General Steel Holdings, Inc. (GSI)

[eastunder]

General Steel Holdings Inc : General Steel Reports Third Quarter 2013 Financial Results


11/12/2013


http://www.4-traders.com/GENERAL-STEEL-HOLDINGS-IN-62626/news/General-Steel-Holdings-Inc--General-Steel-Reports-Third-Quarter-2013-Financial-Results-17453536/

BEIJING, Nov. 12, 2013 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), a leading non-state-owned steel producer in China, today announced financial results for the third quarter ended September 30, 2013.

"I am delighted that we achieved positive gross and net margins during the third quarter," said Henry Yu, Chairman and Chief Executive Officer of General Steel. "We also significantly enhanced our cost structure with the launch of two additional continuous-rolling production lines, with one commencing production in July and the other entering trial production earlier this month."

"We also observed positive market momentum for China's steel industry. The average selling prices of key steel products rebounded moderately during the third quarter, driven by the robust demand from multi-sectors including infrastructure construction and automotive sectors. In addition, manufacturing activities in China grew at its fastest pace in the most recent seven months, with the Purchasing Managers Index reaching 50.9 this October, as the government readies a series of key economic reforms. Given our improving profitability, enhanced cost structure and positive momentum in the industry, we feel optimistic about our business in the quarters ahead."

John Chen, Chief Financial Officer of General Steel, commented, "I'm very pleased with our execution this third quarter. We generated a positive quarterly operating cash inflow of $75 million and vastly improved profitability. Additionally, we further cut finance expenses and enhanced our financing flexibility, through better planning, budgeting and securing additional working capital support through favorable payment terms granted by our stakeholders. I believe we are at the beginning of a sustainable business turn-around."

Third Quarter 2013 Financial Information
-- Sales decreased by 14.2% year-over-year to $610.1 million, from $711.4
million in the third quarter of 2012.
-- Sales volume decreased by 10.0% year-over-year to approximately 1.3
million metric tons, compared with 1.4 million metric tons in the third
quarter of 2012.
-- Gross profit was $8.2 million, or 1.3% of revenue, compared with a gross
loss of $(13.6) million, or negative (1.9%) of revenue in the third
quarter of 2012.
-- Operating income was $30.4 million, compared with an operating loss of
$(36.4) million in the third quarter of 2012.
-- Net income attributable to the Company was $3.8 million, or $0.07 per
diluted share, compared with a net loss of $(41.6) million, or $(0.76)
per diluted share in the third quarter of 2012.
-- Net operating cash inflow was $75.5 million, compared with $9.5 million
in the third quarter of 2012.
-- As of September 30, 2013, the Company had cash and restricted cash of
$467.9 million.


First Nine Months 2013 Financial Information
-- Sales decreased by 10.5% year-over-year to $1.9 billion, from $2.1
billion in the same period of 2012.
-- Sales volume increased by 0.9% year-over-year to approximately 3.95
million metric tons, compared with 3.91 million metric tons in the same
period of 2012.
-- Gross loss was $(23.2) million, or negative (1.2%) of revenue, compared
with a gross profit of $20.1 million, or 0.9% of revenue in the same
period of 2012.
-- Operating income was $25.2 million, compared with an operating loss of
$(41.5) million in the same period of 2012.
-- Net loss attributable to the Company narrowed to $(32.9) million, or
$(0.60) per diluted share, compared with $(102.8) million, or $(1.87)
per diluted share in the same period of 2012.
-- Net operating cash inflow was $14.0 million, compared with a net outflow
of $(90.1) million in the same period of 2012.


Third Quarter 2013 Financial and Operating Results

Total Sales

Total sales for the third quarter of 2013 decreased by 14.2% year-over-year to $610.1 million, compared with $711.4 million in the third quarter of 2012. The year-over-year revenue decreases were due to less sales volume and a decrease in average selling price of the products.
-- Total sales volume in the third quarter of 2013 was 1.3 million metric
tons, a decrease of 10.0% compared with 1.4 million metric tons in the
third quarter of 2012.
-- The average selling price of rebar decreased 6.1% to approximately
$489.6 per ton in the third quarter of 2013 from approximately $521.2
per ton in the same period of 2012.


Gross Profit and Gross Margin

Gross profit for the quarter was $8.2 million, compared with a gross loss of $(13.6) million in the third quarter of 2012. The gross margin increased to 1.3% of total sales in the third quarter of 2013, compared with gross loss margin of negative (1.9%) of total sales in the same period a year ago, which reflects our production efficiency improvement and a slower decrease in ASP compared with cost of rebar.

Operating Expenses and Operating Income

Selling, general and administrative expenses for the third quarter of 2013 decreased 13.7% to $19.7 million, compared to $22.8 million in the third quarter of 2012. General and administrative expenses decreased to $12.4 million, compared with $14.1 million in the same period of 2012. The decrease in general and administrative expense was mainly due to a decrease of $1.7 million in bad debt expenses, partially offset by an additional write-off of a prepaid special fund of $0.6 million in the third quarter of 2013, compared with the same period of last year. Selling expenses decreased 16.5% to $7.3 million, compared to $8.7 million in the same period of 2012. The decrease in selling expense was primarily attributable to savings in a special fund related to the sales of the Company's products, which was no longer imposed by the PRC tax authorities in 2013, while $1.6 million of the special fund was imposed in the third quarter of 2012.

The Company recognized other operating income of $41.8 million due to change in the fair value of profit sharing liability during the third quarter of 2013, compared with $0 in the same period of last year, which reflects a change in the estimated fair value of the Company's profit sharing liability.

Correspondingly, income from operations for the third quarter of 2013 was $30.4 million, compared with a loss from operations of $(36.4) million in the third quarter of 2012.

Finance Expense

Finance and interest expense in the third quarter of 2013 decreased $11.1 million to $25.5 million, of which, $7.8 million was the non-cash interest expense on capital lease, as compared with $10.7 million in the same period of 2012, and $17.7 million was the interest expense on bank loans and discounted note receivables as compared with $25.9 million in the third quarter of 2012. The decrease in interest expense on bank loans and discounted note receivables was primarily attributable to a reduction in the amount of bank notes receivable redeemed early, and less interest-bearing loans from banks and third parties, benefiting from additional financing support from suppliers and vendors during the third quarter of 2013.

Net Income and Net Income per Share

Net income attributable to General Steel for the third quarter of 2013 was $3.8 million, or $0.07 per diluted share, based on 55.1 million weighted average shares outstanding. This compares to a net loss of $(41.6) million, or $(0.76) per diluted share, based on 54.5 million weighted average shares outstanding in the third quarter of 2012.

First Nine Months 2013 Financial Results and Operating Results

Total Sales

Total sales for the first nine months of 2013 decreased 10.5% year-over-year to $1.9 billion, compared with $2.1 billion in the first nine months of 2012. The year-over-year revenue decreases were due to a decrease in the average selling price.
-- Total sales volume in the first nine months of 2013 was 3.95 million
metric tons, an increase of 0.9% compared with 3.91 million metric tons
in the first nine months of 2012.
-- The average selling price of rebar decreased 12.6% to approximately
$495.6 per ton in the first nine months of 2013 from approximately
$566.8 per ton in the same period of 2012.


Gross Profit and Gross Margin

Due to a steeper decrease in average selling price in the first half of 2013, gross loss for the first nine months of 2013 was $(23.2) million, or (1.2%) of total sales, compared with a gross profit of $20.1 million, or 0.9% of total sale in the first nine months of 2012.

Operating Expenses and Operating Income

Selling, general and administrative expenses for the first nine months of 2013 decreased 3.4% to $59.5 million, compared to $61.5 million in the first nine months of 2012. General and administrative expenses increased slightly to $34.9 million, compared with $33.7 million in the same period of 2012. Selling expenses decreased 11.9% to $24.6 million, compared to $27.9 million, which included a $4.5 million special fund imposed in the same period of 2012.

The Company recognized other operating income of $107.9 million due to change in the fair value of profit sharing liability during the first nine months of 2013, compared with $0 in the same period of last year.

Correspondingly, income from operations for the first nine months of 2013 was $25.2 million, compared with a loss from operations of $(41.5) million in the first nine months of 2012.

Finance Expense

Finance and interest expense in the first nine months of 2013 was $81.4 million, of which, $27.8 million was the non-cash interest expense on capital lease as compared with $32.4 million in the same period of 2012, and $53.6 million was the interest expense on bank loans and discounted note receivables, as compared with $106.6 million in the first nine months of 2012.

Net Income and Net Income per Share

Net loss attributable to General Steel for the first nine months of 2013 was $(32.9) million, or $(0.60) per diluted share, based on 55.0 million weighted average shares outstanding. This compares to a net loss of $(102.8) million, or $(1.87) per diluted share, based on 55.0 million weighted average shares outstanding in the first nine months of 2012.

Balance Sheet

As of September 30, 2013, the Company had cash and restricted cash of approximately $467.9 million, compared to $369.9 million as of December 31, 2012. The Company had an inventory balance of approximately $177.4 million as of September 30, 2013, compared to $212.7 million as of December 31, 2012.