China Industrial Steel, Inc. Reports Record Financial Results For 2011

Revenue up 43% from 2010 to $823 million, earnings per share; $0.62, up from $0.39 in 2010

News provided by

Apr 30, 2012, 09:45 ET

NEW YORK, April 30, 2012 /PRNewswire-Asia-FirstCall/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the year ended December 31, 2011. The Company, whose shares trade in the U.S. under the stock symbol "CDNN" filed its Form 10-K with the Securities and Exchange Commission on March 29, 2012.

Highlights of 2011 Year End Financials

Revenues increased 43% to $ 823 million in 2011 from $574 million in 2010.
Net income increased 78% to $46 million in 2011 from $26 million in 2010.
Earnings per share were at $0.62 for the year, compared to $0.39 in 2010.

Total sales for the years ended December 31, 2011 were $823,107,042, an increase of $249,440,358, or 43%, compared to $573,666,684 in 2010. Of the increased revenues, approximately 11% was due to an increase in total selling quantity excluding steel wires, 48% was generated from the recently introduced sale of steel wire; 37% of the increase was attributable to an increase in the sales prices; and the remaining 4% was attributed to the increased sales of byproducts.

The Company reduced its production of steel plates in the fourth quarter of 2011 due to decreased market demand, however the average sales price of steel plate increased $92 per ton, or 17% during 2011, to an average price of approximately $618 per ton from $520 per ton in 2010. The increase in the selling price reflected an increase in cost of raw materials, specifically iron ore which had risen consistently from mid-2009.

China Industrial Steel began producing steel bars in 2010 in response to market demand, however, since that time demand for steel bars and in turn its pricing has fallen off. In light of this, the Company has temporarily stopped manufacturing steel bars and now uses the facility for the production of steel wires. During 2011, the Company sold 195,417 metric tons of steel wires, which generated $119,936,402 of revenue.

Revenue from steel billets more than doubled in 2011, to $209,657,073 from $100,568,635 in 2010. The increase was attributable to increases in both the quantity of steel billets sold as well as the sales price.

Sales of production byproducts also increased substantially, to $17,632,782 in 2011 from $7,277,413 in 2010, a 142% increase.

The following table illustrates the breakdown of the Company's revenue for the year ended December 31, 2011 and 2010.

	2011		2010
Products	Revenue	Quantity (Ton)	Revenue	Quantity (Ton)
Steel plates	$ 474,946,204	768,374	$ 439,719,098	835,795
Steel bars	934,581	1,653	26,101,538	48,780
Steel wires	119,936,402	195,417	-	-
Steel billets	209,657,073	368,544	100,568,635	195,214
Byproducts	17,632,782	-	7,277,413	-
Products Total	$ 823,107,042	1,333,988	$ 573,666,684	1,079,789

The Company's net income totaled $45,801,476 in 2011, an increase of $20,031,036, or 78%, compared to the net income of $25,770,440 in 2010. The increase of net income was attributable primarily to the increase of revenue and decrease in selling, general and administrative expenses.Liu Shenghong, Chief Executive Officer and Chairman of the Company commented on the Company's performance in 2011, "The past few years have been challenging for Chinese steel manufacturers due to a number of factors, including tough economic conditions, erratic raw material prices and fluctuating market demand. Despite this, China Industrial Steel performed well in 2011. Demand for our steel products was strong throughout the year, as reflected in our results."

Mr. Liu commented further, saying, "While the overall recovery of China's steel market is still fragile, we continue to remain optimistic about China Industrial Steel's future. We are dedicated to serving our customer's needs and our infrastructure and management flexibility enables us to move quickly in response to market changes. The benefit of this is evident in the decision to convert our bar production facilities to the production of steel wire, which continues to generate financial rewards. Sale of steel wire generated nearly $120 million in revenue in 2011."

Mr. Liu went on to say, "Our Company came to the market in the United States by filing an S-1 registration statement with the Securities and Exchange Commission. We are also pleased that FINRA has designated a symbol for the common stock of China Industrial Steel, which will shortly begin to trade under the symbol CDNN, and we are hopeful that we will be able to leverage the benefits of being a public company – specifically to be able to access foreign capital so that we can fully implement our company's expansion plans."

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS) (AUDITED)
	AS OF DECEMBER 31,
	2011	2010
ASSETS
Current Assets:
Cash	1,737,495	4,061,412
Bank notes receivable	2,342,186	1,117,248
Accounts receivables, net	20,862,269	12,109,280
Accounts receivables - related party	-	17,298,276
Inventories, net	16,139,936	13,178,890
Advances to suppliers	3,215,680	4,658,802
VAT tax recoverable	21,612,482	13,038,920
Advances to related parties	77,416,285	44,536,486
Total Current Assets	143,326,333	109,999,314

Machinery and Equipment, Net	84,410,398	73,804,064
Machinery and Equipment - acquired from related parties, Net	98,514,249	107,891,061
Total Machinery and Equipment, Net	182,924,647	181,695,125
Other Assets:
Restricted cash	5,402,600	1,818,240
Land use rights and buildings under capital leases	5,613,105	5,998,330
Total Other Assets	11,015,705	7,816,570

TOTAL ASSETS	337,266,685	299,511,009

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	23,095,827	43,193,808
Accounts payable - related parties	184,447	4,505,684
Accrued liabilities	2,622,224	4,013,825
Taxes payables	1,868,886	850,247
Bank loans payable	34,640,200	5,757,760
Bank notes payable	3,019,100	3,030,400
Equipment loan payable - related parties	11,562,752	11,025,728
Current obligations; capital leases - related parties	597,258	529,532
Employee loan payable	-	707,511
Short term loan payable - related party	1,747,900	3,651,632
Advances from customers	13,257,487	22,588,608
Total Current Liabilities	92,596,081	99,854,735

Long Term Liabilities:
Equipment loan payables - related parties	51,093,694	59,746,411
Obligation under capital leases - related parties	6,254,954	6,533,967
Total Long Term Liabilities	57,348,648	66,280,378

TOTAL LIABILITIES	149,944,729	166,135,113

Stockholders' Equity:
Common stock, $0.0001 par value, 980,000,000 authorized, 73,542,058 and 70,962,036 issued and outstanding at December 31, 2011 and 2010, respectively	7,354	7,096
Paid-in capital	16,299,744	12,733,237
Stock to be issued	-	3,175,241
Statutory reserves	6,530,869	6,530,869
Retained earnings	150,189,517	104,388,041
Accumulated other comprehensive income	14,294,472	6,541,412
Total Stockholders' Equity	187,321,956	133,375,896
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	337,266,685	299,511,009

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (IN US DOLLARS) (AUDITED)
	2011	2010	2009
Revenues
Sales to customers	$796,011,478	$546,489,212	$526,388,941
Sales to related parties	27,095,564	27,177,472	30,366,019
Total Revenues	823,107,042	573,666,684	556,754,960

Cost of Revenue
Cost of Revenue - non-related parties	92,311,499	76,627,193	413,006,181
Cost of Revenue - related parties	669,334,535	459,227,304	81,612,000
Total Cost of Revenue	761,646,034	535,854,497	494,618,181

Gross Profit	61,461,008	37,812,187	62,136,779

Selling and General and Administrative Expenses
SG&A - non-related parties	1,695,836	1,963,226	586,610
SG&A Expenses - related parties	804,541	569,035	289,970
Total SG&A Expenses	2,500,377	2,532,261	876,580

Income From Operations	58,960,631	35,279,926	61,260,199

Other Income (Expenses)
Interest income	67,303	19,058	14,000
Interest expense - bank borrowings	(1,505,340)	(353,815)	(169,128)
Interest expense - related parties	(4,405,934)	(4,719,552)	(2,944,094)
Gain on disposal of fixed assets	117,255	-	-
Total Other Income (Expenses)	(5,726,716)	(5,054,309)	(3,099,222)

Income from operation before income tax	53,233,915	30,225,617	58,160,977
Provision for income tax	7,432,439	4,455,177	-
Net Income	$45,801,476	$25,770,440	$58,160,977

Other Comprehensive Income:
Foreign currency translation gain	7,753,060	4,122,803	675,123
Comprehensive Income	53,554,536	29,893,243	58,836,100

Net Income Per Share - Basic	$0.62	$0.39	$0.94
Weighted Average Shares Outstanding - Basic	73,351,698	66,308,038	61,576,992
Net Income Per Share - Diluted	$0.62	$0.39	$0.94
Weighted Average Shares Outstanding - Diluted	73,351,698	66,308,038	61,576,992

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:
China Industrial Steel, Inc.
Phone: +1-646-328-1502

China Industrial Steel, Inc.

Contacts:

Frank Pena – Director
(732) 292-0322

Jeffrey Friedland – Corporate Finance Advisor
646-450-8909

SOURCE China Industrial Steel, Inc.