China Gerui Advanced Materials Group Limited Announces Fourth Quarter and Fiscal Year 2012 Results

  China Gerui Advanced Materials Group Limited Announces Fourth Quarter and
                           Fiscal Year 2012 Results

PR Newswire

ZHENGZHOU, China, March 26, 2013

ZHENGZHOU, China, March 26, 2013 /PRNewswire-FirstCall/ -- China Gerui
Advanced Materials Group Limited (NASDAQ: CHOP) ("China Gerui," or the
"Company"), a leading high precision, cold-rolled steel producer in China,
today announced unaudited financial results for the three months and twelve
months ended December 31, 2012.

Mr. Mingwang Lu, Chairman and Chief Executive Officer, commented, "Full year
2012 revenue and earnings per diluted share performance were in line with the
Company's preliminary 2012 financial results announced on March 19, 2013.
Fourth quarter raw material costs increased while our selling prices were
stagnant due to pricing pressures in a competitive environment. Customers are
more price sensitive across the domestic steel industry including many
segments of the specialized steel sector, preventing a quick rebound in our
selling prices. We have abstained from aggressive pricing schedules to ensure
that our reputation as a high-quality precision cold-rolled steel producer
remains intact with our customers. Our volume and capacity utilization remain
stable compared with the third quarter of 2012, and we are well positioned to
benefit from any strengthening in our markets. We also continue to build our
new product pipeline of laminated and chromium-plated products to provide a
more comprehensive product offering to our current customers and attract new
customers in the future. In many cases, our new products target higher margin
segments of our traditional markets and they will allow us to build sales and
capture market share there. New products potentially will allow us to gain
entrance into other domestic market segments as well as foreign markets."

Fourth Quarter 2012 Results (Unaudited)

Revenue decreased 30.5% to $63.9 million in the fourth quarter of 2012 from
$91.9 million in the fourth quarter of 2011. The decrease in revenue was
primarily due to an 18% decrease in the Company's average selling price to
$778 per ton for the fourth quarter of 2012 as compared to an average selling
price of $949 for the fourth quarter of 2011 as well as a 14.9% decrease in
sales volume to approximately 81,200 tons for the fourth quarter of 2012 as
compared to approximately 95,400  tons for the same quarter of 2011.

Gross profit decreased 75.4% to $6.9 million in the fourth quarter of 2012
from $28.0 million in the same period of 2011. Gross margin was 10.7% in the
fourth quarter of 2012 compared to 30.4% in the fourth quarter of 2011. The
decrease in gross margin was due to significant market-driven pricing
pressures of the Company's raw material, a slowdown of China's economic growth
and demand for China Gerui's products and intensified competition into the
Company's target sectors within the steel market. To maintain the Company's
competitive position, we did not fully pass the increase of raw material costs
onto our consumers by increasing the selling prices. In addition, further
modifications were conducted for the wide-strip production line in the fourth
quarter to ensure its improved precision and successful future ramp-up.

Operating income decreased 97.3% to $0.7 million in the fourth quarter of
2012, from operating income of $23.9 million for the fourth quarter of 2011.
The decrease in operating income in the fourth quarter 2012 as compared to the
operating income in the fourth quarter last year is primarily due to a 75.5%
decrease in gross profit and higher operating expenses in the fourth quarter
of 2012 as compared to the same period of 2011. Fourth quarter expenses rose
in some instances above the prior quarters' trends due to normal end of year
adjustments including a share-based compensation expense of $3.7 million.

Net loss was $0.5 million in the fourth quarter of 2012, or ($0.01) per fully
diluted share, including the impact of a share-based compensation expense of
$3.7 million, or the equivalent of $0.06 per share on a fully diluted basis,
compared to a net profit of $18.2 million, or $0.32 per share in the fourth
quarter of 2011.

Full Year 2012 Results (Unaudited)

Revenue decreased 22.3% to $265.5 million for the fiscal year ended December
31, 2012, from $341.8 million for fiscal year 2011. The decrease in revenue
was primarily due to a 18.6% decrease in the Company's average selling price
to $801 per ton for fiscal year 2012 as compared to $984 per ton for fiscal
year 2011, and a 4.5% decrease in sales volume to 331,500 metric tons for
fiscal year 2012 as compared to approximately 347,200 metric tons for fiscal
year 2011.

Gross profit decreased 43.9% to $56.9 million for the fiscal year ended
December 31, 2012, from $101.6 million for fiscal year 2011. Gross margin was
21.4% for fiscal year 2012, compared to 29.7% in fiscal year 2011 reflecting
the highly competitive pricing pressures the Company faced in the second half
of 2012.

Operating income decreased 49.3% to $42.3 million for the fiscal year ended
December 31, 2012 from $83.5 million for fiscal year 2011. Operating margin
for fiscal year 2012 was 15.9% compared to 24.4% for fiscal year 2011.

Net income decreased 54.6% to $26.1 million for fiscal year ended December 31,
2012, from $57.6 million for fiscal year 2011. Net income per diluted share
for fiscal year 2012 decreased to $0.45, including the impact of share-based
compensation expense of $3.7 million, from $1.02 per fully diluted share for
fiscal year 2011.

Financial Condition

As of December 31, 2012, the Company had $228.9 million in unrestricted cash,
$16.4 million in current certificates of deposit and an additional $145.4
million in restricted cash, as compared to $246.6 million in unrestricted cash
and $118.1 million in restricted cash as of December 31, 2011. Working capital
was $151.7 million as of December 31, 2012, compared to $142.5 million as of
fiscal year end 2011. The Company's short-term debt consisted of notes payable
and term loans that totaled $317.0 million as of December 31, 2012, compared
to $249.1 million as of December 31, 2011. The Company has no long-term debt.
Shareholders' equity was $330.1 million as of December 31, 2012 as compared
to $298.4 million as of December 31, 2011. The net cash used in operating
activities for the twelve months ended December 31, 2012 was $2.1 million
compared to net cash provided by operating activities of $56.2 million as of
fiscal year 2011.

Recent Developments

During the fourth quarter of 2012, the Company repurchased 261,831 ordinary
shares at an average price of $1.58 per share for a total repurchase price of
approximately $0.41 million. Since the launch of its share repurchase program
in April 2011, as of December 31, 2012 the Company repurchased a total of
1,971,929 ordinary shares at an average price of $3.08 per share for a total
repurchase price of approximately $6.1 million.

2013 Financial Guidance

Given current market conditions and the volatility of raw material costs, the
Company is providing full year 2013 revenue guidance in the range of $280
million to $290 million. The Company may adjust such guidance as changing
macroeconomic conditions and operational and competitive challenges dictate.

Industry and Business Update

Over the course of 2012, China's steel industry experienced the most severe
operating difficulties since the beginning of the century driven by overall
weak domestic demand, over-capacity of China steel producers and ongoing
pricing pressures. According to China Iron & Steel Association, its member
companies recorded a 4.3% decrease in revenue and 98.2% decrease in net profit
in 2012 from 2011.

During the fourth quarter of 2012, the Company's cost-plus pricing model
compelled us to increase our average selling price of our cold-rolled steel
products. However, to remain competitive and maintain an acceptable level of
production, the Company increased its selling prices less than the increase in
its raw material prices. Previously, the output of some of the Company's
products were deliberately restrained to maintain the current market
equilibrium and avert a pricing war with lower-grade, cold-rolled steel
producers or larger scale steel producers. These pricing concessions have
proven difficult to reverse with the current market conditions. China Gerui
feared continuing deeper pricing cuts would imperil its highly regarded
reputation as a high-end cold-rolled steel strip producer with its customers.
The Company believes a price war with such lower-grade, cold-rolled steel
competitors would have benefited no one in the short-term and damaged its
former premium pricing strategy as market conditions rebound.

This downward price and volume trend over the past several quarters was
generated by slower economic growth, over capacity in the steel industry,
large steel producers suffering from declining exports and selling more steel
domestically, and a reduction in infrastructure spending. Management believes
one of the impacts to the steel industry is there are fewer players now in the
specialized steel segment as smaller, weaker producers have discontinued
operations. These departures are welcomed as a first sign of turning around
the oversupply of steel in a weak demand market for steel in China. New
product development is also placing smaller, weaker competitors in an
increasingly disadvantaged position for future growth. The Company's new steel
products and applications are driving operations toward higher-margin,
specialized steel segments as well as optimizing the Company's production
lines' utilization rates.

During the fourth quarter, the Company's new wide-strip products and capacity
continued to be evaluated to ensure that large-scale production meets its
specifications to ensure optimal production as the Company seeks to build this
steel segment domestically and internationally. In addition, the Company's
chromium plating lines are value-added products that should maintain premium
pricing to improve gross margins as that business expands. China Gerui
continues to engage potential customers to test the Company's newer products
to secure ongoing, larger contracts in the future.

The Company believes that utilization of its wide- and narrow-strip
cold-rolled steel capacity approximated 75%-80% during the fourth quarter,
consistent with the third quarter utilization. The Company also estimates
that the utilization of its chromium-plating production lines were
approximately 60% during the fourth quarter, slightly below the 65%
utilization rate of the third quarter.

With a new central government taking control, once every 10 years, and GDP
growth the lowest in many years, we believe that the Chinese economy is
stabilizing at a slow growth mode. The new leaders have implemented a RMB
four trillion stimulus plan to help drive economic growth. This stimulus and
potentially other new growth programs will take time to boost economic growth,
and the Company hopes to see renewed strength beginning early in the second
half of 2013 leading to improved demand for domestic steel products in the
coming quarters.

"With our strategies and new product initiatives, we are transforming China
Gerui into a company with a larger product mix to offer greater solutions to
our current customers and develop new customers in other markets as well. With
a larger and diversified base of domestic and international customers, and a
greater number of steel products, we will be better able to compete in a
changing market. We remain confident that with our efficient production
capacity we are positioned to generate greater performance when the industry
rebounds from its secular trough. In the meantime, we are slowly expanding our
international base of business as well where we will become more aggressive as
market conditions improve. We are using this challenging period to become a
more potent competitor in our specialized steel segments to build value for
our shareholders," Mr. Lu concluded.

Conference Call Information

The Company will also host a conference call at 9:00 am EDT (9:00 pm Beijing
Time) on Tuesday, March 26, 2013.^

Listeners may access the call by dialing +1 (877) 399-7810 five to ten minutes
prior to the scheduled conference call time. International callers should
dial +1 (631) 865-1695. The conference call participant pass code is
24853130.

A replay of the conference call will be available for 14 days starting from
12:00 pm EDT on Tuesday, March 26, 2013. To access the replay, dial +1 (855)
859-2056. International callers should dial at +1 (404) 537-3406. The pass
code is 24853130.

A live and archived webcast of the call will be available on the Company's
website at http://www.geruigroup.com/Investors.html.To listen to the live
webcast, please go to the Company's website at least fifteen minutes prior to
the start of the call to register, download and install any necessary audio
software.

About China Gerui Advanced Materials Group Limited

China Gerui Advanced Materials Group Limited is a leading niche and high
value-added steel processing company in China. The Company produces high-end,
high-precision, ultra-thin, high- strength, cold-rolled steel products that
are characterized by stringent performance and specification requirements that
mandate a high degree of manufacturing and engineering expertise. China
Gerui's products are not standardized commodity products. Instead, they are
tailored to customers' requirements and subsequently incorporated into
products manufactured for various applications. The Company sells its products
to domestic Chinese customers in a diverse range of industries, including the
food and industrial packaging, construction and household decorations
materials, electrical appliances, and telecommunications wires and cables. For
more information, please visit http://www.geruigroup.com.

Safe Harbor Statement

Certain of the statements made in this press release are "forward-looking
statements" within the meaning and protections of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended, or the Exchange Act. Forward-looking statements
include statements with respect to our beliefs, plans, objectives, goals,
expectations, anticipations, assumptions, estimates, intentions, and future
performance, and involve known and unknown risks, uncertainties and other
factors, which may be beyond our control, and which may cause the actual
results, performance, capital, ownership or achievements of the Company to be
materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. All statements other
than statements of historical fact are statements that could be
forward-looking statements. You can identify these forward-looking statements
through our use of words such as "may," "will," "anticipate," "assume,"
"should," "indicate," "would," "believe," "contemplate," "expect," "estimate,"
"continue," "plan," "point to," "project," "could," "intend," "target" and
other similar words and expressions of the future.

All written or oral forward-looking statements attributable to us are
expressly qualified in their entirety by this cautionary notice, including,
without limitation, those risks and uncertainties described in our annual
report on Form 20-F for the year ended December 31, 2011 and otherwise in our
SEC reports and filings. Such reports are available upon request from the
Company, or from the SEC, including through the SEC's Internet website at
http://www.sec.gov. We have no obligation and do not undertake to update,
revise or correct any of the forward-looking statements after the date hereof,
or after the respective dates on which any such statements otherwise are made.

Company Contact:         Investor Relations
                         Contacts:
Email:                   Vivian Chen              Kevin Theiss
investors@geruigroup.com
Website:                 Managing Director        Account Director
www.geruigroup.com
                         Grayling                 Grayling
                         Phone: 646-284-9427      Phone: 646-284-9409
                         Email:                   Email:
                         vivian.chen@grayling.com kevin.theiss@grayling.com



- Financial Tables Follow -

CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
(IN US DOLLARS)
                                                                                                                           December 31,  December 31,
                                                                                                                           2012          2011
                                                                                                                           (Unaudited)
Assets
Current assets
 Cash                                                                                                                   $228,861,009  $246,600,917
 Certificates of deposit                                                                                                16,372,128    -
 Restricted cash                                                                                                        145,413,726   118,130,253
 Accounts receivable, net                                                                                               2,276,153     6,382,630
 Notes receivable                                                                                                       433,379       568,328
 Inventories                                                                                                            22,762,545    24,463,142
 Prepaid purchases                                                                                                      76,268,597    45,805,423
 Prepaid expenses                                                                                                       382,569       385,131
 Other receivables                                                                                                      2,270,073     2,850,601
Total current assets                                                                                                       495,040,179   445,186,425
Non-current assets
 Property, plant and equipment, net                                                                                     134,110,657   122,695,246
 Land use right, net                                                                                                    13,625,738    13,807,056
 Deposit on acquisition of future land use right                                                                        -             12,710,719
 Deposit on acquisition of new business                                                                                 24,076,660    -
 Deposit on acquisition of property, plant and equipment                                                                266,312       -
 Other receivable                                                                                                       3,039,835     3,499,083
 Certificates of deposit                                                                                                3,210,221     3,177,679
Total non-current assets                                                                                                   178,329,423   155,889,783
Total assets                                                                                                               $673,369,602  $601,076,208
Liabilities and stockholders' equity
Current Liabilities
 Accounts payable                                                                                                       $2,279,246    $8,074,432
 Notes payable                                                                                                          259,546,395   204,880,916
 Term loans                                                                                                             57,462,962    44,169,751
 Land use right payable                                                                                                 1,419,314     1,404,926
 Income tax payable                                                                                                     5,140,306     5,458,482
 Customers deposits                                                                                                     11,635,999    23,383,849
 Accrued liabilities and other payables                                                                                 5,818,060     15,276,016
                                                                                                                           
Total current liabilities                                                                                                                302,648,372
                                                                                                                           343,302,282
Totalliabilities 343,302,282   302,648,372
Stockholders' equity
 Common stock, 100,000,000 shares authorized with no par value;

 61,533,828 and 59,433,828 shares issued,                                                                                       

 59,561,899 and 58,256,930 shares outstanding as of                                                                140,418,118   140,418,118

 December 31, 2012 and December 31, 2011, respectively
 Additional paid-in capital                                                                                             10,636,053    6,930,944

                                                                                                                                        
Treasury stock, at cost, 1,971,929 and 1,176,898 shares,
                                                                                                                           (6,071,418)   (4,516,744)
 as of December 31, 2012 and December 31, 2011
 Retained earnings                                                                                                      163,276,046   137,142,958
 Accumulated comprehensive income                                                                                       21,808,521    18,452,560
Total stockholders' equity                                                                                                 330,067,320   298,427,836
Total liabilities and stockholders' equity                                                                                 $673,369,602  $601,076,208



CHINA GERUI ADVANCED MATERIALS GROUP LIMITED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN US DOLLARS)
                             For the Three Months       For the Years Ended
                             Ended
                             December 31,               December 31,
                             (Unaudited)                 (Unaudited)
                             2012          2011          2012           2011
Revenue                     63,889,524    91,937,463    265,486,082    341,778,295
Cost of revenue             (57,037,147)  (63,951,432)  (208,541,058)  (240,199,678)
Gross Profit                6,852,377     27,986, 031   56,945,024     101,578,617
Operating expenses:
 General and
administrative               (5,738,929)   (3,564,323)   (13,168,132)   (10,707,418)

expenses 
 Selling and marketing   (457,768)     (472,370)     (1,446,383)    (1,634,232)
expenses
 Warrant compensation    -             -             -              (5,700,000)
expenses
Total operating expenses    (6,196,697)   (4,036,693)   (14,614,515)   (18,041,650)
Operating income            655,680       23,949,338    42,330,509     83,536,967
Other income and (expense):
 Interest income         1,092,002     541,538       3,576,741      1,913,091
 Interest expenses       (2,063,684)   (1,039,575)   (8,228,472)    (6,470,126)
 Sundry income           146,525       159,311       351,483        602,247
Income before income taxes   (169,477)     23,610,612    38,030,261     79,582,179
Income tax expense           (364,906)     (5,419,015)   (11,897,173)   (21,961,627)
Net income                   ($534,383)    $18,191,597   $26,133,088    $57,620,552
Earnings per share
 - Basic and Diluted      ($0.01)       $0.32         $0.45          $1.02
Weighted average common shares outstanding
 - Basic and Diluted      59,769,786    56,297,652    58,543,076     56,297,652





CHINA GERUI ADVANCED MATERIALS GROUP LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN US DOLLARS)
                                                For the year ended December 31
                                                2012            2011
                                                (Unaudited)
Cash flows from operating activities:
Net income                                      $26,133,088     $57,620,552
Adjustments to reconcile net income to net
 cash (used in) / provided by operating
activities:
Depreciation of property, plant and equipment   10,899,049      7,994,638
(Gain)/loss on disposal of property, plant and  (56,107)        12,726
equipment
Amortization of land use right                  330,244         322,638
Stock-based compensation                        3,705,109       -
Warrant compensation expense                    -               5,700,000
Changes in assets and liabilities:
Accounts receivable, net                        4,126,206       (2,046,819)
Notes receivable, net                           139,228         (554,789)
Inventories                                     1,929,773       (16,712,453)
Prepaid expenses                                6,435           621,611
Prepaid purchases                               (29,666,016)    (16,284,440)
Other receivable                                (142,305)       (697,676)
Accounts payable                                (5,813,580)     5,168,689
Income tax payable                              (369,983)       1,078,582
Customers deposit                               (11,856,194)    12,911,217
Accrued liabilities and other payables          (1,466,919)     1,113,651
Net cash (used in) / provided by operating      (2,101,972)     56,248,127
activities
Cash flows from investing activities:
Cash paid for property, plant and equipment     (30,561,916)    (29,816,858)
Proceeds from disposal of property, plant and   59,517          9,655
equipment
Payment of purchases of land use right          -               (9,073,284)
Payment of acquisition of future land use right -               (10,213,261)

                                                -               (5,000,000)
Cash deposit-potential business initiative
program-related party

                                                -               5,000,000
Cash deposit refunded-related party
Advance to unrelated third parties              (4,017,304)     (3,415,724)
Advance from unrelated third party              1,587,554       -
Repayment of advance to unrelated third parties 5,252,326       -
Deposit payment to investing subsidiary         (11,112,875)    -
Investment in certificates of deposit           (16,193,047)    (3,101,978)
Changes in restricted cash                      (25,788,547)    (47,212,098)
Net cash used in investing activities           (80,774,292)    (102,823,548)
Cash flows from financing activities:
Repayment of term loans                         (50,484,204)    (45,831,718)
Proceeds from term loans                        63,184,632      43,815,432
Proceeds from notes payable, net                51,992,380      111,733,230
Proceeds received from exercise of warrants     -               66,473,875
Warrant compensation expense                    -               (5,700,000)
Purchase of treasury stock                      (1,554,674)     (4,516,744)
Net cash provided by financing activities       63,138,134      165,974,075
Net (decrease) / increase in cash               (19,738,130)    119,398,654
Effect on change of exchange rates              1,998,222       7,724,965
Cash as of January 1                            246,600,917     119,477,298
Cash as of December 31                          $228,861,009    $246,600,917
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
               Interest paid                    $8,322,263      $6,254,304
               Income tax paid                  $12,267,157     $20,883,046





SOURCE China Gerui Advanced Materials Group Limited

Website: http://www.geruigroup.com