Last updated on April 21, 2014 at 1:20 EDT

China Industrial Steel, Inc. Reports First Quarter Financial Results

May 16, 2013

NEW YORK, May 16, 2013 /PRNewswire/ — China Industrial Steel, Inc. (the “Company”) today announced its earnings for the three months ended March 31, 2013. The Company, whose shares trade in the U.S. OTC market under the stock symbol “CDNN”, filed its Form 10-Q with the Securities and Exchange Commission on May 15, 2013.

Commenting on the results, Liu Shenghong, Chief Executive Officer and Chairman of the Company stated, “I am pleased to report China Industrial Steel’s financial results for the first quarter of 2013. Company revenues were up as a result of the rebound in China’s demand for steel, and we remain profitable despite the industry wide decline in selling prices resulting from inventory stockpiles over the past year.”

Chairman Liu went on to say, “Demand for our steel plate and wire increased during the quarter reflecting China’s continued economic growth and the government’s investment in infrastructure projects, such as roads, railways and bridges. We anticipate market prices will return to prior levels as steel manufacturers work through their backlog to supply these large scale projects and the forecast growth in other steel dependent industries, including the automotive and construction sectors.”

Financial Discussion

China Industrial Steel reported revenue of $188,363,697 for the three months ended March 31, 2013 an increase of $11,335,049, or 6% compared to $177,028,648 in the same period of 2012. The increase in sales was mainly due to the increase in sales of steel plates and steel wires, offset by the decrease in sales of steel billets and the decrease in unit sales price in the three months ended March 31, 2013. The average unit sales price was $501 per ton, a decrease of $70, or 12%, compared to $571 per ton in the comparable period of 2012.

Revenue from steel plates was $94,496,510 in the three months ended March 31, 2013, an increase of $30,199,775, or 47% compared to $64,296,735 in the three months ended March 31, 2012. The increase in the sales of steel plates resulted from the rebound of steel market in the first quarter of 2013 which was somewhat offset by a decline in the selling price as compared to the same period in 2012.

In January of this year the Company commenced production on a new 600,000 ton steel wire production line. In the three months ended March 31, 2013, revenue from steel wires was $90,938,130, an increase of $27,991,309, or 44%, compared to $62,946,821 for the first three months of 2012. The Company did not sell any steel billet during the first quarter of 2013 and the sale of byproducts remained relatively flat as compared to the same period in 2012.

The following table illustrates the breakdown of the Company’s revenue for the year ended March 31, 2013 and 2012.

                                            2013               2012
                                            ----               ----

    Products       Revenue              Quantity Revenue  Quantity

                                         (Ton)              (Ton)
                                          ----               ----

    Steel plates            $94,496,510           190,230            $64,296,735 113,822

    Steel wires              90,938,130           185,788             62,946,821 110,635

    Steel billets                     -                 -             47,067,680  85,602

    Byproducts                2,929,057                 -              2,717,412       -
                              ---------               ---              ---------     ---

    Products Total         $188,363,697           376,018           $177,028,648 310,059
                           ============           =======           ============ =======

The Company reported net income of $1,353,839 in the three months ended March 31, 2013, a decrease of $3,352,205, or 71%, compared to the net income of $4,706,044 for the same period of 2012. The decrease in net income is primarily the result of the decrease in steel product prices (12%) being sharper than the decrease in the prices of raw materials (10%).

                                                                                                     CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

                                                                                                CONDENSED CONSOLIDATED BALANCE SHEETS (IN US DOLLARS)


                                                                                                                                                      March 31,              December 31,

                                                                                                                                                           2013                      2012
                                                                                                                                                           ----                      ----


     Current Assets:

                                          Cash                                                                                                                    $2,622,083                $1,710,887

                                          Bank notes receivable                                                                                                    1,835,514                   979,111

                                          Accounts receivables, net                                                                                               15,758,620                 9,639,396

                                          Inventories, net                                                                                                        18,767,325                11,585,277

                                          Advances to suppliers, net                                                                                                 479,990                 2,372,693

                                          VAT recoverable                                                                                                         31,222,127                32,208,807

                                          Advances to related parties                                                                                            138,465,397               183,797,203

                                          Other current assets                                                                                                     5,597,242                 3,884,342

                                               Total Current Assets                                                                                              214,748,298               246,177,716

     Machinery and Equipment, Net                                                                                                                                101,873,890               101,450,993

     Machinery and Equipment - acquired from related parties, Net                                                                                                 82,772,390                85,471,360

                                          Total Machinery and Equipment, Net                                                                                     184,646,280               186,922,353

     Other Assets:

                                          Restricted cash                                                                                                          5,796,360                 5,778,360

                                          Land use rights and buildings under capital leases                                                                       4,829,669                 4,985,732

                                               Total Other Assets                                                                                                 10,626,029                10,764,092

     TOTAL ASSETS                                                                                                                                               $410,020,607              $443,864,161
                                                                                                                                                                ============              ============


     Current Liabilities:

                                          Accounts payable                                                                                                       $64,811,203               $92,228,161

                                          Accounts payable - related parties                                                                                       2,536,796                 1,833,558

                                          Accrued liabilities                                                                                                      3,209,088                 3,123,315

                                          Taxes payables                                                                                                             872,968                     2,427

                                          Bank loans payable                                                                                                      27,661,518                26,034,722

                                          Bank notes payable                                                                                                       5,313,330                 5,296,830

                                          Equipment loan payable - related parties - current                                                                       2,893,906                 2,884,919

                                          Current obligations under capital leases - related parties - current                                                       663,216                   648,893

                                          Short term loan payable - related party                                                                                    805,050                   802,550

                                          Customer financing                                                                                                      31,718,970                31,620,470

                                          Advances from customers                                                                                                 65,608,300                77,275,327

                                               Total Current Liabilities                                                                                         206,094,345               241,751,172

     Long Term Liabilities:

                                          Equipment loan payables - related parties - non current                                                                  1,091,341                 1,087,952

                                          Obligation under capital leases - related parties - non current                                                          5,512,068                 5,669,438

                                               Total Long Term Liabilities                                                                                         6,603,409                 6,757,390

     TOTAL LIABILITIES                                                                                                                                           212,697,754               248,508,562
                                                                                                                                                                 -----------               -----------

    Commitments and Contingencies

    Stockholders' Equity:

                                          Series A Convertible Preferred Stock, $0.0001 par value, 10,000,000                                                              -                         -

                                          shares authorized, none issued and outstanding

                                          Blank Check Preferred Stock, $0.0001 par value, 10,000,000                                                                       -                         -
                                          shares authorized, none issued and outstanding

                                          Common stock, $0.0001 par value, 980,000,000 authorized,                                                                     7,362                     7,362
                                          73,620,391 and 73,620,391 issued and outstanding at March 31,
                                          2013 and December 31, 2012, respectively

                                          Paid-in capital                                                                                                         16,417,235                16,417,235

                                          Statutory reserves                                                                                                       6,530,869                 6,530,869

                                          Retained earnings                                                                                                      157,478,346               156,124,507

                                          Accumulated other comprehensive income                                                                                  16,889,041                16,275,626

                                          Total Stockholders' Equity                                                                                             197,322,853               195,355,599

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                  $410,020,607              $443,864,161
                                                                                                                                                                ============              ============

                                                                                                      CHINA INDUSTRIAL STEEL INC. AND SUBSIDIARIES

                                                                                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (IN US DOLLARS)


                                                                                                                                                                       Three Months Ended March 31,

                                                                                                                                                                          2013                      2012
                                                                                                                                                                          ----                      ----


                                                    Sales to customers                                                                                                           $178,171,390            $172,444,448

                                                    Sales to related parties                                                                                                       10,192,307               4,584,200

                                                        Total Revenues                                                                                                            188,363,697             177,028,648

    Cost of Revenue

                                                    Cost of Revenue - non-related parties                                                                                          75,010,369              49,889,474

                                                    Cost of Revenue - related parties                                                                                             108,478,792             118,315,091

                                                      Total Cost of Revenue                                                                                                       183,489,161             168,204,565

    Gross Profit                                                                                                                                                                    4,874,536               8,824,083
                                                                                                                                                                                    ---------               ---------

    Selling and General and Administrative Expenses

                                                    Selling and General and Administrative Expenses - non-related parties                                                             969,701               1,065,079

                                                    Selling and General and Administrative Expenses - related parties                                                                 260,674                 177,083

                                                    Total Selling and General and Administrative Expenses                                                                           1,230,375               1,242,162

    Income From Operations                                                                                                                                                          3,644,161               7,581,921
                                                                                                                                                                                    ---------               ---------

    Other Income (Expenses)

                                                    Interest income                                                                                                                     3,783                  52,489

                                                    Interest expense                                                                                                               (1,390,082)               (944,908)

                                                    Interest expense - related parties                                                                                               (169,858)               (963,068)

                                                        Total Other Income (Expenses)                                                                                              (1,556,157)             (1,855,487)

    Income from operation before income tax                                                                                                                                         2,088,004               5,726,434

    Provision for income tax                                                                                                                                                          734,165               1,020,390

    Net Income                                                                                                                                                                      1,353,839               4,706,044
                                                                                                                                                                                    ---------               ---------

                                                    Earnings Per Share - Basic and Diluted                                                                                              $0.02                   $0.06

                                                    Weighted Average Shares Outstanding - Basic and Diluted                                                                        73,620,391              73,542,058

    Other Comprehensive Income:

                                                    Foreign currency translation gain                                                                                                 613,415                (120,054)

    Comprehensive Income                                                                                                                                                           $1,967,254              $4,585,990
                                                                                                                                                                                   ==========              ==========

About China Industrial Steel, Inc.

China Industrial Steel, Inc., (“CIS” or the “Company”) through its wholly owned subsidiary, Handan Hongri Metallurgy Co., Ltd., produces and sells steel plate and steel bar for domestic and export customers. The Company currently operates three production lines from its headquarters on approximately 1,000 acres in Handan City in the Hebei Province, China, where steel production is a significant component of the regional economy.

Forward-looking statements:

The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as “anticipate,” “appear,” “believe,” “could,” “estimate,” “expect,” “hope,” “indicate,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “will,” “would,” and other variations or negative expressions of these terms, including statements related to expected market trends and the Company’s performance, are all “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances, and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based.

Company contact:

Delong Zhou, CFO
China Industrial Steel, Inc.
Phone: (917) 825-2997
Email: ir@chinaindustrialsteel.com

Frank Pena – Director
Phone: (732) 292-0322

SOURCE China Industrial Steel, Inc.

Source: PR Newswire