General Steel Reports Third Quarter 2013 Financial Results Company Achieves Positive Gross and Net Margins, Generates $75 Million Quarterly Operating Cash Flows and Enhances Production Costs

BEIJING, Nov. 12, 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 third quarter ended September 30, 2013.

"I am delighted that we achieved positive gross and net margins during the third quarter," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "We also significantly enhanced our cost structure with the launch of two additional continuous-rolling production lines, with one commencing production in July and the other entering trial production earlier this month."

"We also observed positive market momentum for China's steel industry. The average selling prices of key steel products rebounded moderately during the third quarter, driven by the robust demand from multi-sectors including infrastructure construction and automotive sectors. In addition, manufacturing activities in China grew at its fastest pace in the most recent seven months, with the Purchasing Managers Index reaching 50.9 this October, as the government readies a series of key economic reforms. Given our improving profitability, enhanced cost structure and positive momentum in the industry, we feel optimistic about our business in the quarters ahead."

John Chen, Chief Financial Officer of General Steel, commented, "I'm very pleased with our execution this third quarter. We generated a positive quarterly operating cash inflow of $75 million and vastly improved profitability. Additionally, we further cut finance expenses and enhanced our financing flexibility, through better planning, budgeting and securing additional working capital support through favorable payment terms granted by our stakeholders.  I believe we are at the beginning of a sustainable business turn-around."

Third Quarter 2013 Financial Information

  • Sales decreased by 14.2% year-over-year to $610.1 million, from $711.4 million in the third quarter of 2012.
  • Sales volume decreased by 10.0% year-over-year to approximately 1.3 million metric tons, compared with 1.4 million metric tons in the third quarter of 2012.
  • Gross profit was $8.2 million, or 1.3% of revenue, compared with a gross loss of $(13.6) million, or negative (1.9%) of revenue in the third quarter of 2012.
  • Operating income was $30.4 million, compared with an operating loss of $(36.4) million in the third quarter of 2012.
  • Net income attributable to the Company was $3.8 million, or $0.07 per diluted share, compared with a net loss of $(41.6) million, or $(0.76) per diluted share in the third quarter of 2012.
  • Net operating cash inflow was $75.5 million, compared with $9.5 million in the third quarter of 2012.
  • As of September 30, 2013, the Company had cash and restricted cash of $467.9 million.

First Nine Months 2013 Financial Information

  • Sales decreased by 10.5% year-over-year to $1.9 billion, from $2.1 billion in the same period of 2012.
  • Sales volume increased by 0.9% year-over-year to approximately 3.95 million metric tons, compared with 3.91 million metric tons in the same period of 2012.
  • Gross loss was $(23.2) million, or negative (1.2%) of revenue, compared with a gross profit of $20.1 million, or 0.9% of revenue in the same period of 2012.
  • Operating income was $25.2 million, compared with an operating loss of $(41.5) million in the same period of 2012.
  • Net loss attributable to the Company narrowed to $(32.9) million, or $(0.60) per diluted share, compared with $(102.8) million, or $(1.87) per diluted share in the same period of 2012.
  • Net operating cash inflow was $14.0 million, compared with a net outflow of $(90.1) million in the same period of 2012.

Third Quarter 2013 Financial and Operating Results

Total Sales

Total sales for the third quarter of 2013 decreased by 14.2% year-over-year to $610.1 million, compared with $711.4 million in the third quarter of 2012. The year-over-year revenue decreases were due to less sales volume and a decrease in average selling price of the products.

  • Total sales volume in the third quarter of 2013 was 1.3 million metric tons, a decrease of 10.0% compared with 1.4 million metric tons in the third quarter of 2012.
  • The average selling price of rebar decreased 6.1% to approximately $489.6 per ton in the third quarter of 2013 from approximately $521.2 per ton in the same period of 2012.

Gross Profit and Gross Margin

Gross profit for the quarter was $8.2 million, compared with a gross loss of $(13.6) million in the third quarter of 2012. The gross margin increased to 1.3% of total sales in the third quarter of 2013, compared with gross loss margin of negative (1.9%) of total sales in the same period a year ago, which reflects our production efficiency improvement and a slower decrease in ASP compared with cost of rebar.

Operating Expenses and Operating Income

Selling, general and administrative expenses for the third quarter of 2013 decreased 13.7% to $19.7 million, compared to $22.8 million in the third quarter of 2012. General and administrative expenses decreased to $12.4 million, compared with $14.1 million in the same period of 2012. The decrease in general and administrative expense was mainly due to a decrease of $1.7 million in bad debt expenses, partially offset by an additional write-off of a prepaid special fund of $0.6 million in the third quarter of 2013, compared with the same period of last year. Selling expenses decreased 16.5% to $7.3 million, compared to $8.7 million in the same period of 2012. The decrease in selling expense was primarily attributable to savings in a special fund related to the sales of the Company's products, which was no longer imposed by the PRC tax authorities in 2013, while $1.6 million of the special fund was imposed in the third quarter of 2012. 

The Company recognized other operating income of $41.8 million due to change in the fair value of profit sharing liability during the third quarter of 2013, compared with $0 in the same period of last year, which reflects a change in the estimated fair value of the Company's profit sharing liability.

Correspondingly, income from operations for the third quarter of 2013 was $30.4 million, compared with a loss from operations of $(36.4) million in the third quarter of 2012.

Finance Expense

Finance and interest expense in the third quarter of 2013 decreased $11.1 million to $25.5 million, of which, $7.8 million was the non-cash interest expense on capital lease, as compared with $10.7 million in the same period of 2012, and $17.7 million was the interest expense on bank loans and discounted note receivables as compared with $25.9 million in the third quarter of 2012. The decrease in interest expense on bank loans and discounted note receivables was primarily attributable to a reduction in the amount of bank notes receivable redeemed early, and less interest-bearing loans from banks and third parties, benefiting from additional financing support from suppliers and vendors during the third quarter of 2013.

Net Income and Net Income per Share

Net income attributable to General Steel for the third quarter of 2013 was $3.8 million, or $0.07 per diluted share, based on 55.1 million weighted average shares outstanding. This compares to a net loss of $(41.6) million, or $(0.76) per diluted share, based on 54.5 million weighted average shares outstanding in the third quarter of 2012.

First Nine Months 2013 Financial Results and Operating Results

Total Sales

Total sales for the first nine months of 2013 decreased 10.5% year-over-year to $1.9 billion, compared with $2.1 billion in the first nine months of 2012. The year-over-year revenue decreases were due to a decrease in the average selling price.

  • Total sales volume in the first nine months of 2013 was 3.95 million metric tons, an increase of 0.9% compared with 3.91 million metric tons in the first nine months of 2012.
  • The average selling price of rebar decreased 12.6% to approximately $495.6 per ton in the first nine months of 2013 from approximately $566.8 per ton in the same period of 2012.

Gross Profit and Gross Margin

Due to a steeper decrease in average selling price in the first half of 2013, gross loss for the first nine months of 2013 was $(23.2) million, or (1.2%) of total sales, compared with a gross profit of $20.1 million, or 0.9% of total sale in the first nine months of 2012.

Operating Expenses and Operating Income

Selling, general and administrative expenses for the first nine months of 2013 decreased 3.4% to $59.5 million, compared to $61.5 million in the first nine months of 2012. General and administrative expenses increased slightly to $34.9 million, compared with $33.7 million in the same period of 2012. Selling expenses decreased 11.9% to $24.6 million, compared to $27.9 million, which included a $4.5 million special fund imposed in the same period of 2012.

The Company recognized other operating income of $107.9 million due to change in the fair value of profit sharing liability during the first nine months of 2013, compared with $0 in the same period of last year.

Correspondingly, income from operations for the first nine months of 2013 was $25.2 million, compared with a loss from operations of $(41.5) million in the first nine months of 2012.

Finance Expense

Finance and interest expense in the first nine months of 2013 was $81.4 million, of which, $27.8 million was the non-cash interest expense on capital lease as compared with $32.4 million in the same period of 2012, and $53.6 million was the interest expense on bank loans and discounted note receivables, as compared with $106.6 million in the first nine months of 2012.

Net Income and Net Income per Share

Net loss attributable to General Steel for the first nine months of 2013 was $(32.9) million, or $(0.60) per diluted share, based on 55.0 million weighted average shares outstanding. This compares to a net loss of $(102.8) million, or $(1.87) per diluted share, based on 55.0 million weighted average shares outstanding in the first nine months of 2012.

Balance Sheet

As of September 30, 2013, the Company had cash and restricted cash of approximately $467.9 million, compared to $369.9 million as of December 31, 2012. The Company had an inventory balance of approximately $177.4 million as of September 30, 2013, compared to $212.7 million as of December 31, 2012.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EST on Tuesday, November 12, 2013 (which corresponds to 9:00 p.m. Beijing/Hong Kong Time on Tuesday, November 12, 2013) to discuss the results and answer questions from investors. Listeners may access the call by dialing 1-877-870-4263 in the U.S., and 1-412-317-0790 internationally.

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.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


(UNAUDITED)

(In thousands)





September 30,


December 31,

ASSETS



2013


2012

CURRENT ASSETS:







 Cash

$

62,091


$

46,467


 Restricted cash


405,781



323,420


 Notes receivable


116,900



145,502


 Restricted notes receivable


357,250



357,900


 Loans receivable - related parties


4,540



69,319


 Accounts receivable, net


8,577



6,695


 Accounts receivable - related parties


3,252



14,966


 Other receivables, net


56,494



8,407


 Other receivables - related parties


51,501



68,382


 Inventories


177,383



212,671


 Advances on inventory purchase


79,855



79,715


 Advances on inventory purchase - related parties


29,667



46,416


 Prepaid expense and other


1,490



450


 Prepaid taxes


16,415



24,116


 Short-term investment


2,771



2,619

TOTAL CURRENT ASSETS



1,373,967



1,407,045










 PLANT AND EQUIPMENT, net


1,250,542



1,167,836








 OTHER ASSETS:







 Advances on equipment purchase


21,715



6,499


 Long-term other receivable


-



43,008


 Investment in unconsolidated entities


1,161



1,166


 Long-term deferred expense


713



1,062


 Intangible assets, net of accumulated amortization


23,928



24,066

TOTAL OTHER ASSETS


47,517



75,801








TOTAL ASSETS

$

2,672,026


$

2,650,682








LIABILITIES AND DEFICIENCY












 CURRENT LIABILITIES:







 Short term notes payable

$

987,988


$

983,813


 Accounts payable


495,488



352,052


 Accounts payable - related parties


172,259



177,432


 Short term loans - bank


254,929



147,124


 Short term loans - others


130,170



147,323


 Short term loans - related parties


48,889



79,557


 Current maturities of long-term loans - related party


47,896



54,885


 Other payables and accrued liabilities


52,272



54,589


 Other payable - related parties


106,153



73,025


 Customer deposits


95,695



125,890


 Customer deposits - related parties


14,512



21,998


 Deposit due to sales representatives


28,184



33,870


 Deposit due to sales representatives - related parties


1,809



1,238


 Taxes payable


9,716



16,674


 Deferred lease income, current


2,178



2,120


TOTAL CURRENT LIABILITIES


2,448,138



2,271,590








 NON-CURRENT LIABILITIES:







 Long-term loans - related party


24,450



38,088


 Long-term other payable - related party


-



43,008


 Deferred lease income, noncurrent


75,480



75,079


 Capital lease obligations


354,576



330,099


 Profit sharing liability


241,090



328,827


 Other noncurrent liabilities


1,402



-


 TOTAL NON-CURRENT LIABILITIES


696,998



815,101








TOTAL LIABILITIES


3,145,136



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 September 30, 2013 and
    December 31, 2012


3



3


Common stock, $0.001 par value, 200,000,000
    shares authorized, 57,771,038 and 57,269,838
    shares issued, 55,298,732 and 54,797,532 shares
    outstanding as of September 30, 2013 and
    December 31, 2012, respectively


58



57


Treasury stock, at cost, 2,472,306 shares as of
    September 30, 2013 and December 31, 2012


(4,199)



(4,199)


  Paid-in-capital


106,405



105,714


  Statutory reserves


6,263



6,076


  Accumulated deficits


(414,696)



(381,782)


  Accumulated other comprehensive income


2,471



10,185


TOTAL GENERAL STEEL
HOLDINGS, INC. DEFICIENCY


(303,695)



(263,946)








 NONCONTROLLING INTERESTS


(169,415)



(172,063)


TOTAL DEFICIENCY


(473,110)



(436,009)








TOTAL LIABILITIES AND DEFICIENCY

$

2,672,026


$

2,650,682

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except per share data)




For the

Three months ended September 30,


For the

Nine months ended September 30,



2013


2012


2013


2012














SALES


$

514,549


$

518,542


$

1,534,330


$

1,441,325














SALES - RELATED PARTIES



95,546



192,883



380,707



698,824

  TOTAL SALES



610,095



711,425



1,915,037



2,140,149














COST OF GOODS SOLD



511,932



528,586



1,550,829



1,426,589














COST OF GOODS SOLD - RELATED PARTIES



89,932



196,435



387,446



693,482

  TOTAL COST OF GOODS SOLD



601,864



725,021



1,938,275



2,120,071














GROSS PROFIT (LOSS)



8,231



(13,596)



(23,238)



20,078














SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES



(19,661)



(22,787)



(59,464)



(61,548)

CHANGE IN FAIR VALUE OF PROFIT
SHARING LIABILITY



41,825



-



107,877



-














INCOME (LOSS) FROM OPERATIONS



30,395



(36,383)



25,175



(41,470)














OTHER INCOME (EXPENSE)













  Interest income



2,835



4,337



8,657



13,039

  Finance/interest expense



(25,503)



(36,615)



(81,355)



(138,929)

  Change in fair value of derivative liabilities



-



(55)



1



(48)

  Gain on disposal of equipment



17



293



113



177

  Income from equity investments



47



44



137



80

  Foreign currency transaction gain (loss)



322



(581)



448



(1,169)

  Lease income



542



528



1,613



1,588

  Other non-operating income (expense), net



770



2,314



1,559



3,316

    Other expense, net



(20,970)



(29,735)



(68,827)



(121,946)














INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES AND NONCONTROLLING
INTEREST



9,425



(66,118)



(43,652)



(163,416)














PROVISION FOR INCOME TAXES













  Current



25



100



201



510

  Deferred



-



-



-



169

    Provision for income taxes



25



100



201



679














NET INCOME (LOSS)



9,400



(66,218)



(43,853)



(164,095)














Less: Net income (loss) attributable to
noncontrolling interest



5,599



(24,620)



(10,939)



(61,336)














NET INCOME (LOSS) ATTRIBUTABLE TO
GENERAL STEEL HOLDINGS, INC.


$

3,801


$

(41,598)


$

(32,914)


$

(102,759)














NET INCOME (LOSS)


$

9,400


$

(66,218)


$

(43,853)


$

(164,095)














OTHER COMPREHENSIVE INCOME (LOSS)













  Foreign currency translation adjustments



(2,547)



(698)



(12,283)



(577)














COMPREHENSIVE INCOME (LOSS)



6,853



(66,916)



(56,136)



(164,672)














Less: Comprehensive income (loss) attributable to
noncontrolling interest



4,782



(24,888)



(15,508)



(61,721)














COMPREHENSIVE INCOME (LOSS)
ATTRIBUTABLE TO GENERAL STEEL
HOLDINGS, INC.


$

2,071


$

(42,028)


$

(40,628)


$

(102,951)














WEIGHTED AVERAGE NUMBER OF SHARES













  Basic and Diluted



55,141



54,466



54,976



54,946














 EARNINGS (LOSS) PER SHARE













  Basic and Diluted


$

0.07


$

(0.76)


$

(0.60)


$

(1.87)














 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)






For the

Nine months ended September 30,






2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES:







Net loss

$

(43,853)


$

(164,095)


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






Depreciation, amortization and depletion


64,955



62,538



Change in fair value of derivative liabilities


(1)



48



Gain on disposal of equipment


(113)



(177)



Provision for doubtful accounts


(251)



2,316



Reservation of mine maintenance fee


315



3



Stock issued for services and compensation


692



679



Amortization of deferred financing cost on capital lease


27,778



32,363



Income from equity investments


(137)



(80)



Foreign currency transaction gain


(448)



1,169



Deferred tax assets


-



169



Deferred lease income


(1,613)



(1,588)



Changes in fair value of profit sharing liability


(107,877)



-


Changes in operating assets and liabilities








Notes receivable


32,138



(99,337)



Accounts receivable


(483)



5,429



Accounts receivable - related parties


11,968



(7,607)



Other receivables


(3,466)



(5,460)



Other receivables - related parties


(55,744)



4,784



Inventories


4,191



73,024



Advances on inventory purchases


1,996



(23,365)



Advances on inventory purchases - related parties


(27,882)



(88,412)



Prepaid expense and other


(1,016)



(183)



Long-term deferred expense


373



119



Prepaid taxes


8,250



4,168



Accounts payable


113,592



(48,059)



Accounts payable - related parties


54,364



31,353



Other payables and accrued liabilities


(3,742)



34,286



Other payables - related parties


(12,844)



95,746



Customer deposits


(33,185)



(9,490)



Customer deposits - related parties


(7,981)



14,740



Taxes payable


(7,317)



(5,195)



Other noncurrent liabilities


1,384



-



Net cash provided by (used in) operating activities


14,043



(90,114)









CASH FLOWS FROM INVESTING ACTIVITIES:







Restricted cash


(72,676)



(35,094)


Loans to related parties


1,460



(69,247)


Cash proceeds from (made to) short term investment


(80)



40


Cash proceeds from sales of equipment


16



19


Equipment purchase and intangible assets


(75,326)



(15,909)


Effect on cash due to deconsolidating of a subsidiary


-



(2,972)



              Net cash used in investing activities


(146,606)



(123,163)









CASH FLOWS FINANCING ACTIVITIES:







Capital contributed by noncontrolling interest


18,028



-


Payments made for treasury stock acquired


-



(1,404)


Notes receivable - restricted


10,218



521,866


Borrowings on short term notes payable


1,348,631



1,382,976


Payments on short term notes payable


(1,370,832)



(1,637,570)


Borrowings on short term loans - bank


258,357



237,535


Payments on short term loans - bank


(155,390)



(355,008)


Borrowings on short term loan - others


148,678



160,554


Payments on short term loans - others


(169,558)



(193,964)


Borrowings on short term loan - related parties


362,202



269,362


Payments on short term loans - related parties


(274,718)



(221,134)


Deposits due to sales representatives


(6,521)



11,939


Deposit due to sales representatives - related parties


531



285


Payments on long-term loans - related party


(22,856)



-



             Net cash provided by financing activities


146,770



175,437









EFFECTS OF EXCHANGE RATE CHANGE IN CASH


1,417



1,426

INCREASE (DECREASE) IN CASH


15,624



(36,414)

CASH, beginning of period


46,467



120,016

CASH, end of period

$

62,091


$

83,602

 

SOURCE General Steel Holdings, Inc.



RELATED LINKS
http://www.gshi-steel.com
http://www.mzcan.com/us/GSI/irwebsite/index.php?mod=event

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