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China Precision Steel Announces Second Quarter Results for Fiscal 2007

2007-02-15 19:21 2154


SHANGHAI, China, Feb. 15 /Xinhua-PRNewswire/ -- China Precision Steel (Nasdaq: CPSL), a niche precision steel processing company principally engaged in producing and selling high precision cold-rolled steel products, announced today its second quarter results for fiscal 2007.

Revenue for the second quarter 2007 increased to $15.0 million, up from 52% from the second quarter 2006 of $9.9 million. The increase in revenue is due to increased volume which offset the decrease in average selling price during the quarter. The decline in the average selling price is attributed to increased sales of low carbon precision steel which the Company began to sell in international markets during the quarter. Gross profit increased 22.2% to $3.4 million in the second quarter 2007 from $2.8 million in the comparable period a year earlier. Net income was $2.9 million up 7.5% for the second quarter 2007 from net income in the second quarter 2006 of $2.7 million.

Revenues from low carbon precision steel increased 105% to $7.2 million for the quarter from $3.5 million in the second quarter of 2006. The increase in sales was due to increased sales volume of 5,601 tons of low carbon cold-rolled steel compared to the same period a year ago. Low carbon products represented 48% of revenue for the quarter up from 35% of revenue in the second quarter 2006. Revenue generated from high carbon products for the second quarter was 52% compared to 65% in the second quarter 2006. Revenues from high end cold-rolled steel products accounted for 28% of total revenues or $4.2 million with an average selling price of $13,090 per ton. China Precision Steel did not sell any high end cold-rolled steel products in the second quarter 2006. International sales accounted for 10% of total sales or $1.5 million. The Company did not have any international sales in the second quarter 2006. The increase in volume during the quarter offset the decline in average selling price per ton of 13% to $764 from $883 per ton in the corresponding period in 2006 which is attributed to the change in product mix.

Gross profit for the quarter was $3.4 million for an increase of 22.2% from gross profit of $2.8 million in the second quarter 2006. Gross margin during the quarter was 23% compared to gross margin of 28% for the comparable period a year ago.

During the quarter total expense was 3.8% or $574,000 of revenue compared to total expense of $476,000 or 4.8% of revenue in the second quarter 2006.

Net income for the quarter was $2.9 million, up 7.5% from net income in the second quarter 2006 of $2.7 million. Fully diluted earnings per share for the quarter were $0.11 compared to fully diluted earnings per share of $0.10 during the second quarter 2006.

Six Months Financial Results

Revenue for the first six months of fiscal 2007 increased 45% to $25.5 million from revenue of $17.6 million in the first six months of 2006. The increase in revenues is attributed to an increase in sales volume and an increase in average selling price. The average selling price for the period was as follows: low carbon cold-rolled steel was $607 compared to $520; high carbon hot-rolled steel was $651 compared to $644; and high carbon cold-rolled steel was $2,535 compared to $2,374. During the period the Company started production of high end cold-rolled steel products which had an average selling price of $13,599. Gross margin for the first six months of fiscal 2007 was 28% compared to gross margin of 30% for the same period a year ago.

Operating income was up 32.9% to $6.3 million for the first six months of fiscal 2007 from $4.7 million for the same period a year ago. Net income was $5.8 million during the period for an increase of 20.6% from net income in the first six months of 2006 of $4.8 million. Fully diluted earnings per share during the first six months of fiscal 2007 were $0.22 compared to fully diluted earnings per share during the first six months of fiscal 2006 of $0.18.

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 produces high precision ultra-thin (3.0 mm to 0.03 mm) cold-rolled steel products primarily for automotive components, food packaging materials, saw blades and textile needle manufacturing companies in the People's Republic of China. China Precision Steel's operation is currently located in The People's Republic of China. However, China Precision Steel intends to expand overseas into Japan, Taiwan, Korea, Thailand, the Philippines, the European Union and the United States in the future.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of China Precision Steel's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth 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. China Precision Steel does not assume any obligation to update the information contained in this press release.

-- Financial Tables Follow --

China Precision Steel, Inc.

Condensed Consolidated Balance Sheets

December 31, June 30,

2006 2006

(Unaudited)

Assets

Current assets

Cash and equivalents $1,173,975 $186,955

Accounts receivable

Trade 9,383,527 13,399,003

Other 25,575 69,913

Inventory 14,491,575 6,283,910

Deposits 79,236 75,575

Advances to suppliers 7,549,582 3,138,759

Total current assets 32,703,470 23,154,115

Property and equipment

Property and equipment, net 18,363,959 8,664,417

Construction-in-progress 13,671,544 13,752,954

32,035,503 22,417,371

Total assets $64,738,973 $45,571,486

Liabilities and

Stockholders' Equity

Current liabilities

Accounts payable $6,423,862 $1,801,466

Advances from customers 4,778,897 1,859,773

Other taxes payables 680,282 862,914

Current income taxes payable 1,496,104

Deferred income taxes payable 1,455,636 1,535,204

Amounts due to directors 2,240,599 5,896,943

Current portion of long-term debt 9,841,091 8,918,939

Notes payable 14,132,427 9,862,672

Total current liabilities 41,048,898 30,737,911

Long-term debt, net of

current portion shown above 6,128,599 3,152,415

Stockholders' equity:

Preferred stock: $0.001 per value,

8,000,000 shares

authorized, no shares outstanding at

December 31, 2006 or June 30, 2006 --

Ordinary stock: $0.001 par value,

62,000,000 shares authorized,

26,981,916 issued and outstanding 26,982 26,982

at December 31, 2006 and June 30,

2006

Additional paid-in capital 1,373,018 1,373,018

Accumulated other comprehensive

income 1,400,568 745,583

Retained earnings 14,760,908 9,535,577

Total stockholders' equity 17,561,476 11,681,160

Total liabilities and

stockholders' equity $64,738,973 $45,571,486

China Precision Steel, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

Three Months Six Months Ended:

Ended:

December December December December

31, 31, 31, 31,

2006 2005 2006 2005

Revenues

Sales revenues $15,007,582 $9,902,359 $25,510,930 $17,605,248

Cost of goods sold 11,594,852 7,109,245 18,394,950 12,287,788

Gross profit 3,412,730 2,793,114 7,115,980 5,317,460

Operating expenses

Selling expenses 64,693 20,296 104,390 42,378

Administrative expenses 498,737 445,927 684,925 510,400

Depreciation and

amortization expense 10,845 10,174 21,262 18,645

Total operating expenses 574,275 476,397 810,577 571,423

Income from continuing

operations 2,838,455 2,316,717 6,305,403 4,746,037

Other income (expense)

Other revenues 318,774 -- 318,774

Interest and finance

Costs (114,743) (206,464) (318,082) (352,662)

Total other income

(expense) (114,743) 112,310 (318,082) (33,888)

Net income from continuing

operations before income

tax 2,723,712 2,429,027 5,987,321 4,712,149

Provision for (benefit from)

income tax

Current (34,057) 895,313

Deferred 389,604 (85,405)

Total income tax expense 355,547 809,908

Net income before

discontinued operations 2,368,165 2,429,027 5,177,413 4,712,149

Net income from

discontinued operations 519,879 258,601 639,072 112,582

Net income $2,888,044 $2,687,628 $5,816,485 $4,824,731

Basic and diluted

earnings per share

From continuing

operations $0.09 $0.09 $0.19 $0.17

From discontinued

operations $0.02 $0.01 $0.03 $0.01

Total $0.11 $0.10 $0.22 $0.18

Basic and diluted

weighted average shares

outstanding 26,981,916 26,981,916 26,981,916 26,981,916

The Components of

comprehensive income:

Net income $2,888,044 $2,687,628 $5,816,485 $4,824,731

Foreign currency

translation adjustment 557,213 76,402 654,985 405,877

Comprehensive income $3,445,257 $2,764,030 $6,470,970 $5,230,608

China Precision Steel, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

For the Six Months Ended:

December December

31, 31,

2006 2005

Cash flows from operating

activities

Net Income 5,816,485 4,824,149

Adjustments to reconcile net

income to net cash provided by

(used in) operating

activities

Depreciation 617,405 403,630

Less income from discontinued operations -

Oralabs, Inc (639,072) (112,582)

Net changes in assets and liabilities:

Accounts receivable, net 4,059,814 (3,558,798)

Inventories (8,207,665) (2,315,178)

Advances to suppliers (4,410,823) (774,381)

Deposits (3,661)

Accounts payable and accrued expenses 4,622,396 (266,168)

Advances from customers 2,919,124 646,278

Deferred income taxes (85,405)

Current income taxes 937,307

Other taxes payable (152,086) 285,493

Net cash provided by (used

in) operating activities 5,473,819 (866,975)

Cash flows from investing activities

Purchases of fixed assets including

construction in progress (10,212,328) (7,012,465)

Net cash (used in) investing activities (10,212,328) (7,012,465)

Cash flows from financing activities

Advances from directors, net (3,237,243) 931,984

Long-term loan proceeds 3,898,336

Notes payable proceeds 3,850,654 4,190,030

Capital and restructuring contributions 558,797

Net cash provided by financing activities 5,070,544 5,122,014

Effect of exchange rate 654,985 402,716

Net increase (decrease) in cash 987,020 (2,354,710)

Cash and cash equivalents,

beginning of year 186,955 3,133,326

Cash and cash equivalents,

end of year 1,173,975 778,616

For more information, please contact:

CCG Elite

Crocker Coulson, President

Leslie Richardson, Financial Writer

Tel: +1-310-231-8600

Email: crocker.coulson@ccgir.com or leslie.richardson@ccgir.com

China Precision Steel

Leada Li, CFO

Tel: +852-2543-8223

Email: leadali@biznetvigator.com

Source: China Precision Steel
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