General Steel Reports First Quarter 2014 Financial Results

BEIJING, May 15, 2014 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), a leading non-state-controlled steel producer in China, today announced its financial results for the first quarter ended March 31, 2014. The Company will file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 with the United States Securities and Exchange Commission following market close on Thursday, May 15, 2014.

"The first quarter of 2014 was widely viewed as the 'coldest winter' for China's iron and steel industry since 2010, which caused a sharp drop in the market price," said Henry Yu, Chairman and Chief Executive Officer of General Steel, "Despite the challenging industry dynamics, demand of our rebar products in Western China remained solid, as our sales volume grew by 14.2% sequentially during the quarter. At the same time, our fully-ramped continuous rolling capacity and enhanced operating efficiencies combined to improve gross margin by 220 basis points compared with the prior quarter."

"We remain confident in our roadmap to regain healthier profits in the second half of 2014. We are seeing a leveling of the average selling price for rebar and a lower average cost for iron ore thus far in the second quarter. Additionally, this April, we signed our first direct supply agreement with Rio Tinto, which we believe will further lower our sourcing costs and ensure timely delivery of the highest quality imported iron ore. In view of the improved pricing environment and the central government's ongoing efforts to reduce pollution and balance steel supply in China, we remain optimistic of a turnaround in our marketplace and thereby our business fundamentals," Mr. Yu concluded.

John Chen, Chief Financial Officer of General Steel, commented, "As we anticipate an imminent rebound in the marketplace, we continue to focus on enhancing our supply chain, production planning and inventory management. We also continue to control operating expenses, manage finance expenses, and enhance funding flexibility. With our improved operational efficiencies, we are confident General Steel is well positioned for sustainable growth and profitability when the industry turns around."

First Quarter 2014 Financial Information

• Sales volume increased by 1.1% year-over-year to approximately 1.32 million metric tons, compared with 1.30 million metric tons in the first quarter of 2013.
• Sales totaled $594.2 million, compared with $651.3 million in the first quarter of 2013.
• Gross loss was $(22.6) million, compared with a gross profit of $4.1 million in the first quarter of 2013.
• Operating loss was $(43.7) million, compared with an operating income of $31.9 million in the first quarter of 2013.
• Net loss attributable to the Company was approximately $(43.6), or $(0.78) per diluted share, compared with a net income of $3.1 million, or $0.06 per diluted share in the first quarter of 2013.
• As of March 31, 2014, the Company had cash and restricted cash of $465.0 million.

First Quarter 2014 Financial and Operating Results

Total Sales

Total sales for the first quarter of 2014 decreased by 8.8% year-over-year to $594.2 million, compared with $651.3 million in the first quarter of 2013, and increased by 8.3% quarter-over-quarter compared with $548.7 million in the fourth quarter of 2013. The year-over-year sales decreases were due to a decrease in average selling price of rebar, offset by increased sales volume.

• Total sales volume in the first quarter of 2014 was 1.32 million metric tons, an increase of 1.1% compared with 1.30 million metric tons in the first quarter of 2013, and an increase of 14.2%, compared with 1.15 million metric tons in the fourth quarter of 2013.
• The average selling price of rebar at Longmen Joint Venture in the first quarter of 2014 decreased to approximately $450.9 per metric ton, down by 12.5% from $515.3 per metric ton in the first quarter of 2013, and by 4.9% from $474.3 per metric ton in the fourth quarter of 2013.

Gross Loss

Gross loss for the first quarter of 2014 was $(22.6) million, compared with a gross profit of $4.1 million in the first quarter of 2013, and gross loss of $(32.7) million in the fourth quarter of 2013. The gross loss was mainly due to a steeper decrease in average selling price than the average cost for rebar.

Operating Expenses and Operating Loss

Selling, general and administrative expenses for the first quarter of 2014 was $21.1 million, an increase of 11.1% from $19.0 million in the first quarter of 2013, and a decrease of 15.0% from $24.8 million in the fourth quarter of 2013. General and administrative expenses totaled $12.7 million in the first quarter of 2014, compared with $10.9 million in the first quarter of 2013, and $15.2 million in the fourth quarter of 2013. The annual increase in general and administrative expense was mainly due to higher employee benefit expenses and increased investment in waste management and environmental protection. Selling expenses was $8.3 million in the first quarter of 2014, compared with $8.1 million in the same period of 2013, and $9.5 million in the prior quarter. The annual increase in selling expenses was mainly due to increased freight expenses from higher sales volume.

Other operating loss from change in the fair value of profit sharing liability during the first quarter of 2014 was $(49,000), compared with gains of $46.8 million in the same period of last year, and $79.1 million in the prior quarter. The loss recognized from change in the fair value of profit sharing liability was primarily due to the amortization of the present value discount. The fair value of the profit sharing liability at March 31, 2014 was not materially different from the previous reporting period.

Correspondingly, loss from operations for the first quarter of 2014 was $(43.7) million, compared with income from operations of $31.9 million for the first quarter of 2013, and $9.2 million for the fourth quarter of 2013.

Finance Expense

Finance and interest expense in the first quarter of 2014 increased to $28.7 million, from $24.9 million in the first quarter of 2013, and $23.0 million in the fourth quarter of 2013. The increase in finance and interest expense was mainly due to higher expense in notes receivable early redemption, and more non-cash financing cost on capital lease during the quarter.

Net Loss and Net Loss per Share

Net loss attributable to General Steel for the first quarter of 2014 was $(43.6) million, or $(0.78) per diluted share, based on 55.8 million weighted average shares outstanding. This compares to a net income of $3.1 million, or $0.06 per diluted share, based on 54.8 million weighted average shares outstanding in the first quarter of 2013, and net loss of approximately $(102,000), or $(0.002) per diluted share, based on 55.6 million weighted average shares outstanding in the fourth quarter of 2013.

Balance Sheet

As of March 31, 2014, the Company had cash and restricted cash of approximately $465.0 million, compared to $431.3 million as of December 31, 2013. The Company had an inventory balance of $210.8 million as of March 31, 2014, compared to $212.9 million as of December 31, 2013.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live Webcast at 8:00 a.m. EDT on Thursday, May 15, 2014 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Thursday, May 15, 2014) to discuss the results and answer questions from investors. Listeners may access the call by dialing 1-877-870-4263 in the U.S., and 1-412-317-0790 internationally.

The call will also be available as a live, listen-only Webcast under the "Events and Presentations" page on the "Investor Relations" section of the Company's Website at http://www.corpasia.net/us/GSI/irwebsite/index.php?mod=event. Following the live Webcast, an online archive of the Webcast will be available for 90 days.

About General Steel Holdings, Inc.

General Steel Holdings, Inc., headquartered in Beijing, China, produces a variety of steel products including rebar, high-speed wire and spiral-weld pipe. The Company has operations in China's Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality, with seven million metric tons of crude steel production capacity under management. For more information, please visit www.gshi-steel.com.

To be added to the General Steel email list to receive Company news, or to request a hard copy of the Company's Annual Report on Form 10-K, please send your request to [email protected].

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. Actual results could differ materially from those projected in the forward-looking statements as a result of inaccurate assumptions or a number of risks and uncertainties. These risks and uncertainties are set forth in the Company's filings under the Securities Act of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" and elsewhere, and include: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether the Company is able to manage its planned growth efficiently and operate profitable operations, including whether its management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether the Company is able to generate sufficient revenues or obtain financing to sustain and grow its operations; (d) whether the Company is able to successfully fulfill our primary requirements for cash; and (e) other risks, including those disclosed in the Company's Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission.  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.

Contact Us

General Steel Holdings, Inc.

In China:

Jenny Wang
Tel: +86-10-5775-7691
Email: [email protected]

In the US:

Joyce Sung
Tel: +1-347-534-1435
Email: [email protected]

Asia Bridge Capital Limited

Carene Toh
Tel: +1-888-957-3362
Email: [email protected]

SOURCE General Steel Holdings, Inc.