Management to host conference call Tuesday, November 15th at 10:30amET

SAN MATEO, Calif., Nov. 15, 2011 /PRNewswire/ -- China Armco Metals, Inc. (AMEX: CNAM) ("China Armco" or the "Company"), a distributor of imported metal ore and metal recycler with a new state-of-the-art scrap metal recycling facility in China, today announced its financial results for its third quarter 2011.

SUMMARY FINANCIALS

Third Quarter of 2011 Financial Results

For the three months ended September 30, 2011, net revenue fell 14% to $16.1 million due to a 59% decline in its metal trading business. The Company sold 16,592 metric tons ("MT") of recycled scrap metal compared to 47,662 tons sold in the second quarter of 2011. Approximately 84% of recycled products sold in the third quarter were done using its pre-selling strategy. China Armco added one new customer in its recycling business in the third quarter.

Gross profit for the third quarter of 2011 was $0.8 million, down from $0.9 million in the third quarter of 2010. Gross margin improved slightly from 4.9% a year ago to 5.0% in the third quarter of 2011.

Operating expenses increased $0.7 million to $1.7 million due to higher professional fees and a $0.5 million underutilization charge for its recycling facility, neither of which were present in the year ago period. As a percent of sales, operating expenses were 10.8% and 5.5% in the third quarter of 2011 and 2010, respectively.

Operating loss for the third quarter of 2011 was $0.9 million compared to $0.1 million in the third quarter of 2010.

Net loss for the third quarter of 2011 was $1.1 million, or $0.07 per diluted share, compared to a $0.4 million loss, or $0.03 per share, in the same period last year. The weighted average diluted shares outstanding of approximately 15.4 million were essentially the same for both periods.

Financial Condition

The Company ended the third quarter of 2011 with $1.1 million in cash and cash equivalents, compared to $3.1 million at the end of 2010. Working capital was $6.3 million and a current ratio of 1.2:1 on September 30, 2011 compared to $9.5 million and 1.3:1 on September 30, 2010. Total accounts receivable were $0.5 million at the end of the third quarter of 2011 compared to $19.1 million at year-end 2010 due to improved collections and the successful transition to the Company's preselling strategy. The accounts receivable turnover was 36.4 days during the third quarter of 2011. Total shareholders' equity was $41.8 million at September 30, 2011.

The Company had generated $14.6 million net cash flows from operations the first nine months of 2011 and spent $1.4 million on capital expenditures. China Armco had approximately $95 million of credit available on nine bank lines with an aggregate capacity of $112 million at September 30, 2011.  Management has not experienced any difficulties securing bank letters of credit.

First Nine months 2011 Financial Results

China Armco's sales increased by approximately $52.5 million in the first nine months of 2011 to $96.8 million. Sales in the metal recycling business were $36.8 million, an increase of $23 million from the same period last year due to higher production and an expanded customer base. Iron ore trading generated $60 million of sales compared to $30.6 million in the comparable period a year ago. Demand and pricing for metal ores dropped significantly in the latter part of the third quarter of 2011 due to the monetary tightening policies and restrictive real estate policies implemented by the PRC government. The Company is pursuing longer term supply contracts to improve the visibility and margins in its iron ore trading business. China Armco has added six new iron ore trading clients in the first nine months of 2011 in Jiangsu province.

Gross profit increased from $1.7 million in the first nine months of 2010 to $5.3 million, with a gross margin of 5.5%.

Operating expenses increased 89% year-over-year to $5.6 million, including a $1.4 million of incremental expense for the metal recycling operations, which commenced full operations toward the end of the third quarter of 2010. Operating income improved from a loss of $1.3 million a year ago to $0.2 million in the comparable period in 2011.

Net loss and per share loss were $1.8 million and $0.12, respectively, in the first nine months of 2011. The weighted average diluted shares outstanding were 15.3 million, a 15% increase from 13.3 million in the corresponding period a year ago.

Business Updates

The metal recycling business resumed normal operations in January 2011 after the provincial government eliminated power restrictions that were in effect from September to December of 2010. As a result, sales increased by 42,230 MT to 78,689 MT in the first nine months of 2011, representing 116% year-over-year growth. Management continues to believe that the secular shift to more environmentally friendly energy production materials and methods will drive underlying demand for recycled steel.

As a part of its strategy to expand its raw materials supply for its recycling business, the Company signed an operating agreement with Lianyungang Hebang Renewable Resources Co., Ltd., an unrelated third party, to lease storage and production capacity at Hebang's facilities located in Guanyun City, Jiangsu province in June 2011. The facility is capable of recycling scrap metals and will increase its control over the local supply of recycled and raw materials, supplying over 2,000 MT of scrap metals since October 2011.

Additionally, in the third quarter of 2011, the Company signed agreements with two other local scrap recyclers capable of supplying and processing 1,000 MT of scrap metals per month and is in negotiations with a number of other similar recycling partners.

China Armco is also actively expanding its raw materials purchase from overseas, acquiring approximately 10,000 MT of unprocessed scrap metals since July of 2011. As it manages the pricing and supply volatility experienced by the industries that it serves, the Company will continue to build its overseas supply channels in order to reduce the supply and price volatility of raw materials.

Conference Call

To attend the call, please use the information below for either dial-in access or webcast access. When prompted on dial-in, ask for "China Armco Metals Third Quarter 2011 Conference Call".

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through November 23, 2011. To listen, please call +1-877-344-7529 within the United States or +1-412-317-0088 if calling internationally. Utilize the pass code 10006848 for the replay.

This call is being webcast by MZ Technologies and can be accessed by clicking on the following link: http://webcast.mz-ir.com/publico.aspx?codplataforma=3362.  

About China Armco Metals, Inc.

China Armco Metals, Inc. is engaged in the sale and distribution of metal ore and non-ferrous metals throughout the PRC and is in the recycling business with the recent launch of operations of a metal recycling facility capable of producing up to approximately one million tons per year located on 32 acres of land. China Armco maintains customers throughout China which includes the fastest growing steel producing mills and foundries in the PRC. Raw materials are acquired from a global group of suppliers located diverse countries, including, but not limited to, Brazil, India, Indonesia, Ukraine and the United States. China Armco's product lines include ferrous and non-ferrous ore, iron ore, chrome ore, nickel ore, magnesium, copper ore, manganese ore and steel billet. The recycling facility is expected to be capable of recycling one million metric tons of scrap metal per year which will position the Company as one of the 10 largest recyclers of scrap metal in China.( China Armco estimates the demand for recycled metal market in China will be over 120 million metric tons in 2011.) For more information about China Armco, 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, China Armco Metals, Inc., is hereby providing cautionary statements identifying 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") may be forward-looking and may 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 revenues and production related to our scrap metal recycling operations and the extent of government imposed energy restrictions and resulting blackouts and impact on our recycling operations.

In addition, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations:

We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations 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. This press release is qualified in its entirety by the following, including, but not limited to, any expectations with respect to the Company's revenues and operations, institution of governmental regulations relating to our businesses and the international economic climate, and the cautionary statements and risk factor disclosure contained in our Securities and Exchange Commission filings, included in our Annual Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Reports on Form 10-Q for end of the quarters on March 31,2011 and on June 30, 2011.

CONTACT:
Investor Relations:
MZ North America
Ted Haberfield, President
Tel: +1-760-755-2716
Email: thaberfield@hcinternational.net
Web: www.mz-ir.com

Company:
US Contact:
Christina Xiong, Business Associate
China Armco Metals, Inc.
Office: 650.212.7620
Email: christina@armcometals.com
Website: www.armcometals.com

China Contact:
Wayne Wu
China Armco Metals, Inc.
Office: 021-62375286
Email: wayne.wu@armcometals.com
Website: www.armcometals.com

-- FINANCIAL TABLES –

SOURCE China Armco Metals, Inc.

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