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China Precision Steel Announces Second Quarter Results for Fiscal 2007

Posted on: Thursday, 15 February 2007, 09:00 CST

SHANGHAI, China, Feb. 15 /Xinhua-PRNewswire/ -- China Precision Steel , a niche precision steel processing company principally engaged in producing and selling high precision cold-rolled steel products, announced today its second quarter results for fiscal 2007.

Revenue for the second quarter 2007 increased to $15.0 million, up from 52% from the second quarter 2006 of $9.9 million. The increase in revenue is due to increased volume which offset the decrease in average selling price during the quarter. The decline in the average selling price is attributed to increased sales of low carbon precision steel which the Company began to sell in international markets during the quarter. Gross profit increased 22.2% to $3.4 million in the second quarter 2007 from $2.8 million in the comparable period a year earlier. Net income was $2.9 million up 7.5% for the second quarter 2007 from net income in the second quarter 2006 of $2.7 million.

Revenues from low carbon precision steel increased 105% to $7.2 million for the quarter from $3.5 million in the second quarter of 2006. The increase in sales was due to increased sales volume of 5,601 tons of low carbon cold- rolled steel compared to the same period a year ago. Low carbon products represented 48% of revenue for the quarter up from 35% of revenue in the second quarter 2006. Revenue generated from high carbon products for the second quarter was 52% compared to 65% in the second quarter 2006. Revenues from high end cold-rolled steel products accounted for 28% of total revenues or $4.2 million with an average selling price of $13,090 per ton. China Precision Steel did not sell any high end cold-rolled steel products in the second quarter 2006. International sales accounted for 10% of total sales or $1.5 million. The Company did not have any international sales in the second quarter 2006. The increase in volume during the quarter offset the decline in average selling price per ton of 13% to $764 from $883 per ton in the corresponding period in 2006 which is attributed to the change in product mix.

Gross profit for the quarter was $3.4 million for an increase of 22.2% from gross profit of $2.8 million in the second quarter 2006. Gross margin during the quarter was 23% compared to gross margin of 28% for the comparable period a year ago.

During the quarter total expense was 3.8% or $574,000 of revenue compared to total expense of $476,000 or 4.8% of revenue in the second quarter 2006.

Net income for the quarter was $2.9 million, up 7.5% from net income in the second quarter 2006 of $2.7 million. Fully diluted earnings per share for the quarter were $0.11 compared to fully diluted earnings per share of $0.10 during the second quarter 2006.

Six Months Financial Results

Revenue for the first six months of fiscal 2007 increased 45% to $25.5 million from revenue of $17.6 million in the first six months of 2006. The increase in revenues is attributed to an increase in sales volume and an increase in average selling price. The average selling price for the period was as follows: low carbon cold-rolled steel was $607 compared to $520; high carbon hot-rolled steel was $651 compared to $644; and high carbon cold-rolled steel was $2,535 compared to $2,374. During the period the Company started production of high end cold-rolled steel products which had an average selling price of $13,599. Gross margin for the first six months of fiscal 2007 was 28% compared to gross margin of 30% for the same period a year ago.

Operating income was up 32.9% to $6.3 million for the first six months of fiscal 2007 from $4.7 million for the same period a year ago. Net income was $5.8 million during the period for an increase of 20.6% from net income in the first six months of 2006 of $4.8 million. Fully diluted earnings per share during the first six months of fiscal 2007 were $0.22 compared to fully diluted earnings per share during the first six months of fiscal 2006 of $0.18.

About China Precision Steel

China Precision Steel 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 produces high precision ultra-thin (3.0 mm to 0.03 mm) cold-rolled steel products primarily for automotive components, food packaging materials, saw blades and textile needle manufacturing companies in the People's Republic of China. China Precision Steel's operation is currently located in The People's Republic of China. However, China Precision Steel intends to expand overseas into Japan, Taiwan, Korea, Thailand, the Philippines, the European Union and the United States in the future.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of China Precision Steel's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: 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. China Precision Steel does not assume any obligation to update the information contained in this press release.

-- Financial Tables Follow -- China Precision Steel, Inc. Condensed Consolidated Balance Sheets December 31, June 30, 2006 2006 (Unaudited) Assets Current assets Cash and equivalents $1,173,975 $186,955 Accounts receivable Trade 9,383,527 13,399,003 Other 25,575 69,913 Inventory 14,491,575 6,283,910 Deposits 79,236 75,575 Advances to suppliers 7,549,582 3,138,759 Total current assets 32,703,470 23,154,115 Property and equipment Property and equipment, net 18,363,959 8,664,417 Construction-in-progress 13,671,544 13,752,954 32,035,503 22,417,371 Total assets $64,738,973 $45,571,486 Liabilities and Stockholders' Equity Current liabilities Accounts payable $6,423,862 $1,801,466 Advances from customers 4,778,897 1,859,773 Other taxes payables 680,282 862,914 Current income taxes payable 1,496,104 Deferred income taxes payable 1,455,636 1,535,204 Amounts due to directors 2,240,599 5,896,943 Current portion of long-term debt 9,841,091 8,918,939 Notes payable 14,132,427 9,862,672 Total current liabilities 41,048,898 30,737,911 Long-term debt, net of current portion shown above 6,128,599 3,152,415 Stockholders' equity: Preferred stock: $0.001 per value, 8,000,000 shares authorized, no shares outstanding at December 31, 2006 or June 30, 2006 -- Ordinary stock: $0.001 par value, 62,000,000 shares authorized, 26,981,916 issued and outstanding 26,982 26,982 at December 31, 2006 and June 30, 2006 Additional paid-in capital 1,373,018 1,373,018 Accumulated other comprehensive income 1,400,568 745,583 Retained earnings 14,760,908 9,535,577 Total stockholders' equity 17,561,476 11,681,160 Total liabilities and stockholders' equity $64,738,973 $45,571,486 China Precision Steel, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Six Months Ended: Ended: December December December December 31, 31, 31, 31, 2006 2005 2006 2005 Revenues Sales revenues $15,007,582 $9,902,359 $25,510,930 $17,605,248 Cost of goods sold 11,594,852 7,109,245 18,394,950 12,287,788 Gross profit 3,412,730 2,793,114 7,115,980 5,317,460 Operating expenses Selling expenses 64,693 20,296 104,390 42,378 Administrative expenses 498,737 445,927 684,925 510,400 Depreciation and amortization expense 10,845 10,174 21,262 18,645 Total operating expenses 574,275 476,397 810,577 571,423 Income from continuing operations 2,838,455 2,316,717 6,305,403 4,746,037 Other income (expense) Other revenues 318,774 -- 318,774 Interest and finance Costs (114,743) (206,464) (318,082) (352,662) Total other income (expense) (114,743) 112,310 (318,082) (33,888) Net income from continuing operations before income tax 2,723,712 2,429,027 5,987,321 4,712,149 Provision for (benefit from) income tax Current (34,057) 895,313 Deferred 389,604 (85,405) Total income tax expense 355,547 809,908 Net income before discontinued operations 2,368,165 2,429,027 5,177,413 4,712,149 Net income from discontinued operations 519,879 258,601 639,072 112,582 Net income $2,888,044 $2,687,628 $5,816,485 $4,824,731 Basic and diluted earnings per share From continuing operations $0.09 $0.09 $0.19 $0.17 From discontinued operations $0.02 $0.01 $0.03 $0.01 Total $0.11 $0.10 $0.22 $0.18 Basic and diluted weighted average shares outstanding 26,981,916 26,981,916 26,981,916 26,981,916 The Components of comprehensive income: Net income $2,888,044 $2,687,628 $5,816,485 $4,824,731 Foreign currency translation adjustment 557,213 76,402 654,985 405,877 Comprehensive income $3,445,257 $2,764,030 $6,470,970 $5,230,608 China Precision Steel, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended: December December 31, 31, 2006 2005 Cash flows from operating activities Net Income 5,816,485 4,824,149 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation 617,405 403,630 Less income from discontinued operations - Oralabs, Inc (639,072) (112,582) Net changes in assets and liabilities: Accounts receivable, net 4,059,814 (3,558,798) Inventories (8,207,665) (2,315,178) Advances to suppliers (4,410,823) (774,381) Deposits (3,661) Accounts payable and accrued expenses 4,622,396 (266,168) Advances from customers 2,919,124 646,278 Deferred income taxes (85,405) Current income taxes 937,307 Other taxes payable (152,086) 285,493 Net cash provided by (used in) operating activities 5,473,819 (866,975) Cash flows from investing activities Purchases of fixed assets including construction in progress (10,212,328) (7,012,465) Net cash (used in) investing activities (10,212,328) (7,012,465) Cash flows from financing activities Advances from directors, net (3,237,243) 931,984 Long-term loan proceeds 3,898,336 Notes payable proceeds 3,850,654 4,190,030 Capital and restructuring contributions 558,797 Net cash provided by financing activities 5,070,544 5,122,014 Effect of exchange rate 654,985 402,716 Net increase (decrease) in cash 987,020 (2,354,710) Cash and cash equivalents, beginning of year 186,955 3,133,326 Cash and cash equivalents, end of year 1,173,975 778,616 For more information, please contact: CCG Elite Crocker Coulson, President Leslie Richardson, Financial Writer Tel: +1-310-231-8600 Email: crocker.coulson@ccgir.com or leslie.richardson@ccgir.com China Precision Steel Leada Li, CFO Tel: +852-2543-8223 Email: leadali@biznetvigator.com

China Precision Steel

CONTACT: CCG Elite - Crocker Coulson, President or Leslie Richardson,Financial Writer, +1-310-231-8600 or crocker.coulson@ccgir.com orleslie.richardson@ccgir.com, for China Precision Steel; or Leada Li, CFO ofChina Precision Steel, +852-2543-8223 or leadali@biznetvigator.com

Source: PRNewswire

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