China GengSheng Minerals Reports First Quarter 2012 Financial Results

GONGYI, China, May 15, 2012 /PRNewswire-Asia-FirstCall/ -- China GengSheng Minerals, Inc. (NYSE Amex: CHGS), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy- efficient materials for a variety of industrial applications, today announced its financial results for the first quarter ended March 31, 2012.

First Quarter 2012 Financial Highlights:

  • Revenue decreased 15.3% year-over-year to approximately $13.7 million.
    • Refractories sales were approximately $9.9 million, compared with approximately $9.9 million in the first quarter of 2011.
    • Fine precision abrasives product sales were approximately $2.4 million, compared with approximately $819,000 in the first quarter of 2011.
    • Fracture proppant sales were approximately $998,000, compared with approximately $5.2 million in the first quarter of 2011.
  • Gross profit was approximately $2.7 million, or 19.8% of total sales, compared with approximately $4.3 million, or 26.5% of total sales in the same period a year ago.
  • Total operating expenses increased to approximately $4.4 million, compared with approximately $3.6 million in the first quarter of 2011.
  • Net loss attributable to the Company was approximately $2.9 million, or $0.11 per share, compared with net loss of approximately $80,000, or $0.003 per share in the first quarter of 2011.
  • As of March 31, 2012, the Company had cash and cash equivalents of approximately $2.7 million, total equity of approximately $51.1 million and working capital of approximately $8.4 million.

"We experienced a disappointing quarter as a result of weak sales in fracture proppants segment. The continued slowdown in the steel industry also had an unfavorable impact on us," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "While financing costs and operating expenses weighed on our results for the first quarter of 2012, we continue to work towards increasing sales and improving profitability thus create sustainable value for our shareholders."

Financial Results for the Three Months Ended March 31, 2012

For the first quarter of 2012, sales revenue was approximately $13.7 million, a decrease of 15.3%, compared with approximately $16.2 million in the first quarter of 2011. The decrease was mainly attributable to the decreased sales from the fracture proppant segments.

  • Sales of the Company's core refractory products totaled approximately $9.9 million, or 72.5% of total sales, nearly flat compared with the first quarter of 2011.
  • Sales of fracture proppant products totaled approximately $998,000, or 7.3% of total sales, a decrease of 80.8%, compared with approximately $5.2 million in the first quarter of 2011. The year-over-year decrease in fracture proppant products sales was mainly due to the decreased sales in the U.S. market as we were unable to sell directly to the end users.
  • Sales of fine precision abrasives products totaled approximately $2.4 million, compared with approximately $819,000 in the first quarter of 2011.  The increase in sales revenue was primarily due to the increased sales to a major customer.
  • Sales of industrial ceramics were approximately $332,000, compared with approximately $230,000 in the first quarter of 2011.

Cost of goods sold totaled approximately $11.0 million, a decrease of 7.6%, compared with approximately $11.9 million in the same period of 2011. The decrease in cost of goods sold was a result of the decrease in total revenue.

Gross profit for the three months ended March 31, 2012 was approximately $2.7 million, or 19.8% of revenue, compared with approximately $4.3 million, or 26.5% of revenue in the first quarter of 2011. The decrease in gross profit and gross profit margin for the quarter was mainly attributable to the higher raw material costs and energy costs compared with the same period in 2011.

General and administrative expenses increased by approximately $224,000 to approximately $1.7 million for the first quarter in 2012, from approximately $1.5 million in the same period in 2011. The increase was primarily due to higher preliminary expenses related to our new fracture proppants production facility and higher professional service fees.

Selling expenses increased by approximately $509,000 to approximately $2.5 million in the first quarter of 2012, compared with approximately $2.0 million in the same period in 2011. The increase in selling expenses was primarily attributable to the increase in the allowance for doubtful accounts and higher transportation expenses compared to the same period in 2011.

Finance costs increased by approximately $784,000, or 81.2% to approximately $1.8 million in the first quarter of 2012, from approximately $966,000 in the same period in 2011. The significant increase was primarily attributable to an increase of approximately $709,000 in bills discounting charges as we discounted more bills receivable instead of holding them to maturity; and an increase of approximately $76,000 in interest expenses as we increased borrowing activities in the first quarter of 2012.

Net loss attributable to Company's common stockholders was approximately $2.9 million, or $0.11 per share, compared with approximately $80,000, or $0.003 per share in the same period in 2011. The net loss for the quarter was primarily attributable to the factors described above.

As of March 31, 2012, the Company had cash and cash equivalents totaling approximately $2.7 million, working capital of approximately $8.4 million and total equity of approximately $51.1 million.

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, fracture proppants and fine precision abrasives. 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 170 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., Henan GengSheng Micronized Powder Materials Co., Ltd, Guizhou SouthEast Prefecture Co., Ltd., GengSheng New Materials Co., Ltd, Henan GengSheng High Temperature Materials Co., Ltd. and Henan Yuxing Proppant 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" within the meaning of the Private Securities Litigation Reform Act of 1995, 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.

For more information, please contact:

China GengSheng Minerals, Inc.
Investor Relations
Mr. Shuai Zhang
ir@gengsheng.com
+86-371-6405-9846

China GengSheng Minerals, Inc.

Condensed Consolidated Balance Sheets



As of

March 31,


As of

December 31,



2012


2011



(Unaudited)


(Audited)

ASSETS





Current assets:





Cash and cash equivalents


$2,696,810


$3,594,361

Restricted cash


31,369,567


21,094,008

Trade receivables, net


48,017,132


49,167,748

Bills receivable


10,963,021


6,331,997

Other receivables and prepayments, net


10,490,196


8,451,185

Advances to senior management


-


360,162

Inventories, net 


21,278,336


16,956,582

Deferred tax assets, net of valuation allowance


-


-






Total current assets


124,815,062


105,956,043






Deposit for acquisition of a non-consolidated affiliate, net


1,098,285


1,092,041

Deposits for acquisition of land use right, property, plant and equipment


622,431


618,892

Goodwill, net


-


-

Intangible assets, net


-


-

Property, plant and equipment, net


37,835,572


37,164,849

Land use rights


3,134,281


3,137,961






TOTAL ASSETS


$167,505,631


$147,969,786






LIABILITIES AND EQUITY










Current liabilities:





Trade payables


$20,038,621


$18,671,086

Bills payable


15,434,250


16,385,340

Other payables and accrued expenses


5,690,863


8,877,407

Deferred revenue - Government grants


461,999


443,632

Provision for warranty


167,698


184,778

Income taxes payable


72,091


218,038

Non-interest-bearing loans


3,635,263


3,318,472

Collateralized short-term bank loans  


67,639,532


45,974,022

Loan from a third party


3,166,000


-

Deferred tax liabilities


125,397


112,625

Warrant liabilities


-


-






TOTAL LIABILITIES                                                                                                    


116,431,714


94,185,400






COMMITMENTS AND CONTINGENCIES










China GengSheng Minerals, Inc.

Condensed Consolidated Balance Sheets (Cont'd)



As of

March 31,


 

As of

December 31,



2012


2011



(Unaudited)


(Audited)

STOCKHOLDERS' EQUITY





Preferred stock - $0.001 par value per share; authorized 50,000,000 shares in
      2012 and 2011, none issued and outstanding


$-


$-

Common stock - $0.001 par value per share; authorized 100,000,000 shares in
      2012 and 2011, issued and outstanding 26,803,044 shares in 2012 and 2011


26,803


26,803

Additional paid-in capital


28,197,310


28,197,310

Statutory and other reserves


8,110,972


8,110,972

Accumulated other comprehensive income


7,895,699


7,713,341

Retained earnings


6,628,728


9,541,560






Total China GengSheng Minerals, Inc. stockholders' equity


50,859,512


53,589,986

NONCONTROLLING INTEREST


214,405


194,400






TOTAL EQUITY


51,073,917


53,784,386






Total liabilities and equity


$167,505,631


$147,969,786

 

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

 



Three months ended March 31,

(Unaudited)




2012


2011








Sales revenue


$13,710,663


$16,183,829


Cost of goods sold


10,994,309


11,896,194








Gross profit


2,716,354


4,287,635








Operating expenses






General and administrative expenses


1,728,711


1,504,218


Research and development expenses


162,996


141,327


Selling expenses


2,480,591


1,971,935








Total operating expenses


4,372,298


3,617,480








(Loss) income from operations


(1,655,944)


670,155








Other (expenses) income






Government grant income


385,314


883


Guarantee income


153,554


87,296


Guarantee expenses


(129,178)


(87,515)


Interest income


52,574


119,488


Change in fair value of warrant liabilities


-


260,000


Other income (expenses)


5,939


(34,189)


Finance costs


(1,750,192)


(965,732)








Total other expenses


(1,281,989)


(619,769)








(Loss) income before income taxes and noncontrolling interest


(2,937,933)


50,386


Income taxes


(12,348)


(136,171)








Net loss before noncontrolling interest


(2,950,281)


(85,785)


Net loss attributable to noncontrolling interest


37,449


5,851








Net loss attributable to Company's common stockholders


$( 2,912,832)


$(79,934)








Net loss before noncontrolling interest


$(2,950,281)


$(85,785)


Other comprehensive income






Foreign currency translation adjustments


239,812


204,844








Comprehensive (loss) income


(2,710,469)


119,059


Comprehensive (income) loss attributable to noncontrolling interest


(20,005)


5,851








Comprehensive (loss) income attributable to Company's common

 






stockholders


$(2,730,474)


$124,910








China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Cont'd)



Three months ended March 31,

(Unaudited)




2012


2011


Loss per share - Basic and diluted






attributable to Company's common stockholders                           


$(0.11)


$(0.003)








Weighted average number of shares - Basic and diluted


26,803,044


26,627,719


 

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Cash Flows



Three months ended March 31,

(Unaudited)



2012


2011

Cash flows from operating activities





Net loss before noncontrolling interest


$(2,950,281)


$(85,785)

Adjustments to reconcile net loss before noncontrolling interest

to net cash flows used in operating activities:





Depreciation


725,675


500,644

Amortization of land use rights


21,649


5,514

Amortization of intangible assets


-


19,025

Deferred taxes


12,348


162,168

Loss on disposal of property, plant and equipment


447


-

Guarantee expenses


129,178


-

Guarantee income


(153,554)


-

Allowance for doubtful accounts


304,678


250,783

Deferred revenue amortized


-


(45,660)

Change in fair value of warrant liabilities


-


(260,000)

Exchange gain


(55,660)


-

Changes in operating assets and liabilities:





Restricted cash


(118,875)


(6,810,950)

Trade receivables


1,445,883


3,242,541

Bills receivable


(4,622,703)


(273,579)

Other receivables and prepayments


(2,437,411)


(4,509,546)

Advances to senior management


362,678


-

Inventories


(4,230,052)


(2,435,941)

Other payables and accrued expenses


(3,217,498)


946,972

Trade payables


1,273,464


2,164,614

Bills payable


(1,024,020)


6,810,950

Provision for warranty


(18,160)


-

Income taxes payable


(147,063)


(141,148)






Net cash flows used in operating activities


(14,699,277)


(459,398)






Cash flows from investing activities





Payments for deposits of acquisition of land use right, property, plant and equipment


-


(1,508,148)

Payments for acquisition of property, plant and equipment


(1,196,013)


(1,849,334)






Net cash flows used in investing activities


(1,196,013)


(3,357,482)






Cash flows from financing activities





Net proceeds from issuance of shares


-


9,258,466

Restricted cash


(10,048,900)


(7,193,779)

Proceeds from bank loans


24,361,925


19,299,987

Repayment of bank loans


(2,932,250)


(6,544,600)

Proceeds from non-interest-bearing loans


642,137


-

Repayment of non-interest-bearing loans


(375,884)


(478,016)

Loan from a third party


3,170,000


-

Government grant received


171,180


-






Net cash flows provided by financing activities


14,988,208


14,342,058






Effect of foreign currency translation on cash and cash equivalents


9,531


21,819






Net (decrease) increase in cash and cash equivalents


(897,551)


10,546,997

Cash and cash equivalents - beginning of period


3,594,361


925,052






Cash and cash equivalents - end of period


$2,696,810


$11,472,049






Supplemental disclosure of cash flow information:





Cash paid for:





   Interest


$688,791


$965,732

Income taxes


$158,232


$114,639






Non-cash operating and investing activities:-





Proceeds from disposal of property, plant and equipment settled by offsetting trade
payables


$11,095


$-

 

SOURCE China GengSheng Minerals, Inc.



RELATED LINKS
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