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China Industrial Steel, Inc. Reports Second Quarter 2013 Financial Results

Quarter Revenues Up 24%, Steel Products Tonnage Sales Increase 45% Over Prior Year

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NEW YORK, Aug. 16, 2013 /PRNewswire/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the three months ended June 30, 2013. The Company filed its Form 10-Q with the Securities and Exchange Commission on August 14, 2013.

Liu Shenghong, Chief Executive Officer and Chairman of the Company commented on the Company's performance, "The Company's continued revenue growth is a reflection of a solid growth plan and strong customer relationships. Our renovated manufacturing facility not only provides us with the additional capacity to satisfy customer demand, higher production levels also strengthen our ability to negotiate preferable raw material prices. These actions have helped us remain profitable despite the market pressure on selling prices, and we anticipate they will have a positive impact on our financial performance once pricing returns to normal levels."

Highlights of 2013 Second Quarter Financials

  • Revenues increased 24% to $181 million in the three months ended June 30, 2013 from $146 million for the same period in 2012.
  • Steel products tonnage sales up 45% for the quarter ended June 30, 2013, to 368,311 metric tons as compared to 253,490 metric tons in the same period of 2012.
  • Net Income decreased 42%, to $1.07 million for the three months ended June 30, 2013, as compared to $1.85 million for the prior year.

Total revenue in the three months ended June 30, 2013 were $180,726,434, an increase of $35,154,065, or 24% compared to $145,572,369 in the second quarter of 2012. The Company sold 368,311 metric tons steel products in the three months ended June 30, 2013, an increase of 114,821 metric tons, or 45%, compared to 253,490 metric tons in the same period of 2012. The average unit sales price was $481 per ton, a decrease of $84, or 15%, compared to $565 per ton in the same period of 2012.

The increase in revenue was reflects the increase in the sale of steel wires which resulted from the Company's new 600,000 ton steel wire production line which commenced production in January 2013.  The Company sold 165,843 metric tons of steel wires, an increase of 94,907 metric tons, or 134%, in the three months ended June 30, 2013, compared to 70,936 in the comparable period of 2012. This was partially offset by the decrease in revenue generated from the sale of steel plate, which was primarily the result of the decline in the average unit sales price for steel plate. The Company sold 202,468 tons of steel plates in the three months ended June 30, 2013, an increase of 19,914 tons, or 11%, compared to 182,554 tons in the comparable period of 2012. However, the average unit sales price of steel plates decreased $68 per ton, or 12% to $487 per ton in the three months ended June 30, 2013 from $555 per ton in the same period of 2012. The decrease in unit sales price offset the increase in sales quantities and caused a decrease in revenue generated from steel plates. Revenue from steel plates was $98,527,863 in 2013, a decrease of $2,768,307, or 3% compared to $101,296,170 in 2012.

Net income for the three months ended June 30, 2013 was $1,068,480 a decrease of $780,037, or 42%, compared to $1,848,517 in the comparable period of 2012. This decline was primarily the result of an unparalleled decrease in unit selling price of steel products (15%) and unit purchase price of raw material (14%).

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS)

(UNAUDITED)










June 30


December 31,




2013


2012

ASSETS





Current Assets:






Cash


$ 1,930,922


$ 1,710,887


Bank notes receivable


488,820


979,111


Accounts receivables, net


11,474,804


9,639,396


Accounts receivables - related parties


3,713,328


-


Inventories, net


13,710,929


11,585,277


Advances to suppliers, net


707,617


2,372,693


VAT recoverable


31,135,223


32,208,807


Advances to related parties


104,422,760


183,797,203


Deferred income tax asset


162,586


-


Other current asset


1,727,164


3,884,342


     Total Current Assets


169,474,153


246,177,716







Machinery and Equipment, Net


115,652,383


101,450,993

Machinery and Equipment - acquired from related parties, Net


80,013,616


85,471,360


Total Machinery and Equipment, Net


195,665,999


186,922,353













Other Assets:






Restricted cash


5,865,840


5,778,360


Land use rights and buildings under capital leases


4,713,910


4,985,732


Total Other Assets


10,579,750


10,764,092







TOTAL ASSETS


$375,719,902


$443,864,161







LIABILITIES AND STOCKHOLDERS' EQUITY





Current Liabilities:






Accounts payable


$ 57,094,085


$ 92,228,161


Accounts payable - related parties


3,118,514


1,833,558


Accrued liabilities


2,570,736


3,123,315


Taxes payables


395,571


2,427


Bank loans payable


24,049,944


26,034,722


Bank notes payable


5,377,020


5,296,830


Equipment loan payable - related parties - current


2,928,595


2,884,919


Current obligations under capital leases - related parties - current


683,615


648,893


Short term loan payable - related party


814,700


802,550


Customer financing


702,108


31,620,470


Advances from customers


70,711,357


77,275,327


      Total Current Liabilities


168,446,245


241,751,172







Long Term Liabilities:






Equipment loan payables - related parties - non current


1,104,423


1,087,952


Obligation under capital leases - related parties - non current


5,401,012


5,669,438


Total Long Term Liabilities


6,505,435


6,757,390







TOTAL LIABILITIES


174,951,680


248,508,562







Commitments and Contingencies











Stockholders' Equity:






Series A Convertible Preferred Stock, $0.0001 par value, 10,000,000
shares authorized, none issued and outstanding


-


-


Blank Check Preferred Stock, $0.0001 par value, 10,000,000 shares
authorized, none issued and outstanding


-


-


Common stock, $0.0001 par value, 980,000,000 authorized,
73,620,391 and 73,620,391 issued and outstanding at June 30, 2013
and December 31, 2012, respectively


7,362


7,362


Paid-in capital


16,417,235


16,417,235


Statutory reserves


6,530,869


6,530,869


Retained earnings


158,546,826


156,124,507


Accumulated other comprehensive income


19,265,930


16,275,626


Total Stockholders' Equity


200,768,222


195,355,599

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY


$375,719,902


$443,864,161







The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F - 1

 

 

 

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN US DOLLARS)

(UNAUDITED)












Three Months Ended June 30,


Six Months Ended June 30,



2013


2012


2013


2012

Revenues









Sales to customers

$    169,642,962


$    141,355,618


$    347,814,352


$    312,794,486


Sales to related parties

11,083,472


4,216,751


21,275,779


9,806,531


    Total Revenues

180,726,434


145,572,369


369,090,131


322,601,017










Cost of Revenue









Cost of Revenue - non-related parties

39,004,381


75,016,983


114,014,750


124,906,457


Cost of Revenue - related parties

138,115,315


66,098,486


246,594,107


184,413,577


   Total Cost of Revenue

177,119,696


141,115,469


360,608,857


309,320,034










Gross Profit

3,606,738


4,456,900


8,481,274


13,280,983










Selling and General and Administrative Expenses









Selling and General and Administrative Expenses - non-related parties

662,236


295,977


1,631,937


1,361,056


Selling and General and Administrative Expenses - related parties

253,851


705,826


514,525


882,909


Total Selling and General and Administrative Expenses

916,087


1,001,803


2,146,462


2,243,965










Income From Operations

2,690,651


3,455,097


6,334,812


11,037,018










Other Income (Expenses)









Interest income

49,890


2,120


53,673


54,609


Interest expense

(1,096,661)


(921,177)


(2,486,743)


(1,866,085)


Interest expense - related parties

(171,772)


(323,521)


(341,630)


(1,286,589)


   Total Other Income (Expenses)

(1,218,543)


(1,242,578)


(2,774,700)


(3,098,065)










Income from operation before income tax

1,472,108


2,212,519


3,560,112


7,938,953

Provision for income tax

403,628


364,002


1,137,793


1,384,392

Net Income

1,068,480


1,848,517


2,422,319


6,554,561











Earnings Per Share - Basic and Diluted

$                   0.01


$                   0.03


$                   0.03


$                   0.09


Weighted Average Shares Outstanding - Basic and Diluted

73,620,391


73,595,428


73,620,391


73,568,597










Other Comprehensive Income:









Foreign currency translation gain

2,376,889


(1,678,398)


2,990,304


(1,798,452)

Comprehensive Income

$         3,445,369


$            170,119


$         5,412,623


$         4,756,109


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F - 2

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.

Contact:

China Industrial Steel, Inc.
Delong Zhou - Chief Financial Officer
Phone +1-917-825-2997

SOURCE China Industrial Steel, Inc.



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