China Precision Steel Announces First Quarter Fiscal 2012 Results

SHANGHAI, Nov. 14, 2011 /PRNewswire-Asia/ -- China Precision Steel, Inc. (NASDAQ: CPSL) ("China Precision Steel" or the "Company"), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its fiscal year 2012 first quarter results for the period ended September 30, 2011.

First Quarter Highlights

  • Revenue increased 24.4% to $42.2 million compared to the first quarter of fiscal year 2011
  • Sales volume was 45,548 tons, up 3,035 tons period-on-period
  • Gross profit was $61,770
  • Net loss was $1.1 million
  • Fully diluted loss per share was $0.02

"Revenue for our low carbon products grew to a record $33.5 million during the first quarter of fiscal year 2012 as domestic demand for home appliances remains strong. However, we also experienced a rapid increase in the cost of our raw material during the quarter which we were not able to fully pass on to our customers resulting in a decline in our gross margin. Subsequently, we have renegotiated with our suppliers to reduce the cost of our raw material which we expect to be reflected in our raw material costs in the second quarter," commented Mr. Hai Sheng Chen, CEO of China Precision Steel. "In addition, we have recently begun to experience an increase in demand from the international markets and have added several new international customers. One company in particular is based in Thailand and is our first international customer to purchase our high carbon steel for use in the production of automobile chains. We are extremely pleased with this development, as sales to international customers contribute to a higher gross margin than sales to domestic customers."

Revenue for the first quarter of fiscal year 2012 was $42.2 million, up 24.4% from revenue in the first quarter of fiscal year 2011 of $33.9 million. The increase in revenue was mainly attributed to the continued increase in demand for low carbon, cold-rolled products used in construction and home appliances production. Total sales volume and average selling price per ton in the first quarter increased to 45,548 tons and $926, respectively, compared to total sales volume and average selling price of 42,513 and $797, respectively, in the first quarter of fiscal year 2011. High carbon and low carbon sales accounted for 16.1% and 79.5% of total sales, respectively, compared to 19.3% and 70.5%, respectively in the first quarter of fiscal year 2011. Exports represented 1% of total sales for the quarter.

Gross profit in the first quarter was $61,770, compared to gross profit in the same period a year ago of $2.4 million. Gross margin was 0.1% compared to 7.0% in the first quarter of fiscal year 2011. The decrease in gross margin was due to a larger portion of total sales derived from the lower margin low carbon products compared to the same period a year ago, along with the rapid increase in raw material costs which the Company was not able to fully pass on to its customers.

Selling expenses for the first quarter of fiscal year 2012 were $68,304, or 0.2% of revenue, compared to $110,205, or 0.3% of revenue, in the first quarter of fiscal year 2011. The decrease in selling expenses was primarily attributable to lower selling commissions paid during the quarter as a result of the decline in international sales. Administrative expenses were $294,076, or 0.7% of revenue, compared to $871,470, or 2.6% of revenue. The decline in administrative expenses is due to a gain in currency exchange of $219,051 on the U.S. denominated long-term loan and a decline in legal and professional expenses period-on-period.

Operating loss for the quarter was $355,054, compared to operating income of $1.4 million in the first quarter of fiscal year 2011.

Net loss for the first quarter of fiscal year 2012 was $1.1 million, compared to net income of $644,511 for the first quarter of fiscal year 2011. Fully diluted loss per share was $0.02 compared to fully diluted earnings per share of $0.01 in the same period a year ago.

Financial Condition

As of September 30, 2011, China Precision Steel had $2.2 million in cash and cash equivalents, $14.4 million in long term debt, total liabilities of $71.0 million and working capital of $72.3 million. Stockholders' equity stood at $134.1 million compared to $133.5 million as of June 30, 2011. Cash generated from operating activities during the first three months of fiscal year 2012 was $303,740.

Business Outlook

China Precision Steel is ramping up production capacity with the addition of its third mill, which went into production in January 2010. The new mill is currently operating at 50% of its design capacity. Total production capacity is expected to increase by approximately 15,000 tons to 235,000 tons by the end of fiscal year 2012. Once all mills reach full design capacity by 2014, total production capacity is expected to be approximately 260,000 tons. As of September 30, 2011, China Precision Steel had a backlog of $19,922,102.

"While we have made strides in expanding our international penetration and continue to sell record volume of our low carbon products, we remain cautious on our outlook as the uncertainty of the global economic environment makes our near-term visibility limited," Mr. Chen continued. "Even though the global markets continue to present challenges, we are still pursuing several new opportunities to expand our sales. Currently, we are focusing on expanding our product offerings to include additional higher margin automobile components such as steel sealing strips as well as electronic parts. We are also working on further expanding into Northern China where there is strong demand for galvanized steel along with targeting new opportunities in international markets. In addition, we expect to strengthen our balance sheet and cash flow by reducing our advance to suppliers and accounts receivables."

About China Precision Steel, Inc.

China Precision Steel, Inc. is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel's high precision, ultra-thin, high strength (7.5 mm to 0.05 mm) cold-rolled steel products are mainly used in the production of automotive components, food packaging materials, saw blades and textile needles. The Company primarily sells to manufacturers in the People's Republic of China and overseas markets such as Nigeria, Thailand, Indonesia and the Philippines. China Precision Steel was incorporated in 2002 and is headquartered in Sheung Wan, Hong Kong. Additional information can be found at the Company's website http://chinaprecisionsteelinc.com.

Conference Call

China Precision Steel will host a conference call on Tuesday, November 15, 2011 at 9:00 a.m. Eastern Time to discuss fiscal 2012 first quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 866-800-8648. International callers should dial 617-614-2702. When prompted by the operator, mention conference passcode 273 259 43.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Tuesday, November 15, 2011 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 59139232. International callers should dial 617-801-6888 and enter the same passcode.

This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.chinaprecisionsteelinc.com. Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by China Precision Steel on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding China Precision Steel's ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion, predictions about improvements in the global economy and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, such as business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which China Precision Steel is engaged; cyclicality of steel consumption including overcapacity and decline in steel prices, limited availability of raw material and energy may constrain operating levels and reduce profit margins, environmental compliance and remediation could result in increased cost of capital as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Elite IR


Leslie J. Richardson, Partner

+852-3183 0283

Leslie.richardson@elite-ir.com



- Financial Tables Follow -

China Precision Steel, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)




September 30,


June 30,




2011


2011

Assets




Current assets





Cash and cash equivalents

$2,153,053


$2,707,754


Accounts receivable






Trade, net of allowances of $1,076,798 and $1,063,620






at September 30 and June 30, 2011, respectively

48,462,563


41,335,759



Bills receivable

-


201,133



Other

1,367,236


1,420,192


Inventories

25,080,071


25,077,449


Prepaid expenses

569,290


633,416


Advances to suppliers, net of allowance of $1,745,638 and






$1,724,275 at September 30 and June 30, 2011, respectively

51,240,910


50,034,590

Total current assets

128,873,123


121,410,293

Property, plant and equipment





Property, plant and equipment, net

74,188,898


75,311,221


Construction-in-progress

9,830


64,762




74,198,728


75,375,983

Intangible assets, net

1,904,652


1,892,249

Goodwill

99,999


99,999

Total assets

$205,076,502


$198,778,524

Liabilities and Stockholders' Equity




Current liabilities





Short-term loans

$27,121,859


$27,370,648


Long-term loan - current portion

3,600,000


3,600,000


Accounts payable and accrued liabilities

6,935,599


5,599,323


Advances from customers

6,082,951


2,275,241


Other taxes payables

7,037,921


6,297,227


Current income taxes payable

5,789,474


5,691,456

Total current liabilities

56,567,804


50,833,895

Long-term loan

14,400,000


14,400,000

Stockholders' equity:





Preferred stock: $0.001 per value, 8,000,000 shares






authorized, no shares outstanding at September 30 and






June 30, 2011, respectively

-


-


Common stock: $0.001 par value, 62,000,000 shares






authorized, 46,562,955 and 46,562,955 issued and






outstanding September 30 and June 30, 2011, respectively

46,563


46,563


Additional paid-in capital

75,642,383


75,642,383


Accumulated other comprehensive income

18,465,349


16,822,185


Retained earnings

39,954,403


41,033,498

Total stockholders' equity

134,108,698


133,544,629

Total liabilities and stockholders' equity

$205,076,502


$198,778,524




China Precision Steel, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three Months Ended September 30, 2011 and 2010

(Unaudited)



2011


2010

Sales revenues

$42,166,843


$33,896,455

Cost of goods sold

42,105,073


31,512,370

Gross profit

61,770


2,384,085

Operating expenses





Selling expenses

68,304


110,205


Administrative expenses

294,076


871,470


Depreciation and amortization expense

54,444


44,160


Total operating expenses

416,824


1,025,835

(Loss)/income from operations

(355,054)


1,358,250

Other income/(expense)





Other revenues

199


1,518


Interest and finance costs

(669,928)


(465,113)


Total other (expense)

(669,729)


(463,595)

(Loss)/income from operations before income tax

(1,024,783)


894,655

Provision for income tax





Current

54,312


250,144


Total income tax expense

54,312


250,144

Net (loss)/income

(1,079,095)


$644,511

Basic (loss)/earnings per share

(0.02)


$0.01

Basic weighted average shares outstanding

46,562,955


46,562,955

Diluted (loss)/earnings per share

(0.02)


$0.01

Diluted weighted average shares outstanding

46,562,955


46,562,955








China Precision Steel, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2011 and 2010

(Unaudited)



2011


2010






Cash flows from operating activities





Net (loss)/income

(1,079,095)


644,511


Adjustments to reconcile net income to net cash provided by operating activities





 Depreciation and amortization

2,196,295


1,918,682


Net changes in assets and liabilities:





 Accounts receivable, net

(6,877,517)


6,594,117


 Inventories

308,082


(2,485,506)


 Prepaid expenses

66,760


(33,514)


 Advances to suppliers

(586,403)


(12,614,539)


 Accounts payable and accrued expenses

1,805,922


(3,886,917)


 Advances from customers

3,779,521


(498,508)


 Other taxes payable

662,673


53,900


 Current income taxes

27,502


191,872

Net cash provided by/(used in) operating activities

303,740


(10,115,902)

Cash flows from investing activities





 Purchase of property, plant and equipment, including construction in progress

(84,886)


(6,542,428)

Net cash (used in) investing activities

(84,886)


(6,542,428)

Cash flows from financing activities





 Repayments of short-term loans

(810,921)


(51,479)

Net cash (used in) financing activities

(810,921)


(51,479)

Effect of exchange rate

37,366


326,160

Net (decrease) in cash

(554,701)


(16,383,649)

Cash and cash equivalents, beginning of period

2,707,754


29,036,706

Cash and cash equivalents, end of period

$2,153,053


$12,653,057




SOURCE China Precision Steel Inc.



RELATED LINKS
http://chinaprecisionsteelinc.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.