China Precision Steel Announces Third Quarter Fiscal 2013 Results

SHANGHAI, May 15, 2013 /PRNewswire/ -- 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 2013 third quarter results for the period ended March 31, 2013. 

Third Quarter Highlights

  • Revenue was $8.6 million
  • Gross loss was $2.4 million
  • Net loss was $13.5 million
  • Fully diluted loss per shares was $3.48
  • International sales were $0.7 million, or 9% of total sales

"We continued to experience a gradual improvement in demand for our high-carbon, cold-rolled precision steel as the segment's sales volume increased 15.2% from the third quarter of fiscal 2012 and 37.2% from the second quarter of fiscal 2013," commented Mr. Hai Sheng Chen, CEO of China Precision Steel.  "During the quarter, we added three new members to our management team to enhance our production efficiency and product quality as well as expand sales for our high-carbon, cold-rolled products.  We intend to dedicate additional sales and marketing efforts for this segment as the manufacturing of these products is one of our key strengths and strongest competitive advantages."      

Revenue for the third quarter of fiscal year 2013 was $8.6 million, down from revenue of $29.5 million in the third quarter of fiscal year 2012.  The decrease in revenue was mainly attributable to the decrease in production and sales of low-carbon, cold-rolled products in response to the Company's strategy to reduce its loss-making products.  Sequentially, revenue increased 4.9% from revenue of $8.2 million in the second quarter of fiscal year 2013 due to an increase in revenue for high-carbon products of 31.6% from the previous quarter.  Total sales volume in the third quarter of fiscal year 2013 was 10,264 tons, down from total sales volume of 38,898 tons in the prior period and from 10,705 tons in the second quarter of fiscal 2013.  High-carbon and low-carbon sales accounted for 40.7% and 48.6% of total sales, respectively, compared to 11.9% and 86.2%, respectively, period-on-period.  Exports represented 9% of total sales for the current period, compared to 5% in the same period a year ago. 

Gross loss in the third quarter was $2.4 million, compared to gross loss of $1.1 million in the same period a year ago.  Gross loss margin for the current period was 27.7%, compared to a gross loss margin of 3.8% in the third quarter of fiscal 2012.  The increase in gross loss margin is mainly due to a 35.5% period-on-period increase in the average cost per unit sold.  Average selling price for the quarter was $834 per ton, up from $758 per ton in the third quarter of fiscal 2012, and the average cost per unit sold was $1,066 per ton, up from $787 per ton in the same period a year ago.

Selling expenses for the third quarter of fiscal year 2013 were $31,901, compared to $63,734 in the third quarter of fiscal year 2012. The decline in selling expenses was primarily attributable to lower transportation costs expenses period-on-period.  Administrative expenses were $576,091, or 6.7% of revenue, compared to $781,221, or 2.6% of revenue period-on-period.  The decrease in administrative expenses was primarily due to decreases in traveling expenses and professional fees period-on-period. 

Operating loss for the current quarter was $12.7 million, compared to an operating loss of $2.5 million in the third quarter of fiscal year 2012.

Net loss for the third quarter of fiscal year 2013 was $13.5 million, compared to net loss of $3.3 million for the third quarter of fiscal year 2012.  Fully diluted loss per share was $3.48, compared to fully diluted loss per share of $0.85 in the same period a year ago.   

Nine Months Financial Results

Revenue for the first nine months of fiscal year 2013 was $22.7 million compared to $105.3 million in the same period a year ago.  Gross loss was $5.1 million, compared to a gross loss of $2.9 million for the nine months of fiscal year 2012.  Gross loss margin for the nine months ended March 31, 2013 was 22.7% compared to 2.7% for the same period a year ago.  Operating loss was $26.6 million compared to $5.7 million in the first nine months of fiscal year 2012.  Net loss was $28.6 million, compared to a net loss of $7.9 million in the same period a year ago.  Fully diluted loss per share was $7.37, compared to fully diluted loss per share of $2.04 for the first nine months of fiscal year 2012. 

Financial Condition

As of March 31, 2013, China Precision Steel had $0.2 million in cash and cash equivalents, $70.6 million in total liabilities and working capital of $28.0 million.  Stockholders' equity stood at $92.6 million, compared to $118.9 million as of June 30, 2012. 

Business Outlook

China Precision Steel expects sales volume to gradually increase as orders for high-carbon steel products are picking up.  The Company will continue to focus on improving its gross margin by being selective in accepting new orders as well as improving cash flow through reducing its accounts receivable.  As of March 31, 2013, China Precision Steel had a backlog in orders of $6.4 million.

"Our outlook for the steel industry is improving as key risks are stabilizing and automobile sales are gradually rebounding in China due to the strengthening economy driven by rising incomes and increasing consumption.  Furthermore, the World Steel Association stated it expects a recovery in global steel demand in the second half of 2013, led by the emerging economies," Mr. Chen continued.  "Going forward, we will continue to focus on expanding our high-carbon, cold-rolled precision steel products while improving our cash flow.  As we work with our customers to recover outstanding receivables, we are also minimizing our credit risk by primarily accepting orders from customers that are able to pay cash on delivery."  

About China Precision Steel

China Precision Steel 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, steel roofing and textile needles. The Company sells to manufacturers in the People's Republic of China as well as overseas markets such as Nigeria, Ethiopia, Thailand and Indonesia. 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.

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press 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 The likelihood that the downturn in China's steel industry has halted and that the industry will experience a turnaround and increased demand; the significance of China's implementation of pro-growth measures and the likelihood that it will start benefitting the domestic steel industry in the fourth quarter; the Company's ability to reduce operating costs, improve working capital and increase profitability, and any other statements of non-historical information. 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)





 March 31,


June 30,





2013


2012

Assets




Current assets






Cash and cash equivalents


$162,273


$1,602,805


Accounts receivable







Trade, net of allowances of $23,320,482 and $3,231,613






  at March 31, 2013 and June 30, 2012, respectively

38,473,081


59,116,931



Bills receivable


25,256


173,089



Other


936,795


1,117,243


Inventories


20,559,566


15,516,220


Prepaid expenses


582,129


668,867


Advances to suppliers, net of allowance of $4,726,554 and







$4,623,323 at March 31, 2013 and June 30, 2012, respectively

37,858,418


37,384,684

Total current assets


98,597,518


115,579,839








Property, plant and equipment






Property, plant and equipment, net


62,419,482


67,752,991


Construction-in-progress


245,692


233,512





62,665,174


67,986,503

Intangible assets, net


1,890,829


1,880,129

Goodwill


99,999


99,999

Total assets


$163,253,520


$185,546,470








Liabilities and Stockholders' Equity





Current liabilities






Short-term loans


$27,673,871


$27,246,477


Long-term loan - current portion


16,200,000


16,200,000


Accounts payable and accrued liabilities


9,989,856


6,772,892


Advances from customers


2,746,107


2,253,956


Other taxes payables


8,088,623


8,446,373


Current income taxes payable


5,917,694


5,756,178

Total current liabilities


70,616,151


66,675,876

Long-term loans


-


-








Stockholders' equity:






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







authorized, no shares outstanding at March 31, 2013 and






June 30, 2012, respectively


-


-


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







authorized, 3,880,866 issued and outstanding at







March 31, 2013 and June 30, 2012, respectively


3,880


3,880


Additional paid-in capital


75,685,066


75,685,066


Accumulated other comprehensive income


21,458,253


19,097,295


Retained (deficit)/earnings


(4,509,830)


24,084,353

Total stockholders' equity


92,637,369


118,870,594

Total liabilities and stockholders' equity


$163,253,520


$185,546,470

 

China Precision Steel, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended March 31, 2013 and 2012

(Unaudited)












Three Months Ended


Nine Months Ended



2013


2012


2013


2012










Sales revenues

$8,563,497


$29,494,865


$22,684,524


$105,324,043

Cost of goods sold

10,938,804


30,612,073


27,828,738


108,178,198

Gross (loss)

(2,375,307)


(1,117,208)


(5,144,214)


(2,854,155)

Operating expenses









Selling expenses

31,901


63,734


86,237


172,223


Administrative expenses

576,091


781,221


1,420,503


2,007,777


Allowance for bad and doubtful debts

9,665,828


522,118


19,825,042


522,118


Depreciation and amortization expense

51,742


54,173


155,753


162,610


Total operating expenses

10,325,562


1,421,246


21,487,535


2,864,728

(Loss) from operations

(12,700,869)


(2,538,454)


(26,631,749)


(5,718,883)

Other income/(expense)









Other revenues

70,743


20,434


678,500


89,505


Interest and finance costs

(857,269)


(794,895)


(2,640,934)


(2,273,473)


Total other (expense)

(786,526)


(774,461)


(1,962,434)


(2,183,968)

(Loss) from operations before income tax

(13,487,395)


(3,312,915)


(28,594,183)


(7,902,851)

Provision for income tax









Current

-


108


-


27,189


Total income tax expense

-


108


-


27,189










Net (loss)

(13,487,395)


(3,313,023)


(28,594,183)


(7,930,040)

Basic (loss) per share

($3.48)


($0.85)


($7.37)


($2.04)

Basic weighted average shares outstanding

3,880,866


3,880,866


3,880,866


3,880,866

Diluted (loss) per share

($3.48)


($0.85)


($7.37)


($2.04)

Diluted weighted average shares outstanding

3,880,866


3,880,866


3,880,866


3,880,866

 

 

China Precision Steel, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2013 and 2012

(Unaudited)



2013


2012

Cash flows from operating activities





Net (loss)

(28,594,183)


(7,930,040)


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





  Depreciation and amortization

6,876,606


6,763,799


  Gain on disposal of property, plant and equipment

-


(36,945)


  Allowance for bad and doubtful debts

19,825,042


522,118


  Inventory provision

-


636,405


Net changes in assets and liabilities:





  Accounts receivable, net

2,304,215


(3,448,433)


  Inventories

(4,696,893)


(3,416,954)


  Prepaid expenses

94,093


(86,378)


  Advances to suppliers

412,483


2,365,370


  Accounts payable and accrued expenses

3,071,081


3,343,901


  Advances from customers

441,823


4,088,100


  Other taxes payable

(546,344)


(144,398)


  Current income taxes

32,989


-

Net cash (used in)/provided by operating activities

(779,088)


2,656,545

Cash flows from investing activities





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

(120,079)


(365,568)


  Purchases of intangible assets

(2,724)


-


  Proceeds from disposal of property, plant and equipment

-


55,933

Net cash (used in) investing activities

(122,803)


(309,635)

Cash flows from financing activities





  Repayments of long-term loans

(542,696)


(2,874,740)

Net cash (used in) financing activities

(542,696)


(2,874,740)

Effect of exchange rate

4,055


64,685

Net (decrease) in cash

(1,440,532)


(463,145)

Cash and cash equivalents, beginning of period

1,602,805


2,707,754

Cash and cash equivalents, end of period

$162,273


$2,244,609

 

 

SOURCE China Precision Steel Inc.



RELATED LINKS
http://chinaprecisionsteelinc.com

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