SHANGHAI, May 11 /PRNewswire-Asia/ -- China Precision Steel, Inc.
(Nasdaq: CPSL) ("China Precision Steel" or the "Company"), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its fiscal 2009 third quarter results for the period ended March 31, 2009.
Third Quarter Highlights
-- Revenue was $7.6 million
-- Gross loss was $2.0 million
-- Net loss of $3.5 million for fully diluted loss per share of $0.08
-- Exports represented 27.5% of total sales
"The steel industry has been severely hit by the credit crunch and global economic downturn during the past quarter. As a result, we experienced an uncommon decrease in customers' orders which negatively impacted our sales," commented Dr. Wo Hing Li, China Precision Steel's Chairman and CEO. "We remain optimistic as we have recently experienced some strengthening in the domestic market as the Chinese government's stimulus package works its way through the economy. In addition, we have taken strides in broadening our customer base, particularly by encouraging relationships with potential customers whose past orders we were previously unable to fulfill due to limited production capacity."
Revenue for the third quarter of fiscal 2009 decreased to $7.6 million, down 59.4% from $18.8 million in the third quarter of fiscal 2008. The decline in revenue was mainly attributable to the decrease in sales volume across all product lines and lower average selling price, as a result of the global economic slowdown and the downturn of the steel industry. Sales volume and average selling price per ton in the third quarter decreased to 11,000 tons and $693, respectively, down 54.7% and 10.3%, respectively, as compared to the third quarter of fiscal 2008. High carbon and low carbon products accounted for 31.3% and 64.8% of sales, respectively, compared to 29.1% and 47.6%, respectively, from the prior year period. Exports contributed to 27.5% of total revenue compared to 19.0% in the third quarter of fiscal 2008.
Gross loss in the third quarter was $2.0 million, compared to gross profit of $5.4 million in the third quarter of fiscal 2008. Gross margin was (26.0)%, down from 28.6% in the same period a year ago. The decline in gross margin was mainly due to the higher raw material cost under weighted-average cost accounting and lower selling prices during the third quarter as compared to the same period a year ago, as well as the inability to pass on all of our labor and overhead costs to customers during the global economic downturn.
Selling expenses for the third quarter of fiscal 2009 were $298,492, or 3.9% of revenue, compared to $203,477, or 1.1% of revenue, in the third fiscal quarter of 2008. The increase in selling expenses was primarily attributable to the settlement of sales commission during the three months ended March 31, 2009 for goods shipped in the previous quarter. Administrative expenses were $541,251, or 7.1% of revenue, compared to $699,220, or 3.7% of revenue. The decline in administrative expenses was mainly due to the lower SEC compliance costs and professional fees as there was no financing activity during the quarter.
Operating loss for the third quarter was $2.9 million, compared to operating income of $4.4 million in the same period a year ago.
Net loss for the third quarter of fiscal 2009 was $3.5 million, compared to net income of $3.6 million in the prior year period. Fully diluted loss per share was $0.08 compared to fully diluted earnings per share of $0.08 in the comparable period a year ago.
Nine Months Financial Results
Revenues for the first nine months of fiscal 2009 were $50.5 million, down 14.6% from revenues of $59.2 million in the first nine months of fiscal 2008. Gross profit was $5.4 million, compared to gross profit of $17.0 million in the first nine months of fiscal 2008. Gross margin was 10.7%, compared to 28.7% for the comparable period a year ago. Operating loss was $1.7 million, compared to operating income of $13.8 million in the first nine months of fiscal 2008. Net loss was $2.6 million, compared to net income of $13.0 million in the same period a year ago. Fully diluted loss per share was $0.06, compared to fully diluted earnings per share of $0.30 in the first nine months of fiscal 2008. Diluted weighted average shares outstanding were 46.6 million, compared to 42.6 million in the first nine months of fiscal 2008.
Financial Condition
As of March 31, 2009, China Precision Steel had $5.6 million in cash and cash equivalents, no long-term debt, total liabilities of $39.3 million and working capital of $38.1 million. Shareholders' equity was $118.3 million, compared to $120.3 million as of June 30, 2008. For the first nine months of fiscal 2009, cash generated from operating activities was $12.2 million.
Business Outlook
China Precision Steel is currently constructing its third cold rolling mill and expects to have completed the construction in the first quarter of fiscal 2010. The new mill is designed to process steel with a width up to 1,450 mm and will be a tandem mill with best-in-class gauge control and shape performance capable of producing high quality steel for exposed and unexposed products.
"While near-term visibility for the steel industry remains limited, we believe that the implementation of several economic and industry stimulus packages are helping to restore stability and reaccelerate global growth. Moreover, China is still in the middle of a grand scale modernization and industrialization which we believe supports long-term demand for precision steel products," Dr. Li commented. "Precision steel remains the material of choice in many important and exacting applications and we have the right people, facilities and technology to deliver the steel solutions our customers need. Therefore, we believe we are well positioned to participate in an economic recovery when it occurs as well as to resume our growth strategy to increase our market share."
About China Precision Steel, Inc.
China Precision Steel, Inc. 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 and textile needles. The Company primarily sells to manufacturers in the People's Republic of China and is expanding into overseas markets such as Nigeria, Thailand, Indonesia and the Philippines. 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 Monday, May 11, 2009 at 9:00 a.m. Eastern Time to discuss third quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 888-339-2688. International callers should dial 617-847-3007. When prompted by the operator, mention Conference Passcode 290 320 21.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Monday, May 11, 2009 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 68709760. 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 our ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion in 2009 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, such as 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
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended March 31, 2009 and 2008
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31, March 31, March 31,
2009 2008 2009 2008
Revenues
Sales revenues $7,623,209 $18,773,504 $50,547,587 $59,189,060
Cost of goods sold 9,605,252 13,399,010 45,125,635 42,172,997
Gross profit/(loss) (1,982,043) 5,374,494 5,421,952 17,016,063
Operating expenses
Selling expenses 298,492 203,477 1,632,322 484,926
Administrative expenses 541,251 699,220 1,581,456 2,031,816
Allowance for bad and
doubtful debts 672 10,150 3,830,134 661,930
Depreciation and
amortization expense 33,624 17,155 93,145 46,585
Total operating expenses 874,039 930,002 7,137,057 3,225,257
Income/(loss) from
operations (2,856,082) 4,444,492 (1,715,105) 13,790,806
Other income/(expense)
Other revenues 76,556 152,894 336,257 945,304
Interest and finance
costs (257,123) (415,863) (905,305) (1,174,864)
Total other income
(expense) (180,567) (262,969) (569,048) (229,560)
Net income/(loss) from
operations before
income tax (3,036,649) 4,181,523 (2,284,153) 13,561,246
Provision for (benefit
from) income tax
Current 481,804 543,623 333,547 1,660,217
Deferred -- -- -- (1,064,028)
Total income tax expense 481,804 543,623 333,547 596,189
Net income/(loss) $(3,518,453) $3,637,900 $(2,617,700) $12,965,057
Basic earnings/(loss)
per share $(0.08) $0.08 $(0.06) $0.31
Basic weighted average
shares outstanding 46,562,953 45,896,288 46,560,656 42,088,128
Diluted earnings/(loss)
per share $(0.08) $0.08 $(0.06) $0.30
Diluted weighted average
shares outstanding 46, 562,953 46,365,778 46,560,656 42,555,912
The Components of
comprehensive
income/(loss):
Net income/(loss) $(3,518,453) $3,637,900 $(2,617,700) $12,965,057
Foreign currency
translation adjustment (366,181) 3,481,498 384,243 5,567,813
Comprehensive
income/(loss) $(3,884,634) $7,119,398 $(2,233,457) $18,532,870
China Precision Steel, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, June 30,
2009 2008
Assets
Current assets
Cash and equivalents $5,569,806 $18,568,842
Accounts receivable net of allowance
of $1,036,609 and $1,033,479 at
March 31, 2009 and June 30, 2008,
respectively 21,029,146 33,783,074
Bills receivables 2,288,691 4,309,703
Other 259,827 571,746
Inventories 22,606,039 17,815,087
Prepaid expenses 131,841 58,105
Advances to suppliers, net of
allowance of $2,530,479 and
$2,522,837 at March 31,2009 and
June 30, 2008, respectively 25,477,855 33,027,365
Total current assets 77,363,205 108,133,922
Property and equipment
Property and equipment, net 39,800,096 39,199,305
Deposit for plant and machinery 8,048,466 --
Construction-in-progress 29,949,380 16,476,454
77,797,942 55,675,759
Intangible assets, net 2,394,406 1,625,690
Goodwill 99,999 99,999
Total assets $157,655,552 $165,535,370
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued
liabilities $10,023,519 $12,047,981
Advances from customers 3,581,863 6,996,996
Other taxes payables 3,529,867 3,976,239
Current income taxes payable 4,746,903 4,742,387
Short-term loans 17,430,904 17,465,799
Total current liabilities 39,313,056 45,229,402
Stockholders' equity:
Preferred stock: $0.001 per value,
8,000,000 shares authorized, no
shares outstanding at March 31,
2009 and June 30, 2008
Common stock: $0.001 par value,
62,000,000 shares authorized,
46,562,953 and 46,472,953 issued
and outstanding March 31,2009 and
June 30, 2008 46,563 46,473
Additional paid-in capital 75,642,383 75,372,488
Accumulated other comprehensive
income 9,679,901 9,295,658
Retained earnings 32,973,649 35,591,349
Total stockholders' equity 118,342,496 120,305,968
Total liabilities and stockholders'
equity $157,655,552 $165,535,370
China Precision Steel, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended March 31, 2009 and 2008
(Unaudited)
2009 2008
Cash flows from operating activities
Net Income $(2,617,700) $12,965,057
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 2,746,541 1,841,947
Allowance for bad and doubtful debts 3,830,134 661,930
Net changes in assets and liabilities:
Accounts receivable, net, bills
receivables and other receivables 11,360,509 (26,067,887)
Inventories (4,732,832) (2,616,526)
Deposits -- 89,361
Prepayments (73,753) (429,556)
Advances to suppliers 7,642,844 (25,893,725)
Accounts payable and accrued expenses (2,058,293) 5,702,234
Advances from customers (3,433,313) 5,037,976
Other taxes payable (458,015) 2,220,328
Current income taxes (9,841) 2,365,673
Deferred income taxes -- (1,064,028)
Net cash (used in) provided by operating
activities 12,196,281 (25,187,216)
Cash flows from investing activities
Purchases of property, plant and
equipment (3,231,638) --
Deposit for plant and machinery (8,048,466) --
Purchases of land use rights (786,643) --
Construction in progress (17,441,297) (7,512,290)
Net cash (used in) investing activities (25,489,763) (7,512,290)
Cash flows from financing activities
Exercise of common stock warrants 269,985 --
Sale of common stock -- 44,375,282
Advances from/(to) directors, net -- 2,572,846
Notes payable proceeds -- 16,446,667
Repayments of notes payable (87,801) (23,757,121)
Net cash provided by financing activities 182,184 39,637,674
Effect of exchange rate 112,263 1,852,473
Net increase/(decrease) in cash (12,999,035) 8,790,641
Cash and cash equivalents, beginning of
period 18,568,842 5,504,862
Cash and cash equivalents, end of period $5,569,807 $14,295,503
For more information, please contact:
China Precision Steel
Dan Carlson,
Email: DanielCarlson@comcast.net
Elite IR
Leslie J. Richardson, Partner
Tel: +852-3183-0283
Email: Leslie.richardson@elite-ir.com
