General Steel Reports First Quarter 2015 Financial Results

May 15, 2015, 06:00 ET from General Steel Holdings, Inc.

BEIJING, May 15, 2015 /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, 2015.

Henry Yu, Chairman and Chief Executive Officer of General Steel commented, "The first quarter of 2015 was very tough for China's iron and steel industry, as the combination of the government's stricter environmental enforcement and a slowdown in demand sharply pressured average selling price and profitability. The average price of rebar encountered a steep double-digit sequential decline during the first quarter to the lowest price level in 13 years. Correspondingly, we reduced production volume to preserve working capital, and we took the opportunity to temporarily shut down in the second half of the first quarter in order to perform maintenance on our production equipment.

As the steel industry remains challenging, we believe our accelerated business transformation strategy is on target. In the first quarter, we established our RFID joint venture that in April 2015 launched its first UHF RFID tag, which has thus far received very positive feedback. We anticipate rolling out deployment and commercialization in the second half of 2015. We remain confident that the transformed businesses will drive greater synergies and efficiency enhancements."

John Chen, Chief Financial Officer of General Steel, commented, "Facing macro-environment challenges for steel operations, we continue to focus on those factors that we can control, including management of our operating expenses and working capital, closely aligning with SOEs and local government for financial support, and continuing to optimize our upgraded manufacturing equipment. As we march forward with our business transformation strategy, we will allocate capital and human resources into our RFID joint venture, as well as unlocking hidden value in our land reserves in an effort to drive greater value for our shareholders."

First Quarter 2015 Financial Information

  • Sales volume decreased by 27.6% year-over-year to approximately 0.95 million metric tons, compared with 1.32 million metric tons in the first quarter of 2014.
  • Sales totaled $328.2 million, compared with $594.2 million in the first quarter of 2014.
  • Gross loss was $(32.1) million, or (9.8%) of total sales, compared with $(22.6) million, or (3.8%) of total sales in the first quarter of 2014.
  • Loss from operations totaled $(55.7) million, compared with $(43.7) million in the first quarter of 2014.
  • Net loss attributable to the Company was $(45.1) million, or $(0.73) per diluted share, compared with $(43.6) million, or $(0.78) per share in the first quarter of 2014.
  • As of March 31, 2015, the Company had cash and restricted cash of $259.6 million.

First Quarter 2015 Financial and Operating Results

Total Sales

Total sales for the first quarter of 2015 decreased by 44.8% year-over-year to $328.2 million, compared with $594.2 million in the first quarter of 2014. The year-over-year sales decrease was primarily due to decreases in both total sales volume and average selling price of rebar.

  • Total sales volume in the first quarter of 2015 was 0.95 million metric tons, a decrease of 27.6% compared with 1.32 million metric tons in the first quarter of 2014.
  • The average selling price of rebar at Longmen Joint Venture in the first quarter of 2015 decreased to approximately $343.8 per metric ton, down by 23.7% from $450.9 per metric ton in the first quarter of 2014.

Gross Loss

Gross loss for the first quarter of 2015 was $(32.1) million, or (9.8)% of total sales, as compared with gross loss of $(22.6) million, or (3.8)% of total sales in the first quarter of 2014. The decrease in gross margin was mainly due to a steeper decrease in average selling price of rebar, compared with the decrease in unit cost of manufactured rebar, as well as a higher fixed manufacturing cost, as the Company proactively paused production for maintenance during the first quarter of 2015.

Operating Expenses and Loss from Operations

Selling, general and administrative expenses for the first quarter of 2015 were $17.4 million, a decrease of 17.6% from $21.1 million in the first quarter of 2014. General and administrative expenses decreased to $11.0 million in the first quarter of 2015, compared with $12.8 million in the first quarter of 2014. Selling expenses were $6.4 million in the first quarter of 2015, compared with $8.3 million in the same period of 2014.

The Company accrued unallocated overheads expenses of $19.1 million in its operating expenses for the first quarter of 2015, which was mainly due to the reallocation of fixed overheads from cost of goods sold to general and administrative in accordance with GAAP, as the Company had temporarily shut down production for maintenance during the period.

Other operating income from a change in the fair value of profit sharing liability during the first quarter of 2015 was $12.9 million, compared with a loss on change in fair value of profit sharing liability of $0.05 million in the same period of last year.

Correspondingly, loss from operations for the first quarter of 2015 totaled $(55.7) million, compared with $(43.7) million for the first quarter of 2014.

Finance Expense

Finance and interest expense in the first quarter of 2015 was $20.6 million, of which $5.2 million was the non-cash interest expense on capital lease, as compared with $5.1 million in the same period of 2014, and $15.4 million was the interest expense on bank loans and discounted note receivables, as compared with $23.6 million in the same period of 2014.

Net Loss and Net Loss per Share

Net loss attributable to General Steel for the first quarter of 2015 was $(45.1) million, or $(0.73) per diluted share, based on 62.0 million weighted average shares outstanding. This compares to a net loss attributable to General Steel of $(43.6) million, or $(0.78) per share, based on 55.8 million weighted average shares outstanding in the first quarter of 2014. The increase in shares count of weighted average shares outstanding was primarily due to the issuance of 5 million shares of the Company's common stock pursuant to a $7.5 million private placement which closed in October 2014.

Balance Sheet

As of March 31, 2015, the Company had cash and restricted cash of approximately $259.6 million, compared to $367.3 million as of December 31, 2014. The Company had an inventory balance of $148.3 million as of March 31, 2015, compared to $156.3 million as of December 31, 2014.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EDT on Friday, May 15, 2015 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Friday, May 15, 2015) to discuss the results and answer questions from investors. Listeners may access the call by dialing:

US Toll Free:

1-888-346-8982

International Toll:

1-412-902-4272

China Toll Free:

400-120-1203

Hong Kong Toll Free:

800-905-945

Conference ID:

General Steel Holdings

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.

A replay of the conference call may be accessed through May 22, 2015 by dialing:

US Toll Free:

1-877-344-7529

International Toll:

1-412-317-0088

Access Code:

10065799

About General Steel Holdings, Inc.

General Steel Holdings, Inc. is a leading non-state-owned steel maker headquartered in Beijing, China.  With seven million metric tons of crude steel production capacity under management and operations in Tianjin municipality and China's Shaanxi and Guangdong provinces, the Company produces a variety of steel products including rebar and high-speed wire.

In addition to its steel business, the Company also designs, manufactures, and integrates radio frequency identification ("RFID") systems. The Company's RFID technology provides real-time data on supplies, inventory, and goods, thereby greatly enhancing its customers' administration and planning processes, as well as asset tracking and supply chain 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 investor.relations@gshi-steel.com.

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, including those disclosed in the Company's most recent 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. Joyce Sung Tel: +1-347-534-1435 Email: joyce.sung@gshi-steel.com

Asia Bridge Capital Limited Carene Toh Tel: +1-888-957-3362 Email: generalsteel@asiabridgegroup.com

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands)

March 31,

December 31,

ASSETS

2015

2014

CURRENT ASSETS:

 Cash

$

9,736

$

11,641

 Restricted cash

249,820

355,685

 Notes receivable

1,606

10,290

 Restricted notes receivable

80,889

111,801

 Loan receivable

42,569

36,001

 Loans receivable - related parties

6,728

34,713

 Accounts receivable, net

10,686

9,321

 Accounts receivable - related parties

160,286

8,498

 Other receivables, net

103,291

63,746

 Other receivables - related parties

6,364

39,670

 Inventories

148,295

156,327

 Advances on inventory purchase

49,440

73,819

 Advances on inventory purchase - related parties

11,243

45,617

 Prepaid expense and other

5,279

4,803

 Prepaid taxes

5,851

5,789

 Short-term investment

7,503

2,688

TOTAL CURRENT ASSETS

899,586

970,409

 PLANT AND EQUIPMENT, net

1,561,511

1,543,136

 OTHER ASSETS:

 Advances on equipment purchase

5,270

11,438

Investment in unconsolidated entities

16,705

16,823

 Long-term deferred expense

452

458

 Intangible assets, net of accumulated amortization

22,885

22,960

TOTAL OTHER ASSETS

45,312

51,679

TOTAL ASSETS

$

2,506,409

$

2,565,224

LIABILITIES AND DEFICIENCY

 CURRENT LIABILITIES:

 Short term notes payable

$

448,362

$

661,635

 Accounts payable

608,678

612,801

 Accounts payable - related parties

226,964

207,783

 Short term loans - bank

232,148

257,502

 Short term loans - others

51,995

60,717

 Short term loans - related parties

217,397

46,380

Other payables and accrued liabilities

51,985

55,488

 Other payable - related parties

96,277

87,252

 Customer deposits

139,106

92,974

 Customer deposits - related parties

148,176

132,616

 Deposit due to sales representatives

19,361

17,871

 Deposit due to sales representatives - related parties

2,553

2,509

 Taxes payable

9,393

5,201

 Deferred lease income, current

2,179

2,176

 Capital lease obligations, current

8,678

8,508

TOTAL CURRENT LIABILITIES

2,263,252

2,251,413

 NON-CURRENT LIABILITIES:

 Long-term loans - related party

352,850

339,549

 Deferred lease income, noncurrent

72,258

72,713

 Capital lease obligations, noncurrent

397,416

393,252

 Profit sharing liability

57,538

70,422

 TOTAL NON-CURRENT LIABILITIES

880,062

875,936

TOTAL LIABILITIES

3,143,314

3,127,349

 COMMITMENTS AND CONTINGENCIES

DEFICIENCY:

Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares issued and outstanding as of March 31, 2015 and December 31, 2014

3

3

Common stock, $0.001 par value, 200,000,000 shares authorized, 64,458,588 shares issued and 61,986,282 shares outstanding as of March 31, 2015 and December 31, 2014, respectively

64

64

Treasury stock, at cost, 2,472,306 shares as of March 31, 2015 and December 31, 2014

(4,199)

(4,199)

  Paid-in-capital

115,563

115,494

  Statutory reserves

6,539

6,472

  Accumulated deficits

(508,674)

(463,521)

  Accumulated other comprehensive income

163

644

  TOTAL GENERAL STEEL   HOLDINGS, INC. DEFICIENCY

 

(390,541)

(345,043)

 NONCONTROLLING INTERESTS

(246,364)

(217,082)

  TOTAL DEFICIENCY

(636,905)

(562,125)

TOTAL LIABILITIES AND DEFICIENCY

$

2,506,409

$

2,565,224

 

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(In thousands, except per share data)

 

For the

Three months ended March 31,

2015

2014

SALES

$

270,769

$

512,005

SALES - RELATED PARTIES

57,395

82,206

  TOTAL SALES

328,164

594,211

COST OF GOODS SOLD

297,565

530,744

COST OF GOODS SOLD - RELATED PARTIES

62,746

86,028

  TOTAL COST OF GOODS SOLD

360,311

616,772

GROSS LOSS

(32,147)

(22,561)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

(17,355)

(21,053)

UNALLOCATED OVERHEADS EXPENSES

(19,134)

-

CHANGE IN FAIR VALUE OF PROFIT SHARING LIABILITY

12,924

(49)

LOSS FROM OPERATIONS

(55,712)

(43,663)

OTHER INCOME (EXPENSE)

  Interest income

2,331

3,192

  Finance/interest expense

(20,570)

(28,695)

  Gain on disposal of equipment and intangible assets

16

46

  Income from equity investments

(37)

13

  Foreign currency transaction loss

(873)

(854)

  Lease income

543

546

  Other non-operating income (expense), net

223

(176)

    Other expense, net

(18,367)

(25,928)

LOSS BEFORE PROVISION FOR INCOME

TAXES AND NONCONTROLLING INTEREST

(74,079)

(69,591)

PROVISION FOR INCOME TAXES

30

5

NET LOSS

(74,109)

(69,596)

Less: Net loss income attributable to noncontrolling interest

 

(28,956)

(26,032)

NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(45,153)

$

(43,564)

NET LOSS

$

(74,109)

$

(69,596)

OTHER COMPREHENSIVE LOSS

  Foreign currency translation adjustments

(853)

4,670

COMPREHENSIVE LOSS

(74,962)

(64,926)

Less: Comprehensive loss attributable to noncontrolling interest

 

(29,328)

(24,226)

COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, INC.

$

(45,634)

$

(40,700)

WEIGHTED AVERAGE NUMBER OF SHARES

  Basic and Diluted

61,986

55,813

LOSS PER SHARE

  Basic and Diluted

$

(0.73)

$

(0.78)

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

For the

Three months ended March 31,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:  

Net loss

$

(74,109)

$

(69,596)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

Depreciation, amortization and depletion

25,164

24,346

Change in fair value of derivative liabilities

(12,924)

49

Gain loss on disposal of equipment and intangible assets

(16)

(46)

Provision for doubtful accounts

1,279

(251)

Reservation of mine maintenance fee

113

242

Stock issued for services and compensation

69

150

Amortization of deferred financing cost on capital lease

4,966

5,086

Income (loss) from equity investments

37

(13)

Foreign currency transaction (gain) loss

873

854

Deferred lease income

(543)

(546)

Changes in operating assets and liabilities

Notes receivable

32,504

(70,354)

Accounts receivable

(1,373)

(102)

Accounts receivable - related parties

(151,218)

(1,569)

Other receivables

(40,476)

355

Other receivables - related parties

33,231

(4,219)

Inventories

7,327

(730)

Advances on inventory purchases

24,380

176

Advances on inventory purchases - related parties

28,436

(38,419)

Prepaid expense and other

(468)

(516)

Long-term deferred expense

7

56

Prepaid taxes

(54)

4,963

Accounts payable

(7,706)

59,351

Accounts payable - related parties

18,856

16,986

Other payables and accrued liabilities

(3,625)

15,300

Other payables - related parties

8,960

(12,676)

Customer deposits

45,848

20,043

Customer deposits - related parties

15,341

113,895

Taxes payable

4,171

2,708

Net cash (used in) provided by operating activities

(40,950)

65,523

CASH FLOWS FROM INVESTING ACTIVITIES:

Restricted cash

105,911

(32,943)

Loan to unrelated parties

(6,500)

-

Repayments from related parties

33,791

-

Cash proceeds from short term investment

81

164

Payments for short term investment

(4,875)

-

Cash proceeds from sales of equipment and intangible assets

-

24

Equipment purchase and intangible assets

(31,589)

(56,861)

Net cash provided by (used in) investing activities

96,819

(89,616)

CASH FLOWS FINANCING ACTIVITIES:

Restricted notes receivable

30,934

131,971

Borrowings on short term notes payable

96,525

439,342

Payments on short term notes payable

(309,823)

(485,455)

Borrowings on short term loans - bank

61,023

95,120

Payments on short term loans - bank

(87,471)

(165,711)

Borrowings on short term loan - others

74,517

9,853

Payments on short term loans - others

(54,275)

(14,426)

Borrowings on short term loan - related parties

75,641

24,528

Payments on short term loans - related parties

(569)

(5,849)

Deposits due to sales representatives

1,462

(425)

Deposit due to sales representatives - related parties

41

-

Borrowings on long-term loans - related party

56,063

-

Payments on long-term loans - related party

(813)

-

Principal payment on capital lease obligation

(1,074)

-

Net cash used in financing activities

(57,819)

(28,948)

EFFECTS OF EXCHANGE RATE CHANGE IN CASH

45

(444)

(DECREASE) INCREASE IN CASH

(1,905)

4,411

CASH, beginning of period

11,641

31,967

CASH, end of period

$

9,736

$

36,378

SOURCE General Steel Holdings, Inc.



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