SHANGHAI, Nov. 19, 2012 /PRNewswire/ -- 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 2013 first quarter
results for the period ended September
30, 2012.
First Quarter Highlights
- Revenue was $6.0 million
- Gross loss was $1.5 million
- Net loss was $4.2 million
- Fully diluted loss per shares was $1.09
- International sales were $1.1
million, or 19% of total sales
"Since the beginning of calendar year 2012, Chinese steel
companies have experienced an extremely challenging environment of
overcapacity, sluggish demand and rising production costs resulting
in a deterioration of profits. In response to these industry
pressures and in an effort to minimize our gross loss, we decided
to only accept orders on products that meet specific price targets.
As a result of this strategy, during the first quarter of fiscal
year 2013, we significantly cut down the sales of our loss-making
low-carbon, cold-rolled steel, which resulted in a sharp drop off
in revenue," commented Mr. Hai Sheng
Chen, CEO of China Precision Steel. "While we remain
selective in accepting new domestic orders, we have experienced an
increase in exports sales as activity in the international markets
has been showing some signs of strengthening."
Revenue for the first quarter of fiscal year 2013 was
$6.0 million, down from revenue of
$42.2 million in the first quarter of
fiscal year 2012. The decrease in revenue was mainly
attributable to the decrease in production and sales of low-carbon
cold-rolled products in response to the company's strategy to
reduce the loss-making products. Total sales volume in the
first quarter of fiscal year 2013 was 7,753 tons, down from total
sales volume of 45,548 tons in the prior period. High carbon
and low carbon sales accounted for 42.9% and 53.4% of total sales,
respectively, compared to 16.1% and 79.5%, respectively,
period-on-period. Exports represented 19% of total sales for
the current period, up from 1% in the same period a year ago as the
international market improved during the past few months.
Gross loss in the first quarter was $1.5
million, compared to gross profit of $0.06 million in the same period a year
ago. Gross loss margin for the current period was 24.6%,
compared to a gross margin of 0.1% in the first quarter of fiscal
2012. The increase in gross loss margin is due to a 17.1%
period-on-period decrease in average selling prices and a 3.6%
period-on-period increase in average cost per unit sold, as steel
prices remained weak while production costs increased.
Average selling price for the quarter was $768 per ton, down from $926 per ton in the first quarter of fiscal 2012,
and the average cost per unit sold was $957 per ton, up from $924 per ton in the same period a year ago.
Selling expenses for the first quarter of fiscal year 2013 were
$29,273, compared to $68,304 in the first quarter of fiscal year 2012.
The decline in selling expenses was primarily attributable to lower
transportation costs and traveling expenses period-on-period.
Administrative expenses were $442,615, or 7.4% of revenue, compared to
$294,076, or 0.7% of revenue
period-on-period. The increase in administrative expenses was
primarily due to an increase in legal and professional fees
period-on-period.
Operating loss for the current quarter was $3.4 million, compared to an operating loss of
$0.4 million in the first quarter of
fiscal year 2012.
Net loss for the first quarter of fiscal year 2013 was
$4.2 million, compared to net loss of
$1.1 million for the first quarter of
fiscal year 2012. Fully diluted loss per share was
$1.09, compared to fully diluted loss
per share of $0.28 in the same period
a year ago.
Financial Condition
As of September 30, 2012, China
Precision Steel had $1.6 million in
cash and cash equivalents, $68.1
million in total liabilities and working capital of
$47.5 million. Stockholders'
equity stood at $115.9 million,
compared to $118.9 million as of
June 30, 2012. Cash generated
from operating activities during the first three months of fiscal
year 2013 was $0.2 million.
Business Outlook
China Precision Steel believes China's steel industry will continue to
experience pressures from oversupply for the near-term and it will
continue to be selective in accepting new orders. As of
September 30, 2012, China Precision
Steel had a backlog of $6.2 million
which is comprised of approximately 20% in exports, 30% in
high-carbon steel and 50% in low-carbon steel products.
"While we anticipate continued difficulty in the steel industry
for the foreseeable future, we are seeing signs that the industry
is poised for a turnaround. Baosteel, China's largest listed steelmaker and a
popular benchmark for the Chinese steel industry, raised steel
prices for the first time since March
2012 on increased demand. Additionally, Mr. Wang Xiaoqi,
Vice-Chairman of the China Iron
and Steel Association, announced recently that the darkest time for
the domestic steel industry should be over as the implementation of
pro-growth measures rolled out by the government will begin to take
effect on China's steel industry
in the fourth quarter," Mr. Chen continued. "We view these
signs as a positive for the market and an indication that the
industry downturn might have already reached its bottom. In
the meantime, we will continue to focus on reducing operating costs
and improving working capital as well as planning our orders and
production to reduce loss and contribute to profitability."
Forward-Looking Statements
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995: Certain statements in this press 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 likelihood that the downturn in
China's steel industry has halted
and that the industry will experience a turnaround and increased
demand; the significance of China's implementation of pro-growth measures
and the likelihood that it will start benefiting the domestic steel
industry in the fourth quarter; the Company's ability to reduce
operating costs, improve working capital and increase
profitability, and any other statements of non-historical
information. 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
|
Consolidated Balance Sheets
|
(Unaudited)
|
|
|
|
|
September 30,
|
|
June
30,
|
|
|
|
|
2012
|
|
2012
|
Assets
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$1,595,567
|
|
$1,602,805
|
|
Accounts
receivable
|
|
|
|
|
|
|
Trade, net
of allowances of $4,655,538 and $3,231,613
|
|
|
|
|
|
at
September 30, 2012 and June 30, 2012, respectively
|
57,932,138
|
|
59,116,931
|
|
Bills
receivable
|
|
103,426
|
|
173,089
|
|
Other
receivables
|
|
965,765
|
|
1,117,243
|
|
Inventories, net
|
|
17,615,451
|
|
15,516,220
|
|
Prepaid
expenses
|
|
466,204
|
|
668,867
|
|
Advances
to suppliers, net of allowance of $4,675,112 and
$4,623,323
|
|
|
|
|
|
at
September 30, 2012 and June 30, 2012, respectively
|
36,964,593
|
|
37,384,684
|
Total
current assets
|
|
115,643,144
|
|
115,579,839
|
Property, plant and equipment
|
|
|
|
|
|
Property,
plant and equipment, net
|
66,194,820
|
|
67,752,991
|
|
Construction-in-progress
|
|
241,959
|
|
233,512
|
|
|
|
|
66,436,779
|
|
67,986,503
|
Intangible assets, net
|
|
1,889,974
|
|
1,880,129
|
Goodwill
|
|
99,999
|
|
99,999
|
Total
assets
|
|
$184,069,896
|
|
$185,546,470
|
Liabilities and Stockholders'
Equity
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Short-term
loans
|
|
$27,551,689
|
|
$27,246,477
|
|
Long-term
loan - current portion
|
16,200,000
|
|
16,200,000
|
|
Accounts
payable and accrued liabilities
|
7,302,426
|
|
6,772,892
|
|
Advances
from customers
|
|
2,798,954
|
|
2,253,956
|
|
Other
taxes payables
|
|
8,432,531
|
|
8,446,373
|
|
Current
income taxes payable
|
5,853,288
|
|
5,756,178
|
Total
current liabilities
|
|
68,138,888
|
|
66,675,876
|
Stockholders' equity:
|
|
|
|
|
|
Preferred
stock: $0.001 per value, 8,000,000 shares
|
|
|
|
|
|
authorized, no shares outstanding at September 30,
2012 and
|
|
|
|
|
|
June 30,
2012, respectively
|
-
|
|
-
|
|
Common
stock: $0.001 par value, 62,000,000 shares
|
|
|
|
|
|
authorized, 3,880,866 issued and outstanding
at
|
|
|
|
|
|
September
30, 2012 and June 30, 2012, respectively
|
3,880
|
|
3,880
|
|
Additional
paid-in capital
|
|
75,685,066
|
|
75,685,066
|
|
Accumulated other comprehensive income
|
20,379,992
|
|
19,097,295
|
|
Retained
earnings
|
|
19,862,070
|
|
24,084,353
|
Total
stockholders' equity
|
|
115,931,008
|
|
118,870,594
|
Total
liabilities and stockholders' equity
|
$184,069,896
|
|
$185,546,470
|
China
Precision Steel, Inc. and Subsidiaries
|
|
Consolidated Statements of Operations and
Comprehensive Income
|
|
For the
Three Months Ended September 30, 2012 and 2011
|
|
(Unaudited)
|
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
revenues
|
$5,956,760
|
|
$42,166,843
|
|
Cost of
goods sold
|
7,423,709
|
|
42,105,073
|
|
Gross
(loss)/profit
|
(1,466,949)
|
|
61,770
|
|
Operating expenses
|
|
|
|
|
|
Selling
expenses
|
29,273
|
|
68,304
|
|
|
Administrative expenses
|
442,615
|
|
294,076
|
|
|
Allowance
for bad and doubtful debts
|
1,373,000
|
|
-
|
|
|
Depreciation and amortization expense
|
51,961
|
|
54,444
|
|
|
Total
operating expenses
|
1,896,849
|
|
416,824
|
|
(Loss)
from operations
|
(3363798)
|
|
(355054)
|
|
Other
income/(expense)
|
|
|
|
|
|
Other
revenues
|
103
|
|
199
|
|
|
Interest
and finance costs
|
(858,588)
|
|
(669,928)
|
|
|
Total
other (expense)
|
(858,485)
|
|
(669,729)
|
|
(Loss)
from operations before income tax
|
(4,222,283)
|
|
(1,024,783)
|
|
Provision for income tax
|
|
|
|
|
|
Current
|
-
|
|
54,312
|
|
|
Total
income tax expense
|
-
|
|
54,312
|
|
Net
(loss)
|
(4,222,283)
|
|
(1,079,095)
|
|
Basic
(loss) per share
|
($1.09)
|
|
($0.28)
|
|
Basic
weighted average shares outstanding
|
3,880,866
|
|
3,880,866
|
|
Diluted
(loss) per share
|
($1.09)
|
|
($0.28)
|
|
Diluted
weighted average shares outstanding
|
3,880,866
|
|
3,880,866
|
|
China
Precision Steel, Inc. and Subsidiaries
|
Consolidated Statements of Cash
Flows
|
For the
Three Months Ended September 30, 2012 and 2011
|
(Unaudited)
|
|
|
2012
|
|
2011
|
Cash
flows from operating activities
|
|
|
|
|
Net
(loss)
|
(4,222,283)
|
|
(1,079,095)
|
|
Adjustments to reconcile net income to net cash
provided by operating activities
|
|
|
|
Depreciation and amortization
|
2,254,886
|
|
2,196,295
|
|
Allowance for bad and doubtful debts
|
1,373,000
|
|
-
|
|
Net
changes in assets and liabilities:
|
|
|
|
|
Accounts receivable, net
|
694,880
|
|
(6,877,517)
|
|
Inventories
|
(1,925,422)
|
|
308,082
|
|
Prepaid expenses
|
206,353
|
|
66,760
|
|
Advances to suppliers
|
889,785
|
|
(586,403)
|
|
Accounts payable and accrued expenses
|
456,346
|
|
1,805,922
|
|
Advances from customers
|
519,750
|
|
3,779,521
|
|
Other taxes payable
|
(108,457)
|
|
662,673
|
|
Current income taxes
|
32,630
|
|
27,502
|
Net
cash provided by operating activities
|
171,468
|
|
303,740
|
Cash
flows from investing activities
|
|
|
|
|
Purchase of property, plant and equipment, including construction
in progress
|
(7,424)
|
|
(84,886)
|
Net
cash (used in) investing activities
|
(7,424)
|
|
(84,886)
|
Cash
flows from financing activities
|
|
|
|
|
Repayments of short-term loans
|
-
|
|
(810,921)
|
Net
cash (used in) financing activities
|
-
|
|
(810,921)
|
Effect
of exchange rate
|
(171,282)
|
|
37,366
|
Net
(decrease) in cash
|
(7,238)
|
|
(554,701)
|
Cash
and cash equivalents, beginning of period
|
1,602,805
|
|
2,707,754
|
Cash
and cash equivalents, end of period
|
$1,595,567
|
|
$2,153,053
|
|
|
|
|
|
|
|
|
|
|
Elite IR
Leslie J. Richardson, Partner
+852-3183-0283
Leslie.richardson@elite-ir.com
SOURCE China Precision Steel Inc.