General Steel Reports Second Quarter 2015 Financial Results

Aug 20, 2015, 06:00 ET from General Steel Holdings, Inc.

BEIJING, Aug. 20, 2015 /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, 2015.

Ms. Yunshan Li, Chief Executive Officer of General Steel commented, "Since being appointed as CEO of General Steel in late July, my top priority has been reviewing and integrating the Company's resources in order to chart the best course for our business transformation. During our strategic reviews, we noted that General Steel is one of the most efficient steel producers in China and that it has excellent experience, resources and expertise. And as we further evaluated General Steel's total value chain, we believe that the more an organization moves upstream towards energy-saving and environmental protection solutions, the higher its return on investments and sustainability will be.  As such, we are very excited about the potential possibilities for the Company in the clean-tech and environmental protection sector."

Ms. Li added, "China is now the world's largest energy consumer and has the largest number of coal-fired power plants and steel mills. The Chinese government is fully aware of the impact from fossil-fuel pollution and is launching the tightest-ever restrictions on emission standards. In my view, General Steel not only has its own demand for clean-tech and environmental protection solutions, but also rich industry resources to promote clean-tech adoption. We feel confident that the combination of my direct knowledge, expertise, and access to emission reduction technology and GSI's excellent experience, resources and expertise will enable us to successfully produce and sell leading clean-tech solutions in China."

John Chen, Chief Financial Officer of General Steel, commented, "As we forge ahead with our business transformation, in the second quarter we proactively revalued our steel-manufacturing equipment in Longmen Joint Venture, and took a write-down of $973.9 million in its carrying value to better reflect the current market conditions. We believe this will lighten future depreciation burden and better enable the Company to adopt new business models."

Second Quarter 2015 Financial Information

  • Sales volume from Longmen Joint Venture increased by 30.2% year-over-year to approximately 1.70 million metric tons, compared with 1.31 million metric tons in the second quarter of 2014.
  • Sales totaled $528.8 million, compared with $588.0 million in the second quarter of 2014.
  • Gross loss was $(64.3) million, or (12.2%) of total sales, compared with gross profit of $28.1 million, or 4.8% of total sales in the second quarter of 2014.
  • Loss from operations totaled $(1.0) billion, compared with income from operations of $6.3 million in the second quarter of 2014.
  • Net loss attributable to the Company was $(615.0) million, or $(9.80) per diluted share, compared with $(11.0) million, or $(0.20) per share in the second quarter of 2014.
  • As of June 30, 2015, the Company had cash and restricted cash of $266.5 million.

Second Quarter 2015 Financial and Operating Results

Total Sales

Total sales for the second quarter of 2015 decreased by 10.1% year-over-year to $528.8 million, compared with $588.0 million in the second quarter of 2014. The year-over-year sales decrease was primarily due to the significant decreases in the average selling price of rebar, partially offset by the higher sales volume.

  • Total sales volume from Longmen Joint Venture in the second quarter of 2015 was 1.70 million metric tons, an increase of 30.2% compared with 1.31 million metric tons in the second quarter of 2014.
  • The average selling price of rebar at Longmen Joint Venture in the second quarter of 2015 decreased to approximately $311.2 per metric ton, down by 30.8% from $450.0 per metric ton in the second quarter of 2014.

Gross (Loss) Profit

Gross loss for the second quarter of 2015 was $(64.3) million, or (12.2)% of total sales, as compared with gross profit of $28.1 million, or 4.8% of total sales in the second quarter of 2014. The decrease in gross margin was mainly due to a steeper decrease in the average selling price of rebar, compared with the decrease in unit cost of manufactured rebar.

Operating Expenses and (Loss) Income from Operations

Selling, general and administrative expenses for the second quarter of 2015 were $22.1 million, an increase of 17.2% from $18.8 million in the second quarter of 2014. General and administrative expenses increased to $11.7 million in the second quarter of 2015, compared with $9.1 million in the second quarter of 2014, which was primarily due to higher expenses for environment protection and a higher local tax rate. Selling expenses increased slightly to $10.4 million in the second quarter of 2015, compared with $9.7 million in the same period of 2014.

The Company accrued unallocated overheads expenses of $5.3 million in its operating expenses for the second quarter of 2015, which was mainly due to the reallocation of fixed overheads from cost of goods sold to general and administrative in accordance with GAAP, as the Company had abnormally low production in May 2015 because it temporarily shut down of one its furnaces to perform maintenance and mechanical adjustments.  

The Company recorded non-cash impairment charges of approximately $973.9 million in the second quarter of 2015, in connection with the write-down of the carrying value of Longmen Joint Venture's long-lived assets. The impairment was primarily related to the continuous worsen condition for China steel industry, and is assessed based on discounted cash flows fair value measurements.

Other operating income from a change in the fair value of profit sharing liability during the second quarter of 2015 was $57.5 million, compared with a loss on change in fair value of profit sharing liability of $(2.9) million in the same period of last year.

Correspondingly, loss from operations for the second quarter of 2015 totaled $(1.0) billion, compared with income from operations of $6.3 million for the second quarter of 2014. Excluding the one-time non-cash impairment charges, adjusted loss from operations for the second quarter of 2015 would have been $(34.2) million.

Finance Expense

Finance and interest expense in the second quarter of 2015 was $29.6 million, of which $5.2 million was the non-cash interest expense on capital lease, as compared with $5.7 million in the same period of 2014, and $24.4 million was the interest expense on bank loans and discounted note receivables, as compared with $21.0 million in the same period of 2014.

Net Loss and Net Loss per Share

Net loss attributable to General Steel for the second quarter of 2015 was $(615.0) million, or $(9.80) per diluted share, based on 62.7 million weighted average shares outstanding. Excluding the one-time non-cash impairment charges, adjusted net loss attributable to General Steel for the second quarter of 2015 would have been $(36.7) million. This compares to a net loss attributable to General Steel of $(11.0) million, or $(0.20) per share, based on 55.8 million weighted average shares outstanding in the second quarter of 2014.

Balance Sheet

As of June 30, 2015, the Company had cash and restricted cash of approximately $266.5 million, compared to $367.3 million as of December 31, 2014. The Company had an inventory balance of $153.1 million as of June 30, 2015, compared to $156.3 million as of December 31, 2014.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EDT on Thursday, August 20, 2015 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Thursday, August 20, 2015) to discuss the results and answer questions from investors. Listeners may access the call by dialing:

US Toll Free:

1-888-346-8982

International Toll:

1-412-902-4272

China Toll Free:

400-120-1203

Hong Kong Toll Free:

800-905-945

Conference ID:

General Steel Holdings

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.

A replay of the conference call may be accessed through August 27, 2015 by dialing:

US Toll Free:

1-877-344-7529

International Toll:       

1-412-317-0088

Access Code:

10071183

About General Steel

General Steel is a leading non-state-owned steel maker headquartered in Beijing, China.  With seven million metric tons of crude steel production capacity under management and operations in Tianjin municipality and China's Shaanxi and Guangdong provinces, the Company produces a variety of steel products including rebar and high-speed wire.

In addition to its steel business, the Company also designs, manufactures, and integrates radio frequency identification ("RFID") systems. The Company's RFID technology provides real-time data on supplies, inventory, and goods, thereby greatly enhancing its customers' administration and planning processes, as well as asset tracking and supply chain 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 investor.relations@gshi-steel.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, including those disclosed in the Company's most recent 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

2015

2014

CURRENT ASSETS:

  Cash

$

36,250

$

11,641

  Restricted cash

230,240

355,685

  Notes receivable

5,736

10,290

  Restricted notes receivable

39,111

111,801

 Loans receivable

42,595

36,001

  Loans receivable - related parties

6,110

34,713

  Accounts receivable, net

11,205

9,321

  Accounts receivable - related parties

3,198

8,498

  Other receivables, net

62,626

63,746

  Other receivables - related parties

7,329

39,670

  Inventories

153,129

156,327

  Advances on inventory purchase

53,389

73,819

  Advances on inventory purchase - related parties

13,411

45,617

  Prepaid expense and other

6,230

4,803

  Prepaid taxes

4,242

5,789

  Short-term investment

7,670

2,688

TOTAL CURRENT ASSETS

682,471

970,409

 PLANT AND EQUIPMENT, net

569,477

1,543,136

 OTHER ASSETS:

  Advances on equipment purchase

2,520

11,438

 Investment in unconsolidated entities

16,749

16,823

  Long-term deferred expense

446

458

  Intangible assets, net of accumulated amortization

22,706

22,960

TOTAL OTHER ASSETS

42,421

51,679

TOTAL ASSETS

$

1,294,369

$

2,565,224

LIABILITIES AND DEFICIENCY

 CURRENT LIABILITIES:

  Short term notes payable

$

531,869

$

661,635

  Accounts payable

596,466

612,801

  Accounts payable - related parties

211,149

207,783

  Short term loans - bank

153,989

257,502

  Short term loans - others

65,158

60,717

  Short term loans - related parties

279,950

46,380

  Other payables and accrued liabilities

61,805

55,488

  Other payable - related parties

80,028

87,252

  Customer deposits

86,860

92,974

  Customer deposits - related parties

33,923

132,616

  Deposit due to sales representatives

15,782

17,871

  Deposit due to sales representatives - related parties

2,872

2,509

  Taxes payable

7,984

5,201

  Deferred lease income, current

2,180

2,176

  Capital lease obligations, current

9,942

8,508

 TOTAL CURRENT LIABILITIES

2,139,957

2,251,413

 NON-CURRENT LIABILITIES:

  Long-term loans - related party

353,067

339,549

  Deferred lease income, noncurrent

71,757

72,713

  Capital lease obligations, noncurrent

401,283

393,252

  Profit sharing liability

-

70,422

  TOTAL NON-CURRENT LIABILITIES

826,107

875,936

TOTAL LIABILITIES

2,966,064

3,127,349

 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, 2015 and December 31, 2014

3

3

Common stock, $0.001 par value, 200,000,000 shares authorized, 66,456,588 shares and 64,458,588 shares issued, 63,984,282 shares and 61,986,282 shares outstanding as of June 30, 2015 and December 31, 2014, respectively

66

64

Treasury stock, at cost, 2,472,306 shares as of June 30,2015 and December 31, 2014

(4,199)

(4,199)

  Paid-in-capital

117,274

115,494

  Statutory reserves

6,583

6,472

  Accumulated deficits

(1,123,701)

(463,521)

  Accumulated other comprehensive income

(1,259)

644

TOTAL GENERAL STEEL HOLDINGS, INC. DEFICIENCY

(1,005,233)

(345,043)

 NONCONTROLLING INTERESTS

(666,462)

(217,082)

TOTAL DEFICIENCY

(1,671,695)

(562,125)

TOTAL LIABILITIES AND DEFICIENCY

$

1,294,369

$

2,565,224

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014

(UNAUDITED)

(In thousands, except per share data)

Three months ended June 30,

Six months ended June 30,

2015

2014

2015

2014

SALES

$

454,855

$

508,637

$

725,624

$

1,020,642

SALES - RELATED PARTIES

73,926

79,376

131,321

161,582

TOTAL SALES

528,781

588,013

856,945

1,182,224

COST OF GOODS SOLD

509,185

482,011

806,750

1,012,755

COST OF GOODS SOLD - RELATED PARTIES

83,865

77,908

146,611

163,936

TOTAL COST OF GOODS SOLD

593,050

559,919

953,361

1,176,691

GROSS PROFIT(LOSS)

(64,269)

28,094

(96,416)

5,533

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

(22,083)

(18,849)

(39,438)

(39,902)

UNALLOCATED OVERHEADS EXPENSES

(5,309)

-

(24,443)

-

IMPAIRMENT EXPENSE

(973,860)

-

(973,860)

-

CHANGE IN FAIR VALUE OF PROFIT SHARING LIABILITY

57,499

(2,920)

70,423

(2,969)

INCOME (LOSS) FROM OPERATIONS

(1,008,022)

6,325

(1,063,734)

(37,338)

OTHER INCOME (EXPENSE)

Interest income

2,741

4,066

5,072

7,258

Finance/interest expense

(29,575)

(26,619)

(50,145)

(55,314)

Loss on disposal of equipment and intangible assets

(44)

(142)

(28)

(96)

Income(loss) from equity investments

34

54

(3)

67

Foreign currency transaction loss

(249)

(963)

(1,122)

(1,817)

Lease income

545

542

1,088

1,088

Other non-operating income (expense), net

378

302

601

126

Other expense, net

(26,170)

(22,760)

(44,537)

(48,688)

LOSS BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST

(1,034,192)

(16,435)

(1,108,271)

(86,026)

PROVISION FOR INCOME TAXES

111

107

141

112

NET LOSS

(1,034,303)

(16,542)

(1,108,412)

(86,138)

Less: Net loss attributable to noncontrolling interest

(419,276)

(5,523)

(448,232)

(31,555)

NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(615,027)

$

(11,019)

$

(660,180)

$

(54,583)

NET LOSS

$

(1,034,303)

$

(16,542)

$

(1,108,412)

$

(86,138)

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustments

(2,274)

(929)

(3,127)

3,741

COMPREHENSIVE LOSS

(1,036,577)

(17,471)

(1,111,539)

(82,397)

Less: Comprehensive loss attributable to noncontrolling interest

(420,128)

(5,875)

(449,456)

(30,101)

COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(616,449)

$

(11,596)

$

(662,083)

$

(52,296)

WEIGHTED AVERAGE NUMBER OF SHARES

Basic and Diluted

62,777

55,842

62,384

55,828

LOSS PER SHARE

Basic and Diluted

$

(9.80)

$

(0.20)

$

(10.58)

$

(0.98)

 

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

For the

Six months ended June 30,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(1,108,412)

$

(86,138)

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

Depreciation, amortization and depletion

56,596

47,788

Impairment of plant and equipment

973,860

Change in fair value of profit sharing liability

(70,423)

2,969

Gain on disposal of equipment and intangible assets

28

96

Provision (recovery) for doubtful accounts

2,548

(250)

Reservation of mine maintenance fee

187

278

Stock issued for services and compensation

382

219

Amortization of deferred financing cost on capital lease

9,765

9,253

Income (loss) from equity investments

3

(67)

Foreign currency transaction loss

1,122

1,817

Deferred lease income

(1,088)

(1,088)

Changes in operating assets and liabilities

Notes receivable

5,238

45,931

Accounts receivable

(1,888)

(1,008)

Accounts receivable - related parties

5,307

(2,875)

Other receivables

(1,188)

(307)

Other receivables - related parties

32,353

(4,275)

Inventories

2,631

1,286

Advances on inventory purchases

20,528

(13,968)

Advances on inventory purchases - related parties

39,581

(36,971)

Prepaid expense and other

(19)

(1,947)

Long-term deferred expense

14

111

Prepaid taxes

1,555

15,747

Accounts payable

(22,969)

(18,050)

Accounts payable - related parties

2,978

28,204

Other payables and accrued liabilities

6,223

2,637

Other payables - related parties

(7,334)

4,824

Customer deposits

(6,274)

49,187

Customer deposits - related parties

(191,619)

78,667

Taxes payable

2,769

(413)

Net cash provided by operating activities

(247,546)

121,657

CASH FLOWS FROM INVESTING ACTIVITIES:

Restricted cash

125,868

(51,820)

Loans to unrelated parties

(6,516)

-

Loans receivable - related party

114,127

-

Cash proceeds from short term investment

2,606

-

Payments for short term investment

(7,575)

-

Cash proceeds from sales of equipment and intangible assets

-

24

Equipment purchase and intangible assets

(40,174)

(112,713)

Net cash provided by (used in) investing activities

188,336

(164,509)

CASH FLOWS FINANCING ACTIVITIES:

Restricted notes receivable

72,762

286,485

Borrowings on short term notes payable

497,497

900,202

Payments on short term notes payable

(628,240)

(1,035,408)

Borrowings on short term loans - bank

97,026

185,023

Payments on short term loans - bank

(201,944)

(285,100)

Borrowings on short term loan - others

109,420

19,949

Payments on short term loans - others

(82,814)

(25,417)

Borrowings on short term loan - related parties

223,974

32,576

Payments on short term loans - related parties

(56,394)

(19,233)

Deposits due to sales representatives

(2,119)

(2,736)

Deposit due to sales representatives - related parties

358

(326)

Borrowings on long-term loans - related party

56,201

-

Payments on long-term loans - related party

(815)

-

Principal payment on capital lease obligation

(1,077)

-

Net cash provided by (used in) financing activities

83,835

56,015

EFFECTS OF EXCHANGE RATE CHANGE IN CASH

(16)

(381)

INCREASE IN CASH

24,609

12,782

CASH, beginning of period

11,641

31,967

CASH, end of period

$

36,250

$

44,749

SOURCE General Steel Holdings, Inc.



RELATED LINKS

http://www.gshi-steel.com