SHANGHAI, Nov. 17 /PRNewswire-Asia-FirstCall/ -- 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 2010 first quarter results for
the period ended September 30, 2009. First Quarter Highlights --
Revenue was $17.0 million -- Gross profit was $0.7 million with
4.1% gross margin -- Net loss was $0.3 million -- Fully diluted
loss per share was $0.01 "Overall demand for our precision steel
products has improved from the lows we experienced in the third
quarter of fiscal 2009 as our sales volume has increased 100% from
11,000 metric tons to 22,000 metric tons in the first quarter of
2010 fiscal year. However, we are still experiencing pricing
pressures from the overcapacity in steel production which continues
to put pressure on our margins," commented Dr. Wo Hing Li, China
Precision Steel's Chairman and CEO. "As the steel industry recovers
from the impact of the global economic crisis, we expect market
demand and our average selling prices will continue to gradually
improve during the coming year." Revenue for the first quarter of
fiscal 2010 was $17.0 million, down 32.8% from revenue in the first
quarter of fiscal 2009 of $25.4 million. The decline in revenue was
mainly attributed to the decrease in sales volume combined with
lower average selling prices as a result of the global economic
slowdown. Total sales volume and average selling price per ton in
the first quarter decreased to 22,293 tons and $764, respectively,
compared to total sales volume and average selling price of 24,216
and $1,047, respectively, in the first quarter of 2010. High carbon
and low carbon sales accounted for 34.5% and 55.3% of total sales,
respectively, compared to 21.2% and 59.7%, respectively in the
first quarter of fiscal 2009. Exports represented 18% of total
sales for the quarter. Gross profit in the first quarter was
$703,359, down 82.2% from gross profit in the same period a year
ago of $4.0 million. Gross margin was 4.1% compared to 15.6% in the
first quarter of fiscal 2009. The decline in gross margin was
mainly due to lower selling prices during the quarter as compared
to the same period a year ago. Selling expenses for the first
quarter of fiscal 2010 were $31,809, or 0.2% of revenue, compared
to $211,298, or 0.8% of revenue, in the first fiscal quarter of
fiscal 2009. The decline in selling expenses was primarily
attributable to lower commissions costs associated with export
products. Administrative expenses were $578,698, or 3.4% of
revenue, compared to $462,100, or 1.8% of revenue. The increase in
administrative expenses is due to an increase in salaries as a
result of an increase in the average number of staff as well as an
increase in stock and listing fees period-on-period. China
Precision Steel also recognized an allowance for bad and doubtful
debts in the amount of $117,117 during the quarter, as compared to
nil for the same period a year ago. Operating loss for the quarter
was $68,003, compare to operating income of $3.3 million in the
first quarter of fiscal 2009. Net loss for the first quarter of
fiscal 2010 was $275,191, compared to net income of $2.9 million
for the first quarter of fiscal 2009. Fully diluted loss per share
was $0.01 compared to fully diluted earnings per share of $0.06 in
the same period a year ago. Financial Condition As of September 30,
2009, China Precision Steel had $13.7 million in cash and cash
equivalents, no long term debt, total liabilities of $45.1 million
and working capital of $40.7 million. Stockholders' equity stood at
$120.4 million compared to $120.6 million as of June 30, 2009.
Business Outlook China Precision Steel is in the final stages of
testing and commissioning its new mill and expects to begin
production at the mill in the third quarter of fiscal 2010. The
mill is expected to reach its full design capacity of 100,000 tons
in approximately four years; increasing the Company's total
production design capacity by 33%. China Precision Steel expects to
incur an additional $900,000 in capital expenditure for the
completion of the new mill and annealing furnaces. "We continue to
maintain our solid competitive position as one of the leading
manufacturers of high carbon, cold rolled, precision steel products
in China," Dr. Li commented. "Moreover, we believe that as the
global economic environment continues to recover, we are well
positioned to meet the increase in demand from our current
customers and the new customers we have acquired over the past year
as we gradually ramp up the additional capacity from our new mill."
About China Precision Steel, Inc. China Precision Steel, Inc. is a
niche precision steel processing company principally engaged in the
production and sale of high precision cold-rolled steel products
and provides value added services such as heat treatment and
cutting medium and high carbon hot-rolled steel strips. China
Precision Steel's high precision, ultra-thin, high strength (7.5 mm
to 0.05 mm) cold-rolled steel products are mainly used in the
production of automotive components, food packaging materials, saw
blades and textile needles. The Company primarily sells to
manufacturers in the People's Republic of China and overseas
markets such as Nigeria, Thailand, Indonesia and the Philippines.
China Precision Steel was incorporated in 2002 and is headquartered
in Sheung Wan, Hong Kong. Additional information can be found at
the Company's website http://chinaprecisionsteelinc.com/ .
Conference Call China Precision Steel will host a conference call
on Tuesday, November 17, 2009 at 9:00 a.m. Eastern Time to discuss
fiscal 2010 first quarter results. To participate in the live
conference call, please dial the following number fifteen minutes
prior to the scheduled conference call time: 888-419-5570.
International callers should dial 617-896-9871. When prompted by
the operator, mention conference passcode 702 339 93. If you are
unable to participate in the call at this time, a replay will be
available for 14 days starting on Tuesday, November 17, 2009 at
11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010
and enter the passcode 10033651. International callers should dial
617-801-6888 and enter the same passcode. This conference call will
be broadcast live over the Internet and can be accessed by all
interested parties by clicking on
http://www.chinaprecisionsteelinc.com/ . Please access the link at
least fifteen minutes prior to the start of the call to register,
download, and install any necessary audio software. For those
unable to participate during the live broadcast, a 90-day replay
will be available shortly after the call by accessing the same
link. Forward-Looking Statements Safe Harbor Statement Under the
Private Securities Litigation Reform Act of 1995: Certain
statements in this press release and oral statements made by China
Precision Steel on its conference call in relation to this 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 China Precision Steel's ability to prepare the
Company for growth, the Company's planned manufacturing capacity
expansion, predictions about improvements in the global economy and
predictions and guidance relating to the Company's future financial
performance. 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 September 30, June 30,
2009 2009 (Unaudited) Assets Current assets Cash and cash
equivalents $13,703,411 $13,649,587 Accounts receivable Trade, net
of allowances of $905,997 and $830,127 at September 30 and June 30,
2009, respectively 26,880,457 25,140,834 Bills receivable 3,662,306
6,131,143 Other 852,157 881,153 Inventories 19,472,547 16,275,070
Prepaid expenses 59,694 75,917 Advances to suppliers, net of
allowance of $1,632,609 and $1,631,557 at September 30 and June 30,
2009, respectively 21,168,976 21,878,047 Total current assets
85,799,548 84,031,751 Property, plant and equipment Property, plant
and equipment, net 45,779,654 46,812,484 Deposits for building,
plant and machinery 2,197,384 8,348,496 Construction-in-progress
29,728,022 22,245,173 77,705,059 77,406,153 Intangible assets, net
1,862,531 1,871,211 Goodwill 99,999 99,999 Total assets
$165,467,137 $163,409,114 Liabilities and Stockholders' Equity
Current liabilities Short-term loans $25,799,602 $22,489,031
Accounts payable and accrued liabilities 9,298,447 7,144,242
Advances from customers 2,176,492 1,742,944 Other taxes payables
3,007,286 6,650,668 Current income taxes payable 4,781,847
4,778,767 Total current liabilities 45,063,674 42,805,652
Stockholders' equity: Preferred stock: $0.001 per value, 8,000,000
shares authorized, no shares outstanding at September 30 and June
30, 2009, respectively Common stock: $0.001 par value, 62,000,000
shares authorized, 46,562,955 and 46,562,955 issued and outstanding
September 30 and June 30, 2009, respectively 46,563 46,563
Additional paid-in capital 75,642,383 75,642,383 Accumulated other
comprehensive income 9,806,697 9,731,505 Retained earnings
34,907,820 35,183,011 Total stockholders' equity 120,403,463
120,603,462 Total liabilities and stockholders' equity $165,467,137
$163,409,114 China Precision Steel, Inc. and Subsidiaries
Consolidated Statements of Operations For the Three Months Ended
September 30, 2009 and 2008 (Unaudited) 2009 2008 Revenues Sales
revenues $17,041,989 $25,350,419 Cost of goods sold 16,338,630
21,397,761 Gross profit 703,359 3,952,658 Operating expenses
Selling expenses 31,809 211,298 Administrative expenses 578,698
462,100 Allowance for bad and doubtful debts 117,117 --
Depreciation and amortization expense 43,738 26,203 Total operating
expenses 771,362 699,601 (Loss)/Income from operations (68,003)
3,253,057 Other income/(expense) Other revenues 19,922 120,703
Interest and finance costs (228,343) (327,405) Total other income
(expense) (208,421) (206,702) Net (loss)/income from operations
before income tax (276,424) 3,046,355 Provision for/(benefit from)
income tax Current (1,233) 170,621 Deferred -- -- Total income tax
(benefit)/expense (1,233) 170,621 Net (loss)/income ($275,191)
$2,875,734 Basic (loss)/earnings per share ($0.01) $0.06 Basic
weighted average shares outstanding 46,562,955 46,556,107 Diluted
(loss)/earnings per share ($0.01) $0.06 Diluted weighted average
shares outstanding 46,562,955 46,692,711 China Precision Steel,
Inc. and Subsidiaries Consolidated Statements of Cash Flows For the
Three Months Ended September 30, 2009 and 2008 (Unaudited) 2009
2008 Cash flows from operating activities Net (loss)/income
$(275,191) $2,875,734 Adjustments to reconcile net income to net
cash provided by operating activities Depreciation and amortization
1,210,759 843,290 Allowance for bad and doubtful debts 117,117 --
Impairment of inventories 42,534 -- Net changes in assets and
liabilities: Accounts receivable, net 661,741 (5,622,477)
Inventories (3,229,520) (325,089) Prepaid expenses 16,231 --
Advances to suppliers 723,173 1,974,708 Accounts payable and
accrued expenses 2,149,699 885,734 Advances from customers 432,425
(3,295,867) Other taxes payable (2,151,427) 1,582,948 Net cash used
in operating activities (302,459) (1,081,019) Cash flows from
investing activities Deposit for building, plant and machinery
(2,197,384) -- Purchase of property, plant and equipment including
construction in progress (749,049) (7,263,898) Net cash used in
investing activities (2,946,433) (7,263,898) Cash flows from
financing activities Exercise of common stock warrants -- 269,985
Short-term loan proceeds 3,735,552 -- Repayments of short-term
loans (439,477) (87,611) Net cash provided by financing activities
3,296,075 182,374 Effect of exchange rate 6,641 (79,224) Net
increase/(decrease) in cash 53,824 (8,241,767) Cash and cash
equivalents, beginning of period 13,649,587 18,568,842 Cash and
cash equivalents, end of period $13,703,411 $10,327,075 For more
information, please contact: China Precision Steel Dan Carlson
Email: Elite IR Leslie J. Richardson, Partner Tel: +852-3183-0283
Email: DATASOURCE: China Precision Steel, Inc. CONTACT: Dan Carlson
of China Precision Steel, ; or at Elite IR, Leslie J. Richardson,
Partner, +852-3183-0283, or , for CPSL Web Site:
http://www.chinaprecisionsteelinc.com/
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