China Industrial Steel, Inc. Reports Second Quarter 2013 Financial Results

Quarter Revenues Up 24%, Steel Products Tonnage Sales Increase 45% Over Prior Year

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Aug 16, 2013, 09:00 ET

NEW YORK, Aug. 16, 2013 /PRNewswire/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the three months ended June 30, 2013. The Company filed its Form 10-Q with the Securities and Exchange Commission on August 14, 2013.

Liu Shenghong, Chief Executive Officer and Chairman of the Company commented on the Company's performance, "The Company's continued revenue growth is a reflection of a solid growth plan and strong customer relationships. Our renovated manufacturing facility not only provides us with the additional capacity to satisfy customer demand, higher production levels also strengthen our ability to negotiate preferable raw material prices. These actions have helped us remain profitable despite the market pressure on selling prices, and we anticipate they will have a positive impact on our financial performance once pricing returns to normal levels."

Highlights of 2013 Second Quarter Financials

Revenues increased 24% to $181 million in the three months ended June 30, 2013 from $146 million for the same period in 2012.
Steel products tonnage sales up 45% for the quarter ended June 30, 2013, to 368,311 metric tons as compared to 253,490 metric tons in the same period of 2012.
Net Income decreased 42%, to $1.07 million for the three months ended June 30, 2013, as compared to $1.85 million for the prior year.

Total revenue in the three months ended June 30, 2013 were $180,726,434, an increase of $35,154,065, or 24% compared to $145,572,369 in the second quarter of 2012. The Company sold 368,311 metric tons steel products in the three months ended June 30, 2013, an increase of 114,821 metric tons, or 45%, compared to 253,490 metric tons in the same period of 2012. The average unit sales price was $481 per ton, a decrease of $84, or 15%, compared to $565 per ton in the same period of 2012.

The increase in revenue was reflects the increase in the sale of steel wires which resulted from the Company's new 600,000 ton steel wire production line which commenced production in January 2013. The Company sold 165,843 metric tons of steel wires, an increase of 94,907 metric tons, or 134%, in the three months ended June 30, 2013, compared to 70,936 in the comparable period of 2012. This was partially offset by the decrease in revenue generated from the sale of steel plate, which was primarily the result of the decline in the average unit sales price for steel plate. The Company sold 202,468 tons of steel plates in the three months ended June 30, 2013, an increase of 19,914 tons, or 11%, compared to 182,554 tons in the comparable period of 2012. However, the average unit sales price of steel plates decreased $68 per ton, or 12% to $487 per ton in the three months ended June 30, 2013 from $555 per ton in the same period of 2012. The decrease in unit sales price offset the increase in sales quantities and caused a decrease in revenue generated from steel plates. Revenue from steel plates was $98,527,863 in 2013, a decrease of $2,768,307, or 3% compared to $101,296,170 in 2012.

Net income for the three months ended June 30, 2013 was $1,068,480 a decrease of $780,037, or 42%, compared to $1,848,517 in the comparable period of 2012. This decline was primarily the result of an unparalleled decrease in unit selling price of steel products (15%) and unit purchase price of raw material (14%).

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS)
(UNAUDITED)

		June 30	December 31,
		2013	2012
ASSETS
Current Assets:
	Cash	$ 1,930,922	$ 1,710,887
	Bank notes receivable	488,820	979,111
	Accounts receivables, net	11,474,804	9,639,396
	Accounts receivables - related parties	3,713,328	-
	Inventories, net	13,710,929	11,585,277
	Advances to suppliers, net	707,617	2,372,693
	VAT recoverable	31,135,223	32,208,807
	Advances to related parties	104,422,760	183,797,203
	Deferred income tax asset	162,586	-
	Other current asset	1,727,164	3,884,342
	Total Current Assets	169,474,153	246,177,716

Machinery and Equipment, Net		115,652,383	101,450,993
Machinery and Equipment - acquired from related parties, Net		80,013,616	85,471,360
	Total Machinery and Equipment, Net	195,665,999	186,922,353


Other Assets:
	Restricted cash	5,865,840	5,778,360
	Land use rights and buildings under capital leases	4,713,910	4,985,732
	Total Other Assets	10,579,750	10,764,092

TOTAL ASSETS		$375,719,902	$443,864,161

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
	Accounts payable	$ 57,094,085	$ 92,228,161
	Accounts payable - related parties	3,118,514	1,833,558
	Accrued liabilities	2,570,736	3,123,315
	Taxes payables	395,571	2,427
	Bank loans payable	24,049,944	26,034,722
	Bank notes payable	5,377,020	5,296,830
	Equipment loan payable - related parties - current	2,928,595	2,884,919
	Current obligations under capital leases - related parties - current	683,615	648,893
	Short term loan payable - related party	814,700	802,550
	Customer financing	702,108	31,620,470
	Advances from customers	70,711,357	77,275,327
	Total Current Liabilities	168,446,245	241,751,172

Long Term Liabilities:
	Equipment loan payables - related parties - non current	1,104,423	1,087,952
	Obligation under capital leases - related parties - non current	5,401,012	5,669,438
	Total Long Term Liabilities	6,505,435	6,757,390

TOTAL LIABILITIES		174,951,680	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 June 30, 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	158,546,826	156,124,507
	Accumulated other comprehensive income	19,265,930	16,275,626
	Total Stockholders' Equity	200,768,222	195,355,599
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$375,719,902	$443,864,161

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F - 1

CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN US DOLLARS)
(UNAUDITED)

		Three Months Ended June 30,		Six Months Ended June 30,
		2013	2012	2013	2012
Revenues
	Sales to customers	$ 169,642,962	$ 141,355,618	$ 347,814,352	$ 312,794,486
	Sales to related parties	11,083,472	4,216,751	21,275,779	9,806,531
	Total Revenues	180,726,434	145,572,369	369,090,131	322,601,017

Cost of Revenue
	Cost of Revenue - non-related parties	39,004,381	75,016,983	114,014,750	124,906,457
	Cost of Revenue - related parties	138,115,315	66,098,486	246,594,107	184,413,577
	Total Cost of Revenue	177,119,696	141,115,469	360,608,857	309,320,034

Gross Profit		3,606,738	4,456,900	8,481,274	13,280,983

Selling and General and Administrative Expenses
	Selling and General and Administrative Expenses - non-related parties	662,236	295,977	1,631,937	1,361,056
	Selling and General and Administrative Expenses - related parties	253,851	705,826	514,525	882,909
	Total Selling and General and Administrative Expenses	916,087	1,001,803	2,146,462	2,243,965

Income From Operations		2,690,651	3,455,097	6,334,812	11,037,018

Other Income (Expenses)
	Interest income	49,890	2,120	53,673	54,609
	Interest expense	(1,096,661)	(921,177)	(2,486,743)	(1,866,085)
	Interest expense - related parties	(171,772)	(323,521)	(341,630)	(1,286,589)
	Total Other Income (Expenses)	(1,218,543)	(1,242,578)	(2,774,700)	(3,098,065)

Income from operation before income tax		1,472,108	2,212,519	3,560,112	7,938,953
Provision for income tax		403,628	364,002	1,137,793	1,384,392
Net Income		1,068,480	1,848,517	2,422,319	6,554,561

	Earnings Per Share - Basic and Diluted	$ 0.01	$ 0.03	$ 0.03	$ 0.09
	Weighted Average Shares Outstanding - Basic and Diluted	73,620,391	73,595,428	73,620,391	73,568,597

Other Comprehensive Income:
	Foreign currency translation gain	2,376,889	(1,678,398)	2,990,304	(1,798,452)
Comprehensive Income		$ 3,445,369	$ 170,119	$ 5,412,623	$ 4,756,109

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F - 2

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.

Contact:

China Industrial Steel, Inc.
Delong Zhou - Chief Financial Officer
Phone +1-917-825-2997

SOURCE China Industrial Steel, Inc.