China Industrial Steel, Inc. Reports First Quarter Financial Results

News provided by

China Industrial Steel, Inc.

May 16, 2013, 09:45 ET

NEW YORK, May 16, 2013 /PRNewswire/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the three months ended March 31, 2013.  The Company, whose shares trade in the U.S. OTC market under the stock symbol "CDNN", filed its Form 10-Q with the Securities and Exchange Commission on May 15, 2013.

Commenting on the results, Liu Shenghong, Chief Executive Officer and Chairman of the Company stated, "I am pleased to report China Industrial Steel's financial results for the first quarter of 2013. Company revenues were up as a result of the rebound in China's demand for steel, and we remain profitable despite the industry wide decline in selling prices resulting from inventory stockpiles over the past year."

Chairman Liu went on to say, "Demand for our steel plate and wire increased during the quarter reflecting China's continued economic growth and the government's investment in infrastructure projects, such as roads, railways and bridges. We anticipate market prices will return to prior levels as steel manufacturers work through their backlog to supply these large scale projects and the forecast growth in other steel dependent industries, including the automotive and construction sectors."

Financial Discussion

China Industrial Steel reported revenue of $188,363,697 for the three months ended March 31, 2013 an increase of $11,335,049, or 6% compared to $177,028,648 in the same period of 2012. The increase in sales was mainly due to the increase in sales of steel plates and steel wires, offset by the decrease in sales of steel billets and the decrease in unit sales price in the three months ended March 31, 2013. The average unit sales price was $501 per ton, a decrease of $70, or 12%, compared to $571 per ton in the comparable period of 2012.

Revenue from steel plates was $94,496,510 in the three months ended March 31, 2013, an increase of $30,199,775, or 47% compared to $64,296,735 in the three months ended March 31, 2012. The increase in the sales of steel plates resulted from the rebound of steel market in the first quarter of 2013 which was somewhat offset by a decline in the selling price as compared to the same period in 2012.

In January of this year the Company commenced production on a new 600,000 ton steel wire production line. In the three months ended March 31, 2013, revenue from steel wires was $90,938,130, an increase of $27,991,309, or 44%, compared to $62,946,821 for the first three months of 2012. The Company did not sell any steel billet during the first quarter of 2013 and the sale of byproducts remained relatively flat as compared to the same period in 2012.

The following table illustrates the breakdown of the Company's revenue for the year ended March 31, 2013 and 2012.

2013

2012

Products

Revenue

Quantity

(Ton)

Revenue

Quantity

(Ton)

Steel plates

$

94,496,510

190,230

$

64,296,735

113,822

Steel wires

90,938,130

185,788

62,946,821

110,635

Steel billets

-

-

47,067,680

85,602

Byproducts

2,929,057

-

2,717,412

-

Products Total

$

188,363,697

376,018

$

177,028,648

310,059

The Company reported net income of $1,353,839 in the three months ended March 31, 2013, a decrease of $3,352,205, or 71%, compared to the net income of $4,706,044 for the same period of 2012. The decrease in net income is primarily the result of the decrease in steel product prices (12%) being sharper than the decrease in the prices of raw materials (10%).

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS)

(UNAUDITED)











March 31,

 December 31,



2013

2012

ASSETS





 Current Assets: 






Cash 

$

2,622,083

$

1,710,887

Bank notes receivable 

1,835,514

979,111

Accounts receivables, net 

15,758,620

9,639,396

Inventories, net 

18,767,325

11,585,277

Advances to suppliers, net 

479,990

2,372,693

VAT recoverable 

31,222,127

32,208,807

Advances to related parties 

138,465,397

183,797,203

Other current assets 

5,597,242

3,884,342

     Total Current Assets     

214,748,298

246,177,716








 Machinery and Equipment, Net 

101,873,890

101,450,993

 Machinery and Equipment - acquired from related parties, Net 

82,772,390

85,471,360

Total Machinery and Equipment, Net

184,646,280

186,922,353
















 Other Assets: 






Restricted cash 

5,796,360

5,778,360

Land use rights and buildings under capital leases 

4,829,669

4,985,732

     Total Other Assets 

10,626,029

10,764,092








 TOTAL ASSETS 

$

410,020,607

$

443,864,161








LIABILITIES AND STOCKHOLDERS' EQUITY





 Current Liabilities: 






Accounts payable 

$

64,811,203

$

92,228,161

Accounts payable - related parties 

2,536,796

1,833,558

Accrued liabilities 

3,209,088

3,123,315

Taxes payables 

872,968

2,427

Bank loans payable 

27,661,518

26,034,722

Bank notes payable 

5,313,330

5,296,830

Equipment loan payable - related parties - current 

2,893,906

2,884,919

Current obligations under capital leases - related parties - current

663,216

648,893

Short term loan payable - related party  

805,050

802,550

Customer financing 

31,718,970

31,620,470

Advances from customers 

65,608,300

77,275,327

     Total Current Liabilities 

206,094,345

241,751,172








 Long Term Liabilities: 






Equipment loan payables - related parties - non current 

1,091,341

1,087,952

Obligation under capital leases - related parties - non current 

5,512,068

5,669,438

     Total Long Term Liabilities 

6,603,409

6,757,390








 TOTAL LIABILITIES 

212,697,754

248,508,562








Commitments and Contingencies













Stockholders' Equity:






Series A Convertible Preferred Stock, $0.0001 par value, 10,000,000

shares authorized, none issued and outstanding

-

-

Blank Check Preferred Stock, $0.0001 par value, 10,000,000
shares authorized, none issued and outstanding

-

-

Common stock, $0.0001 par value, 980,000,000 authorized,
73,620,391 and 73,620,391 issued and outstanding at March 31, 
2013 and December 31, 2012, respectively

7,362

7,362

Paid-in capital 

16,417,235

16,417,235

Statutory reserves 

6,530,869

6,530,869

Retained earnings 

157,478,346

156,124,507

Accumulated other comprehensive income 

16,889,041

16,275,626

Total Stockholders' Equity

197,322,853

195,355,599

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

410,020,607

$

443,864,161

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN US DOLLARS)

(UNAUDITED)









Three Months Ended March 31,


2013

2012

Revenues





Sales to customers

$

178,171,390

$

172,444,448

Sales to related parties

10,192,307

4,584,200

    Total Revenues

188,363,697

177,028,648







Cost of Revenue





Cost of Revenue - non-related parties

75,010,369

49,889,474

Cost of Revenue - related parties

108,478,792

118,315,091

  Total Cost of Revenue

183,489,161

168,204,565







Gross Profit

4,874,536

8,824,083







Selling and General and Administrative Expenses





Selling and General and Administrative Expenses - non-related parties

969,701

1,065,079

Selling and General and Administrative Expenses - related parties

260,674

177,083

Total Selling and General and Administrative Expenses

1,230,375

1,242,162







Income From Operations

3,644,161

7,581,921







Other Income (Expenses)





Interest income

3,783

52,489

Interest expense

(1,390,082)

(944,908)

Interest expense - related parties

(169,858)

(963,068)

    Total Other Income (Expenses)

(1,556,157)

(1,855,487)







Income from operation before income tax

2,088,004

5,726,434

Provision for income tax

734,165

1,020,390

Net Income

1,353,839

4,706,044








Earnings Per Share - Basic and Diluted

$

0.02

$

0.06

Weighted Average Shares Outstanding - Basic and Diluted

73,620,391

73,542,058







Other Comprehensive Income:





Foreign currency translation gain

613,415

(120,054)

Comprehensive Income

$

1,967,254

$

4,585,990

About China Industrial Steel, Inc.

China Industrial Steel, Inc., ("CIS" or the "Company") through its wholly owned subsidiary, Handan Hongri Metallurgy Co., Ltd., produces and sells steel plate and steel bar for domestic and export customers.  The Company currently operates three production lines from its headquarters on approximately 1,000 acres in Handan City in the Hebei Province, China, where steel production is a significant component of the regional economy. 

Forward-looking statements:

The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as "anticipate," "appear," "believe," "could," "estimate," "expect," "hope," "indicate," "intend," "likely," "may," "might," "plan," "potential," "project," "seek," "should," "will," "would," and other variations or negative expressions of these terms, including statements related to expected market trends and the Company's performance, are all "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances, and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company's expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

Company contact:

Delong Zhou, CFO
China Industrial Steel, Inc.
Phone: (917) 825-2997
Email: [email protected]

Frank Pena - Director
Phone: (732) 292-0322

SOURCE China Industrial Steel, Inc.