Teleconference to Be Held Wednesday, April 1, 2009, at 9:00 a.m. EDT
GONGYI, China, March 31 /PRNewswire-Asia-FirstCall/ -- China Gengsheng Minerals, Inc. (OTC Bulletin Board: CHGS) ("Gengsheng" or the "Company"), a leading manufacturer in China of industrial materials capable of withstanding high temperature, saving energy and boosting productivity, today reported its audited financial results for fourth quarter and full year 2008 ended December 31, 2008.
Fourth Quarter 2008 Results
For the fourth quarter of 2008, sales were $12.9 million, compared with $10.9 million recorded in the fourth quarter of 2007.
Monolithic refractory products contributed $10.6 million, or 81.6% of sales. Industrial ceramics contributed 2.4% of sales. Fracture proppants contributed 16.0% of sales.
Gross profit was $2.9 million, compared with $4.3 million in the fourth quarter of 2007. The decrease was primarily because of considerable increase of raw material prices, especially bauxite, on a yearly basis. Bauxite prices were significantly impacted by the Beijing Olympics, as the government restricted mine productions around the Beijing area. Even though the restrictions were lifted after September, prices did not go down fast enough. As a result, fourth quarter 2008 gross margin was 22.4%, compared with 39.4% in same period 2007.
"The severe economic downturn that began late last year had crimped demand for steel products worldwide and consequently our refractory materials," said Mr. Shunqing Zhang, Chairman, President and CEO of Gengsheng. "We are disappointed but not discouraged by the challenging market condition in China's industrial space, and have taken several steps to cut costs, tighten credit terms for our customers and seek out new growth opportunities outside our core refractory business, including fracture proppants."
Mr. Zhang continued, "Entering into 2009, I am encouraged that the Chinese stimulus package has shown signs of rejuvenating the steel sector, as reflected in a pickup in steel production and power consumption so far this year. In addition, the near-term, mandated consolidation of the steel factories in China is gathering speed and potentially presents opportunities for our high-quality, high-end refractory products. Lastly, we continue to see robust demand for our proppants in the export market and we expect the momentum to last for the next year, and that's why we expanded our production capacity for proppants from 30,000 tons to 60,000 tons per year."
Selling expenses in the fourth quarter of 2008 were $1.6 million, compared with $1.2 million in same period 2007, reflecting higher sales. General and administrative expenses were $1.7 million, compared with $184,458 in the fourth quarter of 2007. The fourth quarter 2007 G&A included a one-time, non-recurring foreign currency gain. G&A increase in fourth quarter 2008 was primarily because of increased salaries, wages and employee welfare, rising R&D costs, general costs associated with maintaining the status as a public company, as well as provisions for non-performing debt.
Net loss for the fourth quarter was $643,000, or diluted loss per share of $0.03, compared with net loss of $1.9 million, or diluted loss per share of $0.08 in the fourth quarter of 2007.
2008 Results
For the year 2008, sales were $49.8 million, compared with $39.7 million in 2007.
Refractory products contributed $43.1 million, or 86% of sales. Industrial ceramics contributed $1.5 million, or 3% of sales. Fracture proppants contributed $5.1 million, or 10% of sales.
Gross profit was $16.0 million in 2008, compared with $16.1 million in 2007. The decrease was primarily because of higher raw material costs. Gross margin for 2008 was 32.1% versus 40.5% in 2007.
Selling expenses were $6.1 million, compared with $4.7 million, reflecting cost increases associated with rising sales. General and administrative expenses were $4.4 million, compared with $2.4 million in 2007, primarily because of increased salaries and wages, increased employee welfare, rising R&D costs and general costs associated with maintaining the status as a public company.
Net income for 2008 was $4.1 million, or diluted EPS of $0.17, compared with $3.0 million in 2007, or diluted EPS of $0.14.
As of December 31, 2008, the Company's total cash and cash equivalents were $955,732 compared to $2.0 million at December 31, 2007. Its net working capital was $25.7 million as of December 31, 2008, compared with $27.4 million at December 31, 2007.
Total shareholders' equity increased to $43.3 million as of December 31, 2008 from $37.2 million at December 31, 2007.
The total shares outstanding on a fully diluted basis as of December 31, 2008 were 24.2 million.
Recent Developments
On January 9, 2009, the Company announced that it has formed a long-term supply partnership for bauxite with Aluminum Corporation of China's Gongyi Division ("Chinalco Gongyi"), which produces bauxite from a mine it owns in Gongyi City of Henan Province. The bauxite mine has an estimated reserve of 12 million tons, with an average alumina grade of over 70%, and an estimated life of 25 to 30 years. Under the partnership, Chinalco Gongyi will ensure the annual supply of 150,000 to 250,000 tons of bauxite, with an average alumina grade of no less than 75%, to Gengsheng as raw materials for refractory and fracture proppant products. Gengsheng will pay a slightly-below-market price for Chinalco Gongyi's bauxite.
On February 17, 2009, the Company announced that it has signed fracture proppant supply contracts worth a total value of $1 million with a distributor to supply oil fields in North America. Gengsheng initially signed proppant contracts with a total value of $3.54 million with the same North American-based distributor in late 2008. The Company had shipped approximately $2.2 million of the materials as of March 2009.
On March 10, 2009, the Company announced that it has signed a refractory material supply contract with Jiangsu Sha Steel Group Co., Ltd.'s Zhangjiagang-based subsidiary ("Sha Steel"). Total value of the contract is $1.2 million. Sha Steel is China's largest non-state-owned steel producer by output.
Also in the first quarter of 2009, the Company doubled the production capacity of its fracture proppant business from 30,000 tons per year to 60,000 tons per year.
Conference Call
The Company will host a conference call, to be simultaneously Webcast, on Wednesday, April 1, 2009, at 9:00 a.m. Eastern Daylight Time / 9:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-9205 (North America) or +1-201-689-8054 (International) 10 minutes before the call start time. A live Webcast of the conference call will be available on the English version of the Gengsheng Website at http://www.gengsheng.com .
A replay of the call will be available through Wednesday, April 7, 2009, at 11:59 p.m. Eastern Daylight Time. Interested parties may access the replay by dialing +1-877-660-6853 (North America) or +1-201-612-7415 (International) and entering account number 286 and conference ID number 318443.
About China Gengsheng Minerals, Inc.
China Gengsheng Minerals, Inc. ("Gengsheng") develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics and fracture proppants. A market leader offering customized solutions, Gengsheng sells its products primarily to the iron-and-steel industry as heat-resistant components for steel-making furnaces, industrial kilns and other high-temperature vessels to guarantee and improve the productivity of those expensive pieces of equipment while reducing their consumption of energy. Founded in 1986 and based in China's Henan province, Gengsheng currently has over 200 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and in 11 other countries. Gengsheng conducts business through Gengsheng International Corporation, a British Virgin Islands company, and its Chinese subsidiaries, which are Henan Gengsheng Refractories Co., Ltd., Zhengzhou Duesail Fracture Proppant Co., Ltd. and Henan Gengsheng High Temperature Materials Co., Ltd.
For more information about the Company, please visit http://www.gengsheng.com .
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China Gengsheng Minerals, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the Company's ability to meet its projected output for the term of the supply contract; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
China Gengsheng Minerals, Inc.
Consolidated Balance Sheets
As of December 31,
2008 2007
(Audited, Stated in US Dollars)
ASSETS
Current assets:
Cash and cash equivalents $955,732 $1,964,390
Restricted cash 1,760,400 274,200
Trade receivables 30,026,675 22,721,052
Bills receivable 631,560 6,065,681
Other receivables and prepayments 3,608,247 3,770,908
Inventories 12,170,193 8,060,249
Deferred tax assets 54,869 50,554
Total current assets 49,207,676 42,907,034
Deposits for acquisition of
property, plant and equipment 6,297,205 1,073,684
Deposits for acquisition of
intangible asset-patented
technology -- 534,690
Intangible assets 953,550 342,750
Goodwill 441,089 --
Property, plant and equipment, net 10,654,692 8,733,367
Land use right 956,916 916,167
Total assets $68,511,128 $54,507,692
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Trade payables $9,548,854 $5,324,108
Bills payable 3,520,800 548,400
Other payables and accrued
expenses 6,010,364 3,299,549
Advances from directors 2,460,820 --
Income taxes payable 349,293 750,140
Non-interest-bearing loans 290,100 515,001
Collateralized short-term bank
loans 2,640,600 6,484,830
Unsecured interest-bearing loan 220,050 205,650
Deferred tax liabilities 21,486 --
Total current liabilities 25,062,367 17,127,678
Deferred tax liabilities -- 14,995
Total liabilities 25,062,367 17,142,673
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS 175,731 184,643
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value
50,000,000 shares authorized, no
shares issued and outstanding in
2008 and 2007 -- --
Common stock - $0.001 par value
100,000,000 shares authorized,
24,038,183 shares issued and
outstanding in 2008 and 2007 24,038 24,038
Additional paid-in capital 19,608,044 19,608,044
Statutory and other reserves 7,207,206 6,723,050
Accumulated other comprehensive
income 4,355,605 2,318,600
Retained earnings 12,078,137 8,506,644
Total stockholders' equity 43,273,030 37,180,376
Total liabilities and
stockholders' equity $68,511,128 $54,507,692
China Gengsheng Minerals, Inc.
Consolidated Statements of Income and Comprehensive Income
Year ended December 31,
(Audited, Stated in US Dollars) 2008 2007 2006
Sales $49,762,638 $39,692,908 $27,481,539
Cost of goods sold 33,800,225 23,626,674 16,534,004
Gross profit 15,962,413 16,066,234 10,947,535
Operating expenses
Provision for (Recovery of)
doubtful debts 90,952 (253,205) (58,259)
General and administrative expenses 4,377,926 2,440,112 2,411,939
Amortization and depreciation 328,265 221,376 157,814
Unusual charge - make good
provision -- 5,299,414 --
Selling expenses 6,074,077 4,739,009 3,783,071
Total operating expenses 10,871,220 12,446,706 6,294,565
Net operating income 5,091,193 3,619,528 4,652,970
Other income (expenses)
Government grant income 75,262 1,028,639 33,251
Interest income 36,523 82,208 8,698
Other income 84,961 4,868 36,046
Finance costs (776,027) (429,862) (226,236)
Total other income (expenses) (579,281) 685,853 (148,241)
Income before income taxes and
minority interests 4,511,912 4,305,381 4,504,729
Income taxes (465,175) (1,264,637) (7,010)
Income before minority interests 4,046,737 3,040,744 4,497,719
Minority interests 8,912 (41,861) (1,617)
Net income $4,055,649 $2,998,883 $4,496,102
Other comprehensive income
Foreign currency translation
adjustment 2,037,005 1,450,843 556,201
Total comprehensive income $6,092,654 $4,449,726 $5,052,303
Earnings per share - Basic $0.17 $0.14 $0.27
- Diluted $0.17 $0.14 $0.27
Weighted average number of shares
- Basic 24,038,183 21,785,329 16,887,815
- Diluted 24,038,183 21,877,034 16,887,815
China Gengsheng Minerals, Inc.
Consolidated Statements of Cash Flows
(Audited, Stated in US Dollars) Year ended December 31,
2008 2007 2006
Cash flows from operating activities
Net income $4,055,649 $2,998,883 $4,496,102
Adjustments to reconcile net income to
net cash provided by (used
in)operating activities:
Depreciation 759,700 591,490 389,314
Amortization of land use right 22,996 15,452 22,195
Unusual charge - make good provision -- 5,299,414 --
Deferred taxes 2,128 (33,540) (15,221)
Minority interests (8,912) 41,861 1,617
(Gain) loss on disposal of property,
plant and equipment (8,269) 10,415 (28,085)
Provision for (recovery of) doubtful
debts 90,952 (253,205) (58,259)
Provision of (recovery of) obsolete
inventories -- -- (23,306)
Changes in operating assets and
liabilities:
Restricted cash (1,441,500) (65,835) (188,355)
Trade receivables (6,006,271) (7,552,803) (1,663,523)
Bills receivables 5,389,642 (5,580,537) 436,984
Other receivables and prepayments 137,828 (1,953,581) (1,283,314)
Inventories (3,482,917) (1,142,723) (3,444,767)
Trade payables 3,984,986 325,897 1,880,697
Bills payables 2,883,000 329,175 188,355
Other payables and accrued expenses 2,448,144 620,172 (70,464)
Income tax payable (400,847) 720,207 212
Net cash flows provided by (used in)
operating activities 8,426,309 (5,629,258) 640,182
Cash flows from investing activities
Payments to acquire and deposit for
acquisition of intangible assets -- (514,280) (320,500)
Payments to acquire and deposit for
acquisition of property, plant and
equipment (7,400,994) (3,756,373) (2,818,712)
Proceeds from disposal of property,
plant and equipment 11,532 71,102 34,682
Net cash paid to acquire a subsidiary (875,294) -- --
Net cash flows used in investing
activities (8,264,756) (4,199,551) (3,104,530)
Cash flows from financing activities
Proceeds from bank loans -- 11,494,791 1,883,550
Repayment of bank loans (3,587,391) (7,241,850) (1,255,700)
Proceeds from non-interest-bearing
loans -- 3,203 1,297,307
Repayment of non-interest-bearing
loans (204,504) (1,253,429) (481,244)
Advances from directors 2,418,045 -- --
Cash acquired from RTO -- 3,036 --
Proceeds from issuance of shares, net
of direct share issue expenses
of $1,504,310 -- 8,495,690 --
Share issue expenses paid -- (216,172) --
Net cash flows (used in) provided by
financing activities (1,373,850) 11,285,269 1,443,913
Effect of foreign currency translation
on cash and cash equivalents 203,639 81,831 26,190
Net (decrease) increase in cash and
cash equivalent (1,008,658) 1,538,291 (994,245)
Cash and cash equivalents - beginning
of year 1,964,390 426,099 1,420,344
Cash and cash equivalents - end of
year $955,732 $1,964,390 $426,099
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest $546,889 $283,496 $219,631
Income taxes $805,267 $548,254 $22,018
Non-cash financing activities:
Acquisition of construction
activities under other payable and
accrued expenses $-- $-- $491,837
Issue of warrants to placement agent $-- $748,034 $--