China GengSheng Minerals Reports Second Quarter 2012 Financial Results

14 Aug, 2012, 17:00 ET from China GengSheng Minerals, Inc.

GONGYI, China, Aug. 14, 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 second quarter ended June 30, 2012.

Second Quarter 2012 Financial Summary:

· 

Revenue decreased 4.0% year-over-year to approximately $19.6 million.

· 

Refractories sales were approximately $11.6 million, compared with approximately $12.5 million in the second quarter of 2011.

· 

Fine precision abrasives product sales were approximately $3.3 million, compared with approximately $1.5 million in the second quarter of 2011.

· 

Fracture proppant sales were approximately $4.2 million, compared with approximately $5.9 million in the second quarter of 2011.

· 

Gross profit was approximately $3.1 million, or 15.6% of total sales, compared with approximately $5.3 million, or 26.1% of total sales in the same period a year ago.

· 

Total operating expenses increased to approximately $5.0 million, compared with approximately $4.5 million in the second quarter of 2011.

· 

Net loss attributable to the Company was approximately $3.8 million, or $0.14 per share, compared with net loss of approximately $247,000, or $0.01 per share in the second quarter of 2011.

· 

As of June 30, 2012, the Company had cash and cash equivalents of approximately $5.2 million, total equity of approximately $47.3 million and working capital of approximately $5.3 million.

First Half 2012 Financial Summary:

· 

Revenue decreased 9.0% year-over-year to approximately $33.3 million.

· 

Refractories sales were approximately $21.6 million, compared with approximately $22.5 million in the first half of 2011.

· 

Fine precision abrasives product sales were approximately $5.7 million, compared with approximately $2.3 million in the first half of 2011.

· 

Fracture proppant sales were approximately $5.2 million, compared with approximately $11.1 million in the first half of 2011.

· 

Gross profit was approximately $5.8 million, or 17.3% of total sales, compared with approximately $9.6 million, or 26.3% of total sales in the same period a year ago.

· 

Total operating expenses increased to approximately $9.3 million, compared with approximately $8.2 million in the first half of 2011.

· 

Net loss attributable to the Company was approximately $6.7 million, or $0.25 per share, compared with net loss of approximately $327,000, or $0.01 per share in the first half of 2011.

"Our sales recovered gradually from the disappointing first quarter as we stabilized refractory products sales and re-positioned our sales of fracture proppant products to the domestic market. In particular, our sales of fine precision abrasives products achieved significant increase year-over-year despite the challenging market conditions we are facing," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "While rising costs continued to put pressure on our bottom line number, we still have confidence in our ability and readiness to capture new market opportunities."

Financial Results for the Three Months Ended June 30, 2012

For the second quarter of 2012, sales revenue was approximately $19.6 million, a decrease of 4.0%, compared with approximately $20.4 million in the second quarter of 2011. The decrease was mainly attributable to the decreased sales of our fracture proppant products.

  • Sales of the Company's core refractory products totaled approximately $11.6 million, or 59.2% of total sales, a decrease of 7.4%, compared with approximately $12.5 million in the same period of 2011.   
  • Sales of fracture proppant products totaled approximately $4.2 million, or 21.5% of total sales, a decrease of 28.9%, compared with approximately $5.9 million in the second quarter of 2011. The year-over-year decrease in fracture proppant products sales revenue was mainly due to the larger portion of sales to the domestic market where the fracture proppant products are typically priced lower than that in the U.S. market.
  • Sales of fine precision abrasives products totaled approximately $3.3 million, compared with approximately $1.5 million in the second 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 $530,000, compared with approximately $492,000 in the second quarter of 2011.

Cost of goods sold totaled approximately $16.6 million, an increase of 9.7%, compared with approximately $15.1 million in the same period of 2011. This increase was primarily due to the higher raw material costs and energy costs compared with the same period in 2011.

Gross profit for the three months ended June 30, 2012 was approximately $3.1 million, or 15.6% of revenue, compared with approximately $5.3 million, or 26.1% of revenue in the second quarter of 2011. The decrease in gross profit and gross profit margin for the quarter was mainly attributable to the decreased gross profit margin in our fine precision abrasives segment and fracture proppants segment.

General and administrative expenses increased by approximately $307,000 to approximately $1.9 million for the second quarter in 2012, from approximately $1.6 million in the same period in 2011. The increase was primarily due to the loss on disposal of equipment in our fine precision abrasives segment as we upgraded the production facilities and the increase in depreciation expenses and salary expenses.

Selling expenses stayed flat at approximately $2.8 million in the second quarter of 2012, compared with the same period in 2011.

Finance costs increased by approximately $379,000, or 24.1% to approximately $2.0 million in the second quarter of 2012, from approximately $1.6 million in the same period in 2011. The increase was primarily attributable to an increase of approximately $606,000 in interest expenses as we increased borrowing activities in the second quarter of 2012.

Net loss attributable to Company's common stockholders was approximately $3.8 million, or $0.14 per share, compared with approximately $247,000, or $0.01 per share in the same period in 2011. The net loss for the quarter was primarily attributable to the factors described above.

As of June 30, 2012, the Company had cash and cash equivalents totaling approximately $5.2 million, working capital of approximately $5.3 million and total equity of approximately $47.3 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

June 30,

As of December 31,

2012

2011

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$5,162,949

$3,594,361

Restricted cash

38,465,112

21,094,008

Trade receivables, net

53,645,872

49,167,748

Bills receivable

12,363,231

6,331,997

Other receivables and prepayments, net

9,025,841

8,451,185

Advances to senior management

-

360,162

Inventories, net 

18,248,768

16,956,582

Deferred tax assets, net of valuation allowance

-

-

Total current assets

136,911,773

105,956,043

Deposit for acquisition of a non-consolidated affiliate, net

-

1,092,041

Investment in a non-consolidated affiliate

1,090,412

-

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

622,824

618,892

Goodwill, net

-

-

Intangible assets, net

-

-

Property, plant and equipment, net

37,203,990

37,164,849

Land use rights

3,119,516

3,137,961

TOTAL ASSETS

$178,948,515

$147,969,786

LIABILITIES AND EQUITY

Current liabilities:

Trade payables

$22,090,232

$18,671,086

Bills payable

8,818,128

16,385,340

Other payables and accrued expenses

6,904,576

8,877,407

Deferred revenue - Government grants

649,202

443,632

Provision for warranty

110,730

184,778

Income taxes payable

71,345

218,038

Non-interest-bearing loans

3,568,059

3,318,472

Collateralized short-term bank loans

84,570,235

45,974,022

Loans from third parties

4,752,000

-

Deferred tax liabilities

125,270

112,625

Warrant liabilities

-

-

TOTAL LIABILITIES

131,659,777

94,185,400

COMMITMENTS AND CONTINGENCIES

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

7,916,345

7,713,341

Retained earnings

2,834,958

9,541,560

Total China GengSheng Minerals, Inc. stockholders' equity

47,086,388

53,589,986

NONCONTROLLING INTEREST

202,350

194,400

TOTAL EQUITY

47,288,738

53,784,386

TOTAL LIABILITIES AND EQUITY

$178,948,515

$147,969,786

 

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three months ended

June 30,

Six months ended

June 30,

(Unaudited)

(Unaudited)

2012

2011

2012

2011

Sales revenue

$19,620,215

$20,435,922

$33,330,878

$36,619,751

Cost of goods sold

(16,565,669)

(15,101,251)

(27,559,978)

(26,997,445)

Gross profit

3,054,546

5,334,671

5,770,900

9,622,306

Operating expenses

General and administrative expenses

1,937,379

1,629,380

3,666,090

3,133,598

Research and development expenses

236,283

145,202

399,279

286,529

Selling expenses

2,790,552

2,761,122

5,271,143

4,733,057

Total operating expenses

4,964,214

4,535,704

9,336,512

8,153,184

(Loss) income from operations

(1,909,668)

798,967

(3,565,612)

1,469,122

Other (expenses) income

Government grant income

-

16,802

385,314

17,685

Guarantee income

147,732

122,952

301,286

210,248

Guarantee expenses

(107,630)

(88,877)

(236,808)

(176,392)

Equity in net loss of a non-consolidated affiliate

(8,567)

-

(8,567)

-

Interest income

186,375

62,893

238,949

182,381

Change in fair value of warrant liabilities

-

650,000

-

910,000

Other income (expenses)

37,905

(33,533)

43,844

(67,722)

Finance costs

(1,949,938)

(1,571,367)

(3,700,130)

(2,537,099)

Total other expenses

(1,694,123)

(841,130)

(2,976,112)

(1,460,899)

(Loss) income before income taxes and noncontrolling interest

(3,603,791)

(42,163)

(6,541,724)

8,223

Income taxes

(202,018)

(226,139)

(214,366)

(362,310)

Net loss before noncontrolling interest

(3,805,809)

(268,302)

(6,756,090)

(354,087)

Net loss attributable to noncontrolling interest

12,039

21,264

49,488

27,115

Net loss attributable to Company's common stockholders

$(3,793,770)

$(247,038)

$(6,706,602)

$(326,972)

Net loss before noncontrolling interest

$(3,805,809)

$(268,302)

$(6,756,090)

$(354,087)

Other comprehensive income

Foreign currency translation adjustments

20,630

786,396

260,442

991,240

Comprehensive (loss) income

(3,785,179)

518,094

(6,495,648)

637,153

Comprehensive loss (income)   attributable to noncontrolling

interest

12,055

21,264

(7,950)

27,115

Comprehensive (loss) income attributable to Company's common stockholders

 

$(3,773,124)

 

$539,358

 

$(6,503,598)

 

$664,268

Loss per share  - Basic and    diluted attributable to Company's   common stockholders 

$(0.14)

$(0.01)

$(0.25)

$(0.01)

Weighted average number of    shares - Basic and diluted 

26,803,044

26,794,386

26,803,044

26,711,513

 

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Cash Flows

Six months ended June 30,

(Unaudited)

2012

2011

Cash flows from operating activities

Net loss before noncontrolling interest

$(6,756,090)

$(354,087)

Adjustments to reconcile net loss before noncontrolling interest to net cash flows used in operating activities:

Depreciation

1,545,430

1,040,195

Amortization of land use rights

38,380

10,481

Equity in net loss of a non-consolidated affiliate

8,567

-

Amortization of intangible assets

-

38,180

Deferred taxes

12,157

153,413

Loss on disposal of property, plant and equipment

115,742

29,813

Guarantee expenses

236,808

-

Guarantee income

(301,286)

-

Allowance for doubtful accounts

573,147

432,040

Deferred revenue amortized

-

(45,816)

Change in fair value of warrant liabilities

-

(910,000)

Exchange gain

(65,741)

-

Changes in operating assets and liabilities:

Restricted cash

9,833,472

(4,859,443)

Trade receivables

(4,422,097)

215,589

Bills receivable

(5,921,005)

(11,064,303)

Other receivables and prepayments

(965,360)

(5,214,083)

Advances to senior management

362,450

-

Inventories

(1,184,365)

(5,821,702)

Other payables and accrued expenses

(1,965,058)

1,117,543

Trade payables

3,513,956

5,299,877

Bills payable

(7,741,312)

18,440,940

Provision for warranty

(75,223)

-

Income taxes payable

(147,762)

(54,322)

Net cash flows used in operating activities

(13,305,190)

(1,545,685)

Cash flows from investing activities

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

-

(3,984,119)

Proceeds from disposal of property, plant and equipment

-

64,092

Payments for acquisition of property, plant and equipment

(1,677,628)

(4,397,877)

Net cash flows used in investing activities

(1,677,628)

(8,317,904)

Cash flows from financing activities

Net proceeds from issuance of shares

-

9,258,466

Restricted cash

(27,070,560)

(27,061,374)

Proceeds from bank loans

49,859,412

64,935,933

Repayment of bank loans

(11,555,280)

(28,558,640)

Proceeds from non-interest-bearing loans

576,646

305,440

Repayment of non-interest-bearing loans

(379,822)

(479,649)

Loans from third parties

4,752,000

-

Government grant received

357,984

-

Net cash flows provided by financing activities

16,540,380

18,400,176

Effect of foreign currency translation on cash and cash equivalents

11,026

27,540

Net increase in cash and cash equivalents

1,568,588

8,564,127

Cash and cash equivalents - beginning of period

3,594,361

925,052

Cash and cash equivalents - end of period

$5,162,949

$9,489,179

Supplemental disclosure of cash flow information:-

Cash paid for:

  Interest

$1,559,143

$2,537,099

  Income taxes

$346,552

$262,133

Non-cash operating, investing and financing activities:-

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

$88,707

$-

Warrants issued to investors in connection with the private placement

-

970,000

Acquisition of Yili YiQiang Silicon Limited by offsetting deposit for acquisition of a non-consolidated affiliate 

$1,098,979

$-

SOURCE China GengSheng Minerals, Inc.



RELATED LINKS

http://www.gengsheng.com