General Steel Announces Second Quarter 2010 Results
Total revenues increased approximately 23% year-over-year to $502 million
BEIJING, Aug. 6 /PRNewswire-Asia-FirstCall/ -- General Steel Holdings, Inc. ("General Steel" or "the Company") (NYSE: GSI), one of China's leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced its financial results for the second quarter ended June 30, 2010.
Second Quarter of 2010 Highlights
-- Total revenues increased 22.7% to $501.7 million from $408.9 million in
the second quarter of 2009
-- Aggregate shipment volume reached 1.01 million metric tons, an increase
of 6.8% year-over-year
-- Gross margin was 1.5%, compared to 1.3% in the previous quarter and
5.5% in the second quarter of 2009
-- On May 13, 2010, the Company entered into a Joint Venture Framework
Agreement with Shanxi Meijin Energy Group Co., Ltd.
First Half of 2010 Highlights
-- Total revenues increased 30.5% to a record $954.7 million from $731.7
million in the first half of 2009
-- Aggregate shipment volume reached 2.05 million metric tons, an increase
of 22.3% year-over-year
-- Gross margin was 1.4%, compared to 4.8% in the first half of 2009
"Demand continues to be robust," said General Steel's Chairman and Chief Executive Officer Henry Yu. "Located in central China, our largest subsidiary, Longmen Joint Venture, is relatively insulated from the slowdown in the real estate industry and allows us to continue benefiting from infrastructure development projects in western China. In fact, this year alone, there are over 235 construction and infrastructure projects scheduled to begin in Shaanxi province, including nine new railways, one new airport, the expansion of the Xi'an airport, two new ring subway systems and four new dams. These projects will take place over many years and drive our growth in the quarters and years to come. In the meantime, the industry continues to experience ups and downs as average selling prices and key input costs for iron ore and coking coal continue to fluctuate. Regardless, our focus is to continue vetting high-quality acquisition targets while putting an equal effort on controlling our costs and increasing profitability. The fundamentals of our business remain strong and I'm confident in our ability to deliver long-term shareholder value."
Selected Financial Results for the Second Quarter and First Half of 2010
Total revenues for the second quarter of 2010 increased 22.7% to $501.7 million from $408.9 million in the second quarter of 2009. Total revenues for the first half of 2010 increased 30.5% to $954.7 million from $731.7 million in the first half of 2009.
The increase in total revenues was predominantly due to an increase in both shipment volume and average selling prices for rebar at the Company's Longmen Joint Venture ("Longmen JV").
Cost of Sales
Total cost of sales for the second quarter of 2010 increased 27.9% to $494.3 million from $386.4 million in the second quarter of 2009. Total cost of sales for the first half of 2010 increased 35.2% to $941.6 million from $696.3 million in the first half of 2009. Cost of sales principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. The increase in cost of sales was primarily due to an increase in total revenues.
Gross Profit
Gross profit for the second quarter of 2010 decreased 67.3% year-over-year to $7.4 million from $22.5 million. Gross profit for the first half of 2010 decreased 63.0% year-over-year to $13.1 million from $35.4 million. Gross margin for the second quarter of 2010 was 1.5%, compared to 5.5% in the second quarter of 2009. Gross margin for the first half of 2010 was 1.4%, compared to 4.8% in the first half of 2009.
The Company noted that gross profit was adversely affected by declining average selling prices which fell from the middle of April to the end of June and the price of iron ore and coke, which remained relatively high during the second quarter of 2010.
Operating Expenses
Selling, general and administrative expenses for the second quarter of 2010 increased 43% to $13.7 million, compared to $9.6 million in the second quarter of 2009. Selling, general and administrative expenses for the first half of 2010 increased 37.8% to $25.8 million from $18.7 million in the first half of 2009. Selling, general and administrative expenses were 2.7% and 2.3% of total revenues in the second quarter of 2010 and 2009, respectively, and 2.7% and 2.6% of total revenues in the first half of 2010 and 2009, respectively. The Company noted that the increase is mainly due to higher transportation and agent charges at the Longmen Joint Venture following shipping volume increases.
Finance and interest expenses for the second quarter of 2010 were $16.5 million, compared to $11.3 million in the second quarter of 2009. Finance and interest expenses for the first half of 2010 were $27.4 million, compared to $14.2 million in the first half of 2009. The Company noted that the year-over- year increases were caused by a combination of additional finance and interest expenses and gains on a change in fair value of derivative liabilities.
Net Income
Net loss attributable to General Steel Holdings, Inc. for the second quarter of 2010 was $2.1 million compared to a net loss of $31.8 million in the second quarter of 2009. Net loss attributable to General Steel Holdings, Inc. for the first half of 2010 was $7.6 million compared to net loss of $24.5 million in the first half of 2009.
Basic and diluted losses per share for the second quarter of 2010 were $0.041 compared to basic and diluted losses per share of $0.80 in the second quarter of 2009. Basic and diluted losses per share for the first half of 2010 were $0.15 compared to basic and diluted losses per share of $0.64 in the first half of 2009.
Balance Sheet
As of June 30, 2010, General Steel had cash and restricted cash of $320.4 million, compared to $274.2 million as of December 31, 2009. Accounts receivable was $21.4 million as of June 30, 2010, compared to $8.5 million as of December 31, 2009. Convertible notes payable increased to $1.3 million as of June 30, 2010, compared to $1.1 million as of December 31, 2009.
The Company had an inventory balance of $281.3 million as of June 30, 2010 compared to $208.1 million on December 31, 2009. This balance is comprised of raw materials and finished products.
On August 5, 2010, remaining notes outstanding from the Company's December 13, 2007 private placement have been converted into a total of 1,559,675 shares of Common Stock.
As of today, all of the convertible promissory notes issued on December 13, 2007 have now been converted into Common Stock.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on August 6, 2010 (8:00 p.m. Beijing/Hong Kong Time on August 6, 2010). Management will discuss results and highlights from the quarter and answer questions. The dial-in number and passcode for the conference call are as follows:
U.S. Toll Free: +1-800-860-2442
Passcode: General Steel Holdings
The conference call will be broadcast live over the Internet and can be accessed by clicking the following link: http://www.corpasia.net/cancast/us/index.php?id=usGSI_1&version=e
Additionally, an archived Web cast of this call will be available on General Steel's website at http://www.gshi-steel.com .
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 6.3 million metric tons aggregate production capacity, its companies serve various industries and produce a variety of steel products including rebar, hot-rolled carbon and silicon sheet, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit http://www.gshi-steel.com .
Information Regarding Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations or beliefs about future events and financial, political and social trends and assumptions it has made based on information currently available to it. The Company cannot assure that any expectations, forecasts or assumptions made by management in preparing these forward-looking statements will prove accurate, or that any projections will be realized. Such forward-looking statements may be affected by inaccurate assumptions or by known or unknown risks or uncertainties. Actual results may vary materially from those expressed or implied by the statements herein. For factors that could cause actual results to vary, perhaps materially, from these forward-looking statements, please refer to the Company's Form 10-K, filed with the Securities and Exchange Commission, and other subsequent filings. Forward-looking statements contained herein speak only as of the date of this release. The Company does not undertake any obligation to update or revise publicly any forward-looking statements, whether to reflect new information, future events or otherwise.
For investor and media inquiries, please contact:
In China:
Ms. Jing Ou-Yang
General Steel Holdings, Inc.
Tel: +86-10-5879-7346
Email: [email protected]
Mr. Justin Knapp
Ogilvy Financial, Beijing
Tel: +86-10-8520-6556
Email: [email protected]
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
Email: [email protected]
GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2010 AND DECEMBER 31, 2009
(In thousands, except per share data)
ASSETS
June 30, December 31,
2010 2009
(Unaudited)
CURRENT ASSETS:
Cash $50,772 $82,118
Restricted cash 269,670 192,041
Notes receivable 56,355 29,185
Restricted notes receivable 24,324
Accounts receivable, net 20,759 8,525
Accounts receivable - related party 734
Other receivables, net 8,887 5,357
Other receivables - related parties 30,556 32,670
Dividend receivable 5,940 2,372
Inventories 281,276 208,087
Advances on inventory purchase 40,085 28,407
Advances on inventory purchase -
related parties 8,798 2,995
Prepaid expense 5,409 690
Prepaid value added tax 17,075 19,488
Deferred tax assets 8,775 3,341
Total current assets 829,415 615,276
PLANT AND EQUIPMENT, net 566,202 555,111
OTHER ASSETS:
Advances on equipment purchase 18,618 8,419
Investment in unconsolidated
subsidiaries 12,751 20,022
Long-term deferred expense 2,069
Intangible assets, net of
accumulated amortization 23,400 23,733
Note issuance cost 392 406
Plant and equipment to be disposed 2,800 3,026
Total other assets 57,961 57,675
TOTAL ASSETS $1,453,578 $1,228,064
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short term notes payable $388,080 $254,608
Accounts payable 194,478 158,126
Accounts payable - related parties 85,128 48,151
Short term loans - bank 177,404 148,968
Short term loans - others 97,902 110,358
Short term loans - related parties -- 11,751
Other payables and accrued
liabilities 19,769 16,222
Other payable - related parties 24,085 3,706
Customer deposit 186,589 208,765
Customer deposit - related parties 28,514 3,791
Deposit due to sales representatives 67,884 49,544
Taxes payable 6,020 6,921
Distribution payable to former
shareholders 12,862 16,434
Total current liabilities 1,288,715 1,037,345
CONVERTIBLE NOTES PAYABLE, net of
debt discount of $2,019 and $2,250
as of June 30, 2010 and December 31,
2009, respectively 1,281 1,050
DERIVATIVE LIABILITIES 8,672 23,340
Total liabilities 1,298,668 1,061,735
COMMITMENT AND CONTINGENCIES
EQUITY:
Preferred stock, $0.001 par value,
50,000,000 shares authorized,
3,092,899 shares issued and
outstanding as of June 30, 2010
and December 31, 2009, respectively 3 3
Common Stock, $0.001 par value,
200,000,000 shares authorized,
52,952,508 and 51,618,595 shares
issued and outstanding as of June
30, 2010 and December 31, 2009,
respectively 53 52
Paid-in-capital 99,498 95,588
Statutory reserves 6,541 6,162
Accumulated deficits (24,047) (16,412)
Accumulated other comprehensive
income 8,398 8,336
Total shareholders' equity 90,446 93,729
NONCONTROLLING INTERESTS 64,465 72,598
Total equity 154,911 166,327
TOTAL LIABILITIES AND EQUITY $1,453,578 $1,228,062
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2010 2009 2010 2009
REVENUES $383,173 $324,461 $700,801 $586,875
REVENUES - RELATED PARTIES 118,506 84,486 253,901 144,866
TOTAL REVENUES 501,679 408,947 954,702 731,741
COST OF REVENUES 369,437 301,849 687,013 553,851
COST OF REVENUES - RELATED
PARTIES 124,882 84,599 254,596 142,469
TOTAL COST OF REVENUES 494,319 386,448 941,609 696,320
GROSS PROFIT 7,360 22,499 13,093 35,421
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 13,677 9,564 25,818 18,732
(LOSS) INCOME FROM
OPERATIONS (6,317) 12,935 (12,725) 16,689
OTHER INCOME(EXPENSE)
Interest income 617 764 1,737 1,642
Finance/interest
expense (16,464) (11,309) (27,427) (14,247)
Change in fair value
of derivative
liabilities 10,729 (26,726) 14,668 (22,611)
Gain from debt
extinguishment -- -- -- 2,930
Government grant -- -- -- 3,520
Income from equity
investments 3,074 2,753 4,756 2,698
Other non-operating
income, net 571 142 567 652
Total other
expense, net (1,473) (34,376) (5,699) (25,416)
LOSS BEFORE PROVISION FOR
INCOME TAXES AND
NONCONTROLLING INTEREST (7,790) (21,442) (18,424) (8,728)
PROVISION FOR INCOME TAXES
Current (5,093) 3,230 (4,472) 3,394
Deferred 2,253 (1,222) (335) --
Total (benefit)
provision for
income taxes (2,840) 2,008 (4,807) 3,394
NET LOSS BEFORE
NONCONTROLLING INTEREST (4,950) (23,450) (13,617) (12,122)
Less: Net (Loss) income
attributable to
noncontrolling interest (2,822) 8,340 (5,982) 12,333
NET LOSS ATTRIBUTABLE TO
CONTROLLING INTEREST (2,128) (31,790) (7,635) (24,455)
OTHER COMPREHENSIVE INCOME
(LOSS)
Foreign currency
translation
adjustments 361 163 62 (14)
Comprehensive income
(loss) attributable
to noncontrolling
interest (1) (1,031) 164 (1,106)
COMPREHENSIVE LOSS $(1,768) $(32,658) $(7,409) $(25,575)
WEIGHTED AVERAGE NUMBER
OF SHARES
Basic & Diluted 52,111,605 39,533,099 51,883,491 37,918,177
LOSS PER SHARE
Basic & Diluted $(0.04) $(0.80) $(0.15) $(0.64)
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
(In thousands, except per share data)
Six months ended June 30,
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss attributable to controlling
interest $(7,635) $(24,455)
Net (loss) income attributable to
noncontrolling interest (5,982) 12,333
Consolidated net loss (13,617) (12,122)
Adjustments to reconcile net loss to
cash (used in) provided by
operating activities:
Depreciation and amortization 19,334 13,478
Debt extinguishment (2,930)
Inventory written-off 6,528
Impairment of long-lived assets 1,733
(Gain) Loss on disposal of equipment 123 (3,431)
Stock issued for services and
compensation 1,507 636
Make whole shares interest expense
on notes conversion 6,455
Income from investment (4,756) (2,699)
Amortization of deferred note
issuance cost and discount on
convertible notes 13 43
Change in fair value of derivative
instrument (14,668) 22,612
Deferred tax assets (5,501) 2,166
Changes in operating assets and
liabilities
Notes receivable (26,939) 4,915
Accounts receivable (12,047) (7,924)
Accounts receivable - related parties (1,015) 0
Other receivables (1,570) (362)
Other receivables - related parties 2,300 (14,993)
Inventories (85,941) (84,204)
Advances on inventory purchases (11,512) 11,271
Advances on inventory purchases -
related parties (5,431) (13,021)
Accounts payable 35,734 59,067
Accounts payable - related parties 37,605 15,283
Other payables and accrued liabilities 2,426 19,183
Other payables - related parties 20,495 15,749
Customer deposits (20,269) 16,160
Customer deposits - related parties 25,081 (3,574)
Taxes payable 4,966 (12,769)
Net cash (used in) provided by
operating activities (45,421) 28,990
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquired long term investment (1,273) (6,593)
Cash proceeds from disposal of long-
term investment 3,667
Dividend receivable (1,554)
Long term other receivables 1,215
Deposits due to sales
representatives 18,663 31,933
Cash proceeds from sales of
equipment 60 4,414
Advance on equipment purchases (10,268) 3,065
Equipments purchase and intangible
assets (29,240) (60,388)
Payments to original shareholders (2,460)
Net cash used in investing
activities (22,405) (26,354)
CASH FLOWS FINANCING ACTIVITIES:
Restricted cash (76,526)
Notes receivable - restricted (24,223) (69,727)
Borrowings on short term loans -
bank 133,196 72,816
Payments on short term loans - bank (105,485) (43,353)
Borrowings on short term loan -
others 72,083 79,354
Payments on short term loans -
others (89,878) (63,899)
Payments on short term loans -
others-related parties (4,401) 2,931
Borrowings on short term notes
payable 408,476 371,614
Payments on short term notes payable (276,594) (303,327)
Net cash provided by financing
activities 36,648 46,409
EFFECTS OF EXCHANGE RATE CHANGE IN CASH (168) (9)
(DECREASE) INCREASE IN CASH (31,346) 49,036
CASH, beginning of period 82,118 14,895
CASH, end of period $50,772 $63,931
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except per share data)
Preferred stock Common stock
Paid-in
Shares Par value Shares Par value capital
BALANCE, December
31, 2008 3,092,899 $3.00 36,128,833 $36.00 $37,129
Net loss
attributable to
controlling
interest
Net income
attributable to
noncontrolling
interest
Disposal of
subsidiaries
Distribution of
dividend to
noncontrolling
shareholders
Adjustment to
statutory reserve
Common stocks
issued for
compensation 216,000 0.22 498
Common stock issued
for interest
payment 152,240 0.15 558
Common stock issued
for repayment of
debt 300,000 0.30 1,800
Common stock
transferred by CEO
for compensation 138
Notes converted to
common stock 5,104,596 5.11 24,125
Make whole shares
issued on notes
conversion 1,399,759 1.40 5,565
Reduction of
Registered Capital
Foreign currency
translation
adjustments
BALANCE, June 30,
2009, unaudited 3,092,899 $3.00 43,301,428 $43.00 $69,813
Net loss
attributable to
controlling
interest
Net income
attributable to
noncontrolling
interest
Distribution of
dividend to
noncontrolling
shareholders
Adjustment to
statutory reserve
Common stock issued
for compensation 380,650 0.55 1,377
Common stock issued
for interest
payments 44,065 0.05 187
Common stock
transferred by CEO
for compensation 138
Notes converted to
common stock 1,940,678 1.95 7,947
Make whole shares
issued on notes
conversion 396,218 0.40 1,520
Common stock issued
for private
placement 5,555,556 5.56 14,606
Foreign currency
translation
adjustments
BALANCE, December
31, 2009 3,092,899 $3.00 51,618,595 $51.51 $95,588
Net loss
attributable to
controlling
interest
Net loss
attributable to
noncontrolling
interest
Distribution of
dividend to
noncontrolling
shareholders
Noncontrolling
interest acquired
Adjustment to
special reserve
Common stock issued
for compensation 405,750 0.41 1,369
Common stock issued
for repayment of
debt 928,163 0.93 2,403
Common stock
transferred by CEO
for compensation 138
Foreign currency
translation
adjustments
BALANCE, June 30,
2010, unaudited 3,092,899 $3.00 52,952,508 $52.84 $99,498
Retained earnings /
Accumulated deficits
Statutory Contribution
reserves Unrestricted receivable
BALANCE, December 31, 2008 $4,902 $10,092 $(960)
Net loss attributable to
controlling interest (24,455)
Net income attributable to
noncontrolling interest
Disposal of subsidiaries
Distribution of dividend to
noncontrolling shareholders
Adjustment to statutory reserve 260 (260)
Common stocks issued for
compensation
Common stock issued for interest
payment
Common stock issued for repayment
of debt
Common stock transferred by CEO
for compensation
Notes converted to common stock
Make whole shares issued on notes
conversion
Reduction of Registered Capital 960
Foreign currency translation
adjustments
BALANCE, June 30, 2009, unaudited $5,162 $(14,623) $0
Net loss attributable to
controlling interest (789)
Net income attributable to
noncontrolling interest
Distribution of dividend to
noncontrolling shareholders
Adjustment to statutory reserve 1,000 (1,000)
Common stock issued for
compensation
Common stock issued for interest
payments
Common stock transferred by CEO
for compensation
Notes converted to common stock
Make whole shares issued on notes
conversion
Common stock issued for private
placement
Foreign currency translation
adjustments
BALANCE, December 31, 2009 $6,162 $(16,412) $0
Net loss attributable to
controlling interest (7,635)
Net loss attributable to
noncontrolling interest
Distribution of dividend to
noncontrolling shareholders
Noncontrolling interest acquired
Adjustment to special reserve 379
Common stock issued for
compensation
Common stock issued for repayment
of debt
Common stock transferred by CEO
for compensation
Foreign currency translation
adjustments
BALANCE, June 30, 2010, unaudited $6,541 $(24,047) $0
Accumulated other Noncon-
comprehensive trolling
income interest Totals
BALANCE, December 31, 2008 $8,705 $54,330 $114,237
Net loss attributable to
Controlling interest (24,455)
Net income attributable to
noncontrolling interest 12,333 12,333
Disposal of subsidiaries (293) (293)
Distribution of dividend to
noncontrolling shareholders (556) (556)
Adjustment to statutory reserve 0
Common stocks issued for
compensation 498
Common stock issued for interest
payment 558
Common stock issued for repayment
of debt 1,800
Common stock transferred by CEO
for compensation 138
Notes converted to common stock 24,130
Make whole shares issued on notes
conversion 5,566
Reduction of Registered Capital 960
Foreign currency translation
adjustments (14) (1,106) (1,120)
BALANCE, June 30, 2009, unaudited $8,691 $64,708 $133,797
Net loss attributable to
controlling interest (789)
Net income attributable to
noncontrolling interest 9,230 9,230
Distribution of dividend to
noncontrolling shareholders (2,749) (2,749)
Adjustment to statutory reserve 0
Common stock issued for
compensation 1,378
Common stock issued for interest
payments 187
Common stock transferred by CEO
for compensation 138
Notes converted to common stock 7,949
Make whole shares issued on notes
conversion 1,520
Common stock issued for private
placement 14,612
Foreign currency translation
adjustments (355) 1,409 1,054
BALANCE, December 31, 2009 $8,336 $72,598 $166,327
Net loss attributable to
controlling interest (7,635)
Net loss attributable to
noncontrolling interest (5,982) (5,982)
Distribution of dividend to
noncontrolling shareholders (1,045) (1,045)
Noncontrolling interest acquired (1,270) (1,270)
Adjustment to special reserve 379
Common stock issued for
compensation 1,369
Common stock issued for repayment
of debt 2,404
Common stock transferred by CEO
for compensation 138
Foreign currency translation
adjustments 62 164 226
BALANCE, June 30, 2010, unaudited $8,398 $64,465 $154,911
SOURCE General Steel Holdings, Inc.
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