China Precision Steel Announces Second Quarter Fiscal 2013 Results

      China Precision Steel Announces Second Quarter Fiscal 2013 Results

PR Newswire

SHANGHAI, Feb. 19, 2013

SHANGHAI, Feb. 19, 2013 /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
second quarter results for the period ended December 31, 2012.

Second Quarter Highlights

  oRevenue was $8.2 million
  oGross loss was $1.3 million
  oNet loss was $10.9 million
  oFully diluted loss per shares was $2.80
  oInternational sales were $0.8 million, or 10% of total sales

"During the quarter, we continued to focus on our strategy to reduce
production of negative margin products including many of our low carbon steel
products which resulted in a decline of revenue period-over-period, However,
compared with the immediate preceding quarter ended September 30, 2012, our
revenue increased 37.1% as selling prices showed signs of stabilizing during
the quarter and our sales volume increased 38.1%," commented Mr. Hai Sheng
Chen, CEO of China Precision Steel. "While we continue to remain cautious
about the near-term as the Chinese steel industry works through its
overcapacity, we believe that the Chinese economy and steel industry will
continue to gradually improve throughout the calendar year 2013 as the new
government implements its policies for economic growth."

Revenue for the second quarter of fiscal year 2013 was $8.2 million, down from
revenue of $33.7 million in the second 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 its loss-making products.Sequentially, revenue increased 37.1% from
revenue of $6.0 million in the first quarter of fiscal year 2013.Total sales
volume in the second quarter of fiscal year 2013 was 10,705 tons, down from
total sales volume of 39,907 tons in the prior period and up from total sales
volume of 7,753 tons in the first quarter of 2013. High carbon and low carbon
sales accounted for 32.4% and 65.6% of total sales, respectively, compared to
21.2% and 77.2%, respectively, period-on-period.Exports represented 10% of
total sales for the current period, compared to 14% in the same period a year
ago.

Gross loss in the second quarter was $1.3 million, compared to gross loss of
$1.8 million in the same period a year ago.Gross loss margin for the current
period was 15.9%, compared to a gross loss margin of 5.3% in the second
quarter of fiscal 2012. The increase in gross loss margin is due to a 9.6%
period-on-period decrease in average selling prices while the average cost per
unit sold declined 0.9% period-on-period.Average selling price for the
quarter was $763 per ton, down from $844 per ton in the second quarter of
fiscal 2012, and the average cost per unit sold was $884 per ton, down
slightly from $889 per ton in the same period a year ago.

Selling expenses for the second quarter of fiscal year 2013 were $25,063,
compared to $40,185 in the second 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 $401,797, or
4.9% of revenue, compared to $932,480, or 2.8% of revenue
period-on-period.The decrease in administrative expenses was primarily due to
a decrease in traveling expenses and legal and professional fees
period-on-period.

Operating loss for the current quarter was $10.6 million, compared to an
operating loss of $2.8 million in the second quarter of fiscal year 2012.

Net loss for the second quarter of fiscal year 2013 was $10.9 million,
compared to net loss of $3.5 million for the second quarter of fiscal year
2012.Fully diluted loss per share was $2.80, compared to fully diluted loss
per share of $0.91 in the same period a year ago.

Six Months Financial Results

Revenue for the first six months of fiscal year 2013 was $14.1 million
compared to $75.8 million in the same period a year ago.Gross loss was $2.8
million, compared to a gross loss of $1.7 million for the six months of fiscal
year 2012.Gross loss margin for the six months ended December 31, 2012 was
19.6% compared to 2.3% for the same period a year ago.Operating loss was
$13.9 million compared to $3.2 million in the first six months of fiscal year
2012. Net loss was $15.1 million, compared to a net loss of $4.6 million in
the same period a year ago. Fully diluted loss per share was $3.89, compared
to fully diluted loss per share of $1.19 for the first six months of fiscal
year 2012.

Financial Condition

As of December 31, 2012, China Precision Steel had $0.8 million in cash and
cash equivalents, $67.8 million in total liabilities and working capital of
$39.1 million.Stockholders' equity stood at $106.0 million, compared to
$118.9 million as of June 30, 2012.

Business Outlook

China Precision Steel will continue to focus on improving its gross margin by
being selective in accepting new orders as well as improving cash flow through
reducing accounts receivables.As of December 31, 2012, China Precision Steel
had a backlog of $6.4 million.

"The China Iron and Steel Association (CISA) has prioritized a strict control
of steel production capacity in a move to reduce the excess capacity that has
contributed to the pressure on steel prices.Furthermore, CISA has stated that
it anticipates steel demand for 2013 to be better than 2012 as the industry
recovers from the worst slump in the past decade," Mr. Chen continued. "As we
expect market conditions will gradually improve during the calendar year, we
will be focusing our efforts on improving our working capital and operating
cash flow by implementing more aggressive policies to reduce our accounts
receivables."

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 benefitting 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.

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)
                                                    December31,  June30,
                                                    2012          2012
Assets
Current assets
 Cash and cash equivalents                          $799,887      $1,602,805
 Accounts receivable
    Trade, net of allowances of $13,568,723 and
    $3,231,613
     at December 31, 2012 and June 30, 2012,       47,789,399    59,116,931
    respectively
 Bills receivable                                   48,149        173,089
 Other                                              1,027,119     1,117,243
 Inventories                                        19,886,666    15,516,220
 Prepaid expenses                                   262,943       668,867
 Advances to suppliers, net of allowance of
 $4,715,706 and
    $4,623,323 at December 31, 2012 and June 30,    37,096,316    37,384,684
    2012, respectively
Total current assets                                106,910,479   115,579,839
Property, plant and equipment
 Property, plant and equipment, net                 64,573,675    67,752,991
 Construction-in-progress                           243,167       233,512
                                                    64,816,842    67,986,503
Intangible assets, net                              1,895,071     1,880,129
Goodwill                                            99,999        99,999
Total assets                                        $173,722,391  $185,546,470
Liabilities and Stockholders' Equity
Current liabilities
 Short-term loans                                   $27,610,356   $27,246,477
 Long-term loan - current portion                   16,200,000    16,200,000
 Accounts payable and accrued liabilities           6,763,808     6,772,892
 Advances from customers                            3,054,617     2,253,956
 Other taxes payables                               8,233,263     8,446,373
 Current income taxes payable                       5,904,112     5,756,178
Total current liabilities                           67,766,156    66,675,876
Long-term loans                                     -             -
Stockholders' equity:
 Preferred stock: $0.001 per value, 8,000,000
 shares
    authorized, no shares outstanding at December
    31, 2012 and
    June 30, 2012, respectively                     -             -
 Common stock: $0.001 par value, 62,000,000 shares
    authorized, 3,880,866 issued and outstanding at
    December 31, 2012 and June 30, 2012,            3,880         3,880
    respectively
 Additional paid-in capital                         75,685,066    75,685,066
 Accumulated other comprehensive income             21,289,724    19,097,295
 Retained earnings                                  8,977,565     24,084,353
Total stockholders' equity                          105,956,235   118,870,594



China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Three and Six Months Ended December 31, 2012 and 2011
(Unaudited)
                          Three Months Ended         Six Months Ended
                          2012          2011         2012          2011
Sales revenues            $8,164,267    $33,662,335  $14,121,027   $75,829,178
Cost of goods sold        9,466,225     35,461,052   16,889,934    77,566,125
Gross (loss)              (1,301,958)   (1,798,717)  (2,768,907)   (1,736,947)
Operating expenses
  Selling expenses        25,063        40,185       54,336        108,489
  Administrative expenses 401,797       932,480      844,412       1,226,556
  Allowance for bad and   8,786,214     -            10,159,214    -
  doubtful debts
  Depreciation and        52,050        53,993       104,011       108,437
  amortization expense
  Total operating         9,265,124     1,026,658    11,161,973    1,443,482
  expenses
(Loss) from operations    (10,567,082)  (2,825,375)  (13,930,880)  (3,180,429)
Other income/(expense)
  Other revenues          607,654       68,872       607,757       69,071
  Interest and finance    (925,077)     (808,650)    (1,783,665)   (1,478,578)
  costs
  Total other (expense)   (317,423)     (739,778)    (1,175,908)   (1,409,507)
(Loss) from operations    (10,884,505)  (3,565,153)  (15,106,788)  (4,589,936)
before income tax
Provision for income tax
  Current                 -             -27,231      -             27,081
  Total income tax        -             -27,231      -             27,081
  (benefit)/expense
Net (loss)                (10,884,505)  (3,537,922)  (15,106,788)  (4,617,017)
Basic (loss) per share    ($2.80)       ($0.91)      ($3.89)       ($1.19)
Basic weighted average    3,880,866     3,880,866    3,880,866     3,880,866
shares outstanding
Diluted (loss) per share  ($2.80)       ($0.91)      ($3.89)       ($1.19)
Diluted weighted average  3,880,866     3,880,866    3,880,866     3,880,866
shares outstanding



China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2012 and 2011
(Unaudited)
                                                     2012          2011
Cash flows from operating activities
 Net (loss)                                          (15,106,788)  (4,617,017)
 Adjustments to reconcile net income to net cash
 provided by operating activities
  Depreciation and amortization                     4,561,331     4,457,774
  Gain on disposal of property, plant and equipment -             (16,575)
  Allowance for bad and doubtful debts              10,159,214    -
  Inventory provision                               -             442,383
 Net changes in assets and liabilities:
  Accounts receivable, net                          2,477,594     (4,945,225)
  Inventories                                       (4,060,401)   (1,104,504)
  Prepaid expenses                                  412,031       (299,326)
  Advances to suppliers                             1,086,749     3,046,345
  Accounts payable and accrued expenses             (139,640)     1,400,057
  Advances from customers                           755,623       3,601,384
  Other taxes payable                               (381,886)     587,656
  Current income taxes                              32,914        -
Net cash (used in)/provided by operating activities  (203,259)     2,552,952
Cash flows from investing activities
  Purchase of property, plant and equipment,        (111,583)     (298,802)
 including construction in progress
  Proceeds from disposal of property, plant and     -             16,575
 equipment
Net cash (used in) investing activities              (111,583)     (282,227)
Cash flows from financing activities
  Repayments of short-term loans                    (504,269)     -
  Repayments of long-term loan                      -             (2,845,699)
Net cash (used in) financing activities              (504,269)     (2,845,699)
Effect of exchange rate                              16,193        63,865
Net (decrease) in cash                               (802,918)     (511,109)
Cash and cash equivalents, beginning of period       1,602,805     2,707,754
Cash and cash equivalents, end of period             $799,887      $2,196,645

SOURCE China Precision Steel Inc.

Website: http://chinaprecisionsteelinc.com
 
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