General Steel Reports Results for the First Quarter of 2010
First quarter total revenues increased 40.3% year-over-year to $453.0 million; Aggregate shipment volume increased 44.2% year-over-year to 1.03 million metric tons
BEIJING, May 10 /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 first quarter ended March 31, 2010.
Highlights from the First Quarter of 2010:
-- Total revenues increased 40.3% to $453.0 million from $322.8 million in
the first quarter of 2009
-- Aggregate shipment volume increased 44.2% to 1.03 million metric tons
from 0.72 million metric tons in the first quarter of 2009
-- The Company's subsidiary General Steel (China) Co., Ltd. entered into a
lease agreement with Tianjin Daqiuzhuang Steel Plates Co., Ltd. to
reduce the Company's overhead costs while providing a recurring monthly
revenue stream of approximately $0.2 million resulting from payments
due there under
-- The Company's subsidiary Maoming Hengda Steel Group, Ltd., entered into
a strategic alliance agreement with Zhuhai Yueyufeng Iron and Steel Co.,
Ltd. ("Yueyufeng") whereby Yueyufeng will invest approximately $4.4
million to fund construction of a new 400,000 metric tons capacity
rebar production line
-- Cash and restricted cash remains strong at $317.7 million
"We continue to achieve robust top-line growth and greater shipment volume driven by massive, multi-year infrastructure investment in rural China," said General Steel's Chairman and Chief Executive Officer Henry Yu. "It was a challenging quarter as the price for raw materials increased while average selling prices remained relatively flat from January to the middle of March. By the end of March, the market began to improve as average selling prices increased at a rapid rate and we were able to pass our costs onto our customers and achieve a positive gross margin. Going forward, we expect average selling prices to remain at healthier levels and anticipate that the release of the government's newly crafted steel industry consolidation guidelines in the coming months will bring about new growth opportunities."
Selected Financial Results for the First Quarter of 2010
Revenues
Total revenues in the first quarter of 2010 increased 40.3% to $453.0 million from $322.8 million in the first quarter of 2009.
The year-over-year increase in total revenues was due to a 40.1% increase in shipment volumes at the Company's Longmen Joint Venture ("Longmen JV"). Revenues at Longmen JV comprised approximately 95.9% of total revenues in the first quarter of 2010.
Cost of Revenues
Total cost of revenues for the first quarter of 2010 increased 44.3% to $447.3 million from $309.9 million in the first quarter of 2009.
Cost of revenues principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. Cost of iron ore and coke accounted for approximately 80.0% of the Company's total cost of revenues in the first quarter of 2010.
Gross Profit
Gross profit for the first quarter of 2010 decreased 55.6% year-over-year to $5.7 million from $12.9 million in the first quarter of 2009. Gross margin for the first quarter of 2010 was 1.3%, compared to 4.0% in the first quarter of 2009 and 3.0% in the fourth quarter of 2009.
The Company noted that gross profit was adversely affected as the cost of iron ore and coke increased while average selling prices of rebar remained relatively flat from January to the middle of March 2010. In addition, General Steel noted that depreciation costs of its two new blast furnaces at its Longmen JV, which were capitalized in the first quarter of 2009, were not capitalized in the first quarter of 2010.
Operating Expenses
Selling, general and administrative expenses for the first quarter of 2010 increased 32.4% to $12.1 million from $9.2 million in the first quarter of 2009. Selling, general and administrative expenses were 2.7% of total revenues in the first quarter of 2010, compared to 2.8% of total revenues in the first quarter of 2009.
A large portion of the increase in selling, general and administrative expenses for the first quarter of 2010 was attributable to increased production volume at the Longmen JV.
Finance and interest expenses for the first quarter of 2010 increased 273.0% to $11.0 million from $2.9 million in the first quarter of 2009. The increase was primarily due to an increase in short-term loans and discounting notes borrowed by the Longmen JV.
Net Income
Net loss for the first quarter of 2010 was $5.5 million compared to net income of $7.3 million in the first quarter of 2009. Basic and diluted losses per share for the first quarter of 2010 were $0.11, compared to basic and diluted earnings per share of $0.20 in the first quarter of 2009.
As noted above, increasing raw material costs and relatively stable average selling prices combined with other expenses were the primary reason for the decrease in net income during the first quarter of 2010.
Balance Sheet
As of March 31, 2010, General Steel had cash and restricted cash of $317.7 million, compared to $274.2 million as of December 31, 2009. Accounts receivable was $26.9 million as of March 31, 2010, compared to $8.5 million as of December 31, 2009.
The Company had an inventory balance of $237.7 million as of March 31, 2010 compared to $208.1 million on December 31, 2009. This balance is comprised of raw material and finished products.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on May 10, 2010 (8:00 p.m. Beijing/Hong Kong Time on May 10, 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.visualwebcaster.com/event.asp?id=68668
Additionally, an archived Web cast of this call will be available on the Investor Relations section of the 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, 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 MARCH 31, 2010 AND DECEMBER 31, 2009
(In thousands, except per share data)
March 31, December 31,
2010 2009
A S S E T S (Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $91,032 $82,118
Restricted cash 226,712 192,041
Notes receivable 24,423 29,185
Restricted notes receivable 24,225 --
Accounts receivable, net of
allowance for doubtful accounts of
$402 and $490 as of March 31, 2010
and December 31, 2009, respectively 22,174 8,525
Accounts receivable - related
parties 4,751 --
Other receivables, net of allowance
for doubtful accounts of $10 and
$14 as of March 31, 2010 and
December 31, 2009, respectively 5,571 5,357
Other receivables - related parties 28,716 32,670
Dividend receivable 3,426 2,372
Inventories 237,695 208,087
Advances on inventory purchases 34,930 29,099
Advances on inventory purchases -
related parties 48,791 2,995
Prepaid value added tax 11,502 19,488
Deferred tax assets 5,722 3,341
Total current assets 769,670 615,278
PLANT AND EQUIPMENT, net 552,851 555,111
OTHER ASSETS:
Advances on equipment purchases 12,621 8,419
Investment in unconsolidated
subsidiaries 20,180 20,022
Long-term deferred expense 1,973 2,069
Intangible assets, net of
accumulated amortization 23,565 23,733
Notes issuance cost 400 406
Equipment to be disposed 2,684 3,026
Total other assets 61,423 57,675
Total assets $1,383,944 $1,228,064
L I A B I L I T I E S A N D
S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES:
Short term notes payable 323,987 254,608
Accounts payable $159,389 $158,126
Accounts payable - related parties 52,300 48,151
Short term loans - bank 174,655 148,968
Short term loans - others 113,351 110,358
Short term loans - related parties 11,751
Other payables 15,808 16,222
Other payable - related parties 20,989 3,706
Customer deposits 220,623 208,765
Customer deposits - related parties 40,083 3,791
Deposits due to sales
representatives 65,843 49,544
Taxes payable 5,676 6,921
Distribution payable to former
shareholders 14,519 16,434
Total current liabilities 1,207,223 1,037,345
CONVERTIBLE NOTES PAYABLE, net of
debt discount of $2,188 and
$2,250 as of March 31, 2010 and
December 31, 2009, respectively 1,112 1,050
DERIVATIVE LIABILITIES 19,401 23,340
Total liabilities 1,227,736 1,061,735
EQUITY:
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value,
50,000,000 shares authorized,
3,092,899 shares issued and outstanding 3 3
Common Stock, $0.001 par value,
200,000,000 shares authorized,
51,855,695 and 51,618,594 shares issued
and outstanding as of March 31, 2010
and December 31, 2009, respectively 52 52
Paid-in-capital 96,585 95,588
Statutory reserves 6,162 6,162
Retained earnings (21,919) (16,410)
Accumulated other comprehensive
income 8,037 8,336
Total shareholders' equity 88,920 93,731
Noncontrolling interest 67,288 72,598
Total equity 156,208 166,329
Total liabilities and equity $1,383,944 $1,228,064
GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31
(In thousands except per share data)
Three months ended March 31,
2010 2009
(Unaudited) (Unaudited)
REVENUES $317,628 $262,414
REVENUES - RELATED PARTIES 135,395 60,379
TOTAL REVENUES 453,023 322,793
COST OF REVENUES 317,576 252,002
COST OF REVENUES - RELATED PARTIES 129,714 57,870
TOTAL COST OF REVENUES 447,290 309,872
GROSS PROFIT 5,733 12,921
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 12,141 9,168
(LOSS) INCOME FROM OPERATIONS (6,408) 3,753
OTHER INCOME(EXPENSE)
Interest income 1,120 879
Finance/interest expense (10,963) (2,939)
Change in fair value of
derivative liabilities 3,939 4,115
Gain from debt extinguishment -- 2,930
Government grant 3,520
Income from equity investments 1,682 (55)
Other non-operating (expense)
income, net (4) 510
Total other (expense)
income, net (4,226) 8,960
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES AND NONCONTROLLING INTEREST (10,634) 12,713
PROVISION FOR INCOME TAXES
Current 621 164
Deferred (2,588) 1,222
Total (benefit) provision
for income taxes (1,967) 1,386
NET (LOSS) INCOME BEFORE NONCONTROLLING
INTEREST (8,667) 11,327
Less: Net (Loss) income attributable
to noncontrolling interest (3,160) 3,993
NET (LOSS) INCOME ATTRIBUTABLE TO
CONTROLLING INTEREST (5,507) 7,334
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation
adjustments (299) (177)
Comprehensive income (loss)
attributable to noncontrolling
interest 165 (75)
COMPREHENSIVE (LOSS) INCOME $(5,641) $7,082
WEIGHTED AVERAGE NUMBER OF SHARES
Basic & Diluted 51,652,843 36,285,312
Diluted 51,652,843 36,285,312
(LOSS) EARNINGS PER SHARE
Basic & Diluted $(0.11) $0.20
Diluted $(0.11) $0.20
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except per share data)
Preferred stock Common stock
Par Par Paid-in
Shares value Shares value capital
BALANCE, December 31, 2008 3,092,899 $3 36,128,833 $36 $37,129
Net income
Adjustment to statutory
reserve
Common stock issued for
compensation, $1.85 109,250 0.109 202
Common stock issued for
interest payment, $3.66 152,240 0.152 558
Common stock transferred
by CEO for
compensation, $6.91 69
Foreign currency
translation adjustments
BALANCE, March 31, 2009,
unaudited 3,092,899 3 36,390,323 36 37,958
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 stock issued for
compensation 487,400 0.77 1,673
Common stock issued for
interest payments 44,065 0.2 187
Common stock issued for
repayment of debt,
$6.00 300,000 0.3 1,800
Notes converted to
common stock 7,045,274 7.05 32,072
Make whole shares issued
on notes conversion 1,795,977 1.8 7,085
Common stock transferred
by CEO for
compensation, $6.91 207
Reduction of registered
capital
Common stock issued for
private placement 5,555,556 5.56 14,607
Foreign currency
translation adjustments
BALANCE, December 31, 2009 3,092,899 3 51,618,595 52 95,589
Net loss attributable to
controlling interest
Net loss attributable to
noncontrolling interest
Distribution of dividend
to noncontrolling
shareholders
Noncontrolling interest
acquired
Common stock issued for
compensation 237,100 0.24 927
Common stock transferred
by CEO for
compensation, $6.91 69
Foreign currency
translation adjustments
BALANCE, March 31, 2010,
unaudited 3,092,899 $3 51,855,695 $52 $96,585
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands, except per share data)
Retained earnings Accumu-
(deficits) lated
Contri- other
bution compre- Noncon-
Statutory Unre- receiv- hensive trolling
reserves stricted able income interests Totals
BALANCE, December
31, 2008 $4,902 $10,092 $(960) $8,705 $54,330 114,237
Net income 7,335 3,993 11,328
Adjustment to
statutory
reserve 260 (260) --
Common stock
issued for
compensation,
$1.85 202
Common stock
issued for
interest
payment, $3.66 558
Common stock
transferred by
CEO for
compensation,
$6.91 69
Foreign currency
translation
adjustments (177) (75) (252)
BALANCE, March 31,
2009, unaudited 5,162 17,167 (960) 8,528 58,248 126,142
Net loss
attributable to
controlling
interest (32,579) (32,579)
Net income
attributable to
noncontrolling
interest 17,570 17,570
Disposal of
subsidiaries (293) (293)
Distribution of
dividend to
noncontrolling
shareholders (3,305) (3,305)
Adjustment to
statutory
reserve 1,000 (1,000) --
Common stock
issued for
compensation 1,674
Common stock
issued for
interest
payments 187
Common stock
issued for
repayment of
debt, $6.00 1,800
Notes converted
to common stock 32,079
Make whole
shares issued
on notes
conversion 7,087
Common stock
transferred by
CEO for
compensation,
$6.91 207
Reduction of
registered
capital 960 960
Common stock
issued for
private
placement 14,613
Foreign currency
translation
adjustments (192) 378 186
BALANCE, December
31, 2009 6,162 (16,412) -- 8,336 72,598 166,328
Net loss
attributable to
controlling
interest (5,507) (5,507)
Net loss
attributable to
noncontrolling
interest (3,160) (3,160)
Distribution of
dividend to
noncontrolling
shareholders (1,045) (1,045)
Noncontrolling
interest
acquired (1,270) (1,270)
Common stock
issued for
compensation 927
Common stock
transferred by
CEO for
compensation,
$6.91 69
Foreign currency
translation
adjustments (299) 165 (134)
BALANCE, March 31,
2010, unaudited $6,162 $(21,919) $-- $8,037 $67,288 $156,208
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009, 2008
(In thousands except per share data)
Three months ended March 31,
2010 2009
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income attributable to
controlling interest $(5,507) $7,334
Net income (loss) attributable to
noncontrolling interest (3,160) 3,993
Consolidated net (loss) income (8,667) 11,327
Adjustments to reconcile net (loss)
income to cash provided by
operating activities:
Depreciation and amortization 9,586 6,249
Debt extinguishment -- (2,930)
Bad debt allowance (94) (3,518)
Stock issued for services and
compensation 996 271
Income from investment (1,682) --
Amortization of deferred note
issuance cost and discount on
convertible notes 68 21
Change in fair value of
derivative instrument (3,939) (4,115)
Deferred tax assets (2,484) 989
Changes in operating assets and
liabilities:
Accounts receivable (13,556) (11,764)
Accounts receivable - related
parties (4,750) --
Notes receivable 4,760 20,838
Other receivables 256 2,759
Other receivables - related
parties (389) (1,736)
Inventories (36,689) (48,394)
Advances on inventory purchases (5,945) 10,249
Advances on inventory purchases -
related parties (44,257) (7,552)
Accounts payable 1,556 1,285
Accounts payable - related
parties 8,699 21,861
Other payables (1,384) 7,230
Other payables - related parties 17,291 8,180
Accrued liabilities 1,614 3,883
Customer deposits 14,521 6,103
Customer deposits - related
parties 36,280 (5,121)
Taxes payable 9,978 190
Net cash (used in) provided by
operating activities (18,231) 16,305
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquired long term investment -- (6,593)
Dividend receivable (1,554) --
Deposits due to sales
representatives 16,894 35,723
Advance on equipment purchases (4,664) 1,198
Cash proceeds from sale of
equipment -- --
Equipments purchase (6,713) (41,415)
Intangible assets purchase (103) (163)
Payments to original shareholders (3,732) --
Net cash provided by (used in)
investing activities 128 (11,250)
CASH FLOWS FINANCING ACTIVITIES:
Restricted cash (34,660) (43,802)
Notes receivable - restricted (24,216) --
Borrowings on short term loans -
bank 95,015 51,733
Payments on short term loans - bank (69,336) (33,548)
Borrowings on short term loan -
others 27,945 13,296
Payments on short term loans -
others (24,954) (7,151)
Payments on short term loans -
others-related parties (11,747) --
Borrowings on short term notes
payable 251,725 158,810
Payments on short term notes
payable (182,369) (120,138)
Net cash provided by financing
activities 27,403 19,200
EFFECTS OF EXCHANGE RATE CHANGE IN
CASH (386) (22)
INCREASE (DECREASE) IN CASH 8,914 24,233
CASH, beginning of year 82,118 14,895
CASH, end of year $91,032 $39,128
SOURCE General Steel Holdings, Inc.
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