China Industrial Steel, Inc. Reports Third Quarter 2013 Financial Result

Growth In Revenue and Net Income Reflect China's Increased Demand For Steel

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Nov 15, 2013, 11:57 ET

NEW YORK, Nov. 15, 2013 /PRNewswire/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the three months ended September 30, 2013. The Company filed its Form 10-Q with the Securities and Exchange Commission on November 14, 2013.

Liu Shenghong, Chief Executive Officer and Chairman of the Company commented on the Company's performance, "China Industrial Steel's continued growth stems from increasing market demand. Our ability to generate improved revenue and net income despite the lingering pressure on the average unit sales price of our steel products, reflects the strength of our sales and marketing team as well as the efficiency of our production and distribution channels. I am confident that these efforts will continue to positively impact our financial performance going forward, most notably as pricing returns to prior levels."

Highlights of 2013 Third Quarter Financials

Revenues increased 11% to $188 million in the three months ended September 30, 2013 from $169 million for the same period in 2012.
Steel products tonnage sales up 12% for the quarter ended September 30, 2013, to 390,234 metric tons as compared to 346,977 metric tons in the same period of 2012.
Net Income for the three months ended September 30, 2013, was $2,763,622, as compared to a loss of $3,748,289 for the same period in 2012.
Earnings Per Share were $0.04 for the third quarter 2013, versus a loss of $0.05 for the third quarter 2012.

Total revenue from sales in the three months ended September 30, 2013 were $188,594,415, an increase of $19,044,199, or 11% compared to $169,550,216 in the comparable period of 2012. The increase in sales was mainly due to the increase in sales of steel plates, offset by the decrease in sales of steel wires and steel billets. The Company sold 390,234 metric tons steel products in the three months ended September 30, 2013, an increase of 43,257 metric tons, or 12%, compared to 346,977 metric tons in the same period of 2012; the average unit sales price was $472 per ton, a decrease of $6, or 1%, compared to $478 per ton in the comparable period of 2012.

Net income for the three months ended September 30, 2013 was $2,763,622 as compared to a loss of $3,748,280 in the comparable period of 2012. The increase in net income in the three months ended September 30, 2013 was mainly due to the increases in the sales quantity and unit sales price of steel plate and a decrease in unit cost.

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

		September 30		December 31,
		2013		2012
ASSETS
Current Assets:
	Cash	$	2,380,671	$	1,710,887
	Bank notes receivable		2,271,305		979,111
	Accounts receivables, net		13,677,181		9,639,396
	Accounts receivables - related parties		4,781,683		-
	Inventories, net		18,187,580		11,585,277
	Advances to suppliers, net		15,308,589		2,372,693
	VAT recoverable		29,931,075		32,208,807
	Advances to related parties		124,317,700		183,797,203
	Deferred income tax assets		611,254		-
	Other current asset		163,400		3,884,342
	Total Current Assets		211,630,438		246,177,716

Machinery and Equipment, Net			110,626,078		101,450,993
Machinery and Equipment - acquired from related parties, Net			80,051,427		85,471,360
	Total Machinery and Equipment, Net		190,677,505		186,922,353


Other Assets:
	Restricted cash		5,882,400		5,778,360
	Land use rights and buildings under capital leases		4,553,077		4,985,732
	Total Other Assets		10,435,477		10,764,092

TOTAL ASSETS		$	412,743,420	$	443,864,161

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
	Accounts payable	$	55,941,601	$	92,228,161
	Accounts payable - related parties		3,747,798		1,833,558
	Accrued liabilities		2,783,099		3,123,315
	Taxes payables		1,564,983		2,427
	Bank loans payable		22,549,200		26,034,722
	Bank notes payable		5,392,200		5,296,830
	Equipment loan payable - related parties - current		2,936,862		2,884,919
	Current obligations under capital leases - related parties - current		698,029		648,893
	Short term loan payable - related party		163,400		802,550
	Customer financing		19,117,800		31,620,470
	Advances from customers		87,399,776		77,275,327
	Total Current Liabilities		202,294,748		241,751,172

Long Term Liabilities:
	Equipment loan payables - related parties - non current		1,107,541		1,087,952
	Obligation under capital leases - related parties - non current		5,238,631		5,669,438
	Total Long Term Liabilities		6,346,172		6,757,390

TOTAL LIABILITIES			208,640,920		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 September 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		161,310,448		156,124,507
	Accumulated other comprehensive income		19,836,586		16,275,626
	Total Stockholders' Equity		204,102,500		195,355,599
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	412,743,420	$	443,864,161

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

		Three Months Ended September 30,				Nine Months Ended September 30,
			2013		2012		2013		2012
Revenues
	Sales to customers	$	182,482,721	$	162,539,814	$	530,297,073	$	475,334,300
	Sales to related parties		6,111,694		7,010,402		27,387,473		16,816,933
	Total Revenues		188,594,415		169,550,216		557,684,546		492,151,233

Cost of Revenue
	Cost of Revenue - non-related parties		87,889,927		72,622,372		201,904,677		197,528,829
	Cost of Revenue - related parties		94,027,016		99,305,592		340,621,123		283,719,169
	Total Cost of Revenue		181,916,943		171,927,964		542,525,800		481,247,998

Gross Profit			6,677,472		(2,377,748)		15,158,746		10,903,235

	Selling and General and Administrative Expenses
	Selling and General and Administrative Expenses - non-related parties		1,598,783		579,364		3,230,720		1,940,420
	Selling and General and Administrative Expenses - related parties		257,757		165,787		772,282		1,048,696
	Total Selling and General and Administrative Expenses		1,856,540		745,151		4,003,002		2,989,116

Income From Operations			4,820,932		(3,122,899)		11,155,744		7,914,119

Other Income (Expenses)
	Interest and other income		55,592		137,276		109,265		191,885
	Interest expense		(847,765)		(584,983)		(3,334,508)		(2,451,068)
	Interest expense - related parties		(172,575)		(177,674)		(514,205)		(1,464,263)
	Total Other Income (Expenses)		(964,748)		(625,381)		(3,739,448)		(3,723,446)

Income from operation before income tax			3,856,184		(3,748,280)		7,416,296		4,190,673
Provision for income tax			1,092,562		-		2,230,355		1,384,392
Net Income			2,763,622		(3,748,280)		5,185,941		2,806,281

	Earnings Per Share - Basic and Diluted	$	0.04	$	(0.05)	$	0.07	$	0.04
	Weighted Average Shares Outstanding - Basic and Diluted		73,620,391		73,620,391		73,620,391		73,585,924

Other Comprehensive Income:
	Foreign currency translation gain		570,656		2,042,302		3,560,960		243,850
Comprehensive Income		$	3,334,278	$	(1,705,978)	$	8,746,901	$	3,050,131

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.

China Industrial Steel, Inc.
www.chinaindustrialsteel.com

For more information, please contact:

Delong Zhou
Chief Financial Officer
Phone +1-917-825-2997

SOURCE China Industrial Steel, Inc.