China GengSheng Minerals Reports First Quarter 2012 Financial Results

GONGYI, China, May 15, 2012 /PRNewswire-Asia-FirstCall/ -- China GengSheng Minerals, Inc. (NYSE Amex: CHGS), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy- efficient materials for a variety of industrial applications, today announced its financial results for the first quarter ended March 31, 2012.

First Quarter 2012 Financial Highlights:

• Revenue decreased 15.3% year-over-year to approximately $13.7 million.
  • Refractories sales were approximately $9.9 million, compared with approximately $9.9 million in the first quarter of 2011.
  • Fine precision abrasives product sales were approximately $2.4 million, compared with approximately $819,000 in the first quarter of 2011.
  • Fracture proppant sales were approximately $998,000, compared with approximately $5.2 million in the first quarter of 2011.
• Gross profit was approximately $2.7 million, or 19.8% of total sales, compared with approximately $4.3 million, or 26.5% of total sales in the same period a year ago.
• Total operating expenses increased to approximately $4.4 million, compared with approximately $3.6 million in the first quarter of 2011.
• Net loss attributable to the Company was approximately $2.9 million, or $0.11 per share, compared with net loss of approximately $80,000, or $0.003 per share in the first quarter of 2011.
• As of March 31, 2012, the Company had cash and cash equivalents of approximately $2.7 million, total equity of approximately $51.1 million and working capital of approximately $8.4 million.

"We experienced a disappointing quarter as a result of weak sales in fracture proppants segment. The continued slowdown in the steel industry also had an unfavorable impact on us," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "While financing costs and operating expenses weighed on our results for the first quarter of 2012, we continue to work towards increasing sales and improving profitability thus create sustainable value for our shareholders."

Financial Results for the Three Months Ended March 31, 2012

For the first quarter of 2012, sales revenue was approximately $13.7 million, a decrease of 15.3%, compared with approximately $16.2 million in the first quarter of 2011. The decrease was mainly attributable to the decreased sales from the fracture proppant segments.

• Sales of the Company's core refractory products totaled approximately $9.9 million, or 72.5% of total sales, nearly flat compared with the first quarter of 2011.
• Sales of fracture proppant products totaled approximately $998,000, or 7.3% of total sales, a decrease of 80.8%, compared with approximately $5.2 million in the first quarter of 2011. The year-over-year decrease in fracture proppant products sales was mainly due to the decreased sales in the U.S. market as we were unable to sell directly to the end users.
• Sales of fine precision abrasives products totaled approximately $2.4 million, compared with approximately $819,000 in the first quarter of 2011.  The increase in sales revenue was primarily due to the increased sales to a major customer.
• Sales of industrial ceramics were approximately $332,000, compared with approximately $230,000 in the first quarter of 2011.

Cost of goods sold totaled approximately $11.0 million, a decrease of 7.6%, compared with approximately $11.9 million in the same period of 2011. The decrease in cost of goods sold was a result of the decrease in total revenue.

Gross profit for the three months ended March 31, 2012 was approximately $2.7 million, or 19.8% of revenue, compared with approximately $4.3 million, or 26.5% of revenue in the first quarter of 2011. The decrease in gross profit and gross profit margin for the quarter was mainly attributable to the higher raw material costs and energy costs compared with the same period in 2011.

General and administrative expenses increased by approximately $224,000 to approximately $1.7 million for the first quarter in 2012, from approximately $1.5 million in the same period in 2011. The increase was primarily due to higher preliminary expenses related to our new fracture proppants production facility and higher professional service fees.

Selling expenses increased by approximately $509,000 to approximately $2.5 million in the first quarter of 2012, compared with approximately $2.0 million in the same period in 2011. The increase in selling expenses was primarily attributable to the increase in the allowance for doubtful accounts and higher transportation expenses compared to the same period in 2011.

Finance costs increased by approximately $784,000, or 81.2% to approximately $1.8 million in the first quarter of 2012, from approximately $966,000 in the same period in 2011. The significant increase was primarily attributable to an increase of approximately $709,000 in bills discounting charges as we discounted more bills receivable instead of holding them to maturity; and an increase of approximately $76,000 in interest expenses as we increased borrowing activities in the first quarter of 2012.

Net loss attributable to Company's common stockholders was approximately $2.9 million, or $0.11 per share, compared with approximately $80,000, or $0.003 per share in the same period in 2011. The net loss for the quarter was primarily attributable to the factors described above.

As of March 31, 2012, the Company had cash and cash equivalents totaling approximately $2.7 million, working capital of approximately $8.4 million and total equity of approximately $51.1 million.

About China GengSheng Minerals, Inc.

China GengSheng Minerals, Inc. ("GengSheng") develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics, fracture proppants and fine precision abrasives. A market leader offering customized solutions, GengSheng sells its products primarily to the iron and steel industry as heat-resistant components for steel-making furnaces, industrial kilns and other high-temperature vessels to guarantee and improve the productivity of those expensive pieces of equipment, while reducing their consumption of energy. Founded in 1986 and based in China's Henan province, GengSheng currently has over 170 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and other countries. GengSheng conducts business through GengSheng International Corporation, a British Virgin Islands company, and its Chinese subsidiaries, which are Henan GengSheng Refractories Co., Ltd., Zhengzhou Duesail Fracture Proppant Co., Ltd., Henan GengSheng Micronized Powder Materials Co., Ltd, Guizhou SouthEast Prefecture Co., Ltd., GengSheng New Materials Co., Ltd, Henan GengSheng High Temperature Materials Co., Ltd. and Henan Yuxing Proppant Co., Ltd.

For more information about the Company, please visit http://www.gengsheng.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China GengSheng Minerals, Inc., and its subsidiary companies. All statements other than statements of historical fact included herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's ability to meet its projected output for the term of the supply contract; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

China GengSheng Minerals, Inc.
Investor Relations
Mr. Shuai Zhang
[email protected]
+86-371-6405-9846

SOURCE China GengSheng Minerals, Inc.