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.firstname.lastname@example.org SOURCE China Precision Steel Inc. Website: http://chinaprecisionsteelinc.com
China Precision Steel Announces First Quarter Fiscal 2013 Results
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