SHANGHAI, May 16, 2012 /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 year 2012 third quarter results for the period ended March 31, 2012.
Third Quarter Highlights
"While total sales volume is up period-over-period, it was another challenging quarter for us as the domestic demand for precision steel remains soft due to the slowdown of China's growth rate. Subsequently, the softening steel demand resulted in steel prices sharply dropping 10.2% from the second quarter of fiscal year 2012. Our revenue for the quarter was also impacted by the Chinese New Year holiday which shortened the quarter's production period by ten days," commented Mr. Hai Sheng Chen, CEO of China Precision Steel. "While we continue to remain cautious for the rest of calendar year 2012, we are experiencing a gradual increase in demand for our low carbon, cold-rolled steel and could experience a turnaround in demand for high-carbon steel before the end of the calendar year should the government enacts new stimulus policies."
Revenue for the third quarter of fiscal year 2012 was $29.5 million, down 6.3% from revenue in the third quarter of fiscal year 2011 of $31.5 million. The decrease in revenue was mainly attributed to the 12.2% decline in average selling price to $758 ton from $863 ton in the third quarter of fiscal 2011. Total sales volume in the third quarter of fiscal year 2012 increased to 38,898 tons from total sales volume of 36,475 tons in the prior period. High carbon and low carbon sales accounted for 11.9% and 86.2% of total sales, respectively, compared to 23.8% and 74.0%, respectively, period-on-period. Exports represented 5.4% of total sales for the current period, up from 0.9% in the same period a year ago as the Company has been experiencing strengthening global demand.
Gross loss in the third quarter was $1.1 million, compared to gross loss of $0.04 million in the same period a year ago. Gross loss margin for the current period was 3.8% compared to 0.1% in the third quarter of fiscal 2011. The increase in gross loss margin principally resulted from the a decline in average selling price per unit sold of 12.2%, which was partially offset by a decline in average cost per unit sold of 8.9%, period-on-period.
Selling expenses for the third quarter of fiscal year 2012 were $63,734, compared to $93,172 in the third quarter of fiscal year 2011. The decline in selling expenses was primarily attributable to a decrease in sales commissions during the quarter compared to the same period a year ago. Administrative expenses were $781,221, or 2.6% of revenue, compared to $111,068, or 0.4% of revenue period-on-period. The increase in administrative expenses was primarily due to inventory write down in the amount of $636,405 during the period.
Operating loss for the current quarter was $2.5 million, compared to an operating loss of $0.3 million in the third quarter of fiscal year 2011.
Net loss for the third quarter of fiscal year 2012 was $3.3 million, compared to net loss of $872,497 for the third quarter of fiscal year 2011. Fully diluted loss per share was $0.07, compared to fully diluted loss per share of $0.02 in the same period a year ago.
Nine Months Financial Results
Revenue for the first nine months of fiscal year 2012 was $105.3 million, up 0.2% from $105.2 million in the same period a year ago. Gross loss was $2.9 million, compared to a gross profit of $4.3 million for the nine months of fiscal year 2011. Gross profit margin for the nine months ended March 31, 2012 was (2.7%), down from 4.0% for the comparable period a year ago. Operating loss was $5.7 million, down from an operating income of $2.2 million in the first nine months of fiscal year 2011. Net loss was $7.9 million, compared to a net loss of $0.03 million in the same period a year ago. Fully diluted loss per share was $0.17, compared to fully diluted loss per share of $0.00 for the first nine months of fiscal year 2011.
Financial Condition
As of March 31, 2012, China Precision Steel had $2.2 million in cash and cash equivalents, $12.6 million in long-term debt, total liabilities of $70.8 million and working capital of $69.2 million. Stockholders' equity stood at $129.1 million, compared to $133.5 million as of June 30, 2011. Cash generated from operating activities during the first nine months of fiscal year 2012 was $2.7 million.
Business Outlook
China Precision Steel anticipates that the market demand for precision steel used in home appliance would gradually strengthen while demand for high carbon precision steel used in automobile components and low carbon steel used in roofing materials would continue to be soft throughout calendar year 2012. Additionally, the Company expects to experience more competitive pressures in the international markets if the Chinese RMB continues to strengthen against US Dollars. As of March 31, 2012, China Precision Steel had a backlog of $19.0 million, of which approximately 70% are orders for low-carbon steel products.
"We anticipate a difficult operating environment throughout calendar year 2012 due to a weakening Chinese economy. However, in response to the slowing of China's growth rate, the Chinese government is looking at new ways to stimulate consumption and spending. Currently, it is taking steps to accelerate some infrastructure projects, such as railway, roads, airports and electricity projects, to help boost the economy," Mr. Chen continued. "We view these new infrastructure projects as a potential opportunity to drive sales for our high carbon steel products which are used in automobile parts for transportation vehicles. Furthermore, despite the economic slowdown, urbanization is still going strong in China and will continue to drive demand for home appliances which combined with a potential new round of subsidies could enhance demand for our low-carbon, cold-rolled steel products."
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 overseas markets such as Indonesia, Thailand, the Caribbean, Nigeria and Ethiopia. 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, May 16, 2012 at 9:00 a.m. Eastern Time to discuss fiscal 2011 third quarter results. To participate in the live conference call, please dial the following number fifteen minutes prior to the scheduled conference call time: 866-800-8648. International callers should dial 617-614-2702. When prompted by the operator, mention conference passcode 335 847 90.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Wednesday, May 16, 2012 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010 and enter the passcode 18783351. 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 China Precision Steel's ability to prepare the Company for growth, the Company's planned manufacturing capacity expansion, predictions regarding the ability of China's home appliance stimulus program to continue stimulating the demand for the Company's products, predictions about improvements in the global economy 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.
Elite IR
Leslie J. Richardson, Partner
+852-3183 0283
Leslie.richardson@elite-ir.com
- Financial Tables Follow -
China Precision Steel, Inc. and Subsidiaries | |||||
Consolidated Balance Sheets | |||||
(Unaudited) | |||||
March 31, | June 30, | ||||
2012 | 2011 | ||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $2,244,609 | $2,707,754 | |||
Accounts receivable | |||||
Trade, net of allowances of $1,091,900 and $1,063,620 | |||||
at March 31, 2012 and June 30, 2011, respectively | 45,250,344 | 41,335,759 | |||
Bills receivable | 182,656 | 201,133 | |||
Other | 1,570,111 | 1,420,192 | |||
Inventories, net | 28,518,286 | 25,077,449 | |||
Prepaid expenses | 725,445 | 633,416 | |||
Advances to suppliers, net of allowance of $2,297,554 and | |||||
$1,724,275 at March 31, 2012 and June 30, 2011, respectively | 48,933,681 | 50,034,590 | |||
Total current assets | 127,425,132 | 121,410,293 | |||
Property, plant and equipment | |||||
Property, plant and equipment, net | 70,389,316 | 75,311,221 | |||
Construction-in-progress | 80,191 | 64,762 | |||
70,469,507 | 75,375,983 | ||||
Intangible assets, net | 1,908,973 | 1,892,249 | |||
Goodwill | 99,999 | 99,999 | |||
Total assets | $199,903,611 | $198,778,524 | |||
Liabilities and Stockholders' Equity | |||||
Current liabilities | |||||
Short-term loans | $27,502,237 | $27,370,648 | |||
Long-term loan - current portion | 3,600,000 | 3,600,000 | |||
Accounts payable and accrued liabilities | 8,543,271 | 5,599,323 | |||
Advances from customers | 6,423,836 | 2,275,241 | |||
Other taxes payable | 6,320,262 | 6,297,227 | |||
Current income taxes payable | 5,842,782 | 5,691,456 | |||
Total current liabilities | 58,232,388 | 50,833,895 | |||
Long-term loans | 12,600,000 | 14,400,000 | |||
Stockholders' equity: | |||||
Preferred stock: $0.001 per value, 8,000,000 shares authorized, | |||||
no shares outstanding at March 31, 2012 and June 30, 2011, respectively | - | - | |||
Common stock: $0.001 par value, 62,000,000 shares authorized, | |||||
46,562,955 and 46,562,955 issued and outstanding at | |||||
March 31, 2012 and June 30, 2011, respectively | 46,563 | 46,563 | |||
Additional paid-in capital | 75,642,383 | 75,642,383 | |||
Accumulated other comprehensive income | 20,278,819 | 16,822,185 | |||
Retained earnings | 33,103,458 | 41,033,498 | |||
Total stockholders' equity | 129,071,223 | 133,544,629 | |||
Total liabilities and stockholders' equity | $199,903,611 | $198,778,524 | |||
China Precision Steel, Inc. and Subsidiaries | ||||||||
Consolidated Statements of Operations and Comprehensive Income | ||||||||
For the Three and Nine Months Ended March 31, 2012 and 2011 | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Nine Months Ended | |||||||
March 31, | March 31, | March 31, | March 31, | |||||
2012 | 2011 | 2012 | 2011 | |||||
Sales revenues | $29,494,865 | $31,489,118 | $105,324,043 | $105,154,101 | ||||
Cost of goods sold | 30,612,073 | 31,530,734 | 108,178,198 | 100,902,769 | ||||
Gross (loss)/profit | (1,117,208) | (41,616) | (2,854,155) | 4,251,332 | ||||
Operating expenses | ||||||||
Selling expenses | 63,734 | 93,172 | 172,223 | 201,554 | ||||
Administrative expenses | 781,221 | 111,068 | 2,007,777 | 1,708,188 | ||||
Allowance for bad and doubtful debts | 522,118 | 126 | 522,118 | 19,823 | ||||
Depreciation and amortization expense | 54,173 | 50,173 | 162,610 | 143,884 | ||||
Total operating expenses | 1,421,246 | 254,539 | 2,864,728 | 2,073,449 | ||||
(Loss)/income from operations | (2,538,454) | (296,155) | (5,718,883) | 2,177,883 | ||||
Other income/(expense) | ||||||||
Other revenues | 20,434 | 627 | 89,505 | 3,239 | ||||
Interest and finance costs | (794,895) | (591,118) | (2,273,473) | (1,908,969) | ||||
Total other (expense) | (774,461) | (590,491) | (2,183,968) | (1,905,730) | ||||
(Loss)/income from operations before income tax | (3,312,915) | (886,646) | (7,902,851) | 272,153 | ||||
Provision for income tax | ||||||||
Current | 108 | (14,149) | 27,189 | 298,358 | ||||
Total income tax expense/(benefit) | 108 | (14,149) | 27,189 | 298,358 | ||||
Net (loss) | (3,313,023) | (872,497) | (7,930,040) | (26,205) | ||||
Basic (loss) per share | (0.07) | (0.02) | (0.17) | $0.00 | ||||
Basic weighted average shares outstanding | 46,562,955 | 46,562,955 | 46,562,955 | 46,562,955 | ||||
Diluted (loss) per share | (0.07) | (0.02) | (0.17) | $0.00 | ||||
Diluted weighted average shares outstanding | 46,562,955 | 46,562,955 | 46,562,955 | 46,562,955 | ||||
China Precision Steel, Inc. and Subsidiaries | ||||
Consolidated Statements of Cash Flows | ||||
For the Nine Months Ended March 31, 2012 and 2011 | ||||
(Unaudited) | ||||
2012 | 2011 | |||
Cash flows from operating activities | ||||
Net (loss) | (7,930,040) | (26,205) | ||
Adjustments to reconcile net income to net cash provided by operating activities | ||||
Depreciation and amortization | 6,763,799 | 5,931,643 | ||
Gain on disposal of property, plant and equipment | (36,945) | - | ||
Allowance for bad and doubtful debts | 522,118 | - | ||
Inventory provision | 636,405 | - | ||
Net changes in assets and liabilities: | ||||
Accounts receivable, net | (3,448,433) | 18,758,490 | ||
Inventories | (3,416,954) | (3,171,550) | ||
Prepaid expenses | (86,378) | (236,418) | ||
Advances to suppliers | 2,365,370 | (21,066,432) | ||
Accounts payable and accrued expenses | 3,343,901 | (4,980,726) | ||
Advances from customers | 4,088,100 | 478,006 | ||
Other taxes payable | (144,398) | 212,193 | ||
Current income taxes | - | 138,962 | ||
Net cash provided by/(used in) operating activities | 2,656,545 | (3,962,037) | ||
Cash flows from investing activities | ||||
Purchase of property, plant and equipment, including construction in progress | (365,568) | (9,635,527) | ||
Proceeds from disposal of property, plant and equipment | 55,933 | - | ||
Net cash (used in) investing activities | (309,635) | (9,635,527) | ||
Cash flows from financing activities | ||||
Loan proceeds | - | 497,816 | ||
Repayment of short-term loans | - | (771,106) | ||
Repayment of long-term loan | (2,874,740) | - | ||
Net cash (used in) financing activities | (2,874,740) | (273,290) | ||
Effect of exchange rate | 64,685 | 1,242,139 | ||
Net (decrease) in cash | (463,145) | (12,628,715) | ||
Cash and cash equivalents, beginning of period | 2,707,754 | 29,036,706 | ||
Cash and cash equivalents, end of period | $2,244,609 | $16,407,991 | ||
