quarter results were driven by our continued focus
on delivering value to our customers," said Ms. Lifang Chen, Chairperson of
Sutor. "We continued to focus on our vertical integration and solid
execution. We have successfully expanded our production lines and increased
our market penetration. Our move to the NASDAQ Capital Market will help
raise our visibility among institutional and retail investors alike,
broadening and deepening the market for our shares, as well as our
products."

Mr. Yongfei Jiang, Chief Financial Officer of Sutor, said, "I am
pleased to report another strong quarter. We continued to experience strong
demand for our products in the second quarter which resulted in strong
revenue growth, increased net income and higher gross margins."

Business Highlights

Listed on NASDAQ

Sutor announced that its common shares began trading on the NASDAQ
Capital Market under the ticker symbol "SUTR" on February 11, 2008.
Previously, the company traded on the Over-the-Counter Bulletin Board with
the symbol "SUOT."

Vertical Integration Plan Phase II

The Company is on track to complete its vertical integration process
and expects its zinc & aluminum galvanizing steel production system, which
could operate both hot-rolled and cold-rolled coils, with a designed annual
manufacturing capacity of 400,000 metric tons to become operational by the
end of February 2008.

Second Fiscal Quarter 2008 Unaudited Financial Results

Revenues. Revenues amounted to US$114.89 million in the second fiscal
quarter 2008, compared to US$78.61 million net revenues for the second
fiscal quarter 2007, representing an increase of 46.15%. This significant
increase reflects the Company's success in expanding its production lines
and increasing its market penetration.

Gross Profit. Gross profit increased 67.3% to US$11.41 million for the
second fiscal quarter 2008 from US$6.82 million in the second fiscal
quarter 2007. Gross margin was 9.93% in the second fiscal quarter 2008, up
from 8.67% in the second fiscal quarter 2007. The improved margins resulted
from both the improved product mix and the reduced costs from our vertical
integration. For the second fiscal quarter 2008, our PPGI products, which
generally command higher gross margins than our HDG products, contributed
significantly to total revenue, as compared to the same period last year.
In addition, the added integration of the acid-pickling and cold-rolling
production lines allowed us to ensure high-quality internal sourcing at a
lower cost.

Income from Operations. Income from operations for the second fiscal
quarter 2008 was US$8.66 million, representing a 68.6% increase, compared
to US$5.13 million in the second fiscal quarter 2007. This increase was
primarily due to increased revenue and enhanced gross margins. Operating
margin for the second fiscal quarter 2008 was 7.54%, up from the 6.53% in
the second fiscal quarter 2007, attributable to improved gross margins.

Operating Expenses. Our total operating expenses increased by 63.5% to
US$2.75 million in the second fiscal quarter of 2008, compared to US$1.68
million in the second fiscal quarter 2007. This increase was primarily due
to expenses of being a U.S. public company and the increased transportation
costs in connection with sales to unrelated parties.

Other Expense. Other expense increased to US$1.14 million in the second
fiscal quarter of 2008, compared to net other expense of US$0.04 million in
the second fiscal quarter of 2007, primarily as a result of the increased
interest expense from the current loan amount.

Provision for Income Tax. Our provision for income tax increased by
31.8% from US$0.63 million for the second fiscal quarter 2007 to US$0.83
million for the second fiscal quarter 2008, mainly due to increased taxable
income in the second fiscal quarter 2008 as a result of our increased
profitability.

Net Income. Net income increased by 49.8% from US$4.46 million for
second fiscal quarter 2007 to US$6.69 million for the second fiscal quarter
2008 as a result of all the factors described above.

Conference Call

Sutor senior management will host a conference call at 8:30 pm
(Eastern) / 5:30 pm (Pacific) on Thursday, February 14, 2008 / 9:30 am
(China) on Friday, February 15, 2008 to discuss its fiscal year 2008 second
quarter financial results and business activity. The conference call may be
accessed by calling +1-877-847-0047 (US) with pass code 52680988.

A telephone replay will be available shortly after the call on the
investor relations page of Sutor's website at http://www.sutorcn.com .

Functional Currency and Translating Press Release

The functional currency of the Company is the Chinese Yuan Renminbi
("RMB"); however, the accompanying financial information has been expressed
in United States Dollars ("USD"). The accompanying consolidated balance
sheets have been translated into USD at the exchange rates prevailing at
each balance sheet date. The accompanying consolidated statements of
operations and cash flows have been translated using the weighted-average
exchange rates prevailing during the periods of each statement.
Transactions in the Company's equity securities have been recorded at the
exchange rate existing at the time of the transaction.

About Sutor Technology Group Limited

Sutor (Nasdaq: SUTR) is one of the leading private manufacturers of
steel finishing fabrication products in China. Sutor utilizes a variety of
processes and technological methodologies to convert steel manufactured by
third parties into steel finishing fabrication products, including
hot-dipped galvanized steel, pre-painted galvanized steel, acid-pickled
steel, and cold- rolled steel. To learn more about the Company, please
visit http://www.sutorcn.com .

Forward-Looking Statements

This press release includes certain statements that are not
descriptions of historical facts, but are forward-looking statements. Such
statements include, among others, those concerning our expected financial
performance and strategic and operational plans, our future operating
results, our expectations regarding the market for our steel finishing
fabrication products, our expectations regarding the continued growth of
the steel market, as well as all assumptions, expectations, predictions,
intentions or beliefs about future events. You are cautioned that any such
forward-looking statements are not guarantees of future performance and
that a number of risks and uncertainties could cause our actual results to
differ materially from those anticipated, expressed or implied in the
forward-looking statements. These risks and uncertainties include, but not
limited to, the factors mentioned in the "Risk Factors" section of our
Annual Report on Form 10-K for the year ended June 30, 2007, and other
risks mentioned in our other reports filed with the Securities Exchange
Commission, or SEC. Copies of filings made with the SEC are available
through the SEC's electronic data gathering analysis retrieval system
(EDGAR) at http://www.sec.gov. The words "believe," "expect," "anticipate"
"project," "targets," "optimistic," "intend," "aim," "will" or similar
expressions are intended to identify forward-looking statements. All
statements other than statements of historical fact are statements that
could be deemed forward-looking statements. The Company assumes no
obligation and does not intend to update any forward-looking statements,
except as required by law.





(in USD)

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

December 31, June 30,
2007 2007
ASSETS
Current Assets:
Cash and cash equivalents $10,421,059 $8,832,942
Restricted cash 36,956,016 27,799,475
Trade accounts receivable, net of
allowance for doubtful accounts
of $40,072 and $2,947, respectively 679,957 14,768,954
Other receivables 95,413 44,226
Advances to suppliers, net of
allowance of $3,821,166 and $499,842,
respectively 55,206,222 32,791,928
Inventory 46,942,779 22,703,304
Notes receivable 75,197 203,546
Total Current Assets 150,376,643 107,144,375
Property and Equipment, net of
accumulated depreciation 48,261,565 47,571,353
Intangible Assets, net of accumulated
amortization of $235,484 and
$188,132, respectively 3,076,183 2,988,589
TOTAL ASSETS $201,714,391 $157,704,317

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $5,409,424 $3,916,596
Advances from customers 15,081,018 8,414,629
Other payables and accrued expenses 2,405,983 2,707,473
Short-term loans 56,466,277 50,954,916
Short-term loans - related party 15,460,653 2,325,802
Total Current Liabilities 94,823,355 68,319,416
Minority Interest in Net Assets of
Subsidiary 29,785 32,812
Stockholders' Equity
Undesignated preferred stock - $0.001
par value; 1,000,000 shares authorized;
no shares outstanding -- --
Common stock - $0.001 par value;
500,000,000 shares authorized;
37,955,602 shares outstanding 37,955 37,955
Additional paid-in capital 37,170,164 37,170,164
Statutory reserves 7,748,269 7,748,269
Retained earnings 52,783,514 39,475,731
Accumulated other comprehensive income 9,121,349 4,919,970
Total Stockholders' Equity 106,861,251 89,352,089
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $201,714,391 $157,704,317



(in USD, except per share and other share data)

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)

For the Three Months Ended December 31,
2007 2006

Revenue:
Revenue $65,827,292 $29,635,676
Revenue from related parties 49,064,729 48,975,213
114,892,021 78,610,889

Cost of Revenue
Cost of revenue 84,327,960 26,218,497
Purchases from related parties 19,152,518 45,574,452
103,480,478 71,792,949

Gross Profit 11,411,543 6,817,940

Operating Expenses:
Selling expense 961,748 528,198
General and administrative
expense 1,791,154 1,155,295
Total Operating Expenses 2,752,902 1,683,493
Income from Operations 8,658,641 5,134,447

Other Income (Expense):
Interest income 222,177 105,416
Other income 7,106 144,696
Interest expense (1,257,146) (283,812)
Other expense (109,164) (8,568)
Total Other Income (Expense) (1,137,027) (42,268)

Income Before Taxes and
Minority Interest 7,521,614 5,092,179
Provision for income taxes (833,562) (632,411)
Minority interest in loss of
consolidated subsidiary (260) 4,679

Net Income $6,687,792 $4,464,447

Basic and Diluted Earnings
per Common Share $0.18 $0.14

Net Income $6,687,792 $4,464,447
Foreign currency translation
adjustment 2,877,741 776,094
Comprehensive Income $9,565,533 $5,240,541



(in USD)

SUTOR TECHNOLOGY GROUP LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

For the Six Months Ended
December 31,
2007 2006
Cash Flows from Operating
Activities:
Net income $13,307,782 $7,496,603
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 1,770,360 889,876
Minority interest in loss of
consolidated subsidiary (3,027) (19,325)
Changes in current assets and
liabilities:
Trade accounts receivable, net 14,339,637 736,454
Other receivables, net (48,046) (714,381)
Advances to suppliers (20,483,161) (13,207,001)
Inventories (22,679,207) (3,426,008)
Accounts payable 1,292,495 (777,817)
Advances from customers 6,147,430 293,177
Other payables and accrued expenses (405,840) (21,184)
Related party payables -- 5,290,660
Net Cash Used in Operating
Activities (6,761,577) (3,458,946)

Cash Flows from Investing
Activities:
Changes in notes receivable 133,489 --
Purchase of property and equipment,
net of value added tax refunds
received (435,472) (3,902,348)
Purchase of land use rights -- (195,887)
Net change in restricted cash (7,771,455) 6,165,918
Net Cash (Used in) Provided by
Investing Activities (8,073,438) 2,067,683

Cash Flows from Financing
Activities:
Proceeds from issuance of notes
payable 37,813,493 22,281,328
Proceeds from issuance of notes
payable - related party 12,577,667 --
Proceeds from issuance of Series B
preferred stock -- 22,559,950
Payment on notes payable (34,230,234) (22,885,230)
Capital contribution to
shareholders -- (21,036,767)
Net Cash Provided by Financing
Activities 16,160,926 919,281

Effect of Exchange Rate Changes on
Cash 262,206 182,198

Net Change in Cash 1,588,117 (289,784)
Cash and Cash Equivalents at
Beginning of Period 8,832,942 6,534,493
Cash and Cash Equivalents at End of
Period $10,421,059 $6,244,709

Supplemental Cash Flow Information
Cash paid during the period for
interest $2,172,483 $1,589,863
Cash paid during the period for
taxes $1,809,864 $1,108,962


For more information, please contact:

Company Contact (PRC):
Mr. Kape Cao
Tel: +86-512-5268-0988
Email: investor_relations@sutorcn.com

Investor Relations (US):
Dana Johnston, Director
Taylor Rafferty
Tel: +1-212-889-4350
Email: sutor@taylor-rafferty.com
Web: http://www.taylor-rafferty.com

Investor Relations (TW):
Lisa Zheng, Director
Taylor Rafferty
Tel: +886-91717-0889
Email: sutor@taylor-rafferty.com
Web: http://www.taylor-rafferty.com