China Gengsheng Minerals, Inc. Reports Unaudited EPS of $0.09 for the Second Quarter of 2009

GONGYI, China, Aug. 14 /PRNewswire-Asia-FirstCall/ -- China Gengsheng Minerals, Inc. (OTC Bulletin Board: CHGS; "Gengsheng" or the "Company"), a leading manufacturer in China of industrial materials capable of withstanding high temperature, saving energy and boosting productivity, today reported its unaudited financial results for the second quarter ended June 30, 2009.

    -- Gross Margin 30.5%
    -- Total Sales $14.4 Million, Up 16% from 1Q09
    -- Net Income $2.0 Million, or 114% Higher Than 1Q09
    -- Teleconference to be Held Monday, August 17, 2009, at 9:00 a.m. EDT

Second Quarter 2009 Results

For the second quarter of 2009, sales were $14.4 million, a slight increase of 0.2% from the same period of 2008, and 15.9% higher than the first quarter of 2009. The quarter-over-quarter increase was primarily because of the rebound of monolithic refractory sales in the second quarter as the Chinese steel sector benefited from the government stimulus spending.

In 2Q09, monolithic refractory products contributed 85.7% of sales, vs. 85.5% in 2Q08 and 79.0% in 1Q09. Industrial ceramics contributed 3.8% of sales, vs. 4.2% in 2Q08 and 1.2% in 1Q09. Fracture proppants contributed 10.5% of sales, vs. 10.3% in 2Q08 and 19.8% in 1Q09.

Gross profit was $4.4 million, a decline of 19.5% from the same period of 2008, but an increase of 16.7% from the first quarter of 2009. Gross margin was 30.5%, compared with 38.0% in the same period of 2008 and 30.3% in the first quarter of 2009.

"Our second quarter results benefited from the rebound in steel production as the Chinese economy re-accelerated, spurred by the government stimulus spending on infrastructure," said Mr. Shunqing Zhang, Chairman, President and CEO of Gengsheng. "At the same time, our gross margin continued to recover sequentially as the pressure from raw material prices eased. Lastly, our effective management of operating expenses and a $733,000 grant from the central government to support the development of our cutting-edge abrasive products contributed to the bottom-line growth from the first quarter."

Mr. Zhang continued, "Going forward, we are confident the steel sector in China will continue to expand their production as the Chinese benchmark steel prices have soared 32% since April on what JPMorgan analyst calls the 'explosive demand' from car and home appliance makers. And we are also pleased that our newest business segment, fine precision abrasives, has now begun its trial production. We anticipate a commercial launch sometime in the fall."

Selling expenses in the second quarter of 2009 were $1.4 million, compared with $1.6 million in the same period of 2008, and $1.5 million in the first quarter of 2009. General and administrative expenses were $1.0 million, compared with $1.0 million in the same period of 2008, and $1.0 million in the first quarter of 2009.

As a percentage of total sales, operating expenses were 17.5%, vs. 18.6% in the same period of 2008 and 21.3% in the first quarter of 2009.

Net income attributable to the Company's stockholders was $2.0 million, a decline of 11.7% from the same period of 2008, but an increase of 114.3% from the first quarter of 2009.

Diluted EPS was $0.09, compared with $0.10 in the same period of 2008 and $0.04 in the first quarter of 2009.

Six Months 2009 Results

For the first six months of 2009, sales were $26.8 million, an increase of 11.7% from the same period of 2008.

Monolithic refractory products contributed 82.6% of sales, vs. 87.4% in the same period of 2008. Industrial ceramics contributed 2.6% of sales, vs. 3.9% in the same period of 2008. Fracture proppants contributed 14.8% of sales, vs. 8.7% in the same period of 2008.

Gross profit was $8.1 million, a decrease of 9.6% from the same period of 2008. Gross margin was 30.4%, compared with 37.6% in the same period of 2008.

Selling expenses were $2.9 million, a decrease of 1.6% from the same period of 2008. General and administrative expenses were $2.0 million, an increase of 23.5% from the same period of 2008.

As a percentage of total sales, operating expenses were 19.2%, compared with 19.9% in the same period of 2008.

Net income attributable to the Company's stockholders was $3.0 million, a decline of 14.4% from the same period of 2008. Diluted EPS was $0.12, vs. $0.15 in the same period of 2008.

As of June 30, 2009, the Company had total cash and cash equivalents of $2.0 million, compared with $3.8 million at March 31, 2009.

Total shareholders' equity increased to $46.2 million at June 30, 2009, from $44.2 million at March 31, 2009.

Total shares outstanding on a fully diluted basis as of June 30, 2009 were 24.0 million.

Recent Developments

On July 30, 2009, the Company announced that it has started the trial production of its new product, fine precision abrasives, at the Company's newly completed facilities in Gongyi City, Henan Province. The abrasives are fine grains of silicon carbide, white fused alumina, and blend materials used in the cutting and polishing of optical equipment, semiconductors, and fine metal surfaces to improve finish quality. Currently Gengsheng uses its patented technology to focus on producing lapping abrasives and polishing compounds for the processing of silicon wafers. The facilities, which were completed in April, have an annual production capacity of 20,000 tons.

On July 8, 2009, the Company announced it won a supply contract for fracture proppant products with Liaohe Oilfield, a subsidiary of China National Petroleum Corporation (CNPC). The total value of the contract is $3 million. The contract duration is until December 30, 2009. Liaohe Oilfield is China's third largest oil field, and it produced about 6% of China's oil supply as of 2007, according to CNPC's Website.

On June 10, 2009, the Company announced it signed a short-term loan agreement with Commercial Bank of Zhengzhou for $2.9 million (RMB 20 million) to be used for general corporate purposes.

Conference Call

The Company will host a conference call on Monday, August 17, 2009, at 9:00 a.m. Eastern Daylight Time / 9:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-9205 (North America) or +1-201-689-8054 (International) 10 minutes before the call start time.

A replay of the call will be available through Monday, August 24, 2009, at 11:59 p.m. EDT. Interested parties may access the replay by dialing +1-877-660-6853 (North America) or + 1-201-612-7415 (International) and entering account number 286 and conference ID number 330563.

About China Gengsheng Minerals, Inc.

China Gengsheng Minerals, Inc. ("Gengsheng") develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics and fracture proppants. A market leader offering customized solutions, Gengsheng sells its products primarily to the iron-and-steel industry as heat-resistant components for steel-making furnaces, industrial kilns and other high-temperature vessels to guarantee and improve the productivity of those expensive pieces of equipment while reducing their consumption of energy. Founded in 1986 and based in China's Henan province, Gengsheng currently has over 200 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and other countries. Gengsheng conducts business through Gengsheng International Corporation, a British Virgin Islands company, and its Chinese subsidiaries, which are Henan Gengsheng Refractories Co., Ltd., Zhengzhou Duesail Fracture Proppant Co., Ltd. and Henan Gengsheng High Temperature Materials Co., Ltd.

For more information about the Company, please visit http://www.gengsheng.com

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China Gengsheng Minerals, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the Company's ability to meet its projected output for the term of the supply contract; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov . All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

      China Gengsheng Minerals, Inc. Condensed Consolidated Balance Sheets

                                                  As of             As of
                                                 June 30,        December 31,
                                                   2009              2008
    (Stated in US Dollars)                      (Unaudited)
    ASSETS
        Current assets:
        Cash and cash equivalents               $2,000,363          $955,732
        Restricted cash                          4,248,500         1,760,400
        Trade receivables                       34,030,932        30,026,675
        Bills receivable                         1,658,789           631,560
        Other receivables and prepayments        5,309,314         3,608,247
        Inventories                             13,141,250        12,170,193
        Deferred tax assets                         31,685            54,869

        Total current assets                    60,420,833        49,207,676

        Deposits for acquisition of
         property, plant and equipment           6,097,015         6,297,205
        Deposits for acquisition of land
         use right                                 216,664                --
        Goodwill                                   441,089           441,089
        Intangible asset                           952,250           953,550
        Property, plant and equipment,
         net                                    14,302,008        10,654,692
        Land use right                             944,947           956,916

    TOTAL ASSETS                               $83,374,806       $68,511,128

    LIABILITIES AND EQUITY

        Current liabilities:
        Trade payables                         $11,493,180        $9,548,854
        Bills payable                            6,299,500         3,520,800
        Other payables and accrued
         expenses                                5,113,442         6,010,364
        Advances from a director                   275,481         2,460,820
        Income taxes payable                       379,629           349,293
        Non-interest-bearing loans                 216,454           290,100
        Collateralized bank loans               12,892,000         2,640,600
        Unsecured interest-bearing loan            219,750           220,050
        Deferred tax liabilities                    21,457            21,486

    TOTAL LIABILITIES                           36,910,893        25,062,367

    COMMITMENTS AND CONTINGENCIES

    STOCKHOLDERS' EQUITY
        Preferred stock - $0.001 par
         value 50,000,000 shares
         authorized, no shares issued and
         outstanding                                    --                --
        Common stock - $0.001 par value
         100,000,000 shares authorized,
         24,038,183 shares issued and
         outstanding                                24,038            24,038
        Additional paid-in capital              19,608,044        19,608,044
        Statutory and other reserves             7,207,206         7,207,206
        Accumulated other comprehensive
         income                                  4,298,028         4,355,605
        Retained earnings                       15,075,361        12,078,137

        Total stockholders' equity              46,212,677        43,273,030
    NONCONTROLLING INTERESTS                       251,236           175,731

    TOTAL EQUITY                                46,463,913        43,448,761

    TOTAL LIABILITIES AND EQUITY               $83,374,806       $68,511,128



                         China Gengsheng Minerals, Inc.
      Condensed Consolidated Statements of Income and Comprehensive Income

                              Six months ended         Three months ended
                                  June 30,                  June 30,
                              2009         2008         2009         2008
    (Stated in US Dollars)  (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    Revenue
        Sales              $26,767,935  $23,953,694  $14,369,925  $14,339,542
        Cost of goods sold (18,626,552) (14,949,615)  (9,984,844)  (8,894,020)

        Gross profit         8,141,383    9,004,079    4,385,081    5,445,522

    Operating expenses
        General and
         administrative
         expenses            2,037,372    1,649,438    1,026,189    1,014,534
        Amortization and
         depreciation          199,122      159,988      100,833       55,986
        Selling expenses     2,913,526    2,962,487    1,384,058    1,595,971

    Total operating
     expenses                5,150,020    4,771,913    2,511,080    2,666,491

    Net operating income     2,991,363    4,232,166    1,874,001    2,779,031

    Other income
     (expenses)
        Government grant
         income                769,756       61,586      732,865        2,588
        Interest income         20,209        2,946       11,545          744
        Other income            61,744       35,766       28,778       11,178
        Finance costs         (442,393)    (425,435)    (255,157)    (236,937)

    Total other income
     (expenses)                409,316     (325,137)     518,031     (222,427)

    Income before income
     taxes and
     noncontrolling
     interests               3,400,679    3,907,029    2,392,032    2,556,604
    Income taxes              (328,190)    (371,819)    (282,064)    (221,029)

    Net income               3,072,489    3,535,210    2,109,968    2,335,575
    Net income
     attributable to
     noncontrolling
     interests                 (75,265)     (32,030)     (66,362)     (21,677)

    Net income
     attributable to
     Company's
     stockholders           $2,997,224   $3,503,180   $2,043,606   $2,313,898

    Net income              $3,072,489   $3,535,210   $2,109,968   $2,335,575
    Other comprehensive
     income
    Foreign currency
     translation
     adjustment                (57,577)   2,078,882       (1,644)     857,977

    Comprehensive income    $3,014,912   $5,614,092   $2,108,324   $3,193,552
    Comprehensive income
     attributable to
     noncontrolling
     interests                 (75,505)     (32,030)     (66,842)     (24,505)

    Comprehensive income
     attributable to
     Company's
     stockholders           $2,939,407   $5,582,062   $2,041,482   $3,169,047

    Earnings per share-
     Basic                       $0.12        $0.15        $0.09        $0.10
    Earnings per share-
     Diluted                     $0.12        $0.15        $0.09        $0.10

    Weighted average
     number of shares -
     Basic                  24,038,183   24,038,183   24,038,183   24,038,183
    Weighted average
     number of shares -
     Diluted                24,038,183   24,157,176   24,038,183   24,157,176



    China Gengsheng Minerals, Inc. Condensed Consolidated Statements of Cash
                                      Flows
                                                 Six months ended June 30,
                                                   2009              2008
    (Stated in US Dollars)                      (Unaudited)       (Unaudited)
    Cash flows from operating activities
        Net income attributable to
         Company's stockholders                 $2,997,224        $3,503,180
    Adjustments to reconcile net income
     to net cash (used in) provided by
     operating activities:
        Depreciation                               460,135           461,200
        Amortization of land use right              10,669            11,756
        Deferred taxes                              23,120            31,955
        Noncontrolling interests                    75,265            32,030
        Loss on disposal of property
         plant and equipment                        (1,470)               --
    Changes in operating assets and
     liabilities:
        Restricted cash                         (2,491,690)       (1,313,100)
        Trade receivables                       (4,047,125)       (3,618,468)
        Bills receivables                       (1,028,582)        5,837,860
        Other receivables and prepayments       (1,704,292)         (309,419)
        Advances to staff                               --          (620,593)
        Inventories                               (988,140)       (4,480,688)
        Other payables and accrued
         expenses                                 (889,153)        2,002,916
        Trade payables                           1,958,279           321,073
        Bills payables                           2,784,830         2,626,200
        Income tax payable                          30,826          (212,682)

    Net cash flows (used in) provided by
     operating activities                       (2,810,104)        4,273,220

    Cash flows from investing activities
        Payments for deposits acquisition
         land use right                           (216,768)               --
        Payments to acquire and for
         deposit to acquire property,
         plant and equipment                    (4,049,131)       (2,537,497)
        Proceeds from disposal of
         property, plant and equipment             118,722                --
        Net cash paid to acquire a
         subsidiary                                     --          (875,294)

    Net cash flows used in investing
     activities                                 (4,147,177)       (3,412,791)

    Cash flows from financing activities
        Proceeds from bank loans                10,259,900                --
        Repayment of bank loans                         --        (1,794,570)
        Repayment to a director                 (2,183,026)               --
        Repayment of non-interest-bearing
         loans                                     (73,285)         (212,487)

    Net cash flows provided by (used in)
     financing activities                        8,003,589        (2,007,057)

    Effect of foreign currency
     translation on cash and cash
     equivalents                                    (1,677)          114,224

    Net increase (decrease) in cash and
     cash equivalents                            1,044,631        (1,032,404)
    Cash and cash equivalents - beginning
     of period                                     955,732         1,964,390

    Cash and cash equivalents - end of
     period                                     $2,000,363          $931,986



                           China Gengsheng Minerals, Inc.
        Condensed Consolidated Statements of Income and Comprehensive Income

                                                 Six Months Ended June 30,
                                                   2009              2008
    (Stated in US Dollars)                     (Unaudited)       (Unaudited)

    Supplemental disclosure of cash flow
     information:
    Cash paid for:
    Interest                                      $295,775          $223,204
    Income taxes                                   $39,407          $521,910



    For more information, please contact:

    In China:
    China Gengsheng Minerals, Inc.
     Mr. Shuai Zhang
     Investor Relations
     Email: gszs@gengsheng.com

    In the U.S.:
    Grayling
     Mr. Valentine Ding
     Investor Relations
     Tel:   +1-646-284-9412
     Email: valentine.ding@us.grayling.com

SOURCE China Gengsheng Minerals, Inc.