China Precision Steel Announces First Quarter Fiscal 2014 Results

      China Precision Steel Announces First Quarter Fiscal 2014 Results

PR Newswire

SHANGHAI, Nov. 19, 2013

SHANGHAI, Nov. 19, 2013 – 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 2014 first quarter results for the
period ended September 30, 2013.

First Quarter Highlights

  oRevenue was $11.8 million
  oGross loss was $3.0 million
  oNet loss was $9.6 million
  oFully diluted loss per shares was $2.47
  oInternational sales were $0.4 million, or 4% of total sales

"We are pleased to report first quarter fiscal 2014 sales increased 97.5% from
the first quarter fiscal 2013 as sales volume increased by 12,696 tons. We
expect to continue to experience a gradual increase in our sales volume during
fiscal 2014 as we reposition our products and rebuild our relationship with
customers," commented Mr. Hai Sheng Chen, CEO of China Precision Steel.
"Specifically, we believe the auto components industry, driven by robust
demand from OEMs coupled with growth in the replacement market, offers us
opportunity for future growth. We are working to expand our sales for our
high carbon precision steel products in this segment by ramping up our sales
and marketing efforts along with making improvements to further refine the
precision and consistency of our products to meet customers' stricter
requirements."

Revenue for the first quarter of fiscal year 2014 was $11.8 million, up from
revenue of $6.0 million in the first quarter of fiscal year 2013. The
increase in sales revenues period-on-period is a direct result of management's
sales and marketing efforts across the domestic market. Total sales volume in
the first quarter of fiscal year 2014 was 20,449 tons, up from total sales
volume of 7,753 tons in the prior period. High carbon and low carbon sales
accounted for 43.4% and 52.9% of total sales, respectively, compared to 42.9%
and 53.4%, respectively, period-on-period. Exports represented 4% of total
sales for the current period, down from 19% in the same period a year ago as
the continued appreciation of RMB negatively impacted the Company's
competitiveness in the international market.

Gross loss in the first quarter was $3.0 million, compared to gross loss of
$1.5 million in the same period a year ago. Gross loss margin for the current
period was 25.4%, compared to a gross loss margin of 24.6% in the first
quarter of fiscal 2013. The slight increase in gross loss margin is due to a
25.1% period-on-period decrease in average selling price as steel prices in
China dropped to a 5-year low during the period. Average selling price for
the quarter was $575 per ton, down from $768 per ton in the first quarter of
fiscal 2013 while the average cost per unit sold was $722 per ton, down from
$957 per ton in the same period a year ago.

Selling expenses for the first quarter of fiscal year 2014 were $31,168
compared to $29,273 in the first quarter of fiscal year 2013. The increase in
selling expenses was primarily attributable to higher transportation costs and
traveling expenses period-on-period. Administrative expenses increased
slightly to $447,393, or 3.8% of revenue, compared to $442,615, or 7.4% of
revenue period-on-period.

Operating loss for the current quarter was $8.6 million, compared to an
operating loss of $3.4 million in the first quarter of fiscal year 2013.

Net loss for the first quarter of fiscal year 2014 was $9.6 million, compared
to net loss of $4.2 million for the first quarter of fiscal year 2013. Fully
diluted loss per share was $2.47, compared to fully diluted loss per share of
$1.09 in the same period a year ago.

Financial Condition

As of September 30, 2013, China Precision Steel had $66,496 in cash and cash
equivalents and $72.0 million in total liabilities. Stockholders' equity
stood at $43.5 million, compared to $53.0 million as of June 30, 2013. Cash
generated from operating activities during the first three months of fiscal
year 2014 was $55,331.

Business Outlook

China Precision Steel is focused on expanding its customer base in the
domestic steel market, especially in the auto components segment. The Company
is working to recover its outstanding accounts receivables and has tightened
its credit policy requiring customers to pay a 30% - 40% deposit with the
balance to be paid on delivery. As of September 30, 2013, China Precision
Steel had a backlog of $8.2 million.

"We are working diligently to turnaround our operations by focusing our
efforts on increasing sales of high carbon precision steel products and
improving our gross margin. As our sales volume increases, our average cost
of sales decreases as a result of economies of scale, which we expect will
contribute to an improvement in our gross margin. Additionally, we are working
on strengthening our balance sheet by tightening credit offered to new
customers and recovering outstanding accounts receivable," Mr. Chen
continued. "Even though China's economic growth is starting to show signs of
rebounding and sales are strengthening, our outlook remains cautious as the
steel industry continues to struggle with overcapacity combined with pressure
on steel prices. However, addressing these problems remains a top priority
for the country's leaders who have stopped approving new production
facilities, suspended unauthorized projects and are closing outdated steel
mills."

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)
                                                  September 30,  June 30,
                                                  2013            2013
Assets
Current assets
 Cash and cash equivalents                        $66,496         $75,243
 Accounts receivable
          Trade, net of allowances of $35,802,825
          and $30,642,373
          at September 30 and June 30, 2013,      24,264,027      29,480,738
          respectively
 Bills receivable                                 -               94,089
 Other receivable                                 1,108,601       1,041,255
 Inventories, net                                 16,560,141      15,837,201
 Prepaid expenses                                 325,707         467,890
 Advances to suppliers, net of allowance of
 $19,803,917 and
          $19,689,609 at September 30 and June    11,560,317      9,304,847
          30, 2013, respectively
Total current assets                              53,885,289      56,301,263
Property, plant and equipment
 Property, plant and equipment, net               59,289,484      61,366,745
 Construction-in-progress                         280,046         255,996
                                                  59,569,530      61,622,741
Intangible assets, net                            1,897,885       1,903,675
Goodwill                                          99,999          99,999
Total assets                                      $115,452,703    $119,927,678
Liabilities and Stockholders' Equity
Current liabilities
 Short-term loans                                 $28,111,165     $28,028,722
 Long-term loan - current portion                 16,200,000      16,200,000
 Accounts payable and accrued liabilities         9,086,933       7,044,007
 Advances from customers                          4,478,871       1,456,420
 Other taxes payables                             8,085,729       8,295,220
 Current income taxes payable                     6,011,203       5,993,574
Total current liabilities                         71,973,901      67,017,943
Long-term loan                                    -               -
Stockholders' equity:
 Preferred stock: $0.001 per value,500,000
 shares
          authorized, no shares outstanding
          at September 30 and June 30, 2013,      -               -
          respectively
 Common stock: $0.001 par value, 10,000,000
 shares
          authorized, 3,880,866 issued and
          outstanding
          at September 30 and June 30, 2013,      3,880           3,880
          respectively
 Additional paid-in capital                       75,685,066      75,685,066
 Accumulated other comprehensive income           22,222,029      22,075,822
 Accumulated deficit                              (54,432,173)    (44,855,033)
Total stockholders' equity                        43,478,802      52,909,735
Total liabilities and stockholders' equity        $115,452,703    $119,927,678



China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
For the Three Months Ended September 30, 2013 and 2012
(Unaudited)
                                                                                                         2013          2012
Sales                                                                                                    $11,765,387   $5,956,760
revenues
Cost of goods sold                                                                                       14,759,646    7,423,709
Gross (loss)                                                                                             (2,994,259)   (1,466,949)
Operating expenses
                                  Selling expenses                                                       31,168        29,273
                                  Administrative expenses                                                447,431       442,615
                                  Allowance for bad and doubtful debts                                   5,121,777     1,373,000
                                  Depreciation and amortization expense                                  48,142        51,961
                                  Total operating expenses                                               5,648,518     1,896,849
(Loss) from operations                                                                                   (8,642,777)   (3,363,798)
Other income/(expense)
                                  Other revenues                                                         2,528         103
                                  Interest and finance costs                                             (936,891)     (858,588)
                                  Total other (expense)                                                  (934,363)     (858,485)
(Loss) from operations before income tax                                                                 (9,577,140)   (4,222,283)
Provision for income tax
                                  Current                                                                -             -
                                  Total income tax                                                       -             -
Net (loss)                                                                                               ($9,577,140)  ($4,222,283)
Basic (loss) per share                                                                                   ($2.47)       ($1.09)
Basic weighted average shares outstanding                                                                3,880,866     3,880,866
Diluted (loss) per share                                                                                 ($2.47)       ($1.09)
Diluted weighted average shares outstanding                                                              3,880,866     3,880,866



China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2013 and 2012
(Unaudited)
                                                      2013         2012
Cash flows from operating activities
 Net (loss)                                           (9,577,140)  (4,222,283)
 Adjustments to reconcile net income to net cash
 provided by operating activities
  Depreciation and amortization                      2,258,320    2,254,886
  Allowance for bad and doubtful debts               5,121,777    1,373,000
 Net changes in assets and liabilities:
  Accounts receivable, net                           263,186      694,880
  Inventories                                        (676,357)    (1,925,422)
  Prepaid expenses                                   142,764      206,353
  Advances to suppliers                              (2,284,494)  889,785
  Accounts payable and accrued expenses              2,022,999    456,346
  Advances from customers                            3,018,167    519,750
  Other taxes payable                                (233,891)    (108,457)
  Current income taxes                               -            32,630
Net cash provided by operating activities             55,331       171,468
Cash flows from investing activities
  Purchase of property, plant and equipment,         (14,633)     (7,424)
 including construction in progress
Net cash (used in) investing activities               (14,633)     (7,424)
Cash flows from financing activities
  Repayments of short-term loans                     (47,650)     -
Net cash (used in) financing activities               (47,650)     -
Effect of exchange rate                               (1,795)      (171,282)
Net (decrease) in cash                                (8,747)      (7,238)
Cash and cash equivalents, beginning of period        75,243       1,602,805
Cash and cash equivalents, end of period              $66,496      $1,595,567



SOURCE China Precision Steel Inc.

Website: http://chinaprecisionsteelinc.com
 
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