China Gerui Advanced Materials Group Limited Announces Second Quarter 2013 Results

  China Gerui Advanced Materials Group Limited Announces Second Quarter 2013

PR Newswire

ZHENGZHOU, China, Aug. 28, 2013

ZHENGZHOU, China, Aug. 28, 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
its unaudited financial results for the three months ended June 30, 2013.

Mr. Mingwang Lu, Chairman and Chief Executive Officer of China Gerui,
commented, "Second quarter results reflected the continuing weakness in demand
for steel in China and the pricing pressure resulting from the over-capacity
of steel production in China. Our average selling price declined by 15.7%
year-over-year in the 2013 second quarter, which exceeded the reduction in our
raw material prices. The highly competitive pricing environment prevented us
from increasing prices, which resulted in a lower 8.2% gross margin due to
lower selling prices in the second quarter of 2013 compared with the same
quarter in 2012. We continue to market our steel products on their premium
performance qualities, but price sensitivity has become a factor with our

"However, we believe we are maintaining our market share as all production
lines are in operation and we are outperforming most of our competitors. The
China Iron and Steel Association ("Association") reported that for the first 6
months of 2013, its members reported a revenue increase of 0.94% with an
average gross margin of 0.13%. For the month of June, members of the
Association reported their first monthly net loss totaling RMB699 million due
to decreasing steel prices.In contrast, we achieved another quarter of
positive EBITDA with more stable volumes in this challenging environment.This
temporary period of oversupply has forced us to postpone using our full
production capacity, and to more aggressively introduce new products, to
protect our pricing structure for the future.

"We remain optimistic for our chromium-plated steel and new laminating steel
lines as we are building their presence in the steel markets. New products
carry higher margins that will improve our average gross margin as sales grow
in the future. The Company believes the utilization of its wide- and
narrow-strip cold-rolled steel capacity was 46%-48% in the second quarter of
2013 compared with approximately 68%-72% during the first quarter of 2013. The
Company's utilization of its chromium-plating production lines was
approximately 43% in the second quarter of 2013 compared to 62% during the
first quarter of 2013.

"With these new products, we offer a greater range of cold-rolled steel
products to our current customers that can compete with higher-priced imports,
and we can now provide steel solutions to new customers we could not service
before. Our more comprehensive steel product line differentiates us from many
smaller steel producers who do not have the technology, financial resources,
or customer relationships to effectively compete with us.

"Our steel volume has been stable at approximately 62,000 tons per quarter
over the first half of 2013. We have avoided increasing production to prevent
more aggressive pricing being necessary. We expect recent pricing concessions
are reversible when the market improves. Our specialty steel products continue
to receive more interest and we remain optimistic that exports will become a
more meaningful growth channel. We are seeking accretive acquisitions and
partnerships to become a larger, more powerful global metals processor in the
future, and to generate substantial positive cash flow which will translate
into greater shareholder value for our investors," Mr. Lu concluded.

Second Quarter 2013 Results

Revenue decreased 43.9% to $43.1 million in the second quarter of 2013 from
$76.8 million in the second quarter of 2012. The decrease in revenue was
primarily due to a 15.7% decrease in the Company's average selling price to
$692 per ton for the second quarter of 2013 as compared to an average selling
price of $821 for the second quarter of 2012 as well as a 33.2% decrease in
sales volume to approximately 62,500 tons for the second quarter of 2013 as
compared to approximately 93,500 tons for the same quarter of 2012.

Gross profit decreased 82.2% to $3.5 million in the second quarter of 2013
from $19.8 million in the same quarter of 2012. Gross margin was 8.2% in the
second quarter of 2013 compared to
25.8% in the second quarter of 2012.The decrease in gross profit compared
with a year ago was due to lower sales as the economic slowdown in China
continued and domestic consumption declined in the second quarter of 2013.
Excess capacity and reduced steel demand continued to create the intense
competition and pricing pressures currently in the marketplace during the

Operating income decreased 93.4% to $1.1 million in the second quarter of
2013, from operating income of $16.8 million for the second quarter of 2012.
The decrease in operating income in the second quarter of 2013 was primarily
due to an 82.2% decrease in gross profit.

Net loss was $0.64 million in the second quarter of 2013, or nil per fully
diluted share, compared to a net profit of $10.3 million, or $0.18 per share
in the second quarter of 2012.

Non-GAAP EBITDA was $4.0 million in the second quarter of 2013, or 9.3% of
revenue, compared to $19.6 million, or 25.6% of revenue, in the second quarter
of 2012. Non-GAAP EBITDA is defined as earnings before net interest expense,
taxes, depreciation, and amortization incurred in the second quarter of fiscal
year 2013.*

* Please see the section below entitled "Use of Non-GAAP Adjusted Financial
Measures" and the reconciliation table at the end of this press release for an
explanation and quantitative comparison of the non-GAAP measures used in this
press release to their GAAP equivalents.

Financial Condition

As of June 30, 2013, the Company had $203.6 million in unrestricted cash,
$28.0 million in current certificates of deposit, and an additional $169.8
million in restricted cash, as compared to $228.9 million in unrestricted
cash, $16.4 million in current certificates of deposit and an additional
$145.4 million in restricted cash as of December 31, 2012. The Company's
short-term debt consisted of notes payable and term loans that totaled $377.5
million at June 30, 2013, compared to $317.0 million as of December 31, 2012.
The Company had no long-term liabilities.Shareholders' equity was $334.4
million at June 30, 2013 as compared to $330.1 million as of December 31,
2012. Net cash used in operating activities for the first six months ended
June 30, 2013 was $22.5 million compared with $25.0 million of net cash flow
provided during the first six months of 2012.

Recent Developments

In June 2013, China Gerui was a gold sponsor at the AMM Steel Success
Strategies XXVIII Conference which had attendees from major steel and
steel-related companies and associations from around the world and was a
virtual who's-who of the global steel industry. Participants benefitted from a
high level conference program as well as expanded networking opportunities.
China Gerui's CFO, Edward Meng was a panel presenter at the conference during
two sessions.

In May 2013, China Gerui engaged Cambelle-Inland LLC, a company founded by
Craig T. Bouchard to advise it on strategic planning and expansion in North
America and around the world. Mr. Bouchard is an investor of China Gerui and
he has expertise in building steel operations, especially through
acquisitions. China Gerui is seeking accretive acquisitions to increase its
market share domestically and to globalize the Company's operations over

In April 2013, China Gerui announced it had captured three international
customers placing regular commercial orders for its high-end and narrow-strip
steel. Two customers are located in India and one customer is located in
Turkey. The products purchased were both wide- and narrow-strip
high-precision, chromium-plated, cold-rolled strip steel. Total orders could
reach 3,000 tons based on current order rates.Three additional potential
customers are currently engaged in trials with China Gerui's specialized steel
products in three other countries, including the U.S.

Since the launch of the share repurchase program in April 2011, as of June 30,
2013 the Company had repurchased a total of 2,010,918 ordinary shares at an
average price of $3.06 per share for a total repurchase price of approximately
$6.2 million.

2013 Financial Guidance

Given current market conditions, volatility of raw material costs and the
slower than anticipated price recovery for premium processed steel, the
Company revised its full year 2013 revenue guidance to the range of $165
million to $170 million. The Company may adjust such guidance as changing
macroeconomic conditions and operational and competitive challenges dictate.

Industry and Business Update

"Chinese GDP growth declined further to 7.5% in the second quarter of 2013
from 7.7% in the 2013 first quarter and 7.9% in the fourth quarter of 2012
according to the National Bureau of Statistics. This slowing growth combined
with excess steel production capacity is causing severe price competition in

"However, in the first half of 2013, total consumption of crude steel
increased by 6.8% year-over-year to 364.6 million tons, but national
production of crude steel rose faster at 7.4% to 389.9 million tons according
to the China Iron and Steel Association. Crude steel production has recently
been running at a high average daily rate of 2.15 million tons rate, which
equals approximately 786 million tons for the 2013 year. Additionally, the
production of iron increased by 5.7% to 357.5 million tons and steel
production rose by 10.2% to 517.0 million tons. Steel inventories in China
decreased during the 2013 second quarter from the first quarter of 2013, but
remained at a high level and were 3.6 million tons above the amount at the end
of the second quarter of 2012.

"The central government is taking actions to encourage consolidation in the
steel industry to create a more balanced steel production and price
environment to alleviate the current market conditions over time.Smaller
steel companies or those with older technologies may be forced to merge or
cease operations. China Gerui will be a beneficiary of these actions with its
comprehensive product line, high-quality brand name, established market
position and management capabilities.

"Continued investment in real estate and fixed assets as well as relatively
steady demand from certain industries such as automotive and heavy-duty
equipment, offer the prospect of stronger steel demand in China in the future.
We are further positioning China Gerui to become a substantial player in the
global steel industry with a much larger global customer base through our
comprehensive product mix and potential future opportunistic acquisitions to
further our diversification and quickly build market share. By improving our
production efficiency we expect to become an even more effective competitor
and benefit from the next recovery in the Chinese steel market," Mr. Lu

Conference Call Information

The Company will also host a conference call at 9:00 am EDT (9:00 pm Beijing
Time) on Wednesday, August 28, 2013.^

Listeners may access the call by dialing +1 (877) 407-8133 five to ten minutes
prior to the scheduled conference call time. International callers should dial
+1 (201) 689-8040.

A replay of the conference call will be available for 14 days starting from
12:00 pm EDT on Wednesday, August 28, 2013.

To access the replay, dial +1 (877) 660-6853.International callers should
dial at +1 (201) 612-7415. The pass code is 419874.

A live and archived webcast of the call will be available on the Company's
website at 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

Use of Non-GAAP Financial Measures

This earnings release includes the use of non-GAAP EBITDA, which are financial
measures that are not defined by U.S. generally accepted accounting
principles, or U.S. GAAP. For purposes of Regulation G, a non-GAAP financial
measure is a numerical measure of a registrant's historical or future
financial performance, financial position or cash flows that excludes amounts,
or is subject to adjustments that have the effect of excluding amounts, that
are included in the most directly comparable measure calculated and presented
in accordance with U.S. GAAP in the statement of income, balance sheet, or
statement of cash flows (or equivalent statements) of the issuer; or includes
amounts, or is subject to adjustments that have the effect of including
amounts, that are excluded from the most directly comparable measure so
calculated and presented. Pursuant to the requirements of Regulation G, the
Company has included with this press release a table which includes a
reconciliation of non-GAAP EBITDA to the most directly comparable respective
U.S. GAAP financial measures. Non-GAAP EBITDA is defined in this earnings
release as earnings before interest, taxes, depreciation, and amortization
that were incurred in the second quarter of 2013. The Company's management
believes that the presentation of these non-GAAP financial measures provides
useful information regarding the Company's results of operations because it
assists in analyzing and benchmarking the performance and value of the
Company's business. The Company's calculation of non-GAAP EBITDA may not be
consistent with similarly titled measures of other companies.

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, with an emerging presence in international
markets, in a diverse range of industries, including the food packaging,
telecommunication, electrical appliance, and construction materials
industries. For more information, please visit

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, 2012 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 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:         IR Contacts:
Email:                   Vivian Chen              Kevin Theiss
Website:                 Managing Director        Account Director
                         Grayling                 Grayling
                         Phone: 646-284-9427      Phone: 646-284-9409
                         Email:                   Email:

- Financial Tables Follow -

                                  June 30, 2013        December31,2012
Current assets
 Cash                          $    203,573,315  $     228,861,009
 Certificates of deposit       27,971,127           16,372,128
 Restricted cash               169,845,051          145,413,726
 Accounts receivable, net      7,528,934            2,276,153
 Notes receivable              -                    433,379
 Inventories                   24,598,947           22,762,545
 Prepaid purchases             120,454,584          76,268,597
 Prepaid expenses              950,389              382,569
 Other receivables             1,049,489            2,270,073
Total current assets              555,971,836          495,040,179
Non-current assets
 Property, plant and           138,983,868          134,110,657
equipment, net
 Land use right, net           57,310,003           13,625,738
 Deposit on acquisition of     -                    24,076,660
 Deposit on acquisition of     790,087              266,312
property, plant and equipment
 Other receivable              3,075,738            3,039,835
 Certificates of deposit       3,258,708            3,210,221
Total non-current assets          203,418,404          178,329,423
Total assets                      $    759,390,240  $     673,369,602
Liabilities and stockholders'
Current Liabilities
 Accounts payable              $                $       2,279,246
 Notes payable                 315,878,059          259,546,395
 Term loans                    61,589,598           57,462,962
 Land use right payable        1,440,751            1,419,314
 Income tax payable            1,771,519            5,140,306
 Customers deposits            20,467,262           11,635,999
 Accrued liabilities and other 6,786,234            5,818,060
Total current liabilities         425,001,103          343,302,282
Total liabilities                 425,001,103          343,302,282
Stockholders' equity
Common stock, 100,000,000
shares authorized with no par

59,823,730 and
59,823,730 shares issued,
                                  140,418,118          140,418,118
59,522,910 and
59,561,899 shares outstanding as

June 30, 2013 and
December 31, 2012, respectively
 Additional paid-in capital    5,011,589            4,978,698
Treasury stock, at cost,
300,820 and 261,831 shares,
                                  (498,799)            (414,063)
as of June 30, 2013 and
December 31, 2012, respectively
 Retained earnings             162,536,868          163,276,046
 Accumulated comprehensive     26,921,361           21,808,521
Total stockholders' equity        334,389,137          330,067,320
Total liabilities and             $    759,390,240  $     673,369,602
stockholders' equity

                     For the Three Months Ended      For the Six Months Ended
                     June 30,                        June 30,
                     2013              2012           2013             2012
Revenue           $ 43,078,588      $ 76,783,963   $ 88,689,295     $ 145,473,530
Cost of revenue     (39,557,743)      (56,975,825)   (79,961,858)     (104,172,570)
Gross Profit        3,520,845         19,808,138     8,727,437        41,300,960
andadministrative   (2,330,607)       (2,511,170)    (4,733,708)      (4,880,531)
 Selling and     (73,666)          (506,711)      (808,013)        (613,797)
Total operating     (2,404,273)       (3,017,881)    (5,541,721)      (5,494,328)
Operating income    1,116,572         16,790,257     3,185,716        35,806,632
Other income and

 Interest        845,618           624,578        2,082,157        1,250,829
 Interest        (2,580,151)       (2,028,459)    (5,939,682)      (3,059,376)
 Sundry income   3,423             24,911         102,021          183,648
before               (614,538)         15,411,287     (569,788)        34,181,733

income taxes
Income tax expense   (29,566)          (5,136,010)    (169,390)        (9,895,848)
Net (loss) /       $ (644,104)       $ 10,275,277   $ (739,178)      $ 24,285,885
Earnings per share
 - Basic        $ Nil            $ 0.18         $   $ 0.42
 - Diluted      $  $ 0.18         $  $ 0.42
                     Nil                              Nil
Weighted average

shares outstanding
 - Basic          59,556,396        58,203,179     59,559,133       58,230,054
 - Diluted        59,556,396        58,203,179     59,559,133       58,230,054

                                                 For The Six Months Ended
                                                 2013            2012
Cash flows from operating activities:
Net (loss) / income                            $ (739,178)     $ 24,285,885
Adjustments to reconcile net (loss) / income
to net

cash provided by operating activities:
Depreciation of property, plant and equipment    5,602,740       5,445,665
Amortization of land use right                   168,271         164,662
Amortization of intangible asset                 -               2,730
Stock-based compensation                         32,891          -
Changes in assets and liabilities:
Accounts receivable, net                         (5,181,508)     2,688,177
Notes receivable, net                            436,815         75,515
Inventories                                      (1,482,042)     723,341
Prepaid expenses                                (1,074,146)     (2,240,101)
Prepaid purchases                                (42,729,770)    (30,503,908)
Other receivable                                 147,453         143,083
Accounts payable                                 14,649,698      26,426,165
Income tax payable                               (3,422,061)     3,329,166
Customers deposit                                8,594,318       (5,288,776)
Accrued liabilities and other payables           2,538,767       (276,963)
Net cash (used in) / provided by operating       (22,457,752)    24,974,641
Cash flows from investing activities:
Cash paid for property, plant and equipment      (7,855,584)     (1,646,177)
Payment of purchases intangible asset            -               (16,435)
Advance to unrelated third parties               -               (3,689,485)
Repayment of advance to unrelated third          772,012         5,237,692
Repayment of advance to related party            315,177         -
Repayment of advance from unrelated third        (1,617,835)     -
Cash paid for acquisition of land use right      (19,214,984)    -
Investment in certificates of deposit            (11,271,457)    (4,432,764)
Changes in restricted cash                       (22,077,780)    (28,048,733)
Net cash used in investing activities            (60,950,451)    (32,595,902)
Cash flows from financing activities:
Repayment of term loans                          (14,560,515)    (14,248,171)
Proceeds from term loans                        17,796,185      17,414,432
Proceeds from notes payable                      313,644,821     247,601,558
Repayments from notes payable                    (261,603,922)   (204,144,635)
Purchase of treasury stock                       (84,736)        (571,496)
Net cash provided by financing activities        55,191,833      46,051,688
Net (decrease)/increase in cash                  (28,216,370)    38,430,427
Effect on change of exchange rates               2,928,676       (2,191,610)
Cash as of January 1                             228,861,009     246,600,917
Cash as of June 30                             $ 203,573,315   $ 282,839,734
Supplemental disclosures of cash flow
Cash paid during the year for:
Interest paid                             $ 5,895,801     $ 3,153,604
Income tax paid                           $ 3,591,451     $ 6,566,682

                                         Non-GAAP EBITDA
                                          Second Quarter Ended June 30,
                                         2013               2012
Net (Loss) / Income, GAAP amount per     $(644,104)         $10,275,277
consolidatedstatement of income
Interest income                          (845,618)          (624,578)
Interest expenses                        2,580,151          2,028,459
Income tax expense                       29,566             5,136,010
Depreciation of property, plant and      2,818,472          2,724,266
Amortization of land use right           84,620             82,110
Non-GAAP EBITDA                          $4,023,087         $19,621,544

SOURCE China Gerui Advanced Materials Group Limited

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