2014

China Industrial Steel, Inc. Reports Financial Results For The Second Quarter 2012

NEW YORK, Aug. 20, 2012 /PRNewswire-Asia/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the three months ended June 30, 2012. The Company filed its Form 10-Q with the Securities and Exchange Commission on August 14, 2012.

Sales for the three months ended June 30, 2012 were $145,572,369, a decrease of $71,226,932, or 33%, compared to $216,799,301 in the comparable period in 2011. Approximately $13.3 million, or 19% of the decrease was due to a decrease in the average sales price and 81% was due to decrease in the quantity sold offset by the new steel wire products.

Gross profit margin was 3.06% in the three months ended June 30, 2012, a decrease of 3.59 percentage points, compared to 6.65% in the same period of 2011. The decrease in gross profit margin resulted mainly from decreased sales price of steel products.

Net income totaled $1,848,517 in the three months ended June 30, 2012, a decrease of $8,855,692, or 83%, compared to the net income of $10,704,209 in the comparable period of 2011. The decrease of net income was attributable primarily to the decrease in revenue, gross profit margin and an increase in selling, general and administrative expenses.

Liu Shenghong, Chief Executive Officer and Chairman of the Company commented on the Company's performance, "This has been a challenging year for China's steel industry, and our Company was not an exception. According to the Association of Chinese Steel Industry, 34% of steel manufacturers are experiencing losses, and while our results are off from last year, I am pleased to report that China Industrial Steel has remained profitable throughout this downturn."

Mr. Liu went on to say "Although economic recovery has been slower than expected worldwide, we expect that China's growth will be a significant driver in the turnaround, and we are working to ensure that China Industrial Steel will fully participate in that growth. In addition to shifting our existing production capabilities to the highest margin product mix, we are evaluating financing alternatives to increase our capacity for specialized steel products, the first of which will be a Galvalume production facility. Galvalume is a coated steel product, which is primarily used in the automotive and home appliance industries."

 

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS)

(UNAUDITED)


June 30,

2012

December 31,

2011

ASSETS



 Current Assets:



 Cash

$226,961

$1,737,495

 Bank notes receivable

698,919

2,342,186

 Accounts receivables, net

12,115,630

20,862,269

 Inventories, net

13,803,390

16,139,936

 Advances to suppliers

2,151,348

3,215,680

 VAT tax recoverable

22,624,414

21,612,482

 Advances to related parties

118,087,616

77,416,285

     Total Current Assets

169,708,278

143,326,333




 Machinery and Equipment, Net

82,659,717

84,410,398

 Machinery and Equipment - acquired from related parties, Net

95,921,717

98,514,249

Total Machinery and Equipment, Net

178,581,434

182,924,647




 Other Assets:



 Restricted cash

7,240,860

5,402,600

 Land use rights and buildings under capital leases

5,224,956

5,613,105

     Total Other Assets

12,465,816

11,015,705

 TOTAL ASSETS

$359,290,886

$337,266,685




LIABILITIES AND STOCKHOLDERS' EQUITY


 Current Liabilities:



 Accounts payable

90,138,703

23,095,827

 Accounts payable - related parties

426,409

184,447

 Accrued liabilities

2,384,275

2,622,224

 Taxes payables

536,212

1,868,886

 Bank loans payable

26,114,319

34,640,200

 Bank notes payable

5,981,580

3,019,100

 Equipment loan payable - related parties

3,896,141

11,562,752

 Current obligations under capital leases - related parties

614,009

597,258

 Short term loan payable - related party

787,050

1,747,900

 Advances from customers

30,338,502

13,257,487

     Total Current Liabilities

161,217,200

92,596,081




 Long Term Liabilities:



 Equipment loan payables - related parties

-

51,093,694

 Obligation under capital leases - related parties

5,878,122

6,254,954

     Total Long Term Liabilities

5,878,122

57,348,648

 TOTAL LIABILITIES

167,095,322

149,944,729




Stockholders' Equity:



Common stock, $0.0001 par value, 980,000,000 authorized, 73,542,058

issued and outstanding

7,362

7,354

 Paid-in capital

16,417,235

16,299,744

 Statutory reserves

6,530,869

6,530,869

 Retained earnings

156,744,078

150,189,517

 Accumulated other comprehensive income

12,496,020

14,294,472

Total Stockholders' Equity

192,195,564

187,321,956

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$359,290,886

$337,266,685

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(IN US DOLLARS)

(UNAUDITED)

 


Three Months Ended June 30,

Six Months Ended June 30,


2012

2011

2012

2011

Revenues





Sales to customers

$141,355,618

$195,513,869

$312,794,486

$383,038,685

Sales to related parties

4,216,751

21,285,432

9,806,531

21,285,432

    Total Revenues

145,572,369

216,799,301

322,601,017

404,324,117

Cost of Revenue





Cost of Revenue - non-related parties

75,016,983

26,715,484

124,906,457

48,852,768

Cost of Revenue - related parties

66,098,486

175,674,549

184,413,577

330,635,538

  Total Cost of Revenue

141,115,469

202,390,033

309,320,034

379,488,306

Gross Profit

4,456,900

14,409,268

13,280,983

24,835,811






Selling and General and Administrative Expenses





SG&A Expenses - non-related parties

295,977

412,040

1,361,056

859,287

SG&A Expenses - related parties

705,826

216,799

882,909

403,449

Total SG&A Expenses

1,001,803

628,839

2,243,965

1,262,736

Income From Operations

3,455,097

13,780,429

11,037,018

23,573,075

Other Income (Expenses)





Interest income

2,120

8,328

54,609

8,543

Interest expense - bank and private borrowings

(921,177)

(124,846)

(1,866,085)

(574,596)

Interest expense - related parties

(323,521)

(1,133,459)

(1,286,589)

(2,198,775)

    Total Other Income (Expenses)

(1,242,578)

(1,249,977)

(3,098,065)

(2,764,828)






Income from operation before income tax

2,212,519

12,530,452

7,938,953

20,808,247

Provision for income tax

364,002

1,826,243

1,384,392

2,971,264

Net Income

$1,848,517

$10,704,209

$6,554,561

$17,836,983

Earnings Per Share - Basic and Diluted

$0.03

$0.15

$0.09

$0.24

Weighted Average Shares Outstanding

73,595,428

73,542,058

73,568,597

73,159,247

Other Comprehensive Income:





Foreign currency translation (loss) gain

(1,678,398)

1,931,889

(1,798,452)

3,013,380

Comprehensive Income

170,119

12,636,098

4,756,109

20,850,363


About China Industrial Steel, Inc.

China Industrial Steel, Inc., ("CIS" or the "Company") through its wholly owned subsidiary, Handan Hongri Metallurgy Co., Ltd., produces and sells steel plate and steel bar for domestic and export customers.  The Company currently operates three production lines from its headquarters on approximately 1,000 acres in Handan City in the Hebei Province, China, where steel production is a significant component of the regional economy. 

Forward-looking Statements:

The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "will," "would," and other variations or negative expressions of these terms, including statements related to expected market trends and the Company's performance, are all "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances, and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

China Industrial Steel, Inc.

Contacts:

Frank Pena – Director
(732) 292-0322

Delong Zhou – Chief Financial Officer
Phone +1-917-825-2997

SOURCE China Industrial Steel, Inc.



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