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

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

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