China Precision Steel Announces Second Quarter Fiscal 2014 Results PR Newswire SHANGHAI, Feb. 19, 2014 SHANGHAI, Feb. 19, 2014 /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 2014 second quarter results for the period ended December 31, 2013. Second Quarter Highlights oRevenue was $11.9 million oGross loss was $5.1 million oNet loss was $13.0 million oFully diluted loss per shares was $3.34 oInternational sales were $0.2 million, or 2% of total sales "We experienced an increase in demand for our high-carbon, hot-rolled steel in the second quarter as sales volume for the segment increased to 5,448 tons from 142 tons in the same period a year ago. However, as we ramped up production of high-carbon, hot-rolled steel used in automobile components, we scaled back production of our low-carbon, cold-rolled steel due to the rising cost of our raw material during the end of the year," commented Mr. Hai Sheng Chen, CEO of China Precision Steel. "We anticipate the price of steel will remain high in the near-term as China's steel industry adjusts to the closing of high polluting steel plants." Revenue for the second quarter of fiscal year 2014 was $11.9 million, up 45.3% from revenue of $8.2 million in the second quarter of fiscal year 2013. The increase in revenue was mainly attributable to the increase in production and sales of high-carbon products as a result of increased marketing and sales to the automobile industry. Sequentially, revenue increased 0.9% from revenue of $11.8 million in the first quarter of fiscal year 2014. Total sales volume in the second quarter of fiscal year 2014 was 15,036 tons, up from total sales volume of 10,705 tons in the prior period. High carbon and low carbon sales accounted for 66.9% and 26.8% of total sales, respectively, compared to 32.4% and 65.6%, respectively, period-on-period. Exports represented 2% of total sales for the current period, compared to 10% in the same period a year ago. Gross loss in the second quarter was $5.1 million, compared to gross loss of $1.3 million in the same period a year ago. Gross loss margin for the current period was 43.2%, compared to a gross loss margin of 15.9% in the second quarter of fiscal 2013. The increase in gross loss margin is due to a 27.8% period-on-period increase in average cost per unit sold as a result of a spike in steel prices due to an expectation of a reduction in steel produced during the quarter. Selling expenses for the second quarter of fiscal year 2014 were $49,583, compared to $25,063 in the second 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 were $303,617, or 2.6% of revenue, compared to $401,797, or 4.9% 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 $12.0 million, compared to an operating loss of $10.6 million in the second quarter of fiscal year 2013. Net loss for the second quarter of fiscal year 2014 was $13.0 million, compared to net loss of $10.9 million for the second quarter of fiscal year 2013. Fully diluted loss per share was $3.34, compared to fully diluted loss per share of $2.80 in the same period a year ago. Six Months Financial Results Revenue for the first six months of fiscal year 2014 increased 67.3% to $23.6 million from $14.1 million in the same period a year ago. Gross loss was $8.1 million, compared to a gross loss of $2.8 million for the six months of fiscal year 2013. Gross loss margin for the six months ended December 31, 2013 was 34.4% compared to 19.6% for the same period a year ago. Operating loss was $20.7 million compared to $13.9 million in the first six months of fiscal year 2013. Net loss was $22.5 million, compared to a net loss of $15.1 million in the same period a year ago. Fully diluted loss per share was $5.81, compared to fully diluted loss per share of $3.89 for the first six months of fiscal year 2013. Financial Condition As of December 31, 2013, China Precision Steel had $135,219 in cash and cash equivalents, $80.8 million in total liabilities and stockholders' equity stood at $30.8 million. Net cash generated from operations was $478,410. Business Outlook China Precision Steel has been working on improving cash flow and intends to stay conservative in regards to managing its balance sheet. The Company is also collaborating with one of its steel suppliers and a customer to develop new steel products using its high quality steel. As of December 31, 2013, China Precision Steel had a backlog of $3.6 million. "The steel industry remains under a lot of pressure as the government is aggressively working to reduce the high amount of pollution the industry creates which has resulted in a temporary imbalance in supply and demand. During the last two months of 2013, the government began to shut down high polluting mills in the province of Hebei, the region where a quarter of China's steel is produced," Mr. Chen continued. "Subsequently, steel prices spiked on expectations steel output will experience a short term drop off in production. We anticipate the imbalance will be resolved within the first half of the year as larger more efficient mills ramp up production. In the meantime, we are working on strengthening our cash flow, expanding our sales for our high-carbon steel products and minimizing our gross loss by focusing on higher margin products." 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; 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.email@example.com –Financial Tables Follow – China Precision Steel, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) December 31, June 30, 2013 2013 Assets Current assets Cash and cash equivalents $135,219 $75,243 Accounts receivable Trade, net of allowances of $42,495,764 and $30,642,373 at December 31 and June 30, 2013, 23,997,088 29,480,738 respectively Bills receivable 49,554 94,089 Other receivable 980,049 1,041,255 Inventories, net 15,324,726 15,837,201 Prepaid expenses 269,180 467,890 Advances to suppliers, net of allowance of $20,305,486 and $19,689,609 at December 31 and June 10,833,214 9,304,847 30, 2013, respectively Total current assets 51,589,030 56,301,263 Property, plant and equipment Property, plant and equipment, net 57,743,507 61,366,745 Construction-in-progress 295,857 255,996 58,039,364 61,622,741 Intangible assets, net 1,906,545 1,903,675 Goodwill 99,999 99,999 Total assets $111,634,938 $119,927,678 Liabilities and Stockholders' Equity Current liabilities Short-term loans $28,415,772 $28,028,722 Long-term loan - current portion 16,200,000 16,200,000 Accounts payable and accrued liabilities 12,342,164 7,044,007 Advances from customers 9,773,145 1,456,420 Other taxes payables 7,985,307 8,295,220 Current income taxes payable 6,076,339 5,993,574 Total current liabilities 80,792,727 67,017,943 Long-term loan - - Stockholders' equity: Preferred stock: $0.001 per value, 500,000 shares authorized, no shares outstanding at December 31 and June 30, 2013, - - respectively Common stock: $0.001 par value, 10,000,000 shares authorized, 3,880,866 issued and outstanding at December 31 and June 30, 2013, 3,880 3,880 respectively Additional paid-in capital 75,685,066 75,685,066 Accumulated other comprehensive income 22,544,421 22,075,822 Accumulated deficit (67,391,156) (44,855,033) Total stockholders' equity 30,842,211 52,909,735 Total liabilities and stockholders' equity $111,634,938 $119,927,678 China Precision Steel, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income For the Three and Six Months Ended December 31, 2013 and 2012 (Unaudited) Three Months Ended Six Months Ended 2013 2012 2013 2012 Sales revenues $11,866,008 $8,164,267 $23,631,395 $14,121,027 Cost of goods sold 16,997,339 9,466,225 31,756,985 16,889,934 Gross (loss) (5,131,331) (1,301,958) (8,125,590) (2,768,907) Operating expenses Selling expenses 49,583 25,063 80,751 54,336 Administrative 303,617 401,797 751,048 844,412 expenses Allowance for bad 6,546,832 8,786,214 11,668,609 10,159,214 and doubtful debts Depreciation and 40,500 52,050 88,642 104,011 amortization expense Total operating 6,940,532 9,265,124 12,589,050 11,161,973 expenses (Loss) from operations (12,071,863) (10,567,082) (20,714,640) (13,930,880) Other income/(expense) Other revenues 57,536 607,654 60,064 607,757 Interest and finance (944,656) (925,077) (1,881,547) (1,783,665) costs Total other (887,120) (317,423) (1,821,483) (1,175,908) (expense) (Loss) from operations (12,958,983) (10,884,505) (22,536,123) (15,106,788) before income tax Provision for income tax Current - - - - Total income tax - - - - Net (loss) (12,958,983) (10,884,505) (22,536,123) (15,106,788) Basic (loss) per share ($3.34) ($2.80) ($5.81) ($3.89) Basic weighted average 3,880,866 3,880,866 3,880,866 3,880,866 shares outstanding Diluted (loss) per ($3.34) ($2.80) ($5.81) ($3.89) share Diluted weighted average shares 3,880,866 3,880,866 3,880,866 3,880,866 outstanding China Precision Steel, Inc. and Subsidiaries Consolidated Statements of Cash Flows For the Six Months Ended December 31, 2013 and 2012 (Unaudited) 2013 2012 Cash flows from operating activities Net (loss) ($22,536,123) ($15,106,788) Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 4,498,491 4,561,331 Allowance for bad and doubtful debts 11,668,609 10,159,214 Net changes in assets and liabilities: Accounts receivable, net (5,418,079) 2,477,594 Inventories 731,172 (4,060,401) Prepaid expenses 201,438 412,031 Advances to suppliers (1,743,858) 1,086,749 Accounts payable and accrued expenses 5,204,609 (139,640) Advances from customers 8,296,613 755,623 Other taxes payable (424,462) (381,886) Current income taxes - 32,914 Net cash provided by/(used in) operating 478,410 (203,259) activities Cash flows from investing activities Purchase of property, plant and equipment, (80,759) (111,583) including construction in progress Net cash (used in) investing activities (80,759) (111,583) Cash flows from financing activities Repayments of short-term loans (223,707) (504,269) Net cash (used in) financing activities (223,707) (504,269) SOURCE China Precision Steel Inc. Website: http://chinaprecisionsteelinc.com
China Precision Steel Announces Second Quarter Fiscal 2014 Results
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