General Steel Announces Second Quarter 2010 Results
Total revenues increased approximately 23% year-over-year to $502 million
BEIJING, Aug. 6 /PRNewswire-Asia-FirstCall/ -- General Steel Holdings, Inc. ("General Steel" or "the Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced its financial results for the second quarter ended June 30, 2010.
Second Quarter of 2010 Highlights -- Total revenues increased 22.7% to $501.7 million from $408.9 million in the second quarter of 2009 -- Aggregate shipment volume reached 1.01 million metric tons, an increase of 6.8% year-over-year -- Gross margin was 1.5%, compared to 1.3% in the previous quarter and 5.5% in the second quarter of 2009 -- On May 13, 2010, the Company entered into a Joint Venture Framework Agreement with Shanxi Meijin Energy Group Co., Ltd. First Half of 2010 Highlights -- Total revenues increased 30.5% to a record $954.7 million from $731.7 million in the first half of 2009 -- Aggregate shipment volume reached 2.05 million metric tons, an increase of 22.3% year-over-year -- Gross margin was 1.4%, compared to 4.8% in the first half of 2009
"Demand continues to be robust," said General Steel's Chairman and Chief Executive Officer Henry Yu. "Located in central China, our largest subsidiary, Longmen Joint Venture, is relatively insulated from the slowdown in the real estate industry and allows us to continue benefiting from infrastructure development projects in western China. In fact, this year alone, there are over 235 construction and infrastructure projects scheduled to begin in Shaanxi province, including nine new railways, one new airport, the expansion of the Xi'an airport, two new ring subway systems and four new dams. These projects will take place over many years and drive our growth in the quarters and years to come. In the meantime, the industry continues to experience ups and downs as average selling prices and key input costs for iron ore and coking coal continue to fluctuate. Regardless, our focus is to continue vetting high-quality acquisition targets while putting an equal effort on controlling our costs and increasing profitability. The fundamentals of our business remain strong and I'm confident in our ability to deliver long-term shareholder value."
Selected Financial Results for the Second Quarter and First Half of 2010
Total revenues for the second quarter of 2010 increased 22.7% to $501.7 million from $408.9 million in the second quarter of 2009. Total revenues for the first half of 2010 increased 30.5% to $954.7 million from $731.7 million in the first half of 2009.
The increase in total revenues was predominantly due to an increase in both shipment volume and average selling prices for rebar at the Company's Longmen Joint Venture ("Longmen JV").
Cost of Sales
Total cost of sales for the second quarter of 2010 increased 27.9% to $494.3 million from $386.4 million in the second quarter of 2009. Total cost of sales for the first half of 2010 increased 35.2% to $941.6 million from $696.3 million in the first half of 2009. Cost of sales principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. The increase in cost of sales was primarily due to an increase in total revenues.
Gross Profit
Gross profit for the second quarter of 2010 decreased 67.3% year-over-year to $7.4 million from $22.5 million. Gross profit for the first half of 2010 decreased 63.0% year-over-year to $13.1 million from $35.4 million. Gross margin for the second quarter of 2010 was 1.5%, compared to 5.5% in the second quarter of 2009. Gross margin for the first half of 2010 was 1.4%, compared to 4.8% in the first half of 2009.
The Company noted that gross profit was adversely affected by declining average selling prices which fell from the middle of April to the end of June and the price of iron ore and coke, which remained relatively high during the second quarter of 2010.
Operating Expenses
Selling, general and administrative expenses for the second quarter of 2010 increased 43% to $13.7 million, compared to $9.6 million in the second quarter of 2009. Selling, general and administrative expenses for the first half of 2010 increased 37.8% to $25.8 million from $18.7 million in the first half of 2009. Selling, general and administrative expenses were 2.7% and 2.3% of total revenues in the second quarter of 2010 and 2009, respectively, and 2.7% and 2.6% of total revenues in the first half of 2010 and 2009, respectively. The Company noted that the increase is mainly due to higher transportation and agent charges at the Longmen Joint Venture following shipping volume increases.
Finance and interest expenses for the second quarter of 2010 were $16.5 million, compared to $11.3 million in the second quarter of 2009. Finance and interest expenses for the first half of 2010 were $27.4 million, compared to $14.2 million in the first half of 2009. The Company noted that the year-over- year increases were caused by a combination of additional finance and interest expenses and gains on a change in fair value of derivative liabilities.
Net Income
Net loss attributable to General Steel Holdings, Inc. for the second quarter of 2010 was $2.1 million compared to a net loss of $31.8 million in the second quarter of 2009. Net loss attributable to General Steel Holdings, Inc. for the first half of 2010 was $7.6 million compared to net loss of $24.5 million in the first half of 2009.
Basic and diluted losses per share for the second quarter of 2010 were $0.041 compared to basic and diluted losses per share of $0.80 in the second quarter of 2009. Basic and diluted losses per share for the first half of 2010 were $0.15 compared to basic and diluted losses per share of $0.64 in the first half of 2009.
Balance Sheet
As of June 30, 2010, General Steel had cash and restricted cash of $320.4 million, compared to $274.2 million as of December 31, 2009. Accounts receivable was $21.4 million as of June 30, 2010, compared to $8.5 million as of December 31, 2009. Convertible notes payable increased to $1.3 million as of June 30, 2010, compared to $1.1 million as of December 31, 2009.
The Company had an inventory balance of $281.3 million as of June 30, 2010 compared to $208.1 million on December 31, 2009. This balance is comprised of raw materials and finished products.
On August 5, 2010, remaining notes outstanding from the Company's December 13, 2007 private placement have been converted into a total of 1,559,675 shares of Common Stock.
As of today, all of the convertible promissory notes issued on December 13, 2007 have now been converted into Common Stock.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on August 6, 2010 (8:00 p.m. Beijing/Hong Kong Time on August 6, 2010). Management will discuss results and highlights from the quarter and answer questions. The dial-in number and passcode for the conference call are as follows:
U.S. Toll Free: +1-800-860-2442
Passcode: General Steel Holdings
The conference call will be broadcast live over the Internet and can be accessed by clicking the following link: http://www.corpasia.net/cancast/us/index.php?id=usGSI_1&version=e
Additionally, an archived Web cast of this call will be available on General Steel's website at http://www.gshi-steel.com .
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 6.3 million metric tons aggregate production capacity, its companies serve various industries and produce a variety of steel products including rebar, hot-rolled carbon and silicon sheet, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit http://www.gshi-steel.com .
Information Regarding Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs about future events and financial, political and social trends and assumptions it has made based on information currently available to it. The Company cannot assure that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. Such forward-looking statements may be affected by inaccurate assumptions or by known or unknown risks or uncertainties. Actual results may vary materially from those expressed or implied by the statements herein. For factors that could cause actual results to vary, perhaps materially, from these forward-looking statements, please refer to the Company's Form 10-K, filed with the Securities and Exchange Commission, and other subsequent filings. Forward-looking statements contained herein speak only as of the date of this release. The Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.
For investor and media inquiries, please contact: In China: Ms. Jing Ou-Yang General Steel Holdings, Inc. Tel: +86-10-5879-7346 Email: [email protected] Mr. Justin Knapp Ogilvy Financial, Beijing Tel: +86-10-8520-6556 Email: [email protected] In the United States: Ms. Jessica Barist Cohen Ogilvy Financial, New York Tel: +1-646-460-9989 Email: [email protected] GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2010 AND DECEMBER 31, 2009 (In thousands, except per share data) ASSETS June 30, December 31, 2010 2009 (Unaudited) CURRENT ASSETS: Cash $50,772 $82,118 Restricted cash 269,670 192,041 Notes receivable 56,355 29,185 Restricted notes receivable 24,324 Accounts receivable, net 20,759 8,525 Accounts receivable - related party 734 Other receivables, net 8,887 5,357 Other receivables - related parties 30,556 32,670 Dividend receivable 5,940 2,372 Inventories 281,276 208,087 Advances on inventory purchase 40,085 28,407 Advances on inventory purchase - related parties 8,798 2,995 Prepaid expense 5,409 690 Prepaid value added tax 17,075 19,488 Deferred tax assets 8,775 3,341 Total current assets 829,415 615,276 PLANT AND EQUIPMENT, net 566,202 555,111 OTHER ASSETS: Advances on equipment purchase 18,618 8,419 Investment in unconsolidated subsidiaries 12,751 20,022 Long-term deferred expense 2,069 Intangible assets, net of accumulated amortization 23,400 23,733 Note issuance cost 392 406 Plant and equipment to be disposed 2,800 3,026 Total other assets 57,961 57,675 TOTAL ASSETS $1,453,578 $1,228,064 LIABILITIES AND EQUITY CURRENT LIABILITIES: Short term notes payable $388,080 $254,608 Accounts payable 194,478 158,126 Accounts payable - related parties 85,128 48,151 Short term loans - bank 177,404 148,968 Short term loans - others 97,902 110,358 Short term loans - related parties -- 11,751 Other payables and accrued liabilities 19,769 16,222 Other payable - related parties 24,085 3,706 Customer deposit 186,589 208,765 Customer deposit - related parties 28,514 3,791 Deposit due to sales representatives 67,884 49,544 Taxes payable 6,020 6,921 Distribution payable to former shareholders 12,862 16,434 Total current liabilities 1,288,715 1,037,345 CONVERTIBLE NOTES PAYABLE, net of debt discount of $2,019 and $2,250 as of June 30, 2010 and December 31, 2009, respectively 1,281 1,050 DERIVATIVE LIABILITIES 8,672 23,340 Total liabilities 1,298,668 1,061,735 COMMITMENT AND CONTINGENCIES EQUITY: Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively 3 3 Common Stock, $0.001 par value, 200,000,000 shares authorized, 52,952,508 and 51,618,595 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively 53 52 Paid-in-capital 99,498 95,588 Statutory reserves 6,541 6,162 Accumulated deficits (24,047) (16,412) Accumulated other comprehensive income 8,398 8,336 Total shareholders' equity 90,446 93,729 NONCONTROLLING INTERESTS 64,465 72,598 Total equity 154,911 166,327 TOTAL LIABILITIES AND EQUITY $1,453,578 $1,228,062 GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME (UNAUDITED) (In thousands, except per share data) Three months ended Six months ended June 30, June 30, 2010 2009 2010 2009 REVENUES $383,173 $324,461 $700,801 $586,875 REVENUES - RELATED PARTIES 118,506 84,486 253,901 144,866 TOTAL REVENUES 501,679 408,947 954,702 731,741 COST OF REVENUES 369,437 301,849 687,013 553,851 COST OF REVENUES - RELATED PARTIES 124,882 84,599 254,596 142,469 TOTAL COST OF REVENUES 494,319 386,448 941,609 696,320 GROSS PROFIT 7,360 22,499 13,093 35,421 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 13,677 9,564 25,818 18,732 (LOSS) INCOME FROM OPERATIONS (6,317) 12,935 (12,725) 16,689 OTHER INCOME(EXPENSE) Interest income 617 764 1,737 1,642 Finance/interest expense (16,464) (11,309) (27,427) (14,247) Change in fair value of derivative liabilities 10,729 (26,726) 14,668 (22,611) Gain from debt extinguishment -- -- -- 2,930 Government grant -- -- -- 3,520 Income from equity investments 3,074 2,753 4,756 2,698 Other non-operating income, net 571 142 567 652 Total other expense, net (1,473) (34,376) (5,699) (25,416) LOSS BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST (7,790) (21,442) (18,424) (8,728) PROVISION FOR INCOME TAXES Current (5,093) 3,230 (4,472) 3,394 Deferred 2,253 (1,222) (335) -- Total (benefit) provision for income taxes (2,840) 2,008 (4,807) 3,394 NET LOSS BEFORE NONCONTROLLING INTEREST (4,950) (23,450) (13,617) (12,122) Less: Net (Loss) income attributable to noncontrolling interest (2,822) 8,340 (5,982) 12,333 NET LOSS ATTRIBUTABLE TO CONTROLLING INTEREST (2,128) (31,790) (7,635) (24,455) OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustments 361 163 62 (14) Comprehensive income (loss) attributable to noncontrolling interest (1) (1,031) 164 (1,106) COMPREHENSIVE LOSS $(1,768) $(32,658) $(7,409) $(25,575) WEIGHTED AVERAGE NUMBER OF SHARES Basic & Diluted 52,111,605 39,533,099 51,883,491 37,918,177 LOSS PER SHARE Basic & Diluted $(0.04) $(0.80) $(0.15) $(0.64) GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) (In thousands, except per share data) Six months ended June 30, 2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss attributable to controlling interest $(7,635) $(24,455) Net (loss) income attributable to noncontrolling interest (5,982) 12,333 Consolidated net loss (13,617) (12,122) Adjustments to reconcile net loss to cash (used in) provided by operating activities: Depreciation and amortization 19,334 13,478 Debt extinguishment (2,930) Inventory written-off 6,528 Impairment of long-lived assets 1,733 (Gain) Loss on disposal of equipment 123 (3,431) Stock issued for services and compensation 1,507 636 Make whole shares interest expense on notes conversion 6,455 Income from investment (4,756) (2,699) Amortization of deferred note issuance cost and discount on convertible notes 13 43 Change in fair value of derivative instrument (14,668) 22,612 Deferred tax assets (5,501) 2,166 Changes in operating assets and liabilities Notes receivable (26,939) 4,915 Accounts receivable (12,047) (7,924) Accounts receivable - related parties (1,015) 0 Other receivables (1,570) (362) Other receivables - related parties 2,300 (14,993) Inventories (85,941) (84,204) Advances on inventory purchases (11,512) 11,271 Advances on inventory purchases - related parties (5,431) (13,021) Accounts payable 35,734 59,067 Accounts payable - related parties 37,605 15,283 Other payables and accrued liabilities 2,426 19,183 Other payables - related parties 20,495 15,749 Customer deposits (20,269) 16,160 Customer deposits - related parties 25,081 (3,574) Taxes payable 4,966 (12,769) Net cash (used in) provided by operating activities (45,421) 28,990 CASH FLOWS FROM INVESTING ACTIVITIES: Acquired long term investment (1,273) (6,593) Cash proceeds from disposal of long- term investment 3,667 Dividend receivable (1,554) Long term other receivables 1,215 Deposits due to sales representatives 18,663 31,933 Cash proceeds from sales of equipment 60 4,414 Advance on equipment purchases (10,268) 3,065 Equipments purchase and intangible assets (29,240) (60,388) Payments to original shareholders (2,460) Net cash used in investing activities (22,405) (26,354) CASH FLOWS FINANCING ACTIVITIES: Restricted cash (76,526) Notes receivable - restricted (24,223) (69,727) Borrowings on short term loans - bank 133,196 72,816 Payments on short term loans - bank (105,485) (43,353) Borrowings on short term loan - others 72,083 79,354 Payments on short term loans - others (89,878) (63,899) Payments on short term loans - others-related parties (4,401) 2,931 Borrowings on short term notes payable 408,476 371,614 Payments on short term notes payable (276,594) (303,327) Net cash provided by financing activities 36,648 46,409 EFFECTS OF EXCHANGE RATE CHANGE IN CASH (168) (9) (DECREASE) INCREASE IN CASH (31,346) 49,036 CASH, beginning of period 82,118 14,895 CASH, end of period $50,772 $63,931 GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands, except per share data) Preferred stock Common stock Paid-in Shares Par value Shares Par value capital BALANCE, December 31, 2008 3,092,899 $3.00 36,128,833 $36.00 $37,129 Net loss attributable to controlling interest Net income attributable to noncontrolling interest Disposal of subsidiaries Distribution of dividend to noncontrolling shareholders Adjustment to statutory reserve Common stocks issued for compensation 216,000 0.22 498 Common stock issued for interest payment 152,240 0.15 558 Common stock issued for repayment of debt 300,000 0.30 1,800 Common stock transferred by CEO for compensation 138 Notes converted to common stock 5,104,596 5.11 24,125 Make whole shares issued on notes conversion 1,399,759 1.40 5,565 Reduction of Registered Capital Foreign currency translation adjustments BALANCE, June 30, 2009, unaudited 3,092,899 $3.00 43,301,428 $43.00 $69,813 Net loss attributable to controlling interest Net income attributable to noncontrolling interest Distribution of dividend to noncontrolling shareholders Adjustment to statutory reserve Common stock issued for compensation 380,650 0.55 1,377 Common stock issued for interest payments 44,065 0.05 187 Common stock transferred by CEO for compensation 138 Notes converted to common stock 1,940,678 1.95 7,947 Make whole shares issued on notes conversion 396,218 0.40 1,520 Common stock issued for private placement 5,555,556 5.56 14,606 Foreign currency translation adjustments BALANCE, December 31, 2009 3,092,899 $3.00 51,618,595 $51.51 $95,588 Net loss attributable to controlling interest Net loss attributable to noncontrolling interest Distribution of dividend to noncontrolling shareholders Noncontrolling interest acquired Adjustment to special reserve Common stock issued for compensation 405,750 0.41 1,369 Common stock issued for repayment of debt 928,163 0.93 2,403 Common stock transferred by CEO for compensation 138 Foreign currency translation adjustments BALANCE, June 30, 2010, unaudited 3,092,899 $3.00 52,952,508 $52.84 $99,498 Retained earnings / Accumulated deficits Statutory Contribution reserves Unrestricted receivable BALANCE, December 31, 2008 $4,902 $10,092 $(960) Net loss attributable to controlling interest (24,455) Net income attributable to noncontrolling interest Disposal of subsidiaries Distribution of dividend to noncontrolling shareholders Adjustment to statutory reserve 260 (260) Common stocks issued for compensation Common stock issued for interest payment Common stock issued for repayment of debt Common stock transferred by CEO for compensation Notes converted to common stock Make whole shares issued on notes conversion Reduction of Registered Capital 960 Foreign currency translation adjustments BALANCE, June 30, 2009, unaudited $5,162 $(14,623) $0 Net loss attributable to controlling interest (789) Net income attributable to noncontrolling interest Distribution of dividend to noncontrolling shareholders Adjustment to statutory reserve 1,000 (1,000) Common stock issued for compensation Common stock issued for interest payments Common stock transferred by CEO for compensation Notes converted to common stock Make whole shares issued on notes conversion Common stock issued for private placement Foreign currency translation adjustments BALANCE, December 31, 2009 $6,162 $(16,412) $0 Net loss attributable to controlling interest (7,635) Net loss attributable to noncontrolling interest Distribution of dividend to noncontrolling shareholders Noncontrolling interest acquired Adjustment to special reserve 379 Common stock issued for compensation Common stock issued for repayment of debt Common stock transferred by CEO for compensation Foreign currency translation adjustments BALANCE, June 30, 2010, unaudited $6,541 $(24,047) $0 Accumulated other Noncon- comprehensive trolling income interest Totals BALANCE, December 31, 2008 $8,705 $54,330 $114,237 Net loss attributable to Controlling interest (24,455) Net income attributable to noncontrolling interest 12,333 12,333 Disposal of subsidiaries (293) (293) Distribution of dividend to noncontrolling shareholders (556) (556) Adjustment to statutory reserve 0 Common stocks issued for compensation 498 Common stock issued for interest payment 558 Common stock issued for repayment of debt 1,800 Common stock transferred by CEO for compensation 138 Notes converted to common stock 24,130 Make whole shares issued on notes conversion 5,566 Reduction of Registered Capital 960 Foreign currency translation adjustments (14) (1,106) (1,120) BALANCE, June 30, 2009, unaudited $8,691 $64,708 $133,797 Net loss attributable to controlling interest (789) Net income attributable to noncontrolling interest 9,230 9,230 Distribution of dividend to noncontrolling shareholders (2,749) (2,749) Adjustment to statutory reserve 0 Common stock issued for compensation 1,378 Common stock issued for interest payments 187 Common stock transferred by CEO for compensation 138 Notes converted to common stock 7,949 Make whole shares issued on notes conversion 1,520 Common stock issued for private placement 14,612 Foreign currency translation adjustments (355) 1,409 1,054 BALANCE, December 31, 2009 $8,336 $72,598 $166,327 Net loss attributable to controlling interest (7,635) Net loss attributable to noncontrolling interest (5,982) (5,982) Distribution of dividend to noncontrolling shareholders (1,045) (1,045) Noncontrolling interest acquired (1,270) (1,270) Adjustment to special reserve 379 Common stock issued for compensation 1,369 Common stock issued for repayment of debt 2,404 Common stock transferred by CEO for compensation 138 Foreign currency translation adjustments 62 164 226 BALANCE, June 30, 2010, unaudited $8,398 $64,465 $154,911
SOURCE General Steel Holdings, Inc.
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