China Precision Steel Announces Third Quarter Fiscal 2010 Results
SHANGHAI, May 18 /PRNewswire-Asia/ -- China Precision Steel, Inc. (Nasdaq: CPSL) ("China Precision Steel" or the "Company"), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its fiscal 2010 third quarter results for the period ended March 31, 2010.
Third Quarter Highlights
-- Revenue increased 293.4% year-over-year to a company record
$30.0 million
-- Sold a company record 36,953 total tons
-- Gross profit was $3.4 million with gross margin of 11.4%
-- Net profit was $2.0 million versus a net loss of $3.5 million in third
quarter 2009
-- Fully diluted earnings per share were $0.04
-- Backlog of $36.8 million as of March 31, 2010
"We are excited to have achieved a company record quarter in terms of sales volume and revenue as we continue to see a strengthening demand for our precision steel products from the domestic and international markets," commented Mr. Hai Sheng Chen, China Precision Steel's CEO. "Our strong sales volume this quarter is the result of bringing our new mill on line at the beginning of the quarter combined with an increase in orders across all product segments. The strong demand we experienced during the quarter was built on the foundation of a 60% increase of customer base during the 2009 fiscal year and longer-term customers ramping up their orders."
Revenue for the third quarter of fiscal 2010 was a company record $30.0 million, up 293.4% from revenue in the third quarter of fiscal 2009 of $7.6 million. The increase in revenue was mainly attributed to the rebound in overall demand as a result of the improving domestic and global economic conditions. Total sales volume in the third quarter was a company record 36,953 tons, up 236% from total sales volume of 11,000 in the third quarter of 2009. Average selling price per ton was $812, up 17% from $693 in the third quarter of fiscal 2009. The increase in average selling price is in line with the overall increase in global steel prices. High carbon and low carbon sales accounted for 23.1% and 63.0% of total sales, respectively, compared to 31.3% and 64.7%, respectively, in the third quarter of fiscal 2009. Exports represented 13.6% of total sales for the quarter.
Gross profit in the third quarter was $3.4 million, up from a gross loss of $2.0 million in the same period a year ago. Gross margin was 11.4% compared to (26.0%) in the third quarter of fiscal 2009.
Selling expenses for the third quarter of fiscal 2010 were $124,589, or 0.4% of revenue, compared to $298,492, or 3.9% of revenue, in the third quarter of fiscal 2009. The decrease in selling expense was a result of decreased export sales commission costs incurred period-on-period. Administrative expenses were $773,102, or 2.6% of revenue, compared to $541,251, or 7.1% of revenue. The increase in dollar amount of administrative expense was due to an increase in salaries and wages and traveling expenses during the third quarter of fiscal 2010.
Operating income for the quarter was $2.5 million, compared to an operating loss of $2.9 million in the third quarter of fiscal 2009.
Net income for the third quarter of fiscal 2010 was $2.0 million, compared to a net loss of $3.5 million for the third quarter of fiscal 2009. Fully diluted earnings per share were $0.04 compared to fully diluted loss per share of $0.08 in the same period a year ago.
Nine Months Financial Results
Revenue for the first nine months of fiscal 2010 was $74.0 million, up 46.5% from $50.5 million in the same period a year ago. Gross profit was $7.8 million, up 43.3% from gross profit of $5.4 million for the nine months of fiscal 2009. Gross margin was 10.5% compared to 10.7% for the comparable period a year ago. Operating income was $5.2 million compared to an operating loss of $1.7 million in the first nine months of fiscal 2009. Net income was $4.3 million compared to a net loss of $2.6 million in the same period a year ago. Fully diluted earnings per share were $0.09 compared to fully diluted loss per share of $0.06 in the first nine months of fiscal 2009.
Financial Conditions
As of March 31, 2010, China Precision Steel had $12.7 million in cash and cash equivalents, no long term debt, total liabilities of $46.0 million and working capital of $46.0 million. Net cash provided by operating activities for the first nine months of fiscal 2010 was $0.7 million. Stockholders' equity stood at $125.0 million compared to $120.6 million as of June 30, 2009.
Recent Events
Mr. Hai Sheng Chen was appointed as the Company's new Chief Executive Officer and Mr. Zu De Jiang as the Company's new Chief Operating Officer, effective as of May 1, 2010. Dr. Wo Hing Li stepped down from the role of Chief Executive Officer but remains with China Precision Steel as the Chairman of the Company's Board of Directors.
Business Outlook
China Precision Steel continues to expand its production capacity with the new mill that began production in January 2010. The Company expects to increase its total annual production capacity from 120,000 tons to 160,000 tons during the first year of operation and ultimately to 220,000 tons when the new mill reaches its full design capacity in the next three to four years. China Precision Steel expects to incur an additional $900,000 in capital expenditure for the completion of the new mill and annealing furnaces.
"While some risk remains in the global market and steel industry, we are optimistic about our near-term growth. With the addition of our third mill and the continued increase in demand for our precision steel products, especially in the domestic market, we believe that we are well positioned to continue experiencing healthy revenue and net income growth," commented Mr. Chen. "Specifically, as of March 31, 2010, we had a backlog of $36.8 million which is expected to be delivered over the next three to four months and our total production capacity is expected to increase by one third to 160,000 tons by the end of calendar 2010."
About China Precision Steel, Inc.
China Precision Steel, Inc. is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel's high precision, ultra-thin, high strength (7.5 mm to 0.05 mm) cold- rolled steel products are mainly used in the production of automotive components, food packaging materials, saw blades and textile needles. The Company primarily sells to manufacturers in the People's Republic of China and overseas markets such as Nigeria, Thailand, Indonesia and the Philippines. China Precision Steel was incorporated in 2002 and is headquartered in Sheung Wan, Hong Kong. Additional information can be found at the Company's website http://chinaprecisionsteelinc.com .
Conference Call
China Precision Steel will host a conference call on Tuesday, May 18, 2010 at 10:00 a.m. Eastern Time to discuss fiscal 2010 third quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 888-419-5570. International callers should dial 617-896-9871. When prompted by the operator, mention conference passcode 37492912.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Tuesday, May 18, 2010 at 12:00 p.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 12863730. International callers should dial 617-801-6888 and enter the same passcode.
This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.chinaprecisionsteelinc.com . Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.
Forward-Looking Statements
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:
Certain statements in this press release and oral statements made by China Precision Steel on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding China Precision Steel's ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion, predictions about improvements in the global economy and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, such as business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which China Precision Steel is engaged; cyclicality of steel consumption including overcapacity and decline in steel prices, limited availability of raw material and energy may constrain operating levels and reduce profit margins, environmental compliance and remediation could result in increased cost of capital as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
For further information, please contact:
China Precision Steel
Dan Carlson, Non-Executive Director
Email: [email protected]
Elite IR
Leslie J. Richardson, Partner
Tel: +852-3183-0283
Email: [email protected]
China Precision Steel, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
March 31, June 30,
2010 2009
Assets
Current assets
Cash and cash equivalents $12,734,971 $13,649,587
Accounts receivable
Trade, net of allowances of
$1,007,135 and $830,127 at March 31,
2010 and June 30, 2009, respectively 26,857,342 25,140,834
Bills receivable 114,271 6,131,143
Other 811,960 881,153
Inventories 32,431,034 16,275,070
Prepaid expenses 274,153 75,917
Advances to suppliers, net of
allowance of $1,632,705
and$1,631,557 at March 31, 2010 and
June 30, 2009, respectively 18,846,246 21,878,047
Total current assets 92,069,977 84,031,751
Property, plant and equipment
Property, plant and equipment, net 71,409,799 46,812,484
Deposits for building, plant and
machinery -- 8,348,496
Construction-in-progress 5,661,802 22,245,173
Total Property, plant and equipment 77,071,601 77,406,153
Intangible assets, net 1,841,986 1,871,211
Goodwill 99,999 99,999
Total assets $171,083,563 $163,409,114
Liabilities and Stockholders' Equity
Current liabilities
Short-term loans $25,796,145 $22,489,031
Accounts payable and accrued
liabilities 5,887,906 7,144,242
Advances from customers 6,989,121 1,742,944
Other taxes payables 2,096,594 6,650,668
Current income taxes payable 5,300,626 4,778,767
Total current liabilities 46,070,392 42,805,652
Stockholders' equity:
Preferred stock: $0.001 per value,
8,000,000 shares authorized, no
shares outstanding at March 31, 2010
and June 30, 2009, respectively -- --
Common stock: $0.001 par value,
62,000,000 shares authorized,
46,562,955 and 46,562,955 issued and
outstanding at March 31, 2010 and
June 30, 2009, respectively 46,563 46,563
Additional paid-in capital 75,642,383 75,642,383
Accumulated other comprehensive
income 9,815,513 9,731,505
Retained earnings 39,508,611 35,183,011
Total stockholders' equity 125,013,171 120,603,462
Total liabilities and stockholders'
equity $171,083,563 $163,409,114
China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three and Nine Months Ended March 31, 2010 and 2009
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31, March 31, March 31,
2010 2009 2010 2009
Sales revenues 29,990,596 7,623,209 74,046,423 50,547,587
Cost of goods sold 26,560,721 9,605,252 66,277,234 45,125,635
Gross profit/(loss) 3,429,875 (1,982,043) 7,769,189 5,421,952
Selling expenses 124,589 298,492 227,003 1,632,322
Administrative expenses 773,102 541,251 2,005,841 1,581,456
Allowance for bad and
doubtful debts 16 672 218,200 3,830,134
Depreciation and
amortization expense 37,857 33,624 118,350 93,145
Total operating expenses 935,564 874,039 2,569,394 7,137,057
Income/(loss) from
operations 2,494,311 (2,856,082) 5,199,795 (1,715,105)
Other income/(expense)
Other revenues 9,790 76,556 120,753 336,257
Interest and finance
costs (171,928) (257,123) (675,362) (905,305)
Total other (expense) (162,138) (180,567) (554,609) (569,048)
Net income/(loss) from
operations before
income tax 2,332,173 (3,036,649) 4,645,186 (2,284,153)
Current 320,819 481,804 319,586 333,547
Deferred -- -- -- --
Total income tax expense 320,819 481,804 319,586 333,547
Net income/(loss) $2,011,354 $(3,518,453) $4,325,600 $(2,617,700)
Basic earnings/(loss)
per share $0.04 $(0.08) $0.09 $(0.06)
Basic weighted average
shares outstanding 46,562,955 46,562,953 46,562,955 46,560,656
Diluted earnings/(loss)
per share $0.04 $(0.08) $0.09 $(0.06)
Diluted weighted average
shares outstanding 46,562,955 46,562,953 46,562,955 46,560,656
China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2010 and 2009
(Unaudited)
2010 2009
Cash flows from operating activities
Net income/(loss) $4,325,600 $(2,617,700)
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 3,850,697 2,746,541
Allowance for bad and doubtful debts 218,200 3,830,134
Inventory impairment 42,537 --
Net changes in assets and
liabilities:
Accounts receivable, net 4,173,882 11,360,509
Inventories (16,187,073) (4,732,832)
Prepaid expenses (198,228) (73,753)
Advances to suppliers 3,047,186 7,642,844
Accounts payable and accrued expenses (1,261,253) (2,058,293)
Advances from customers 5,244,952 (3,433,313)
Other taxes payable (3,062,421) (458,015)
Current income taxes 518,499 (9,841)
Net cash provided by operating
activities 712,578 12,196,281
Cash flows from investing activities
Deposit for plant and machinery -- (8,048,466)
Purchase of land use rights -- (786,643)
Purchase of property, plant and
equipment including construction in
progress (4,927,077) (16,654,654)
Net cash (used in) investing
activities (4,927,077) (25,489,763)
Cash flows from financing activities
Exercise of common stock warrants -- 269,985
Short-term loan proceeds 3,735,771 --
Repayments of short-term loans (444,471) (87,801)
Net cash provided by financing
activities 3,291,300 182,184
Effect of exchange rate 8,483 112,262
Net (decrease) in cash (914,616) (12,999,036)
Cash and cash equivalents, beginning
of period 13,649,587 18,568,842
Cash and cash equivalents, end of
period $12,734,971 $5,569,806
SOURCE China Precision Steel, Inc.
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