General Steel Reports Profitable First Quarter 2013 Financial Results

GAAP EPS of $0.06 on Net Income of $3.1 Million

GAAP Operating Income of $37.0 Million

Operating Cash Flow of $3.9 Million

06 Aug, 2013, 06:00 ET from General Steel Holdings, Inc.

BEIJING, Aug. 6, 2013 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), a leading non-state-owned steel producer in China, today announced financial results for the first quarter ended March 31, 2013. The Company will file its Form 10-Q for the quarter ended March 31, 2013 with the Securities and Exchange Commission after market closes on Tuesday, August 6, 2013.

"We are very pleased the first quarter marked significant milestones in our returning to profitability and quarterly reporting," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "Despite the challenging macro environment, we were able to forge ahead with our strategies and operations, as we increased shipment, gained market share in our key market in Western China, improved internal purchasing, and won additional credit support from our suppliers."

"During the first quarter, we also began construction of an additional continuous advanced-rebar-rolling production line with capacity of 1.2 million metric tons scheduled to commence production in the fourth quarter of 2013. This is in addition to our newly-completed 900,000 seismic-grade rebar-rolling production line that had already started trial productions in July. We believe the expanded capacity will further lower our production costs, thereby further improve our bottom line and market competitiveness in the second half of 2013."

First Quarter 2013 Financial Information

  • Sales increased by 0.5% year-over-year to $651.3 million, from $648.0 million in the first quarter of 2012.
  • Sales volume increased by 11.0% year-over-year to approximately 1.3 million metric tons, compared with 1.2 million metric tons in the first quarter of 2012.
  • Gross profit totaled $4.1 million, or 0.6% of revenue, compared with $5.6 million, or 0.9% of revenue in the first quarter of 2012.
  • Operating income turned positive to $37.0 million, compared with an operating loss of $(13.0) million in the first quarter of 2012.
  • Net income attributable to the Company was $3.1 million, or $0.06 per diluted share, compared with a net loss of $(34.8) million, or $(0.63) per diluted share in the first quarter of 2012.
  • Operating cash inflow improved to $3.9 million, compared with a net outflow of $(167.0) million in the first quarter of 2012.
  • As of March 31, 2013, the Company had cash and restricted cash of $336.0 million.

John Chen, Chief Financial Officer of General Steel, commented, "The profitable financial results in the first quarter is a solid start for the new year, as we continued to grow sales, drive operational efficiencies, and lower finance expenses. Benefiting from a year-over-year improvement of nearly 600 basis points in our net margin and disciplined cash management, we were able to generate positive operating cash flow during the quarter. We anticipate a notable improvement in our overall gross margin in the second half of 2013, as our newly added rolling line will reduce unit production cost by up to approximately RMB 70 per metric ton, and as such, we feel confident that we can further build on the momentum achieved in the first quarter and generate healthy profits and cash flows in the second half of this year."

First Quarter 2013 Financial and Operating Results

Total Sales

Total sales for the first quarter of 2013 increased 0.5% year-over-year to $651.3 million, compared with $648.0 million in the first quarter of 2012. The year-over-year revenue increases were primarily attributable to increased sales volume, partially offset by a decrease in the average selling price of rebar.

  • Total sales volume in the first quarter of 2013 was 1.3 million metric tons, an increase of 11.0% compared with 1.2 million metric tons in the first quarter of 2012.
  • The average selling price of rebar decreased 12.5% to approximately $515.3 in the first quarter of 2013 from approximately $588.7 in the same period of 2012.

Gross Profit and Gross Margin

Gross profit for the quarter totaled $4.1 million, compared with $5.6 million in the first quarter of 2012. The decrease in gross profit was mainly attributable to a steeper decrease in average selling price, with the gross margin decreased to 0.6% of total sales in the first quarter of 2013, compared with 0.9% the same period a year ago.

Operating Expenses and Operating Income

Selling, general and administrative expenses for the first quarter of 2013 increased 1.7% to $19.0 million, compared to $18.6 million in the first quarter of 2012. General and administrative expenses increased to $10.9 million, compared with $9.7 million in the same period of 2012, due to increased expense in human resources and higher facility maintenance expense. Selling expenses decreased by 9.6% to $8.1 million, compared to $8.9 million in the same period of 2012. The decrease in selling expense was primary attributable to a savings in a special fund related to the sales of our products, which was no long imposed by the PRC tax authorities in 2013, while $1.3 million of the special fund was imposed in the first quarter of 2012.

The Company recognized other operating income of $51.9 million due to change in the fair value of profit sharing liability during the first quarter of 2013, compared with $0 in the same period of last year. On April 29, 2011, the Company's subsidiary, Longmen Joint Venture entered into a capital lease agreement with Shaanxi Steel and Shaanxi Coal for the use of new equipment. The profit sharing liability is recognized initially at its estimated fair value at the lease commencement date, and the value of the profit sharing liability is reassessed each reporting period with any change in fair value accounted for on a prospective basis. As such, and in consideration of the recent changes in China economic situation, the fair value of the Company's profit sharing liability has been reduced as compared to its previous estimates, and the Company recognized a gain of $51.9 million accordingly.

Correspondingly, income from operations for the first quarter of 2013 totaled $37.0 million, compared with a loss from operations of $(13.0) million in the first quarter of 2012.

Finance Expense

Finance and interest expense in the first quarter of 2013 was $30.0 million, of which, $10.2 million was the non-cash interest expense on capital lease as compared with $10.8 million in the same period of 2012, and $19.8 million was the interest expense on bank loans and discounted note receivables as compared with $37.5 million in the first quarter of 2012. The decrease in interest expense on bank loans and discounted note receivables was primarily attributable to less bank loans, benefiting from positive operating cash flow and financing support from suppliers during the first quarter of 2013.

Net Income and Net Income per Share

Net income attributable to General Steel for the first quarter of 2013 was $3.1 million, or $0.06 per diluted share, based on 54.8 million weighted average shares outstanding. This compares to a net loss of $(34.8) million, or $(0.63) per diluted share, based on 55.5 million weighted average shares outstanding in the first quarter of 2012.

Balance Sheet

As of March 31, 2013, the Company had cash and restricted cash of approximately $336.0 million, compared to $369.9 million as of December 31, 2012. The Company had an inventory balance of approximately $247.9 million as of March 31, 2013, compared to $212.7 million as of December 31, 2012. As of March 31, 2013, the Company had total liabilities of approximately $2.9 billion.

Outlook

"Looking ahead, we will continue to execute on our strategy to further upgrade our production capabilities, improve operating efficiencies and further strengthen our competitiveness in Western China. In addition, we will also explore other strategic opportunities to expand our scale and scope in the steel industry. Lastly, we intend to pursue other strategies and initiatives to enhance shareholder value, which may include restarting our share repurchase program. We aim to enhance shareholders' wealth, and we would like to thank our shareholders for their continued support," Mr. Yu concluded.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EDT on Tuesday, August 6, 2013 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Tuesday, August 6, 2013) to discuss the results and answer questions from investors. Listeners may access the call by dialing 1-800-860-2442 in the U.S., and 1-412-858-4600 internationally.

The call will be also be available as a live, listen-only webcast under the "Events and Presentations" page on the "Investor Relations" section of the Company's website at http://www.mzcan.com/us/GSI/irwebsite/index.php?mod=event. Following the live webcast, an online archive will be available for 90 days.

About General Steel Holdings, Inc.

General Steel Holdings, Inc., headquartered in Beijing, China, produces a variety of steel products including rebar, high-speed wire and spiral-weld pipe. The Company has operations in China's Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality with seven million metric tons of crude steel production capacity under management. For more information, please visit www.gshi-steel.com.

To be added to the General Steel email list to receive Company news, or to request a hard copy of the Company's Annual Report on Form 10-K, please send your request to generalsteel@asiabridgegroup.com.

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, including those disclosed in the Company's Form 10-K, filed with the SEC. 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.

Contact Us

General Steel Holdings, Inc.

In China: Jenny Wang Tel: +86-10-5775-7691 Email: jenny.wang@gshi-steel.com

In the US: Joyce Sung Tel: +1-347-534-1435 Email: joyce.sung@gshi-steel.com

Asia Bridge Capital Limited

Carene Toh Tel: +1-888-957-3362 Email: generalsteel@asiabridgegroup.com

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2013 AND DECEMBER 31, 2012

(UNAUDITED)

(In thousands)

March 31,

December 31,

2013

2012

CURRENT ASSETS:

 Cash

$

65,799

$

46,467

 Restricted cash

270,167

323,420

 Notes receivable

118,527

145,502

 Restricted notes receivable

260,531

357,900

 Loans receivable

6,000

69,319

 Accounts receivable, net

17,154

6,695

 Accounts receivable - related parties

8,231

14,966

 Other receivables, net

11,455

8,407

 Other receivables - related parties

89,015

68,382

 Inventories

247,930

212,671

 Advances on inventory purchase

57,341

79,715

 Advances on inventory purchase - related parties

5,259

46,416

 Prepaid expense

1,494

450

 Prepaid taxes

23,202

24,116

 Short-term investment

2,633

2,619

TOTAL CURRENT ASSETS

1,184,738

1,407,045

 PLANT AND EQUIPMENT, net

1,172,318

1,167,836

 OTHER ASSETS:

 Advances on equipment purchase

14,549

6,499

 Long-term other receivable

43,252

43,008

 Investment in unconsolidated entities

958

1,166

 Long-term deferred expense

807

1,062

 Intangible assets, net of accumulated amortization

23,976

24,066

TOTAL OTHER ASSETS

83,542

75,801

TOTAL ASSETS

$

2,440,598

$

2,650,682

LIABILITIES AND DEFICIENCY

 CURRENT LIABILITIES:

 Short term notes payable

$

785,519

$

983,813

 Accounts payable

411,776

352,052

 Accounts payable - related parties

154,492

177,432

 Short term loans - bank

117,124

147,124

 Short term loans - others

148,023

147,323

 Short term loans - related parties

104,390

79,557

 Current maturities of long-term loans - related party

 Other payables and accrued liabilities

     59,984

     56,785

     54,885

     54,589

 Other payable - related parties

82,232

73,025

 Customer deposits

104,609

125,890

 Customer deposits - related parties

12,649

21,998

 Deposit due to sales representatives

40,484

33,870

 Deposit due to sales representatives - related parties

1,772

1,238

 Taxes payable

12,334

16,674

 Deferred lease income, current

2,132

2,120

TOTAL CURRENT LIABILITIES

2,094,305

2,271,590

 NON-CURRENT LIABILITIES:

 Long-term loans - related party

33,516

38,088

 Long-term other payable - related party

43,252

43,008

Deferred lease income, noncurrent

74,971

75,079

 Capital lease obligations, noncurrent

337,075

330,099

 Profit sharing liability, noncurrent

283,831

328,827

 Other noncurrent liabilities

1,373

 TOTAL NON-CURRENT LIABILITIES

774,018

815,101

TOTAL LIABILITIES

2,868,323

3,086,691

 COMMITMENTS AND CONTINGENCIES

DEFICIENCY:

Preferred stock, $0.001 par value, 50,000,000

shares authorized, 3,092,899 shares issued and

outstanding as of March 31, 2013 and December

31, 2012

3

3

Common stock, $0.001 par value, 200,000,000

shares authorized, 57,444,738 and 57,269,838

shares issued, 54,972,432 and 54,797,532 shares

outstanding as of March 31, 2013 and December

31, 2012

57

57

Treasury stock, at cost, 2,472,306 and 2,472,306

shares as of March 31, 2013 and December 31,

2012

(4,199)

(4,199)

 Paid-in-capital

105,958

105,714

 Statutory reserves

6,103

6,076

 Accumulated deficits

(378,679)

(381,782)

 Accumulated other comprehensive income

8,621

10,185

TOTAL GENERAL STEEL HOLDINGS, INC. DEFICIENCY

(262,135)

(263,946)

 NONCONTROLLING INTERESTS

(165,590)

(172,063)

TOTAL DEFICIENCY

(427,725)

(436,009)

TOTAL LIABILITIES AND DEFICIENCY

$

2,440,598

$

2,650,682

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012

(UNAUDITED)

(In thousands, except per share data)

2013

2012

SALES

$

502,431

$

383,797

SALES - RELATED PARTIES

148,860

264,244

 TOTAL SALES

651,291

648,041

COST OF GOODS SOLD

498,626

381,726

COST OF GOODS SOLD - RELATED PARTIES

148,598

260,685

 TOTAL COST OF GOODS SOLD

647,224

642,411

GROSS PROFIT (LOSS)

4,067

5,630

SELLING, GENERAL AND

ADMINISTRATIVE EXPENSES

(18,955)

(18,629)

CHANGE IN FAIR VALUE OF PROFIT

SHARING LIABILITY

51,892

INCOME (LOSS) FROM OPERATIONS

37,004

(12,999)

OTHER INCOME (EXPENSE)

 Interest income

2,439

5,556

 Finance/interest expense

(29,970)

(48,366)

 Change in fair value of derivative liabilities

1

(13)

 Gain (loss) on disposal of equipment

331

(119)

 Income from equity investments

(42)

(43)

 Foreign currency transaction gain

28

385

 Lease income

532

530

 Other non-operating expense, net

268

(143)

  Other expense, net

(26,413)

(42,213)

INCOME (LOSS) BEFORE PROVISION FOR

INCOME TAXES AND NONCONTROLLING

INTEREST

10,591

(55,212)

PROVISION FOR INCOME TAXES

 Current

71

367

 Deferred

-

169

  Provision for income taxes

71

536

NET INCOME (LOSS)

10,520

(55,748)

Less: Net income (loss) attributable to

noncontrolling interest

7,417

(20,964)

NET INCOME (LOSS) ATTRIBUTABLE TO

GENERAL STEEL HOLDINGS, INC.

$

3,103

$

(34,784)

NET INCOME (LOSS)

$

10,520

$

(55,748)

OTHER COMPREHENSIVE LOSS

 Foreign currency translation adjustments

(2,526)

(1,469)

COMPREHENSIVE INCOME (LOSS)

7,994

(57,217)

Less: Comprehensive income (loss) attributable to

noncontrolling interest

6,455

(21,440)

COMPREHENSIVE INCOME (LOSS)

ATTRIBUTABLE TO GENERAL STEEL

HOLDINGS, INC.

$

1,539

$

(35,777)

WEIGHTED AVERAGE NUMBER OF SHARES

 Basic and Diluted

54,805

55,520

EARNINGS (LOSS) PER SHARE

 Basic and Diluted

$

0.06

$

(0.63)

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012

(UNAUDITED)

(In thousands)

Three months ended March 31,

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

10,520

$

(55,748)

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

Depreciation, amortization and depletion

21,358

20,559

Change in fair value of derivative liabilities

(1)

13

(Gain) loss on disposal of equipment

(331)

119

Provision for doubtful accounts

(42)

5

Reservation of mine maintenance fee

45

254

Stock issued for services and compensation

245

262

Amortization of deferred financing cost on capital lease

10,208

10,839

Loss from equity investments

42

43

Foreign currency transaction gain

(28)

(385)

Deferred tax assets

-

169

Deferred lease income

(532)

(530)

Changes in fair value of profit sharing liability

(51,892)

Changes in operating assets and liabilities

Notes receivable

27,752

22,048

Accounts receivable

(9,426)

(5,887)

Accounts receivable - related parties

6,808

(32,374)

Other receivables

(2,826)

3,371

Other receivables - related parties

(20,212)

(5,999)

Inventories

(37,526)

(61,814)

Advances on inventory purchases

22,786

(36,580)

Advances on inventory purchases - related parties

(46,883)

(68,061)

Prepaid expense and other

(1,039)

32

Long-term deferred expense

260

88

Prepaid taxes

1,049

5,513

Accounts payable

57,648

(104,700)

Accounts payable - related parties

39,661

103,918

Other payables and accrued liabilities

1,887

(5,924)

Other payables - related parties

8,789

72,220

Customer deposits

(21,956)

(10,653)

Customer deposits - related parties

(9,457)

(11,467)

Taxes payable

(4,427)

(6,355)

Other noncurrent liabilities

1,370

-

Net cash provided by (used in) operating activities

3,850

(167,024)

CASH FLOWS FROM INVESTING ACTIVITIES:

Restricted cash

54,991

(54,126)

Loans to related parties

-

(65,359)

Cash proceeds from (made to) short term investment

-

79

Cash proceeds from sales of equipment

4

-

Equipment purchase and intangible assets

(24,093)

(10,729)

Effect on cash due to deconsolidating of a subsidiary

-

(2,977)

Net cash provided by (used in) investing activities

30,902

(133,112)

CASH FLOWS FINANCING ACTIVITIES:

Restricted notes receivable

99,224

(19,891)

Borrowings on short term notes payable

289,548

467,269

Payments on short term notes payable

(493,064)

(341,435)

Borrowings on short term loans - bank

32,563

150,252

Payments on short term loans - bank

(63,315)

(87,102)

Borrowings on short term loan - others

21,296

119,089

Payments on short term loans - others

(21,432)

(65,486)

Borrowings on short term loan - related parties

142,999

85,197

Payments on short term loans - related parties

(30,430)

(54,453)

Deposits due to sales representatives

6,411

10,481

Deposit due to sales representatives - related parties

526

286

Net cash provided by (used in) financing activities

(15,674)

264,207

EFFECTS OF EXCHANGE RATE CHANGE IN CASH

254

429

INCREASE (DECREASE) IN CASH

19,332

(35,500)

CASH, beginning of period

46,467

120,016

CASH, end of period

$

65,799

$

84,516

SOURCE General Steel Holdings, Inc.



RELATED LINKS

http://www.gshi-steel.com


http://www.mzcan.com/us/GSI/irwebsite/index.php?mod=event


http://www.mzcan.com/us/GSI/irwebsite/index.php?mod=event