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China Precision Steel Announces First Quarter Fiscal 2013 Results

Date : 11/19/2012 @ 4:30PM
Source : PR Newswire (US)
Stock : China Precision Steel, Inc. (PC) (CPSL)
Quote : 0.83  0.0 (0.00%) @ 1:36AM
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China Precision Steel Announces First Quarter Fiscal 2013 Results

China Precision Steel, Inc. (USOTC:CPSL)
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China Precision Steel Announces First Quarter Fiscal 2013 Results

SHANGHAI, Nov. 19, 2012 /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 first quarter results for the period ended September 30, 2012. 

First Quarter Highlights

  • Revenue was $6.0 million
  • Gross loss was $1.5 million
  • Net loss was $4.2 million
  • Fully diluted loss per shares was $1.09
  • International sales were $1.1 million, or 19% of total sales

"Since the beginning of calendar year 2012, Chinese steel companies have experienced an extremely challenging environment of overcapacity, sluggish demand and rising production costs resulting in a deterioration of profits.  In response to these industry pressures and in an effort to minimize our gross loss, we decided to only accept orders on products that meet specific price targets. As a result of this strategy, during the first quarter of fiscal year 2013, we significantly cut down the sales of our loss-making low-carbon, cold-rolled steel, which resulted in a sharp drop off in revenue," commented Mr. Hai Sheng Chen, CEO of China Precision Steel.  "While we remain selective in accepting new domestic orders, we have experienced an increase in exports sales as activity in the international markets has been showing some signs of strengthening."   

Revenue for the first quarter of fiscal year 2013 was $6.0 million, down from revenue of $42.2 million in the first 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 the loss-making products.  Total sales volume in the first quarter of fiscal year 2013 was 7,753 tons, down from total sales volume of 45,548 tons in the prior period.  High carbon and low carbon sales accounted for 42.9% and 53.4% of total sales, respectively, compared to 16.1% and 79.5%, respectively, period-on-period.  Exports represented 19% of total sales for the current period, up from 1% in the same period a year ago as the international market improved during the past few months. 

Gross loss in the first quarter was $1.5 million, compared to gross profit of $0.06 million in the same period a year ago.  Gross loss margin for the current period was 24.6%, compared to a gross margin of 0.1% in the first quarter of fiscal 2012. The increase in gross loss margin is due to a 17.1% period-on-period decrease in average selling prices and a 3.6% period-on-period increase in average cost per unit sold, as steel prices remained weak while production costs increased.  Average selling price for the quarter was $768 per ton, down from $926 per ton in the first quarter of fiscal 2012, and the average cost per unit sold was $957 per ton, up from $924 per ton in the same period a year ago.

Selling expenses for the first quarter of fiscal year 2013 were $29,273, compared to $68,304 in the first 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 $442,615, or 7.4% of revenue, compared to $294,076, or 0.7% of revenue period-on-period.  The increase in administrative expenses was primarily due to an increase in legal and professional fees period-on-period. 

Operating loss for the current quarter was $3.4 million, compared to an operating loss of $0.4 million in the first quarter of fiscal year 2012.

Net loss for the first quarter of fiscal year 2013 was $4.2 million, compared to net loss of $1.1 million for the first quarter of fiscal year 2012.  Fully diluted loss per share was $1.09, compared to fully diluted loss per share of $0.28 in the same period a year ago. 

Financial Condition

As of September 30, 2012, China Precision Steel had $1.6 million in cash and cash equivalents, $68.1 million in total liabilities and working capital of $47.5 million.  Stockholders' equity stood at $115.9 million, compared to $118.9 million as of June 30, 2012.  Cash generated from operating activities during the first three months of fiscal year 2013 was $0.2 million.

Business Outlook

China Precision Steel believes China's steel industry will continue to experience pressures from oversupply for the near-term and it will continue to be selective in accepting new orders.  As of September 30, 2012, China Precision Steel had a backlog of $6.2 million which is comprised of approximately 20% in exports, 30% in high-carbon steel and 50% in low-carbon steel products.

"While we anticipate continued difficulty in the steel industry for the foreseeable future, we are seeing signs that the industry is poised for a turnaround. Baosteel, China's largest listed steelmaker and a popular benchmark for the Chinese steel industry, raised steel prices for the first time since March 2012 on increased demand. Additionally, Mr. Wang Xiaoqi, Vice-Chairman of the China Iron and Steel Association, announced recently that the darkest time for the domestic steel industry should be over as the implementation of pro-growth measures rolled out by the government will begin to take effect on China's steel industry in the fourth quarter," Mr. Chen continued.  "We view these signs as a positive for the market and an indication that the industry downturn might have already reached its bottom.  In the meantime, we will continue to focus on reducing operating costs and improving working capital as well as planning our orders and production to reduce loss and contribute to profitability."

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 benefiting 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. 

--  Financial Tables Follow --

 

China Precision Steel, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)





September 30,


June 30,





2012


2012

Assets




Current assets






Cash and cash equivalents


$1,595,567


$1,602,805


Accounts receivable







Trade, net of allowances of $4,655,538 and $3,231,613






  at September 30, 2012 and June 30, 2012, respectively

57,932,138


59,116,931


Bills receivable


103,426


173,089


Other receivables


965,765


1,117,243


Inventories, net


17,615,451


15,516,220


Prepaid expenses


466,204


668,867


Advances to suppliers, net of allowance of $4,675,112 and $4,623,323






at September 30, 2012 and June 30, 2012, respectively

36,964,593


37,384,684

Total current assets


115,643,144


115,579,839

Property, plant and equipment






Property, plant and equipment, net

66,194,820


67,752,991


Construction-in-progress


241,959


233,512





66,436,779


67,986,503

Intangible assets, net


1,889,974


1,880,129

Goodwill


99,999


99,999

Total assets


$184,069,896


$185,546,470

Liabilities and Stockholders' Equity




Current liabilities






Short-term loans


$27,551,689


$27,246,477


Long-term loan - current portion

16,200,000


16,200,000


Accounts payable and accrued liabilities

7,302,426


6,772,892


Advances from customers


2,798,954


2,253,956


Other taxes payables


8,432,531


8,446,373


Current income taxes payable

5,853,288


5,756,178

Total current liabilities


68,138,888


66,675,876

Stockholders' equity:






Preferred stock: $0.001 per value, 8,000,000 shares






authorized, no shares outstanding at September 30, 2012 and






June 30, 2012, respectively

-


-


Common stock: $0.001 par value, 62,000,000 shares






authorized, 3,880,866 issued and outstanding at






September 30, 2012 and June 30, 2012, respectively

3,880


3,880


Additional paid-in capital


75,685,066


75,685,066


Accumulated other comprehensive income

20,379,992


19,097,295


Retained earnings


19,862,070


24,084,353

Total stockholders' equity


115,931,008


118,870,594

Total liabilities and stockholders' equity

$184,069,896


$185,546,470

 

China Precision Steel, Inc. and Subsidiaries


Consolidated Statements of Operations and Comprehensive Income


For the Three Months Ended September 30, 2012 and 2011


(Unaudited)




2012


2011














Sales revenues

$5,956,760


$42,166,843


Cost of goods sold

7,423,709


42,105,073


Gross (loss)/profit

(1,466,949)


61,770


Operating expenses






Selling expenses

29,273


68,304



Administrative expenses

442,615


294,076



Allowance for bad and doubtful debts

1,373,000


-



Depreciation and amortization expense

51,961


54,444



Total operating expenses

1,896,849


416,824


(Loss) from operations

(3363798)


(355054)


Other income/(expense)






Other revenues

103


199



Interest and finance costs

(858,588)


(669,928)



Total other (expense)

(858,485)


(669,729)


(Loss) from operations before income tax

(4,222,283)


(1,024,783)


Provision for income tax






Current

-


54,312



Total income tax expense

-


54,312


Net (loss)

(4,222,283)


(1,079,095)


Basic (loss) per share

($1.09)


($0.28)


Basic weighted average shares outstanding

3,880,866


3,880,866


Diluted (loss) per share

($1.09)


($0.28)


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, 2012 and 2011

(Unaudited)



2012


2011

Cash flows from operating activities





Net (loss)

(4,222,283)


(1,079,095)


Adjustments to reconcile net income to net cash provided by operating activities




  Depreciation and amortization

2,254,886


2,196,295


  Allowance for bad and doubtful debts

1,373,000


-


Net changes in assets and liabilities:





  Accounts receivable, net

694,880


(6,877,517)


  Inventories

(1,925,422)


308,082


  Prepaid expenses

206,353


66,760


  Advances to suppliers

889,785


(586,403)


  Accounts payable and accrued expenses

456,346


1,805,922


  Advances from customers

519,750


3,779,521


  Other taxes payable

(108,457)


662,673


  Current income taxes

32,630


27,502

Net cash provided by operating activities

171,468


303,740

Cash flows from investing activities





  Purchase of property, plant and equipment, including construction in progress

(7,424)


(84,886)

Net cash (used in) investing activities

(7,424)


(84,886)

Cash flows from financing activities





  Repayments of short-term loans

-


(810,921)

Net cash (used in) financing activities

-


(810,921)

Effect of exchange rate

(171,282)


37,366

Net (decrease) in cash

(7,238)


(554,701)

Cash and cash equivalents, beginning of period

1,602,805


2,707,754

Cash and cash equivalents, end of period

$1,595,567


$2,153,053











Elite IR
Leslie J. Richardson, Partner
+852-3183-0283
Leslie.richardson@elite-ir.com

SOURCE China Precision Steel Inc.

Copyright 2012 PR Newswire



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