SHANGHAI, Sept. 29 /PRNewswire-Asia/ -- China Precision Steel, Inc. (Nasdaq: CPSL), a niche precision steel processing company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its financial results for the 2010 fourth quarter and fiscal year ended June 30, 2010.
Fourth Quarter 2010 Highlights
Full Year 2010 Highlights
"Our record revenue for the fourth quarter and full year fiscal 2010 is due to our increased production capacity in January 2010, combined with strong domestic demand. Our total tons sold increased 60% in fiscal 2010 over the previous year as domestic demand continues to strengthen, especially for home appliances and auto products," commented Mr. Hai Sheng Chen, China Precision Steel's CEO. "Looking forward, we expect to experience continued growth in these markets and as of June 30, 2010, we had a backlog of $16 million."
Revenue for the fourth quarter of fiscal 2010 was a record $36.4 million, up 41.5% from $25.7 million in the fourth quarter of fiscal 2009. High carbon and low carbon products accounted for 39.3% and 59.0% of sales, respectively, compared to 31.0% and 59.9%, respectively, from the same period of the prior year. Exports contributed to 9.4% of total revenue, compared to 6.1% in the fourth quarter of fiscal 2009.
Gross profit in the fourth quarter was $2.5 million, up 9.9% from gross profit of $2.3 million in the fourth quarter of fiscal 2009. Gross margin was 7.0%, compared to 9.0% in the same period a year ago. Gross margin was impacted by an increase in depreciation of the new mill and annealing furnaces that began production in the third and fourth quarter of fiscal 2010, respectively, and partially offset by an increase in the average selling price per ton from $745 to $931, period-on-period. Management expects that gross margins will remain around 10% in the near-term and then increase to approximately 15% over the next one to two years as the production volume from the new mill increases.
Selling expenses for the fourth quarter of fiscal 2010 were $173,805, or 0.5% of revenue, compared to $46,961, or 0.2% of revenue, in the fourth fiscal quarter of 2009. Administrative expenses were $702,723, or 1.9% of revenue, compared to $656,632, or 2.6% of revenue in the same period a year ago. Depreciation and amortization expenses for the quarter were $50,731, or 0.1% of revenue, down from $103,648, or 0.4% of revenue, in the same period a year ago.
Operating income for the fourth quarter was $1.6 million, compared to operating income of $1.5 million in the same period a year ago.
Net income for the fourth quarter of fiscal 2010 was $1.3 million, compared to net income of $2.2 million in the same period of the prior year. Net income for the fourth quarter of fiscal 2009 included other income in the amount of $1.1 million, due to a reversal of provision for bad and doubtful debts and advances to suppliers in accordance with the company's accounting policies. Fully diluted earnings per share were $0.03, compared to fully diluted earnings per share of $0.05 in the fourth quarter of fiscal 2009.
Fiscal Year 2010 Results
Revenues for the fiscal year 2010 were a record $110.5 million, up 44.8% from revenues of $76.3 million in fiscal year 2009. High carbon and low carbon products accounted for 32.4% and 58.5% of sales, respectively, compared to 22.0% and 66.6%, respectively, in the prior year. Sales of high carbon, cold-rolled steel increased from $11.3 million, or 15% of total sales, to $29.1 million, or 26% of total sales, due to a strong increase in the demand for auto components during the year. International sales represented 13% of total sales, down from 28% in fiscal 2009 as the Company continued to experience strong domestic demand as a result of China's economic stimulus policies during the period. Gross profit was $10.3 million, up 33.3% from gross profit of $7.7 million in fiscal 2009. Gross margin was 9.3%, compared to 10.1% a year ago. Operating income was $6.8 million, compared to an operating loss of $0.2 million in fiscal 2009. Net income was $5.6 million, compared to a net loss of $0.4 million a year ago. Fully diluted earnings per share were $0.12, compared to a fully diluted loss per share of $0.01 for fiscal 2009.
Financial Condition
As of June 30, 2010, China Precision Steel had $29.0 million in cash and cash equivalents, $18.1 million in long-term debt, total liabilities of $66.5 million and working capital of $69.3 million. Stockholders' equity was $127.1 million, compared to $120.6 million as of June 30, 2009.
Business Outlook
In January 2010, China Precision Steel commenced production on its new mill. The new mill adds 80,000 tons of design capacity, and is expected to bring total production capacity to 260,000 tons once all mills reach full design capacity in approximately three to four years. Currently, the second and third mills are operating at 80% and 25% of their design capacity, respectively. Backlog as of June 30, 2010 was $16 million.
"While demand for precision steel products in China continues to improve, steel demand in the rest of the world is still recovering from the global economic crisis. As a result, we expect the majority of our near-term growth will continue to be derived from the domestic market," Mr. Chen continued. "Moreover, we believe that as production gradually ramps up at our new mill, we will continue to experience a stable increase in revenue and net income over the next two to three years."
About China Precision Steel
China Precision Steel is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel's high precision, ultra-thin, high strength (7.5 mm to 0.05 mm) cold-rolled steel products are mainly used in the production of automotive components, food packaging materials, saw blades, steel roofing and textile needles. The Company sells to manufacturers in the People's Republic of China as well as overseas markets such as Nigeria, Ethiopia, Thailand and Indonesia. China Precision Steel was incorporated in 2002 and is headquartered in Sheung Wan, Hong Kong. Additional information can be found at the Company's website http://chinaprecisionsteelinc.com .
Conference Call
China Precision Steel will host a conference call on Wednesday, September 29, 2010 at 9:00 am ET to discuss fiscal 2010 fourth quarter and year end results. To participate in the live conference call, please dial 888-339-2688 fifteen minutes prior to the scheduled conference call time. International callers should dial 617-847-3007. When prompted by the operator, provide Conference Passcode 45711286.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Wednesday, September 29, 2009 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 20603237. International callers should dial 617-801-6888 and enter the same passcode.
This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.chinaprecisionsteelinc.com . Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.
Forward-Looking Statements
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by China Precision Steel on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding, the impact of the Company's newly constructed facility on the Company's business and operations, and the Company's ability to expand manufacturing capacity in 2010 and 2011 as a result of the new facility; the significance of the Company's backorder on the future business and operations of the Company and the Company's ability to optimize growth as overall economic conditions improve; and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which China Precision Steel is engaged; cyclicality of steel consumption including overcapacity and decline in steel prices, limited availability of raw material and energy may constrain operating levels and reduce profit margins, environmental compliance and remediation could result in increased cost of capital as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
- Financial Tables Follow -
China Precision Steel, Inc. and Subsidiaries Consolidated Balance Sheets Audited June 30, June 30, 2010 2009 Assets Current assets Cash and cash equivalents $29,036,706 $13,649,587 Accounts receivable Trade, net of allowances of $1,013,744 and $830,127 at June 30, 2010 and 2009, respectively 39,598,845 25,140,834 Bills receivable 4,760,816 6,131,143 Other 1,369,219 881,153 Inventories 28,522,198 16,275,070 Prepaid expenses 534,882 75,917 Advances to suppliers, net of allowance of $1,643,419 and $1,631,557 at June 30, 2010 and 2009, respectively 13,959,206 21,878,047 Total current assets 117,781,872 84,031,751 Property, plant and equipment Property, plant and equipment, net 69,907,194 46,812,484 Deposits for building, plant and machinery -- 8,348,496 Construction-in-progress 3,983,450 22,245,173 Total Property, plant and equipment 73,890,644 77,406,153 Intangible assets, net 1,844,995 1,871,211 Goodwill 99,999 99,999 Total assets $193,617,510 $163,409,114 Liabilities and Stockholders' Equity Current liabilities Short-term loans $25,965,421 $22,489,031 Accounts payable and accrued liabilities 9,952,109 7,144,242 Advances from customers 3,266,377 1,742,944 Other taxes payables 3,868,220 6,650,668 Current income taxes payable 5,393,000 4,778,767 Total current liabilities 48,445,127 42,805,652 Long-term loans 18,075,914 -- Stockholders' equity: Preferred stock: $0.001 per value, 8,000,000 shares authorized, no shares outstanding at June 30, 2010 and 2009, respectively Common stock: $0.001 par value, 62,000,000 shares authorized, 46,562,955 and 46,562,955 issued and outstanding June 30, 2010 and 2009, respectively 46,563 46,563 Additional paid-in capital 75,642,383 75,642,383 Accumulated other comprehensive income 10,630,975 9,731,505 Retained earnings 40,776,548 35,183,011 Total stockholders' equity 127,096,469 120,603,462 Total liabilities and stockholders' equity $193,617,510 $163,409,114 China Precision Steel, Inc. and Subsidiaries Consolidated Statements of Operations For the Three Months Ended June 30, 2010 and 2009 2010 2009 Sales revenues 36,407,524 25,734,034 Cost of goods sold 33,869,690 23,423,791 Gross profit 2,537,834 2,310,243 Operating expenses Selling expenses 173,805 46,961 Administrative expenses 702,723 656,632 Allowance for bad and doubtful debts 35 1,344 Depreciation and amortization expense 50,731 103,648 Total operating expenses 927,294 808,585 Income from operations 1,610,540 1,501,658 Other income/(expense) Other revenues 75,042 1,061,001 Interest and finance costs (245,255) (323,360) Total other (expense)/income (170,213) 737,641 Income from operations before income tax 1,440,327 2,239,299 Provision for income tax 169,924 29,937 Net income 1,270,403 2,209,362 Basic earnings per share $0.03 $0.05 Basic weighted average shares outstanding 46,562,955 46,562,955 Diluted earnings per share $0.03 $0.05 Diluted weighted average shares outstanding 46,562,955 46,562,955 China Precision Steel, Inc. and Subsidiaries Consolidated Statements of Operations For the Years Ended June 30, 2010 and 2009 2010 2009 Sales revenues 110,453,947 76,281,621 Cost of goods sold 100,146,924 68,549,426 Gross profit 10,307,023 7,732,195 Operating expenses Selling expenses 400,808 1,679,283 Administrative expenses 2,708,564 2,238,088 Allowance for bad and doubtful debts 218,235 3,831,478 Depreciation and amortization expense 169,081 196,793 Total operating expenses 3,496,688 7,945,642 Income/(loss) from operations 6,810,335 (213,447) Other income/(expense) Other revenues 195,795 1,397,258 Interest and finance costs (920,617) (1,228,665) Total other (expense)/income (724,822) 168,593 Income/(loss) from operations before income tax 6,085,513 (44,854) Provision for income tax Current 491,976 363,484 Deferred -- -- Total income tax expense 491,976 363,484 Net income/(loss) $5,593,537 ($408,338) Basic earnings/(loss) per share $0.12 (0.01) Basic weighted average shares outstanding 46,562,955 46,561,229 Diluted earnings/(loss) per share $0.12 (0.01) Diluted weighted average shares outstanding 46,562,955 46,561,229 China Precision Steel, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Years Ended June 30, 2010 and 2009 Audited 2010 2009 Cash flows from operating activities Net income/(loss) 5,593,537 (408,338) Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 6,272,027 3,565,422 Allowance for bad and doubtful debts 218,235 3,831,478 Reversal of provision for doubtful accounts -- (1,105,866) Inventory provision 42,816 -- Loss on disposal of property, plant and equipment 2,006 -- Net changes in assets and liabilities: Accounts receivable, net (13,559,383) 3,016,777 Inventories (12,171,915) 1,601,568 Prepaid expenses (458,887) (17,861) Advances to suppliers 8,077,892 12,163,423 Accounts payable and accrued expenses 2,757,067 (4,944,049) Advances from customers 1,510,763 (5,278,228) Other taxes payable (1,324,648) 2,660,691 Current income taxes 579,492 19,995 Net cash (used in)/provided by operating activities (2,460,998) 15,105,012 Cash flows from investing activities Deposit for plant and machinery -- (8,348,496) Purchase of land use rights -- (340,066) Purchase of property, plant and equipment, including construction in progress (3,684,282) (16,642,038) Proceeds from disposal of property, plant and equipment 2,212 -- Net cash (used in) investing activities (3,682,070) (25,330,600) Cash flows from financing activities Exercise of common stock warrants -- 269,985 Loan proceeds 21,836,199 5,050,727 Repayments of short-term loans (447,389) (87,839) Net cash provided by financing activities 21,388,810 5,232,873 Effect of exchange rate 141,377 73,460 Net increase/(decrease) in cash 15,387,119 (4,919,255) Cash and cash equivalents, beginning of year 13,649,587 18,568,842 Cash and cash equivalents, end of year $29,036,706 $13,649,587
For more information, please contact:
China Precision Steel
Dan Carlson
Email: DanielCarlson@comcast.net
Elite IR
Leslie J. Richardson, Partner
Phone: +852-3183 0283
Email: Leslie.richardson@elite-ir.com
