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General Steel Announces Second Quarter 2010 ResultsFont size: A | A | A6:09 AM ET 8/6/10 | PR Newswire
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 second quarter ended June 30, 2010.
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Second Quarter of 2010 Highlights
-- Total revenues increased 22.7% to $501.7 million from $408.9 million in
the second quarter of 2009
-- Aggregate shipment volume reached 1.01 million metric tons, an increase
of 6.8% year-over-year
-- Gross margin was 1.5%, compared to 1.3% in the previous quarter and
5.5% in the second quarter of 2009
-- On May 13, 2010, the Company entered into a Joint Venture Framework
Agreement with Shanxi Meijin Energy Group Co., Ltd.
First Half of 2010 Highlights
-- Total revenues increased 30.5% to a record $954.7 million from $731.7
million in the first half of 2009
-- Aggregate shipment volume reached 2.05 million metric tons, an increase
of 22.3% year-over-year
-- Gross margin was 1.4%, compared to 4.8% in the first half of 2009
Second Quarter of 2010 Highlights -- Total revenues increased 22.7% to $501.7 million from $408.9 million in the second quarter of 2009 -- Aggregate shipment volume reached 1.01 million metric tons, an increase of 6.8% year-over-year -- Gross margin was 1.5%, compared to 1.3% in the previous quarter and 5.5% in the second quarter of 2009 -- On May 13, 2010, the Company entered into a Joint Venture Framework Agreement with Shanxi Meijin Energy Group Co., Ltd. First Half of 2010 Highlights -- Total revenues increased 30.5% to a record $954.7 million from $731.7 million in the first half of 2009 -- Aggregate shipment volume reached 2.05 million metric tons, an increase of 22.3% year-over-year -- Gross margin was 1.4%, compared to 4.8% in the first half of 2009
"Demand continues to be robust," said General Steel's Chairman and Chief Executive Officer Henry Yu. "Located in central China, our largest subsidiary, Longmen Joint Venture, is relatively insulated from the slowdown in the real estate industry and allows us to continue benefiting from infrastructure development projects in western China. In fact, this year alone, there are over 235 construction and infrastructure projects scheduled to begin in Shaanxi province, including nine new railways, one new airport, the expansion of the Xi'an airport, two new ring subway systems and four new dams. These projects will take place over many years and drive our growth in the quarters and years to come. In the meantime, the industry continues to experience ups and downs as average selling prices and key input costs for iron ore and coking coal continue to fluctuate. Regardless, our focus is to continue vetting high-quality acquisition targets while putting an equal effort on controlling our costs and increasing profitability. The fundamentals of our business remain strong and I'm confident in our ability to deliver long-term shareholder value."
Selected Financial Results for the Second Quarter and First Half of 2010
Total revenues for the second quarter of 2010 increased 22.7% to $501.7 million from $408.9 million in the second quarter of 2009. Total revenues for the first half of 2010 increased 30.5% to $954.7 million from $731.7 million in the first half of 2009.
The increase in total revenues was predominantly due to an increase in both shipment volume and average selling prices for rebar at the Company's Longmen Joint Venture ("Longmen JV").
Cost of Sales
Total cost of sales for the second quarter of 2010 increased 27.9% to $494.3 million from $386.4 million in the second quarter of 2009. Total cost of sales for the first half of 2010 increased 35.2% to $941.6 million from $696.3 million in the first half of 2009. 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 primarily due to an increase in total revenues.
Gross Profit
Gross profit for the second quarter of 2010 decreased 67.3% year-over-year to $7.4 million from $22.5 million. Gross profit for the first half of 2010 decreased 63.0% year-over-year to $13.1 million from $35.4 million. Gross margin for the second quarter of 2010 was 1.5%, compared to 5.5% in the second quarter of 2009. Gross margin for the first half of 2010 was 1.4%, compared to 4.8% in the first half of 2009.
The Company noted that gross profit was adversely affected by declining average selling prices which fell from the middle of April to the end of June and the price of iron ore and coke, which remained relatively high during the second quarter of 2010.
Operating Expenses
Selling, general and administrative expenses for the second quarter of 2010 increased 43% to $13.7 million, compared to $9.6 million in the second quarter of 2009. Selling, general and administrative expenses for the first half of 2010 increased 37.8% to $25.8 million from $18.7 million in the first half of 2009. Selling, general and administrative expenses were 2.7% and 2.3% of total revenues in the second quarter of 2010 and 2009, respectively, and 2.7% and 2.6% of total revenues in the first half of 2010 and 2009, respectively. The Company noted that the increase is mainly due to higher transportation and agent charges at the Longmen Joint Venture following shipping volume increases.
Finance and interest expenses for the second quarter of 2010 were $16.5 million, compared to $11.3 million in the second quarter of 2009. Finance and interest expenses for the first half of 2010 were $27.4 million, compared to $14.2 million in the first half of 2009. The Company noted that the year-over- year increases were caused by a combination of additional finance and interest expenses and gains on a change in fair value of derivative liabilities.
Net Income
Net loss attributable to General Steel Holdings, Inc. for the second quarter of 2010 was $2.1 million compared to a net loss of $31.8 million in the second quarter of 2009. Net loss attributable to General Steel Holdings, Inc. for the first half of 2010 was $7.6 million compared to net loss of $24.5 million in the first half of 2009.
Basic and diluted losses per share for the second quarter of 2010 were $0.041 compared to basic and diluted losses per share of $0.80 in the second quarter of 2009. Basic and diluted losses per share for the first half of 2010 were $0.15 compared to basic and diluted losses per share of $0.64 in the first half of 2009.
Balance Sheet
As of June 30, 2010, General Steel had cash and restricted cash of $320.4 million, compared to $274.2 million as of December 31, 2009. Accounts receivable was $21.4 million as of June 30, 2010, compared to $8.5 million as of December 31, 2009. Convertible notes payable increased to $1.3 million as of June 30, 2010, compared to $1.1 million as of December 31, 2009.
The Company had an inventory balance of $281.3 million as of June 30, 2010 compared to $208.1 million on December 31, 2009. This balance is comprised of raw materials and finished products.
On August 5, 2010, remaining notes outstanding from the Company's December 13, 2007 private placement have been converted into a total of 1,559,675 shares of Common Stock.
As of today, all of the convertible promissory notes issued on December 13, 2007 have now been converted into Common Stock.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on August 6, 2010 (8:00 p.m. Beijing/Hong Kong Time on August 6, 2010). 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: