Gross Margin 30.3%
Fracture Proppants Booked $2.5M or 19.8% of Total Sales
Teleconference to Be Held Monday, May 18, 2009, at 8:00 a.m. EDT
GONGYI, China, May 16 /PRNewswire-Asia/ -- 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 unaudited financial results for the first quarter ended March 31, 2009.
First Quarter 2009 Results
For the first quarter of 2009, sales were $12.4 million, compared with $9.6 million in the first quarter of 2008.
Monolithic refractory products contributed 79.0% of sales, vs. 90.2% in the first quarter of 2008. Industrial ceramics contributed 1.2% of sales, vs. 3.5% in the first quarter of 2008. Fracture proppants contributed 19.8% of sales, vs. 6.3% in the same quarter of last year.
Gross profit was $3.8 million, compared with $3.6 million in the same period of 2008. Gross margin was 30.3%, compared with 37.0% in the first quarter of 2008 and 22.3% in the fourth quarter of 2008.
"I am pleased with our gross margin rebound on a sequential basis, as well as the higher contribution to revenue of our fracture proppant products in the first quarter," said Mr. Shunqing Zhang, Chairman, President and CEO of Gengsheng. "Although the economic environment still remains challenging for Chinese steel companies, the Chinese government's decision action to rejuvenate the infrastructure sector has sparked new demand for steel products for roads and ports. We expect to see better refractory sales in the second half of this year if the government demand holds up."
Mr. Zhang continued, "I am at the same time encouraged by the strong demand for our fracture proppant products. This is best exemplified by PetroChina's $5.5-million Changqing Oilfield contract we announced today. After our capacity expansion, we are now capable of producing 60,000 tons of proppants per year and we are winning contracts both domestically and overseas. With crude oil prices hitting $60 again, we are optimistic that our proppants will continue to see purchase orders. Lastly, we still expect to begin the trial production of the fine precision abrasive line in the second quarter and start commercial production sometime in the summer."
Selling expenses in the first quarter of 2009 were $1.5 million, compared with $1.4 million in the same period of 2008, reflecting higher sales. General and administrative expenses were $2.6 million, compared with $2.1 million in the same period of 2008.
Net income was $954,000, or diluted EPS of $0.04, compared with $1.2 million, or diluted EPS of $0.05, in the same period of 2008; and a net loss of $643,000, or diluted loss per share of $0.03, in the fourth quarter of 2008.
As of March 31, 2009, the Company had total cash and cash equivalents of $3.8 million, compared with $955,732 at year-end 2008.
Total shareholders' equity increased to $44.2 million at March 31, 2009, from $43.3 million at December 31, 2008.
Total shares outstanding on a fully diluted basis as of March 31, 2009 were 24.2 million.
Recent Developments
On May 15, 2009, the Company announced that it has won a supply contract for fracture proppants with PetroChina's Changqing Oilfield. The total value of the contract is $5.5 million (RMB 37.6 million). Gengsheng is scheduled to start shipping immediately. According to PetroChina's English-language Website, in 2007, PetroChina's Changqing Oil and Gas Province ("Changqing"), located at the Ordos Basin in Northwest China, produced 12 million tons of crude oil and 11 billion cubic meters of natural gas, making Changqing China's third-largest onshore oil and gas field.
On May 11, 2009, the Company announced its wholly owned subsidiary, Henan Gengsheng Refractories Co., Ltd., has been designated the National High & New Tech Enterprise (HNTE) by Henan Province. Gengsheng is one of the only three firms in the city of Gongyi to receive such a title in the current round of new National HNTE designations. Being a national HNTE entails lower corporate income tax rate (from the regular 25% to 15% starting this year), faster clearance of customs during overseas travels, preferential terms of bank loans, priority in government approvals of various administrative applications, etc.
On April 29, 2009, the Company announced it has signed a full-service refractory supply contract with Zibo Zhang Steel Co., Ltd. ("Zhang Steel") in Shandong Province. The value of the contract is estimated to be approximately $2.9 million per year. Gengsheng provides "full services" to China's steel mills in the form of refractory product installation, testing, maintenance, repair and replacement.
Conference Call
The Company will host a conference call on Monday, May 18, 2009, at 8:00 a.m. Eastern Daylight Time / 8:00 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 replay of the call will be available through May 25, 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 322746.
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 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.
Condensed Consolidated Balance Sheets
As of March 31, As of December 31,
2009 2008
(Stated in US Dollars) (Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $3,827,233 $955,732
Restricted cash 4,248,500 1,760,400
Trade receivables 29,461,779 30,026,675
Bills receivable 1,287,281 631,560
Other receivables and prepayments 4,691,730 3,608,247
Inventories 12,883,416 12,170,193
Deferred tax assets 31,685 54,869
Total current assets 56,431,264 49,207,676
Deposits for acquisition of property,
plant and equipment 7,325,038 6,297,205
Deposits for acquisition of land use
right 216,264 --
Intangible asset 952,250 953,550
Goodwill 441,089 441,089
Property, plant and equipment, net 10,580,901 10,654,692
Land use right 950,304 956,916
TOTAL ASSETS $76,898,470 $68,511,128
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables 9,966,323 $9,548,854
Bills payable 6,299,500 3,520,800
Other payables and accrued expenses 5,265,049 6,010,364
Advances from directors 1,100,605 2,460,820
Income taxes payable 370,983 349,293
Non-interest-bearing loans 69,954 290,100
Collateralized bank loans 9,229,500 2,640,600
Unsecured interest-bearing loan 219,750 220,050
Deferred tax liabilities 21,457 21,486
TOTAL LIABILITIES 32,543,121 25,062,367
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value
50,000,000 shares authorized, no
shares issued and outstanding -- --
Common stock - $0.001 par value
100,000,000 shares
authorized,24,038,183 shares issued
and outstanding 24,038 24,038
Additional paid-in capital 19,608,044 19,608,044
Statutory and other reserves 7,207,206 7,207,206
Accumulated other comprehensive
income 4,299,912 4,355,605
Retained earnings 13,031,755 12,078,137
Total stockholders' equity 44,170,955 43,273,030
NONCONTROLLING INTERESTS 184,394 175,731
TOTAL EQUITY 44,355,349 43,448,761
TOTAL LIABILITIES AND EQUITY $76,898,470 $68,511,128
China Gengsheng Minerals, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
Three Months Ended March 31,
2009 2008
(Stated in US Dollars) (Unaudited) (Unaudited)
Sales $12,398,010 $9,614,152
Cost of goods sold 8,641,708 6,055,595
Gross profit 3,756,302 3,558,557
Operating expenses
General and administrative expenses 1,011,183 634,904
Amortization and depreciation 98,289 104,002
Selling expenses 1,529,468 1,366,516
Total operating expenses 2,638,940 2,105,422
Net operating income 1,117,362 1,453,135
Other income (expenses)
Government grant income 36,891 58,998
Interest income 8,664 2,202
Other income 32,966 24,588
Finance costs (187,236) (188,498)
Total other income (expenses) (108,715) (102,710)
Income before income taxes and
noncontrolling interests 1,008,647 1,350,425
Income taxes (46,126) (150,790)
Net income attributable to
noncontrolling interests 962,521 1,199,635
Noncontrolling interests (8,903) (10,353)
Net income attributable to Company’s
stockholders 953,618 1,189,282
Net income 962,521 1,199,635
Other comprehensive income
Foreign currency translation
adjustment (55,933) 1,220,905
Comprehensive income 906,588 2,420,540
Comprehensive income attributable
to noncontrolling interests (8,663) (7,525)
Comprehensive income attributable
to Company’s shareholders 897,925 2,413,015
Earnings per share-Basic 0.04 0.05
Earnings per share-Diluted 0.04 0.05
Weighted average number of shares –
Basic 24,038,183 24,038,183
Weighted average number of shares –
Diluted 24,038,183 24,180,946
China Gengsheng Minerals, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31,
2009 2008
(Stated in US Dollars) (Unaudited) (Unaudited)
Cash flows from operating activities
Net income attributable to the
Company’s stockholders $953,618 $1,189,282
Adjustments to reconcile net income
to net cash provided by(used in)
operating activities:
Depreciation 230,101 184,474
Amortization of land use right 6,115 3,982
Deferred taxes 23,110 30,612
Noncontrolling interests 8,903 10,353
Changes in operating assets and
liabilities:
Restricted cash (2,490,670) --
Trade receivables 523,995 826,060
Bills receivables (656,628) 4,541,512
Other receivables and prepayments (1,085,158) (3,424,414)
Inventories (729,885) (2,281,299)
Trade payables 430,516 876,088
Bills payables 2,783,690 --
Other payables and accrued expenses (738,865) 642,900
Income tax payable 22,169 (408,751)
Net cash flows used in operating
activities (718,989) 2,190,799
Cash flows from investing activities
Payments to acquire and deposit for
land use right (216,278) --
Payments to acquire and for deposit
for acquisition of Property, Plant
and
Equipment 1,209,050 (914,921)
Net cash flows used in investing
activities 1,425,328 (914,921)
Cash flows from financing activities
Proceeds from bank loans 6,592,950 --
Repayment to bank loans -- (321,471)
Repayment of non-interest-bearing
loans (219,765) (189,580)
Repayment to director (1,356,952) --
Net cash flows provided by financing
activities 5,016,233 (511,051)
Effect of foreign currency
translation on cash and cash
equivalents (415) 92,015
Net increase in cash and cash
equivalents 2,871,501 856,842
Cash and cash equivalents - beginning
of period 955,732 1,964,390
Cash and cash equivalents - end of
period 3,827,233 2,821,232
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest 76,214 26,670
Income taxes -- 373,371
