Company achieves record total revenues, shipment volume and income from operations during the third quarter of 2009

BEIJING, Nov. 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 third quarter ended September 30, 2009.

    Third Quarter of 2009 Highlights
    -- Aggregate shipment volume increased 67.2% year-over-year to a record
       1,036,076 metric tons
    -- Total revenues increased 17.8% to a record $484.8 million from $411.5
       million in the third quarter of 2008
    -- Gross margin was 8.2%, compared to 5.5% in the previous quarter and
       -1.5% in the third quarter of 2008
    -- Income from operations increased to a record $29.2 million
    -- Net income was $10.4 million, or earnings per basic and diluted share
       of $0.23 and $0.22, respectively
    -- Established a sales office in one of western China's key economic
       development zones, Guanzhong-Tianshui Economic Zone

"We achieved record total revenues, shipment volume and income from operations during the quarter," said Mr. Henry Yu, General Steel's chairman and chief executive officer. "Our Longmen JV continues to benefit from a micro-trend in the domestic steel space, delivering construction-related steel to an increasing number of rural development and infrastructure projects. This helped gross margin at the subsidiary expand to more than 8% during the quarter, which is four consecutive quarters of improvement. Going forward, the accelerating momentum for significant industry consolidation combined with our unique platform and ability to create 'win-win' partnerships, has positioned us as one of the most sought out partners within the industry."

Selected Financial Results for the Third Quarter and Nine Months Ended September 30, 2009

Total revenues for the third quarter of 2009 increased 17.8% year-over-year to $484.8 million from $411.5 million in the year-ago period. Total revenues for the nine months ended September 30, 2009 increased 11.6% year-over-year to $1.2 billion from $1.1 billion in the year-ago period.

The increase in total revenues was predominantly due to increased shipment volumes at the Company's Shaanxi Longmen Iron and Steel Co., Ltd. joint venture ("Longmen JV"), which in the nine months ended September 30, 2009, increased 61.0% year-over-year as well as the Company's Maoming Hengda Steel Group, Limited ("Maoming") subsidiary, which in the nine months ended September 30, 2009, increased 617.7% year-over-year. The Company noted that the increase in shipment volumes helped to offset lower selling prices and declines at its Daqiuzhuang Metal subsidiary and Baotou Steel Pipe joint venture. The increase in total revenues was also attributable to the Company's Maoming acquisition, which took place on June 25, 2008. Total revenues for the nine months ended September 30, 2009 reflect a full nine months of operations, whereas the subsidiary did not exist in the same period last year.

Cost of Sales

Total cost of sales for the third quarter of 2009 increased 6.5% year-over-year to $445.0 million from $417.9 million in the year-ago period. Total cost of sales for the nine months ended September 30, 2009 increased 7.6% year-over-year to $1.1 billion from $1.0 billion in the year-ago period. 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 mostly attributable to an increase in shipment volumes at the Company's Longmen JV and Maoming subsidiary in response to demand created by earthquake reconstruction and infrastructure-related stimulus projects.

Gross Profit

Gross profit for the third quarter of 2009 was $39.7 million compared to a gross loss of $6.3 million in the year-ago period. Gross profit for the nine months ended September 30, 2009 increased 154.7% year-over-year to $75.2 million from $29.5 million in the year-ago period. Gross margin for the third quarter of 2009 was 8.2%, compared to -1.5% in the year-ago period. Gross margin for the nine months ended September 30, 2009 was 6.2%, compared to 2.7% in the year-ago period.

Operating Expenses

Selling, general and administrative expenses for the third quarter of 2009 decreased 14.9% to $10.5 million, compared to $12.3 million in the year-ago period. Selling, general and administrative expenses for the nine months ended September 30, 2009 increased 3.0% to $29.2 million from $28.4 million in the year-ago period. Selling, general and administrative expenses were 2.2% and 3.0% of total revenues in the third quarters of 2009 and 2008, respectively, compared to 2.4% and 2.6% in the nine months ended September 30, 2009 and 2008, respectively. The Company noted that the year-over-year increase in selling, general and administrative expenses in the nine months ended September 30, 2009 was attributable to the addition of the Company's Maoming subsidiary, which did not exist in the year-ago period as well as a 61% increase in shipment volume at the Company's Longmen JV.

Finance and interest expenses for the third quarter of 2009 were $4.2 million, compared to $6.9 million in the year-ago period. Finance and interest expenses for the nine months ended September 30, 2009 were $18.4 million, compared to $19.1 million in the year-ago period. The reduction in finance and interest expense for the nine months ended September 30, 2009 was primarily due to interest paid on bank loans and the early redemption of notes receivable and various bank fees.

Net Income

Net income for the third quarter of 2009 was $10.4 million, compared to net income of $20.5 million in the year-ago period. Net loss for the nine months ended September 30, 2009 was $14.2 million, compared to net loss of $1.6 million in the year-ago period. The decrease in net income was due to a $29.9 million derivative instrument-related gain which occurred in the third quarter of 2008 and is a non-operating, non-cash gain related to a convertible bond and warrants issued in December of 2007.

Basic earnings per share was $0.23 in the third quarter of 2009 and $0.57 in the year-ago period.

Diluted earnings per share was $0.22 in the third quarter of 2009 and $0.57 in the year-ago period. Basic and diluted losses per share were $0.35 in the nine months ended September 30, 2009, compared to $0.05 in the year-ago period.

Balance Sheet

As of September 30, 2009, General Steel had cash and restricted cash of $251.9 million, compared to $145.6 million as of December 31, 2008. Accounts receivable was $12.2 million and accounts receivables - related parties was $2.8 million as of September 30, 2009, compared to accounts receivable of $8.3 million as of December 31, 2008. Convertible notes payable decreased to $912 thousand as of September 30, 2009, compared to $7.2 million as of December 31, 2008. Because $8.3 million in notes were converted to 1,940,678 shares of common stock from June 30, 2009 to September 30, 2009, total outstanding shares increased to 45.8 million as of September 30, 2009.

Conference Call

General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on November 6, 2009 (9:00 p.m. Beijing/Hong Kong Time on November 6, 2009). On the call, 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.visualwebcaster.com/event.asp?id=63645 . The Company has also posted a presentation on their corporate website which can be downloaded and used to follow along on the call.

Additionally, an archived webcast 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. Actual results could differ materially from those projected in the forward-looking statements as a result of inaccurate assumptions or a number of risks and uncertainties. These risks and uncertainties are set forth in the Company's filings under the Securities Act of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" and elsewhere, and include: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether the Company is able to manage its planned growth efficiently and operate profitable operations, including whether its management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether the Company is able to generate sufficient revenues or obtain financing to sustain and grow its operations; (d) whether the Company is able to successfully fulfill our primary requirements for cash and (e) other risks. 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: jing.ouyang@gshi-steel.com

     Mr. Justin Knapp
     Ogilvy Financial, Beijing
     Tel:   +86-10-8520-6556
     Email: gsi@ogilvy.com

    In the United States:

     Ms. Jessica Barist Cohen
     Ogilvy Financial, New York
     Tel:   +1-646-460-9989
     Email: gsi@ogilvy.com



                  GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

       CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME
                                   (UNAUDITED)
                      (In thousands, except per share data)

                                   Three months ended      Nine months ended
                                     September 30,           September 30,
                                   2009        2008        2009        2008
    REVENUES                     $361,652    $325,911    $875,374    $781,918

    REVENUES - RELATED PARTIES    123,099      85,610     341,118     308,198

      TOTAL REVENUES              484,751     411,521   1,216,492   1,090,116

    COST OF SALES                 340,484     335,944     822,392     762,395

    COST OF SALES - RELATED
     PARTIES                      104,534      81,923     318,946     298,218

      TOTAL COST OF SALES         445,018     417,867   1,141,338   1,060,612

    GROSS PROFIT                   39,733      (6,347)     75,154      29,504

    SELLING, GENERAL AND
     ADMINISTRATIVE EXPENSES       10,487      12,328      29,219      28,364

    INCOME(LOSS) FROM
     OPERATIONS                    29,246     (18,675)     45,935       1,140

    OTHER INCOME(EXPENSE), NET
      Interest income                 826         646       2,468       2,104
      Finance/interest expense     (4,174)     (6,872)    (18,422)    (19,149)
      Change in fair value of
       derivative liabilities        (617)     29,885     (23,228)      4,769
      Gain from debt
       extinguishment                  --       7,169       2,932       7,169
      Government grant                 --          --       3,433          --
      Income from equity
       investments                    963          --       3,661          --
      Other non-operating
       income, net                 (2,984)        899      (2,331)      1,919
          Total other (expense)
           income, net             (5,986)     31,727     (31,487)     (3,189)

    INCOME(LOSS) BEFORE PROVISION
     FOR INCOME TAXES AND
     NONCONTROLLING INTEREST       23,260      13,051      14,448      (2,049)

    PROVISION FOR INCOME TAXES
      Current                       6,717        (813)     12,451       1,147
      Deferred                     (2,925)     (1,271)     (5,265)     (1,694)
          Total provision
           (benefit) for
           income taxes             3,792      (2,084)      7,186        (547)

    NET INCOME(LOSS) BEFORE
     NONCONTROLLING INTEREST       19,468      15,135       7,262      (1,502)

    Less: Net income (Loss)
     attributable to
     noncontrolling interest        9,088      (5,329)     21,421         116

    NET INCOME(LOSS)
     ATTRIBUTABLE TO
     CONTROLLING INTEREST          10,380      20,464     (14,159)     (1,618)

    OTHER COMPREHENSIVE INCOME
     (LOSS):
      Foreign currency
       translation adjustments       (247)         96        (175)      6,554
      Comprehensive (loss)
       income attributable to
       noncontrolling interest      1,441        (295)        334       3,911

    COMPREHENSIVE INCOME(LOSS)    $11,574     $20,266    $(14,000)     $8,846

    WEIGHTED AVERAGE NUMBER
     OF SHARES
      Basic                    44,973,882  35,687,891  40,295,924  35,157,579
      Diluted                  45,040,143  35,687,891  40,295,924  35,157,579

    EARNINGS PER SHARE
      Basic                         $0.23       $0.57      $(0.35)     $(0.05)
      Diluted                       $0.22       $0.57      $(0.35)     $(0.05)



                   GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
                      (In thousands, except per share data)

                                 ASSETS
                                                 September 30,     December 31,
                                                     2009               2008
                                                  (Unaudited)
    CURRENT ASSETS:
      Cash                                          $54,289           $14,895
      Restricted cash                               197,584           130,700
      Notes receivable                               27,373            38,207
      Accounts receivable, net of allowance
       for doubtful accounts of $612 and
       $401 as of September 30, 2009 and
       December 31, 2008, respectively               12,151             8,329
      Accounts receivable - related parties           2,784                --
      Other receivables, net of allowance
       for doubtful accounts of $566 and
       $564 as of September 30, 2009 and
       December 31, 2008, respectively                6,855             5,099
      Other receivables - related parties               420               523
      Dividend receivable                             4,957               630
      Inventories                                   221,502            59,549
      Advances on inventory purchases                39,230            47,154
      Advances on inventory purchases -
       related parties                               17,853             2,375
      Prepaid expenses - current                        926               494
      Deferred tax assets                             2,191             7,487
                                                    588,115           315,444

    PLANT AND EQUIPMENT, net                        558,405           491,705

    OTHER ASSETS:
      Advances on equipment purchases                 7,069             8,965
      Investment in unconsolidated
       subsidiaries                                  17,640            13,959
      Prepaid expenses - non current                    500             1,195
      Prepaid expenses related party -
       non current                                      172               211
      Long term other receivable                      2,674             4,873
      Intangible assets, net of
       accumulated amortization                      24,020            24,556
      Note issuance cost                                964             4,218
      Plant and equipment to be disposed              6,455               587
        Total other assets                           59,494            58,564

          Total assets                           $1,206,014          $865,713


                          LIABILITIES AND EQUITY
    CURRENT LIABILITIES:
      Short term notes payable                     $280,134          $206,040
      Accounts payable                              175,309           149,239
      Accounts payable - related parties             19,324            15,327
      Short term loans - bank                       151,050            67,840
      Short term loans - others                     110,171            87,834
      Short term loans - related parties              8,362             7,350
      Other payables                                  8,655             3,183
      Other payable - related parties                 2,074               677
      Accrued liabilities                            14,716             7,779
      Customer deposits                             199,909           141,102
      Customer deposits - related parties                --             7,216
      Deposits due to sales representatives          39,286             8,149
      Taxes payable                                  13,317            13,917
      Distribution payable to former
       shareholders                                  15,934            18,765
      Deferred tax liability                            103                --
        Total current liabilities                 1,038,344           734,418

    CONVERTIBLE NOTES PAYABLE, net of
     debt discount of $2,388 and $26,095
     as of September 30, 2009 and
     December 31, 2008, respectively                    912             7,155

    DERIVATIVE LIABILITIES                            4,933             9,903

    COMMITMENT AND CONTINGENCIES

        Total liabilities                         1,044,189           751,476

    EQUITY:
      Preferred stock, $0.001 par value,
       50,000,000 shares authorized,
       3,092,899 shares issued and
       outstanding as of September 30,
       2009 and December 31, 2008,
       respectively                                       3                 3
      Common Stock, $0.001 par value,
       200,000,000 shares authorized,
       45,789,439 and 36,128,833 shares
       issued and outstanding as of
       September 30, 2009 and
       December 31, 2008, respectively                   46                36
      Paid-in-capital                                79,924            37,129
      Statutory reserves                              6,827             4,903
      Retained (deficits) earnings                   (5,992)           10,092
      Contribution receivable                            --              (960)
      Accumulated other comprehensive
       income                                         8,531             8,706
        Total equity                                 89,339            59,909

    NONCONTROLLING INTERESTS                         72,486            54,329

        Total equity                                161,825           114,237

          Total liabilities and equity           $1,206,014          $865,713

SOURCE General Steel Holdings, Inc.

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RELATED LINKS
http://www.gshi-steel.com
http://www.visualwebcaster.com/event.asp?id=63645