General Steel Reports Second Quarter 2015 Financial Results
BEIJING, Aug. 20, 2015 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), a leading non-state-controlled steel producer in China, today announced its financial results for the second quarter ended June 30, 2015.
Ms. Yunshan Li, Chief Executive Officer of General Steel commented, "Since being appointed as CEO of General Steel in late July, my top priority has been reviewing and integrating the Company's resources in order to chart the best course for our business transformation. During our strategic reviews, we noted that General Steel is one of the most efficient steel producers in China and that it has excellent experience, resources and expertise. And as we further evaluated General Steel's total value chain, we believe that the more an organization moves upstream towards energy-saving and environmental protection solutions, the higher its return on investments and sustainability will be. As such, we are very excited about the potential possibilities for the Company in the clean-tech and environmental protection sector."
Ms. Li added, "China is now the world's largest energy consumer and has the largest number of coal-fired power plants and steel mills. The Chinese government is fully aware of the impact from fossil-fuel pollution and is launching the tightest-ever restrictions on emission standards. In my view, General Steel not only has its own demand for clean-tech and environmental protection solutions, but also rich industry resources to promote clean-tech adoption. We feel confident that the combination of my direct knowledge, expertise, and access to emission reduction technology and GSI's excellent experience, resources and expertise will enable us to successfully produce and sell leading clean-tech solutions in China."
John Chen, Chief Financial Officer of General Steel, commented, "As we forge ahead with our business transformation, in the second quarter we proactively revalued our steel-manufacturing equipment in Longmen Joint Venture, and took a write-down of $973.9 million in its carrying value to better reflect the current market conditions. We believe this will lighten future depreciation burden and better enable the Company to adopt new business models."
Second Quarter 2015 Financial Information
- Sales volume from Longmen Joint Venture increased by 30.2% year-over-year to approximately 1.70 million metric tons, compared with 1.31 million metric tons in the second quarter of 2014.
- Sales totaled $528.8 million, compared with $588.0 million in the second quarter of 2014.
- Gross loss was $(64.3) million, or (12.2%) of total sales, compared with gross profit of $28.1 million, or 4.8% of total sales in the second quarter of 2014.
- Loss from operations totaled $(1.0) billion, compared with income from operations of $6.3 million in the second quarter of 2014.
- Net loss attributable to the Company was $(615.0) million, or $(9.80) per diluted share, compared with $(11.0) million, or $(0.20) per share in the second quarter of 2014.
- As of June 30, 2015, the Company had cash and restricted cash of $266.5 million.
Second Quarter 2015 Financial and Operating Results
Total Sales
Total sales for the second quarter of 2015 decreased by 10.1% year-over-year to $528.8 million, compared with $588.0 million in the second quarter of 2014. The year-over-year sales decrease was primarily due to the significant decreases in the average selling price of rebar, partially offset by the higher sales volume.
- Total sales volume from Longmen Joint Venture in the second quarter of 2015 was 1.70 million metric tons, an increase of 30.2% compared with 1.31 million metric tons in the second quarter of 2014.
- The average selling price of rebar at Longmen Joint Venture in the second quarter of 2015 decreased to approximately $311.2 per metric ton, down by 30.8% from $450.0 per metric ton in the second quarter of 2014.
Gross (Loss) Profit
Gross loss for the second quarter of 2015 was $(64.3) million, or (12.2)% of total sales, as compared with gross profit of $28.1 million, or 4.8% of total sales in the second quarter of 2014. The decrease in gross margin was mainly due to a steeper decrease in the average selling price of rebar, compared with the decrease in unit cost of manufactured rebar.
Operating Expenses and (Loss) Income from Operations
Selling, general and administrative expenses for the second quarter of 2015 were $22.1 million, an increase of 17.2% from $18.8 million in the second quarter of 2014. General and administrative expenses increased to $11.7 million in the second quarter of 2015, compared with $9.1 million in the second quarter of 2014, which was primarily due to higher expenses for environment protection and a higher local tax rate. Selling expenses increased slightly to $10.4 million in the second quarter of 2015, compared with $9.7 million in the same period of 2014.
The Company accrued unallocated overheads expenses of $5.3 million in its operating expenses for the second quarter of 2015, which was mainly due to the reallocation of fixed overheads from cost of goods sold to general and administrative in accordance with GAAP, as the Company had abnormally low production in May 2015 because it temporarily shut down of one its furnaces to perform maintenance and mechanical adjustments.
The Company recorded non-cash impairment charges of approximately $973.9 million in the second quarter of 2015, in connection with the write-down of the carrying value of Longmen Joint Venture's long-lived assets. The impairment was primarily related to the continuous worsen condition for China steel industry, and is assessed based on discounted cash flows fair value measurements.
Other operating income from a change in the fair value of profit sharing liability during the second quarter of 2015 was $57.5 million, compared with a loss on change in fair value of profit sharing liability of $(2.9) million in the same period of last year.
Correspondingly, loss from operations for the second quarter of 2015 totaled $(1.0) billion, compared with income from operations of $6.3 million for the second quarter of 2014. Excluding the one-time non-cash impairment charges, adjusted loss from operations for the second quarter of 2015 would have been $(34.2) million.
Finance Expense
Finance and interest expense in the second quarter of 2015 was $29.6 million, of which $5.2 million was the non-cash interest expense on capital lease, as compared with $5.7 million in the same period of 2014, and $24.4 million was the interest expense on bank loans and discounted note receivables, as compared with $21.0 million in the same period of 2014.
Net Loss and Net Loss per Share
Net loss attributable to General Steel for the second quarter of 2015 was $(615.0) million, or $(9.80) per diluted share, based on 62.7 million weighted average shares outstanding. Excluding the one-time non-cash impairment charges, adjusted net loss attributable to General Steel for the second quarter of 2015 would have been $(36.7) million. This compares to a net loss attributable to General Steel of $(11.0) million, or $(0.20) per share, based on 55.8 million weighted average shares outstanding in the second quarter of 2014.
Balance Sheet
As of June 30, 2015, the Company had cash and restricted cash of approximately $266.5 million, compared to $367.3 million as of December 31, 2014. The Company had an inventory balance of $153.1 million as of June 30, 2015, compared to $156.3 million as of December 31, 2014.
Conference Call and Webcast:
General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EDT on Thursday, August 20, 2015 (which corresponds to 8:00 p.m. Beijing/Hong Kong Time on Thursday, August 20, 2015) to discuss the results and answer questions from investors. Listeners may access the call by dialing:
| US Toll Free: |
1-888-346-8982 |
| International Toll: |
1-412-902-4272 |
| China Toll Free: |
400-120-1203 |
| Hong Kong Toll Free: |
800-905-945 |
| Conference ID: |
General Steel Holdings |
The call will also be available as a live, listen-only Webcast under the "Events and Presentations" page on the "Investor Relations" section of the Company's Website at http://www.corpasia.net/us/GSI/irwebsite/index.php?mod=event. Following the live Webcast, an online archive of the Webcast will be available for 90 days.
A replay of the conference call may be accessed through August 27, 2015 by dialing:
| US Toll Free: |
1-877-344-7529 |
|
| International Toll: |
1-412-317-0088 |
|
| Access Code: |
10071183 |
|
About General Steel
General Steel is a leading non-state-owned steel maker headquartered in Beijing, China. With seven million metric tons of crude steel production capacity under management and operations in Tianjin municipality and China's Shaanxi and Guangdong provinces, the Company produces a variety of steel products including rebar and high-speed wire.
In addition to its steel business, the Company also designs, manufactures, and integrates radio frequency identification ("RFID") systems. The Company's RFID technology provides real-time data on supplies, inventory, and goods, thereby greatly enhancing its customers' administration and planning processes, as well as asset tracking and supply chain management.
For more information, please visit www.gshi-steel.com. To be added to the General Steel email list to receive Company news, or to request a hard copy of the Company's Annual Report on Form 10-K, please send your request to [email protected].
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, including those disclosed in the Company's most recent Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission. 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.
Contact Us
General Steel Holdings, Inc.
Joyce Sung
Tel: +1-347-534-1435
Email: [email protected]
Asia Bridge Capital Limited
Carene Toh
Tel: +1-888-957-3362
Email: [email protected]
| GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES |
||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
| (UNAUDITED) (In thousands) |
||||||||
| June 30, |
December 31, |
|||||||
| ASSETS |
2015 |
2014 |
||||||
| CURRENT ASSETS: |
||||||||
| Cash |
$ |
36,250 |
$ |
11,641 |
||||
| Restricted cash |
230,240 |
355,685 |
||||||
| Notes receivable |
5,736 |
10,290 |
||||||
| Restricted notes receivable |
39,111 |
111,801 |
||||||
| Loans receivable |
42,595 |
36,001 |
||||||
| Loans receivable - related parties |
6,110 |
34,713 |
||||||
| Accounts receivable, net |
11,205 |
9,321 |
||||||
| Accounts receivable - related parties |
3,198 |
8,498 |
||||||
| Other receivables, net |
62,626 |
63,746 |
||||||
| Other receivables - related parties |
7,329 |
39,670 |
||||||
| Inventories |
153,129 |
156,327 |
||||||
| Advances on inventory purchase |
53,389 |
73,819 |
||||||
| Advances on inventory purchase - related parties |
13,411 |
45,617 |
||||||
| Prepaid expense and other |
6,230 |
4,803 |
||||||
| Prepaid taxes |
4,242 |
5,789 |
||||||
| Short-term investment |
7,670 |
2,688 |
||||||
| TOTAL CURRENT ASSETS |
682,471 |
970,409 |
||||||
| PLANT AND EQUIPMENT, net |
569,477 |
1,543,136 |
||||||
| OTHER ASSETS: |
||||||||
| Advances on equipment purchase |
2,520 |
11,438 |
||||||
| Investment in unconsolidated entities |
16,749 |
16,823 |
||||||
| Long-term deferred expense |
446 |
458 |
||||||
| Intangible assets, net of accumulated amortization |
22,706 |
22,960 |
||||||
| TOTAL OTHER ASSETS |
42,421 |
51,679 |
||||||
| TOTAL ASSETS |
$ |
1,294,369 |
$ |
2,565,224 |
||||
| LIABILITIES AND DEFICIENCY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Short term notes payable |
$ |
531,869 |
$ |
661,635 |
||||
| Accounts payable |
596,466 |
612,801 |
||||||
| Accounts payable - related parties |
211,149 |
207,783 |
||||||
| Short term loans - bank |
153,989 |
257,502 |
||||||
| Short term loans - others |
65,158 |
60,717 |
||||||
| Short term loans - related parties |
279,950 |
46,380 |
||||||
| Other payables and accrued liabilities |
61,805 |
55,488 |
||||||
| Other payable - related parties |
80,028 |
87,252 |
||||||
| Customer deposits |
86,860 |
92,974 |
||||||
| Customer deposits - related parties |
33,923 |
132,616 |
||||||
| Deposit due to sales representatives |
15,782 |
17,871 |
||||||
| Deposit due to sales representatives - related parties |
2,872 |
2,509 |
||||||
| Taxes payable |
7,984 |
5,201 |
||||||
| Deferred lease income, current |
2,180 |
2,176 |
||||||
| Capital lease obligations, current |
9,942 |
8,508 |
||||||
| TOTAL CURRENT LIABILITIES |
2,139,957 |
2,251,413 |
||||||
| NON-CURRENT LIABILITIES: |
||||||||
| Long-term loans - related party |
353,067 |
339,549 |
||||||
| Deferred lease income, noncurrent |
71,757 |
72,713 |
||||||
| Capital lease obligations, noncurrent |
401,283 |
393,252 |
||||||
| Profit sharing liability |
- |
70,422 |
||||||
| TOTAL NON-CURRENT LIABILITIES |
826,107 |
875,936 |
||||||
| TOTAL LIABILITIES |
2,966,064 |
3,127,349 |
||||||
| COMMITMENTS AND CONTINGENCIES |
||||||||
| DEFICIENCY: |
||||||||
| Preferred stock, $0.001 par value, 50,000,000 shares |
3 |
3 |
||||||
| Common stock, $0.001 par value, 200,000,000 shares |
66 |
64 |
||||||
| Treasury stock, at cost, 2,472,306 shares as of June |
(4,199) |
(4,199) |
||||||
| Paid-in-capital |
117,274 |
115,494 |
||||||
| Statutory reserves |
6,583 |
6,472 |
||||||
| Accumulated deficits |
(1,123,701) |
(463,521) |
||||||
| Accumulated other comprehensive income |
(1,259) |
644 |
||||||
| TOTAL GENERAL STEEL HOLDINGS, INC. DEFICIENCY |
(1,005,233) |
(345,043) |
||||||
| NONCONTROLLING INTERESTS |
(666,462) |
(217,082) |
||||||
| TOTAL DEFICIENCY |
(1,671,695) |
(562,125) |
||||||
| TOTAL LIABILITIES AND DEFICIENCY |
$ |
1,294,369 |
$ |
2,565,224 |
||||
| GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES |
||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
||||||||||||
| FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014 |
||||||||||||
| (UNAUDITED) |
||||||||||||
| (In thousands, except per share data) |
||||||||||||
| Three months ended June 30, |
Six months ended June 30, |
|||||||||||
| 2015 |
2014 |
2015 |
2014 |
|||||||||
| SALES |
$ |
454,855 |
$ |
508,637 |
$ |
725,624 |
$ |
1,020,642 |
||||
| SALES - RELATED PARTIES |
73,926 |
79,376 |
131,321 |
161,582 |
||||||||
| TOTAL SALES |
528,781 |
588,013 |
856,945 |
1,182,224 |
||||||||
| COST OF GOODS SOLD |
509,185 |
482,011 |
806,750 |
1,012,755 |
||||||||
| COST OF GOODS SOLD - RELATED PARTIES |
83,865 |
77,908 |
146,611 |
163,936 |
||||||||
| TOTAL COST OF GOODS SOLD |
593,050 |
559,919 |
953,361 |
1,176,691 |
||||||||
| GROSS PROFIT(LOSS) |
(64,269) |
28,094 |
(96,416) |
5,533 |
||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
(22,083) |
(18,849) |
(39,438) |
(39,902) |
||||||||
| UNALLOCATED OVERHEADS EXPENSES |
(5,309) |
- |
(24,443) |
- |
||||||||
| IMPAIRMENT EXPENSE |
(973,860) |
- |
(973,860) |
- |
||||||||
| CHANGE IN FAIR VALUE OF PROFIT SHARING LIABILITY |
57,499 |
(2,920) |
70,423 |
(2,969) |
||||||||
| INCOME (LOSS) FROM OPERATIONS |
(1,008,022) |
6,325 |
(1,063,734) |
(37,338) |
||||||||
| OTHER INCOME (EXPENSE) |
||||||||||||
| Interest income |
2,741 |
4,066 |
5,072 |
7,258 |
||||||||
| Finance/interest expense |
(29,575) |
(26,619) |
(50,145) |
(55,314) |
||||||||
| Loss on disposal of equipment and intangible assets |
(44) |
(142) |
(28) |
(96) |
||||||||
| Income(loss) from equity investments |
34 |
54 |
(3) |
67 |
||||||||
| Foreign currency transaction loss |
(249) |
(963) |
(1,122) |
(1,817) |
||||||||
| Lease income |
545 |
542 |
1,088 |
1,088 |
||||||||
| Other non-operating income (expense), net |
378 |
302 |
601 |
126 |
||||||||
| Other expense, net |
(26,170) |
(22,760) |
(44,537) |
(48,688) |
||||||||
| LOSS BEFORE PROVISION FOR INCOME TAXES AND |
(1,034,192) |
(16,435) |
(1,108,271) |
(86,026) |
||||||||
| PROVISION FOR INCOME TAXES |
111 |
107 |
141 |
112 |
||||||||
| NET LOSS |
(1,034,303) |
(16,542) |
(1,108,412) |
(86,138) |
||||||||
| Less: Net loss attributable to noncontrolling interest |
(419,276) |
(5,523) |
(448,232) |
(31,555) |
||||||||
| NET LOSS ATTRIBUTABLE TO GENERAL STEEL HOLDINGS, |
$ |
(615,027) |
$ |
(11,019) |
$ |
(660,180) |
$ |
(54,583) |
||||
| NET LOSS |
$ |
(1,034,303) |
$ |
(16,542) |
$ |
(1,108,412) |
$ |
(86,138) |
||||
| OTHER COMPREHENSIVE LOSS |
||||||||||||
| Foreign currency translation adjustments |
(2,274) |
(929) |
(3,127) |
3,741 |
||||||||
| COMPREHENSIVE LOSS |
(1,036,577) |
(17,471) |
(1,111,539) |
(82,397) |
||||||||
| Less: Comprehensive loss attributable to noncontrolling interest |
(420,128) |
(5,875) |
(449,456) |
(30,101) |
||||||||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO GENERAL STEEL |
$ |
(616,449) |
$ |
(11,596) |
$ |
(662,083) |
$ |
(52,296) |
||||
| WEIGHTED AVERAGE NUMBER OF SHARES |
||||||||||||
| Basic and Diluted |
62,777 |
55,842 |
62,384 |
55,828 |
||||||||
| LOSS PER SHARE |
||||||||||||
| Basic and Diluted |
$ |
(9.80) |
$ |
(0.20) |
$ |
(10.58) |
$ |
(0.98) |
||||
| GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES |
|||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
| (UNAUDITED) (In thousands) |
|||||||
| For the Six months ended June 30, |
|||||||
| 2015 |
2014 |
||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||||
| Net loss |
$ |
(1,108,412) |
$ |
(86,138) |
|||
| Adjustments to reconcile net loss to cash provided by (used in) operating activities: |
|||||||
| Depreciation, amortization and depletion |
56,596 |
47,788 |
|||||
| Impairment of plant and equipment |
973,860 |
||||||
| Change in fair value of profit sharing liability |
(70,423) |
2,969 |
|||||
| Gain on disposal of equipment and intangible assets |
28 |
96 |
|||||
| Provision (recovery) for doubtful accounts |
2,548 |
(250) |
|||||
| Reservation of mine maintenance fee |
187 |
278 |
|||||
| Stock issued for services and compensation |
382 |
219 |
|||||
| Amortization of deferred financing cost on capital lease |
9,765 |
9,253 |
|||||
| Income (loss) from equity investments |
3 |
(67) |
|||||
| Foreign currency transaction loss |
1,122 |
1,817 |
|||||
| Deferred lease income |
(1,088) |
(1,088) |
|||||
| Changes in operating assets and liabilities |
|||||||
| Notes receivable |
5,238 |
45,931 |
|||||
| Accounts receivable |
(1,888) |
(1,008) |
|||||
| Accounts receivable - related parties |
5,307 |
(2,875) |
|||||
| Other receivables |
(1,188) |
(307) |
|||||
| Other receivables - related parties |
32,353 |
(4,275) |
|||||
| Inventories |
2,631 |
1,286 |
|||||
| Advances on inventory purchases |
20,528 |
(13,968) |
|||||
| Advances on inventory purchases - related parties |
39,581 |
(36,971) |
|||||
| Prepaid expense and other |
(19) |
(1,947) |
|||||
| Long-term deferred expense |
14 |
111 |
|||||
| Prepaid taxes |
1,555 |
15,747 |
|||||
| Accounts payable |
(22,969) |
(18,050) |
|||||
| Accounts payable - related parties |
2,978 |
28,204 |
|||||
| Other payables and accrued liabilities |
6,223 |
2,637 |
|||||
| Other payables - related parties |
(7,334) |
4,824 |
|||||
| Customer deposits |
(6,274) |
49,187 |
|||||
| Customer deposits - related parties |
(191,619) |
78,667 |
|||||
| Taxes payable |
2,769 |
(413) |
|||||
| Net cash provided by operating activities |
(247,546) |
121,657 |
|||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||
| Restricted cash |
125,868 |
(51,820) |
|||||
| Loans to unrelated parties |
(6,516) |
- |
|||||
| Loans receivable - related party |
114,127 |
- |
|||||
| Cash proceeds from short term investment |
2,606 |
- |
|||||
| Payments for short term investment |
(7,575) |
- |
|||||
| Cash proceeds from sales of equipment and intangible assets |
- |
24 |
|||||
| Equipment purchase and intangible assets |
(40,174) |
(112,713) |
|||||
| Net cash provided by (used in) investing activities |
188,336 |
(164,509) |
|||||
| CASH FLOWS FINANCING ACTIVITIES: |
|||||||
| Restricted notes receivable |
72,762 |
286,485 |
|||||
| Borrowings on short term notes payable |
497,497 |
900,202 |
|||||
| Payments on short term notes payable |
(628,240) |
(1,035,408) |
|||||
| Borrowings on short term loans - bank |
97,026 |
185,023 |
|||||
| Payments on short term loans - bank |
(201,944) |
(285,100) |
|||||
| Borrowings on short term loan - others |
109,420 |
19,949 |
|||||
| Payments on short term loans - others |
(82,814) |
(25,417) |
|||||
| Borrowings on short term loan - related parties |
223,974 |
32,576 |
|||||
| Payments on short term loans - related parties |
(56,394) |
(19,233) |
|||||
| Deposits due to sales representatives |
(2,119) |
(2,736) |
|||||
| Deposit due to sales representatives - related parties |
358 |
(326) |
|||||
| Borrowings on long-term loans - related party |
56,201 |
- |
|||||
| Payments on long-term loans - related party |
(815) |
- |
|||||
| Principal payment on capital lease obligation |
(1,077) |
- |
|||||
| Net cash provided by (used in) financing activities |
83,835 |
56,015 |
|||||
| EFFECTS OF EXCHANGE RATE CHANGE IN CASH |
(16) |
(381) |
|||||
| INCREASE IN CASH |
24,609 |
12,782 |
|||||
| CASH, beginning of period |
11,641 |
31,967 |
|||||
| CASH, end of period |
$ |
36,250 |
$ |
44,749 |
|||
SOURCE General Steel Holdings, Inc.
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