General Steel Reports Second Quarter 2014 Financial Results

Quarterly Gross Margin Improves to a 36-Month High of 4.8%

Quarterly EBITDA Improves by $54.4 million Year-over-Year to $33.6 million

Quarterly Operating Cash Flows Improve by $121.4 million Year-over-Year to $56.1 million

Company Reiterates EPS Guidance of $0.08 to $0.12 for Second Half of 2014

14 Aug, 2014, 06:00 ET from General Steel Holdings, Inc.

BEIJING, Aug. 14, 2014 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), a leading non-state-controlled steel producer in China, today announced its financial results for the second quarter ended June 30, 2014.

Henry Yu, Chairman and Chief Executive Officer of General Steel commented, "We are very proud that our turn-around efforts are now driving measurable improvements to our financials, as gross margin expanded to a 36-month high and EBITDA substantially improved to a positive $33.6 million. These highlights reflect the success we have had over the past year in lowering our unit production cost and enhancing our operating efficiencies."

"During the second quarter, industry fundamentals significantly improved, and we were able to hold firm on our pricing. We are seeing a better demand-and-supply balance, and it is increasingly more evident that the market dynamics and competitive landscape will substantially improve in the coming months." Mr. Yu concluded.

John Chen, Chief Financial Officer of General Steel, commented, "This quarter we saw contributions to profitability from our two major initiatives. Our sourcing strategy lowered our raw material costs and, our upgraded production lines and technical improvements lowered our unit costs. We also turned around our operating cash flows to an inflow of $56.1 million, providing us with greater operating flexibility for the quarters ahead. Given our solid execution and the improved market fundamentals, we anticipate additional margin expansion and are confident that we will deliver on our target EPS range of 8 to 12 cents for the second half of 2014."

Second Quarter 2014 Financial Information

  • Sales volume decreased by 5.7% year-over-year to approximately 1.31 million metric tons, compared with 1.38 million metric tons in the second quarter of 2013.
  • Sales totaled $588.0 million, compared with $653.7 million in the second quarter of 2013.
  • Gross profit was $28.1 million on gross margin of 4.8%, compared with a gross loss of $(35.5) million in the second quarter of 2013.
  • Operating income totaled $6.3 million, compared with an operating loss of $(46.9) million in the second quarter of 2013.
  • Net loss attributable to the Company reduced to approximately $(11.0) million, or $(0.20) per diluted share, compared with a net loss of $(39.8) million, or $(0.72) per diluted share in the second quarter of 2013.
  • As of June 30, 2014, the Company had cash and restricted cash of $492.9 million.

First Six Months 2014 Financial Information

  • Sales volume decreased by 2.4% year-over-year to approximately 2.62 million metric tons, compared with 2.69 million metric tons in the first six months of 2013.
  • Sales were $1.2 billion, compared with $1.3 billion in the first six months of 2013.
  • Gross profit was $5.5 million on gross margin of 0.5%, compared with a gross loss of $(31.5) million in the first six months of 2013.
  • Operating loss was $(37.3) million, compared with an operating loss of $(15.0) million in the first six months of 2013.
  • Net loss attributable to the Company was $(54.6) million, or $(0.98) per diluted share, compared with a net loss of $(36.7) million, or $(0.67) per diluted share in the first six months of 2013.

Second Quarter 2014 Financial and Operating Results

Total Sales

Total sales for the second quarter of 2014 decreased by 10.0% year-over-year to $588.0 million, compared with $653.7 million in the second quarter of 2013. The year-over-year sales decreases were due to decreases in both average selling price of rebar and sales volume.

  • Total sales volume in the second quarter of 2014 was 1.31 million metric tons, a decrease of 5.7% compared with 1.38 million metric tons in the second quarter of 2013.
  • The average selling price of rebar at Longmen Joint Venture in the second quarter of 2014 decreased to approximately $450.0 per metric ton, down by 6.8% from $482.7 per metric ton in the second quarter of 2013.

Gross Profit/Loss

Gross profit for the second quarter of 2014 was $28.1 million, or 4.8% of total sales, as compared with a gross loss of $(35.5) million, or (5.4%) of total sales in the second quarter of 2013. The 1,020 basis points improvement in gross margin during the quarter was mainly attributable to decreased unit costs of rebar manufactured.

Operating Expenses and Operating Income/Loss

Selling, general and administrative expenses for the second quarter of 2014 were $18.8 million, a decrease of 9.6% from $20.8 million in the second quarter of 2013. Driven by effective headcount expense control, general and administrative expenses decreased to $9.1 million in the second quarter of 2014, compared with $11.6 million in the second quarter of 2013. Selling expenses was $9.7 million in the second quarter of 2014, slighted increased from $9.3 million in the same period of 2013. The increase in selling expenses was mainly due to the increase in freight expenses as a result of the PRC government's policy to increase freight train fees in early 2014.

Other operating loss from change in the fair value of profit sharing liability during the second quarter of 2014 was $(2.9) million, compared with a gain of $9.5 million recognized in the same period of last year. The loss recognized from change in the fair value of profit sharing liability was primarily due to the amortization of the present value discount.

Correspondingly, income from operations for the second quarter of 2014 was $6.3 million, an improvement of $53.2 million compared with loss from operations of $(46.9) million for the second quarter of 2013.

Finance Expense

Finance and interest expense in the second quarter of 2014 was $26.6 million, of which, $5.7 million was the non-cash interest expense on capital lease as compared with $5.1 million in the same period of 2013, and $20.9 million was the interest expense on bank loans and discounted note receivables as compared with $16.1 million in the same period of 2013. The increase in finance and interest expenses was mainly a result of higher finance costs charged by banks and more of the early redemption on note receivables.

Net Loss and Net Loss per Share

Net loss attributable to General Steel for the second quarter of 2014 narrowed $(11.0) million, or $(0.20) per diluted share, based on 55.8 million weighted average shares outstanding. This compares to a net loss of $(39.8) million, or $(0.72) per diluted share, based on 55.0 million weighted average shares outstanding in the second quarter of 2013.

First Six Months 2014 Financial and Operating Results

Total Sales

Total sales for the first six months of 2014 decreased by 9.4% year-over-year to $1.2 billion, compared with $1.3 billion in the first six months of 2013. The year-over-year sales decreases were due to decreases in both average selling price of rebar and sales volume.

  • Total sales volume in the first six months of 2014 was 2.62 million metric tons, a decrease of 2.4% compared with 2.69 million metric tons in the first six months of 2013.
  • The average selling price of rebar at Longmen Joint Venture in the first six months of 2014 decreased to approximately $450.4 per metric ton, down by 9.6% from $498.4 per metric ton in the first six months of 2013.

Gross Profit/Loss

Gross profit for the first six months of 2014 was $5.5 million, or 0.5% of total sales, as compared with a gross loss of $(31.5) million, or (2.4%) of total sales in the first six months of 2013.

Operating Expenses and Operating Loss

Selling, general and administrative expenses for the first six months of 2014 were $39.9 million, slightly increased from $39.8 million in the first six months of 2013. General and administrative expenses were $21.9 million, compared with $22.5 million in the same period of 2013. Selling expenses increased by 4.1% to $18.0 million, compared to $17.3 million in the same period of 2013.

Other operating loss from change in the fair value of profit sharing liability during the first six months of 2014 was $(3.0) million, compared with a gain of $56.3 million in the same period of last year.

Correspondingly, loss from operations for the first six months of 2014 was $(37.3) million, compared with loss from operations of $(15.0) million for the first six months of 2013.

Finance Expense

Finance and interest expense in the first six months of 2014 was $55.3 million, of which, $10.7 million was the non-cash interest expense on capital lease as compared with $10.2 million in the same period of 2013, and $44.6 million was the interest expense on bank loans and discounted note receivables as compared with $35.9 million in the first six months of 2013.

Net Loss and Net Loss per Share

Net loss attributable to General Steel for the first six months of 2014 was $(54.6) million, or $(0.98) per diluted share, based on 55.8 million weighted average shares outstanding. This compares to a net loss of $(36.7) million, or $(0.67) per diluted share, based on 54.9 million weighted average shares outstanding in the first six months of 2013.

Balance Sheet

As of June 30, 2014, the Company had cash and restricted cash of approximately $492.9 million, compared to $431.3 million as of December 31, 2013. The Company had an inventory balance of $209.0 million as of June 30, 2014, compared to $212.9 million as of December 31, 2013.

Business Outlook

For the six months ending December 31, 2014, the Company reiterates that it currently projects:

  • Sales to range from $1.3 billion to $1.4 billion, on sales volume of approximately 3 million metric tons;
  • Net income attributable to the Company to range from $4.5 million to $6.5 million; and
  • EPS attributable to the Company to range from $0.08 to $0.12.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EDT on Thursday, August 14, 2014 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Thursday, August 14, 2014) to discuss the results and answer questions from investors. Listeners may access the call by dialing:

US Toll Free:

1-866-250-8117

International Toll:

1-412-317-6011

China Toll

400-120-3170

China Toll Free

800-870-0210

Conference ID:

83542725

The call will 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.corpasia.net/us/GSI/irwebsite/index.php?mod=event. Following the live Webcast, an online archive of the Webcast 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 Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission.  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. 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

(UNAUDITED)

(In thousands)

June 30,

December 31,

ASSETS

2014

2013

CURRENT ASSETS:

 Cash

$

 

44,749

$

 

31,967

 Restricted cash

448,106

399,333

 Notes receivable

36,948

60,054

 Restricted notes receivable

106,873

395,589

 Loans receivable - related parties

4,540

4,540

 Accounts receivable, net

5,277

4,078

 Accounts receivable - related parties

5,788

2,942

 Other receivables, net

54,804

54,716

 Other receivables - related parties

57,983

54,106

 Inventories

208,971

212,921

 Advances on inventory purchase

58,503

44,897

 Advances on inventory purchase - related parties

119,279

83,003

 Prepaid expense and other

3,322

1,388

 Prepaid taxes

12,489

28,407

 Short-term investment

2,763

2,783

TOTAL CURRENT ASSETS

1,170,395

1,380,724

 PLANT AND EQUIPMENT, net

1,253,351

1,271,907

 OTHER ASSETS:

 Advances on equipment purchase

92,133

6,409

 Investment in unconsolidated entities

16,710

16,943

 Long-term deferred expense

552

668

 Intangible assets, net of accumulated amortization

23,333

23,707

TOTAL OTHER ASSETS

132,728

47,727

TOTAL ASSETS

$

2,556,474

$

2,700,358

LIABILITIES AND DEFICIENCY

 CURRENT LIABILITIES:

 Short term notes payable

$

875,479

$

1,017,830

 Accounts payable

418,468

434,979

 Accounts payable - related parties

262,103

235,692

 Short term loans - bank

201,673

301,917

 Short term loans - others

64,395

62,067

 Short term loans - related parties

153,996

126,693

 Current maturities of long-term loans - related party

 Other payables and accrued liabilities

      62,374

      48,343

      53,013

      45,653

 Other payable - related parties

98,209

94,079

 Customer deposits

136,288

87,860

 Customer deposits - related parties

142,888

64,881

 Deposit due to sales representatives

21,435

24,343

 Deposit due to sales representatives - related parties

1,658

1,997

 Taxes payable

4,181

4,628

 Deferred lease income, current

2,171

2,187

 Capital lease obligations, current

6,443

4,321

TOTAL CURRENT LIABILITIES

2,500,104

2,562,140

 NON-CURRENT LIABILITIES:

 Long-term loans - related party

9,750

19,644

 Deferred lease income, noncurrent

73,620

75,257

 Capital lease obligations, noncurrent

384,830

375,019

 Profit sharing liability at fair value

164,067

162,295

 TOTAL NON-CURRENT LIABILITIES

632,267

632,215

TOTAL LIABILITIES

3,132,371

3,194,355

 COMMITMENTS AND CONTINGENCIES

DEFICIENCY:

Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares issued and outstanding as of June 30, 2014 and December 31, 2013

3

3

Common stock, $0.001 par value, 200,000,000 shares authorized, 58,314,688 and 58,234,688 shares issued, 55,842,382 and 55,762,382 shares outstanding as of June 30, 2014 and December 31, 2013, respectively

58

58

Treasury stock, at cost, 2,472,306 shares as of June 30, 2014 and December 31, 2013

(4,199)

(4,199)

 Paid-in-capital

107,097

106,878

 Statutory reserves

6,408

6,243

 Accumulated deficits

(469,381)

(414,798)

 Accumulated other comprehensive income

3,016

729

TOTAL GENERAL STEEL HOLDINGS, INC. DEFICIENCY

(356,998)

(305,086)

 NONCONTROLLING INTERESTS

(218,899)

(188,911)

TOTAL DEFICIENCY

(575,897)

(493,997)

TOTAL LIABILITIES AND DEFICIENCY

$

2,556,474

$

2,700,358

 

 

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

(UNAUDITED)

(In thousands, except per share data)

Three months ended June 30,

Six months ended June 30,

2014

2013

2014

2013

SALES

$

508,637

$

517,350

$

1,020,642

$

1,019,781

SALES - RELATED PARTIES

79,376

136,301

161,582

285,161

  TOTAL SALES

588,013

653,651

1,182,224

1,304,942

COST OF GOODS SOLD

482,011

540,271

1,012,755

1,038,897

COST OF GOODS SOLD - RELATED PARTIES

77,908

148,916

163,936

297,514

  TOTAL COST OF GOODS SOLD

559,919

689,187

1,176,691

1,336,411

GROSS PROFIT (LOSS)

28,094

(35,536)

5,533

(31,469)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

(18,849)

(20,848)

(39,902)

(39,803)

CHANGE IN FAIR VALUE OF PROFIT SHARING LIABILITY

(2,920)

9,494

(2,969)

56,273

INCOME (LOSS) FROM OPERATIONS

6,325

(46,890)

(37,338)

(14,999)

OTHER INCOME (EXPENSE)

  Interest income

4,066

3,383

7,258

5,882

  Finance/interest expense

(26,619)

(21,216)

(55,314)

(46,073)

  Gain (loss) on disposal of equipment and intangible assets

(142)

(235)

(96)

96

  Income from equity investments

54

132

67

90

  Foreign currency transaction gain (loss)

(963)

98

(1,817)

126

  Lease income

542

539

1,088

1,071

  Other non-operating income (expense), net

302

521

126

790

    Other expense, net

(22,760)

(16,778)

(48,688)

(38,078)

LOSS BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST

(16,435)

(63,668)

(86,026)

(53,077)

PROVISION FOR INCOME TAXES

  Current

107

105

112

176

  Deferred

-

-

-

-

    Provision for income taxes

107

105

112

176

NET LOSS

(16,542)

(63,773)

(86,138)

(53,253)

Less: Net loss attributable to noncontrolling interest

(5,523)

(23,955)

(31,555)

(16,538)

NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(11,019)

$

(39,818)

$

(54,583)

$

(36,715)

NET LOSS

$

(16,542)

$

(63,773)

$

(86,138)

$

(53,253)

OTHER COMPREHENSIVE LOSS

  Foreign currency translation adjustments

(929)

(7,210)

3,741

(9,736)

COMPREHENSIVE LOSS

(17,471)

(70,983)

(82,397)

(62,989)

Less: Comprehensive loss attributable to noncontrolling interest

(5,875)

(26,745)

(30,101)

(20,290)

COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(11,596)

$

(44,238)

$

(52,296)

$

(42,699)

WEIGHTED AVERAGE NUMBER OF SHARES

  Basic and Diluted

55,842

54,980

55,828

54,893

LOSS PER SHARE

  Basic and Diluted

$

(0.20)

$

(0.72)

$

(0.98)

$

(0.67)

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

For the

Six months ended June 30,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$

(86,138)

$

(53,253)

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

Depreciation, amortization and depletion

47,788

43,067

Change in fair value of derivative liabilities-warrants

-

(1)

Change in fair value of profit sharing liability

2,969

(56,273)

(Gain) loss on disposal of equipment and intangible assets

96

(96)

Provision for doubtful accounts

(250)

(169)

Reservation of mine maintenance fee

278

215

Stock issued for services and compensation

219

480

Amortization of deferred financing cost on capital lease

9,253

10,217

Income from equity investments

(67)

(90)

Foreign currency transaction (gain) loss

1,817

(126)

Deferred lease income

(1,088)

(1,071)

Changes in operating assets and liabilities

Notes receivable

45,931

(64,424)

Accounts receivable

(1,008)

(33,951)

Accounts receivable - related parties

(2,875)

8,969

Other receivables

(307)

(857)

Other receivables - related parties

(4,275)

10,275

Inventories

1,286

38,014

Advances on inventory purchases

(13,968)

23,215

Advances on inventory purchases - related parties

(36,971)

(48,019)

Prepaid expense and other

(1,947)

(1,115)

Long-term deferred expense

111

317

Prepaid taxes

15,747

2,742

Accounts payable

(18,050)

43,122

Accounts payable - related parties

28,204

55,227

Other payables and accrued liabilities

2,637

5,002

Other payables - related parties

4,824

(16,987)

Customer deposits

49,187

(6,103)

Customer deposits - related parties

78,667

(14,502)

Taxes payable

(413)

(6,639)

Other noncurrent liabilities

-

1,378

     Net cash provided by (used in) operating activities

121,657

(61,436)

CASH FLOWS FROM INVESTING ACTIVITIES:

Restricted cash

(51,820)

(49,988)

Cash proceeds from short term investment

-

80

Cash proceeds from sales of equipment and intangible assets

24

16

Equipment purchase and intangible assets

(112,713)

(52,350)

     Net cash used in investing activities

(164,509)

(102,242)

CASH FLOWS FINANCING ACTIVITIES:

Restricted notes receivable

286,485

244,940

Borrowings on short term notes payable

900,202

812,577

Payments on short term notes payable

(1,035,408)

(1,001,301)

Borrowings on short term loans - bank

185,023

141,484

Payments on short term loans - bank

(285,100)

(83,433)

Borrowings on short term loan - others

19,949

47,903

Payments on short term loans - others

(25,417)

(47,055)

Borrowings on short term loan - related parties

32,576

213,576

Payments on short term loans - related parties

(19,233)

(124,059)

Deposits due to sales representatives

(2,736)

(3,734)

Deposit due to sales representatives - related parties

(326)

529

Payments on long-term loans - related party

-

(17,544)

     Net cash provided by financing activities

56,015

183,883

EFFECTS OF EXCHANGE RATE CHANGE IN CASH

(381)

1,199

INCREASE IN CASH

12,782

21,404

CASH, beginning of period

31,967

46,467

CASH, end of period

$

44,749

$

67,871

 

 

SOURCE General Steel Holdings, Inc.



RELATED LINKS

http://www.gshi-steel.com