BEIJING, Nov. 6 /PRNewswire-Asia-FirstCall/ -- General Steel Holdings, Inc.
("General Steel" or "the Company") (NYSE: GSI), one of China's leading
non-state-owned producers of steel products and aggregators of domestic steel
companies, today announced its financial results for the third quarter ended
September 30, 2009.
Third Quarter of 2009 Highlights
-- Aggregate shipment volume increased 67.2% year-over-year to a record
1,036,076 metric tons
-- Total revenues increased 17.8% to a record $484.8 million from $411.5
million in the third quarter of 2008
-- Gross margin was 8.2%, compared to 5.5% in the previous quarter and
-1.5% in the third quarter of 2008
-- Income from operations increased to a record $29.2 million
-- Net income was $10.4 million, or earnings per basic and diluted share
of $0.23 and $0.22, respectively
-- Established a sales office in one of western China's key economic
development zones, Guanzhong-Tianshui Economic Zone
"We achieved record total revenues, shipment volume and income from
operations during the quarter," said Mr. Henry Yu, General Steel's chairman
and chief executive officer. "Our Longmen JV continues to benefit from a
micro-trend in the domestic steel space, delivering construction-related steel
to an increasing number of rural development and infrastructure projects. This
helped gross margin at the subsidiary expand to more than 8% during the
quarter, which is four consecutive quarters of improvement. Going forward, the
accelerating momentum for significant industry consolidation combined with our
unique platform and ability to create 'win-win' partnerships, has positioned
us as one of the most sought out partners within the industry."
Selected Financial Results for the Third Quarter and Nine Months Ended
September 30, 2009
Total revenues for the third quarter of 2009 increased 17.8%
year-over-year to $484.8 million from $411.5 million in the year-ago period.
Total revenues for the nine months ended September 30, 2009 increased 11.6%
year-over-year to $1.2 billion from $1.1 billion in the year-ago period.
The increase in total revenues was predominantly due to increased shipment
volumes at the Company's Shaanxi Longmen Iron and Steel Co., Ltd. joint
venture ("Longmen JV"), which in the nine months ended September 30, 2009,
increased 61.0% year-over-year as well as the Company's Maoming Hengda Steel
Group, Limited ("Maoming") subsidiary, which in the nine months ended
September 30, 2009, increased 617.7% year-over-year. The Company noted that
the increase in shipment volumes helped to offset lower selling prices and
declines at its Daqiuzhuang Metal subsidiary and Baotou Steel Pipe joint
venture. The increase in total revenues was also attributable to the Company's
Maoming acquisition, which took place on June 25, 2008. Total revenues for the
nine months ended September 30, 2009 reflect a full nine months of operations,
whereas the subsidiary did not exist in the same period last year.
Cost of Sales
Total cost of sales for the third quarter of 2009 increased 6.5%
year-over-year to $445.0 million from $417.9 million in the year-ago period.
Total cost of sales for the nine months ended September 30, 2009 increased
7.6% year-over-year to $1.1 billion from $1.0 billion in the year-ago period.
Cost of sales principally consists of the cost of raw materials, labor,
utilities, manufacturing costs, manufacturing-related depreciation and other
fixed costs. The increase in cost of sales was mostly attributable to an
increase in shipment volumes at the Company's Longmen JV and Maoming
subsidiary in response to demand created by earthquake reconstruction and
infrastructure-related stimulus projects.
Gross Profit
Gross profit for the third quarter of 2009 was $39.7 million compared to a
gross loss of $6.3 million in the year-ago period. Gross profit for the nine
months ended September 30, 2009 increased 154.7% year-over-year to $75.2
million from $29.5 million in the year-ago period. Gross margin for the third
quarter of 2009 was 8.2%, compared to -1.5% in the year-ago period. Gross
margin for the nine months ended September 30, 2009 was 6.2%, compared to 2.7%
in the year-ago period.
Operating Expenses
Selling, general and administrative expenses for the third quarter of 2009
decreased 14.9% to $10.5 million, compared to $12.3 million in the year-ago
period. Selling, general and administrative expenses for the nine months ended
September 30, 2009 increased 3.0% to $29.2 million from $28.4 million in the
year-ago period. Selling, general and administrative expenses were 2.2% and
3.0% of total revenues in the third quarters of 2009 and 2008, respectively,
compared to 2.4% and 2.6% in the nine months ended September 30, 2009 and 2008,
respectively. The Company noted that the year-over-year increase in selling,
general and administrative expenses in the nine months ended September 30,
2009 was attributable to the addition of the Company's Maoming subsidiary,
which did not exist in the year-ago period as well as a 61% increase in
shipment volume at the Company's Longmen JV.
Finance and interest expenses for the third quarter of 2009 were $4.2
million, compared to $6.9 million in the year-ago period. Finance and interest
expenses for the nine months ended September 30, 2009 were $18.4 million,
compared to $19.1 million in the year-ago period. The reduction in finance and
interest expense for the nine months ended September 30, 2009 was primarily
due to interest paid on bank loans and the early redemption of notes
receivable and various bank fees.
Net Income
Net income for the third quarter of 2009 was $10.4 million, compared to
net income of $20.5 million in the year-ago period. Net loss for the nine
months ended September 30, 2009 was $14.2 million, compared to net loss of
$1.6 million in the year-ago period. The decrease in net income was due to a
$29.9 million derivative instrument-related gain which occurred in the third
quarter of 2008 and is a non-operating, non-cash gain related to a convertible
bond and warrants issued in December of 2007.
Basic earnings per share was $0.23 in the third quarter of 2009 and $0.57
in the year-ago period.
Diluted earnings per share was $0.22 in the third quarter of 2009 and
$0.57 in the year-ago period. Basic and diluted losses per share were $0.35 in
the nine months ended September 30, 2009, compared to $0.05 in the year-ago
period.
Balance Sheet
As of September 30, 2009, General Steel had cash and restricted cash of
$251.9 million, compared to $145.6 million as of December 31, 2008. Accounts
receivable was $12.2 million and accounts receivables - related parties was
$2.8 million as of September 30, 2009, compared to accounts receivable of $8.3
million as of December 31, 2008. Convertible notes payable decreased to $912
thousand as of September 30, 2009, compared to $7.2 million as of December 31,
2008. Because $8.3 million in notes were converted to 1,940,678 shares of
common stock from June 30, 2009 to September 30, 2009, total outstanding
shares increased to 45.8 million as of September 30, 2009.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m.
U.S. Eastern Time on November 6, 2009 (9:00 p.m. Beijing/Hong Kong Time on
November 6, 2009). On the call, management will discuss results and highlights
from the quarter and answer questions.
The dial-in number and passcode for the conference call are as follows:
U.S. Toll-free: +1-800-860-2442
Passcode: General Steel Holdings
The conference call will be broadcast live over the Internet and can be
accessed by clicking the following link:
http://www.visualwebcaster.com/event.asp?id=63645 . The Company has also
posted a presentation on their corporate website which can be downloaded and
used to follow along on the call.
Additionally, an archived webcast of this call will be available on
General Steel's website at http://www.gshi-steel.com .
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China,
operates a diverse portfolio of Chinese steel companies. With 6.3 million
metric tons aggregate production capacity, its companies serve various
industries and produce a variety of steel products including rebar, hot-rolled
carbon and silicon sheet, high-speed wire and spiral-weld pipe. General Steel
Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner
Mongolia Autonomous Region and Tianjin municipality. For more information,
please visit http://www.gshi-steel.com .
Information Regarding Forward-Looking Statements
This press release may contain certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations or beliefs about
future events and financial, political and social trends and assumptions it
has made based on information currently available to it. The Company cannot
assure that any expectations, forecasts or assumptions made by management in
preparing these forward-looking statements will prove accurate, or that any
projections will be realized. Actual results could differ materially from
those projected in the forward-looking statements as a result of inaccurate
assumptions or a number of risks and uncertainties. These risks and
uncertainties are set forth in the Company's filings under the Securities Act
of 1933 and the Securities Exchange Act of 1934 under "Risk Factors" and
elsewhere, and include: (a) those risks and uncertainties related to general
economic conditions in China, including regulatory factors that may affect
such economic conditions; (b) whether the Company is able to manage its
planned growth efficiently and operate profitable operations, including
whether its management will be able to identify, hire, train, retain, motivate
and manage required personnel or that management will be able to successfully
manage and exploit existing and potential market opportunities; (c) whether
the Company is able to generate sufficient revenues or obtain financing to
sustain and grow its operations; (d) whether the Company is able to
successfully fulfill our primary requirements for cash and (e) other risks.
Forward-looking statements contained herein speak only as of the date of this
release. The Company does not undertake any obligation to update or revise
publicly any forward-looking statements, whether to reflect new information,
future events or otherwise.
For investor and media inquiries, please contact:
In China:
Ms. Jing Ou-Yang
General Steel Holdings, Inc.
Tel: +86-10-5879-7346
Email: jing.ouyang@gshi-steel.com
Mr. Justin Knapp
Ogilvy Financial, Beijing
Tel: +86-10-8520-6556
Email: gsi@ogilvy.com
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
Email: gsi@ogilvy.com
GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
REVENUES $361,652 $325,911 $875,374 $781,918
REVENUES - RELATED PARTIES 123,099 85,610 341,118 308,198
TOTAL REVENUES 484,751 411,521 1,216,492 1,090,116
COST OF SALES 340,484 335,944 822,392 762,395
COST OF SALES - RELATED
PARTIES 104,534 81,923 318,946 298,218
TOTAL COST OF SALES 445,018 417,867 1,141,338 1,060,612
GROSS PROFIT 39,733 (6,347) 75,154 29,504
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 10,487 12,328 29,219 28,364
INCOME(LOSS) FROM
OPERATIONS 29,246 (18,675) 45,935 1,140
OTHER INCOME(EXPENSE), NET
Interest income 826 646 2,468 2,104
Finance/interest expense (4,174) (6,872) (18,422) (19,149)
Change in fair value of
derivative liabilities (617) 29,885 (23,228) 4,769
Gain from debt
extinguishment -- 7,169 2,932 7,169
Government grant -- -- 3,433 --
Income from equity
investments 963 -- 3,661 --
Other non-operating
income, net (2,984) 899 (2,331) 1,919
Total other (expense)
income, net (5,986) 31,727 (31,487) (3,189)
INCOME(LOSS) BEFORE PROVISION
FOR INCOME TAXES AND
NONCONTROLLING INTEREST 23,260 13,051 14,448 (2,049)
PROVISION FOR INCOME TAXES
Current 6,717 (813) 12,451 1,147
Deferred (2,925) (1,271) (5,265) (1,694)
Total provision
(benefit) for
income taxes 3,792 (2,084) 7,186 (547)
NET INCOME(LOSS) BEFORE
NONCONTROLLING INTEREST 19,468 15,135 7,262 (1,502)
Less: Net income (Loss)
attributable to
noncontrolling interest 9,088 (5,329) 21,421 116
NET INCOME(LOSS)
ATTRIBUTABLE TO
CONTROLLING INTEREST 10,380 20,464 (14,159) (1,618)
OTHER COMPREHENSIVE INCOME
(LOSS):
Foreign currency
translation adjustments (247) 96 (175) 6,554
Comprehensive (loss)
income attributable to
noncontrolling interest 1,441 (295) 334 3,911
COMPREHENSIVE INCOME(LOSS) $11,574 $20,266 $(14,000) $8,846
WEIGHTED AVERAGE NUMBER
OF SHARES
Basic 44,973,882 35,687,891 40,295,924 35,157,579
Diluted 45,040,143 35,687,891 40,295,924 35,157,579
EARNINGS PER SHARE
Basic $0.23 $0.57 $(0.35) $(0.05)
Diluted $0.22 $0.57 $(0.35) $(0.05)
GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
(In thousands, except per share data)
ASSETS
September 30, December 31,
2009 2008
(Unaudited)
CURRENT ASSETS:
Cash $54,289 $14,895
Restricted cash 197,584 130,700
Notes receivable 27,373 38,207
Accounts receivable, net of allowance
for doubtful accounts of $612 and
$401 as of September 30, 2009 and
December 31, 2008, respectively 12,151 8,329
Accounts receivable - related parties 2,784 --
Other receivables, net of allowance
for doubtful accounts of $566 and
$564 as of September 30, 2009 and
December 31, 2008, respectively 6,855 5,099
Other receivables - related parties 420 523
Dividend receivable 4,957 630
Inventories 221,502 59,549
Advances on inventory purchases 39,230 47,154
Advances on inventory purchases -
related parties 17,853 2,375
Prepaid expenses - current 926 494
Deferred tax assets 2,191 7,487
588,115 315,444
PLANT AND EQUIPMENT, net 558,405 491,705
OTHER ASSETS:
Advances on equipment purchases 7,069 8,965
Investment in unconsolidated
subsidiaries 17,640 13,959
Prepaid expenses - non current 500 1,195
Prepaid expenses related party -
non current 172 211
Long term other receivable 2,674 4,873
Intangible assets, net of
accumulated amortization 24,020 24,556
Note issuance cost 964 4,218
Plant and equipment to be disposed 6,455 587
Total other assets 59,494 58,564
Total assets $1,206,014 $865,713
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short term notes payable $280,134 $206,040
Accounts payable 175,309 149,239
Accounts payable - related parties 19,324 15,327
Short term loans - bank 151,050 67,840
Short term loans - others 110,171 87,834
Short term loans - related parties 8,362 7,350
Other payables 8,655 3,183
Other payable - related parties 2,074 677
Accrued liabilities 14,716 7,779
Customer deposits 199,909 141,102
Customer deposits - related parties -- 7,216
Deposits due to sales representatives 39,286 8,149
Taxes payable 13,317 13,917
Distribution payable to former
shareholders 15,934 18,765
Deferred tax liability 103 --
Total current liabilities 1,038,344 734,418
CONVERTIBLE NOTES PAYABLE, net of
debt discount of $2,388 and $26,095
as of September 30, 2009 and
December 31, 2008, respectively 912 7,155
DERIVATIVE LIABILITIES 4,933 9,903
COMMITMENT AND CONTINGENCIES
Total liabilities 1,044,189 751,476
EQUITY:
Preferred stock, $0.001 par value,
50,000,000 shares authorized,
3,092,899 shares issued and
outstanding as of September 30,
2009 and December 31, 2008,
respectively 3 3
Common Stock, $0.001 par value,
200,000,000 shares authorized,
45,789,439 and 36,128,833 shares
issued and outstanding as of
September 30, 2009 and
December 31, 2008, respectively 46 36
Paid-in-capital 79,924 37,129
Statutory reserves 6,827 4,903
Retained (deficits) earnings (5,992) 10,092
Contribution receivable -- (960)
Accumulated other comprehensive
income 8,531 8,706
Total equity 89,339 59,909
NONCONTROLLING INTERESTS 72,486 54,329
Total equity 161,825 114,237
Total liabilities and equity $1,206,014 $865,713
