China Precision Steel Announces First Quarter Fiscal 2013 Results

      China Precision Steel Announces First Quarter Fiscal 2013 Results

PR Newswire

SHANGHAI, Nov. 19, 2012

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

  oRevenue was $6.0 million
  oGross loss was $1.5 million
  oNet loss was $4.2 million
  oFully diluted loss per shares was $1.09
  oInternational 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   57,932,138     59,116,931
                30, 2012, respectively
 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, 36,964,593     37,384,684
                2012, respectively
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,    3,880          3,880
                2012, respectively
 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        1,373,000              -
         doubtful debts
         Depreciation and             51,961                 54,444
         amortization expense
         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  (4,222,283)            (1,024,783)
tax
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         3,880,866              3,880,866
outstanding
Diluted (loss) per share              ($1.09)                ($0.28)
Diluted weighted average shares       3,880,866              3,880,866
outstanding






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,      (7,424)      (84,886)
    including construction in progress
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.

Website: http://chinaprecisionsteelinc.com
 
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