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| 8-K - FORM 8-K - CHINA GENGSHENG MINERALS, INC. | form8k.htm |
China GengSheng Minerals Reports Second Quarter 2012 Financial Results
GONGYI, China, August 14, 2012 – China GengSheng Minerals, Inc. (NYSE Amex: CHGS), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy- efficient materials for a variety of industrial applications, today announced its financial results for the second quarter ended June 30, 2012.
Second Quarter 2012 Financial Summary:
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Revenue decreased 4.0% year-over-year to approximately $19.6 million. | |
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Refractories sales were approximately $11.6 million, compared with approximately $12.5 million in the second quarter of 2011. | |
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Fine precision abrasives product sales were approximately $3.3 million, compared with approximately $1.5 million in the second quarter of 2011. | |
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Fracture proppant sales were approximately $4.2 million, compared with approximately $5.9 million in the second quarter of 2011. | |
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Gross profit was approximately $3.1 million, or 15.6% of total sales, compared with approximately $5.3 million, or 26.1% of total sales in the same period a year ago. | |
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Total operating expenses increased to approximately $5.0 million, compared with approximately $4.5 million in the second quarter of 2011. | |
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Net loss attributable to the Company was approximately $3.8 million, or $0.14 per share, compared with net loss of approximately $247,000, or $0.01 per share in the second quarter of 2011. | |
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As of June 30, 2012, the Company had cash and cash equivalents of approximately $5.2 million, total equity of approximately $47.3 million and working capital of approximately $5.3 million. | |
First Half 2012 Financial Summary:
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Revenue decreased 9.0% year-over-year to approximately $33.3 million. | |
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Refractories sales were approximately $21.6 million, compared with approximately $22.5 million in the first half of 2011. | |
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Fine precision abrasives product sales were approximately $5.7 million, compared with approximately $2.3 million in the first half of 2011. | |
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Fracture proppant sales were approximately $5.2 million, compared with approximately $11.1 million in the first half of 2011. | |
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Gross profit was approximately $5.8 million, or 17.3% of total sales, compared with approximately $9.6 million, or 26.3% of total sales in the same period a year ago. | |
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Total operating expenses increased to approximately $9.3 million, compared with approximately $8.2 million in the first half of 2011. | |
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Net loss attributable to the Company was approximately $6.7 million, or $0.25 per share, compared with net loss of approximately $327,000, or $0.01 per share in the first half of 2011. | |
“Our sales recovered gradually from the disappointing first quarter as we stabilized refractory products sales and repositioned our sales of fracture proppant products to the domestic market. In particular, our sales of fine precision abrasives products achieved significant increase year-over-year despite the challenging market conditions we are facing.” Said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. “While rising costs continued to put pressure on our bottom line number, we still have confidence in our ability and readiness to capture new market opportunities.”
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Financial Results for the Three Months Ended June 30, 2012
For the second quarter of 2012, sales revenue was approximately $19.6 million, a decrease of 4.0%, compared with approximately $20.4 million in the second quarter of 2011. The decrease was mainly attributable to the decreased sales of our fracture proppant products.
- Sales of the Company’s core refractory products totaled approximately $11.6 million, or 59.2% of total sales, a decrease of 7.4%, compared with approximately $12.5 million in the same period of 2011.
- Sales of fracture proppant products totaled approximately $4.2 million, or 21.5% of total sales, a decrease of 28.9%, compared with approximately $5.9 million in the second quarter of 2011. The year-over-year decrease in fracture proppant products sales revenue was mainly due to the larger portion of sales to the domestic market where the fracture proppant products are typically priced lower than that in the U.S. market.
- Sales of fine precision abrasives products totaled approximately $3.3 million, compared with approximately $1.5 million in the second quarter of 2011. The increase in sales revenue was primarily due to the increased sales to a major customer.
- Sales of industrial ceramics were approximately $530,000, compared with approximately $492,000 in the second quarter of 2011.
Cost of goods sold totaled approximately $16.6 million, an increase of 9.7%, compared with approximately $15.1 million in the same period of 2011. This increase was primarily due to the higher raw material costs and energy costs compared with the same period in 2011.
Gross profit for the three months ended June 30, 2012 was approximately $3.1 million, or 15.6% of revenue, compared with approximately $5.3 million, or 26.1% of revenue in the second quarter of 2011. The decrease in gross profit and gross profit margin for the quarter was mainly attributable to the decreased gross profit margin in our fine precision abrasives segment and fracture proppants segment.
General and administrative expenses increased by approximately $307,000 to approximately $1.9 million for the second quarter in 2012, from approximately $1.6 million in the same period in 2011. The increase was primarily due to the loss on disposal of equipment in our fine precision abrasives segment as we upgraded the production facilities and the increase in depreciation expenses and salary expenses.
Selling expenses stayed flat at approximately $2.8 million in the second quarter of 2012, compared with the same period in 2011.
Finance costs increased by approximately $379,000, or 24.1% to approximately $2.0 million in the second quarter of 2012, from approximately $1.6 million in the same period in 2011. The increase was primarily attributable to an increase of approximately $606,000 in interest expenses as we increased borrowing activities in the second quarter of 2012.
Net loss attributable to Company's common stockholders was approximately $3.8 million, or $0.14 per share, compared with approximately $247,000, or $0.01 per share in the same period in 2011. The net loss for the quarter was primarily attributable to the factors described above.
As of June 30, 2012, the Company had cash and cash equivalents totaling approximately $5.2 million, working capital of approximately $5.3 million and total equity of approximately $47.3 million.
About China GengSheng Minerals, Inc.
China GengSheng Minerals, Inc. ("GengSheng") develops, manufactures and markets a broad range of high-tech industrial material products, including monolithic refractories, industrial ceramics, fracture proppants and fine precision abrasives. A market leader offering customized solutions, GengSheng sells its products primarily to the iron and steel industry as heat-resistant components for steel-making furnaces, industrial kilns and other high-temperature vessels to guarantee and improve the productivity of those expensive pieces of equipment, while reducing their consumption of energy. Founded in 1986 and based in China's Henan province, GengSheng currently has over 170 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and other countries. GengSheng conducts business through GengSheng International Corporation, a British Virgin Islands company, and its Chinese subsidiaries, which are Henan GengSheng Refractories Co., Ltd., Zhengzhou Duesail Fracture Proppant Co., Ltd., Henan GengSheng Micronized Powder Materials Co., Ltd, Guizhou SouthEast Prefecture Co., Ltd., GengSheng New Materials Co., Ltd, Henan GengSheng High Temperature Materials Co., Ltd. and Henan Yuxing Proppant Co., Ltd.
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For more information about the Company, please visit http://www.gengsheng.com.
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China GengSheng Minerals, Inc., and its subsidiary companies. All statements other than statements of historical fact included herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's ability to meet its projected output for the term of the supply contract; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
China GengSheng Minerals, Inc.
Investor Relations
Mr. Shuai Zhang
ir@gengsheng.com
+86-371-6405-9846
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China GengSheng Minerals, Inc.
Condensed
Consolidated Balance Sheets
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As of | As of | ||||
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June 30, | December 31, | ||||
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2012 | 2011 | ||||
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(Unaudited) | |||||
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | 5,162,949 | $ | 3,594,361 | ||
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Restricted cash |
38,465,112 | 21,094,008 | ||||
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Trade receivables, net |
53,645,872 | 49,167,748 | ||||
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Bills receivable |
12,363,231 | 6,331,997 | ||||
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Other receivables and prepayments, net |
9,025,841 | 8,451,185 | ||||
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Advances to senior management |
- | 360,162 | ||||
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Inventories, net |
18,248,768 | 16,956,582 | ||||
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Deferred tax assets, net of valuation allowance |
- | - | ||||
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Total current assets |
136,911,773 | 105,956,043 | ||||
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Deposit for acquisition of a non-consolidated affiliate, net |
- | 1,092,041 | ||||
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Investment in a non-consolidated affiliate |
1,090,412 | - | ||||
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Deposits for acquisition of land use right, property, plant and equipment |
622,824 | 618,892 | ||||
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Goodwill, net |
- | - | ||||
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Intangible assets, net |
- | - | ||||
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Property, plant and equipment, net |
37,203,990 | 37,164,849 | ||||
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Land use rights |
3,119,516 | 3,137,961 | ||||
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TOTAL ASSETS |
$ | 178,948,515 | $ | 147,969,786 | ||
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Trade payables |
$ | 22,090,232 | $ | 18,671,086 | ||
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Bills payable |
8,818,128 | 16,385,340 | ||||
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Other payables and accrued expenses |
6,904,576 | 8,877,407 | ||||
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Deferred revenue - Government grants |
649,202 | 443,632 | ||||
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Provision for warranty |
110,730 | 184,778 | ||||
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Income taxes payable |
71,345 | 218,038 | ||||
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Non-interest-bearing loans |
3,568,059 | 3,318,472 | ||||
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Collateralized short-term bank loans |
84,570,235 | 45,974,022 | ||||
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Loans from third parties |
4,752,000 | - | ||||
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Deferred tax liabilities |
125,270 | 112,625 | ||||
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Warrant liabilities |
- | - | ||||
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TOTAL LIABILITIES |
131,659,777 | 94,185,400 | ||||
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COMMITMENTS AND CONTINGENCIES |
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China GengSheng Minerals, Inc.
Condensed
Consolidated Balance Sheets (Cont’d)
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As of | As of | ||||
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June 30, | December 31, | ||||
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2012 | 2011 | ||||
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(Unaudited) | |||||
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STOCKHOLDERS' EQUITY |
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Preferred stock - $0.001 par value per share; authorized 50,000,000 shares in 2012 and 2011, none issued and outstanding |
$ | - | $ | - | ||
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Common stock - $0.001 par value per share; authorized 100,000,000 shares in 2012 and 2011, issued and outstanding 26,803,044 shares in 2012 and 2011 |
26,803 | 26,803 | ||||
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Additional paid-in capital |
28,197,310 | 28,197,310 | ||||
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Statutory and other reserves |
8,110,972 | 8,110,972 | ||||
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Accumulated other comprehensive income |
7,916,345 | 7,713,341 | ||||
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Retained earnings |
2,834,958 | 9,541,560 | ||||
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Total China GengSheng Minerals, Inc. stockholders' equity |
47,086,388 | 53,589,986 | ||||
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NONCONTROLLING INTEREST |
202,350 | 194,400 | ||||
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TOTAL EQUITY |
47,288,738 | 53,784,386 | ||||
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TOTAL LIABILITIES AND EQUITY |
$ | 178,948,515 | $ | 147,969,786 |
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China GengSheng Minerals, Inc.
Condensed
Consolidated Statements of Operations and Comprehensive Loss
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Three months ended | Six months ended | ||||||||||
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June 30, | June 30, | ||||||||||
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(Unaudited) | (Unaudited) | ||||||||||
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2012 | 2011 | 2012 | 2011 | ||||||||
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Sales revenue |
$ | 19,620,215 | $ | 20,435,922 | $ | 33,330,878 | $ | 36,619,751 | ||||
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Cost of goods sold |
(16,565,669 | ) | (15,101,251 | ) | (27,559,978 | ) | (26,997,445 | ) | ||||
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Gross profit |
3,054,546 | 5,334,671 | 5,770,900 | 9,622,306 | ||||||||
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Operating expenses |
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General and administrative expenses |
1,937,379 | 1,629,380 | 3,666,090 | 3,133,598 | ||||||||
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Research and development expenses |
236,283 | 145,202 | 399,279 | 286,529 | ||||||||
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Selling expenses |
2,790,552 | 2,761,122 | 5,271,143 | 4,733,057 | ||||||||
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Total operating expenses |
4,964,214 | 4,535,704 | 9,336,512 | 8,153,184 | ||||||||
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(Loss) income from operations |
(1,909,668 | ) | 798,967 | (3,565,612 | ) | 1,469,122 | ||||||
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Other (expenses) income |
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Government grant income |
- | 16,802 | 385,314 | 17,685 | ||||||||
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Guarantee income |
147,732 | 122,952 | 301,286 | 210,248 | ||||||||
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Guarantee expenses |
(107,630 | ) | (88,877 | ) | (236,808 | ) | (176,392 | ) | ||||
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Equity in net loss of a non-consolidated affiliate |
(8,567 | ) | - | (8,567 | ) | - | ||||||
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Interest income |
186,375 | 62,893 | 238,949 | 182,381 | ||||||||
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Change in fair value of warrant liabilities |
- | 650,000 | - | 910,000 | ||||||||
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Other income (expenses) |
37,905 | (33,533 | ) | 43,844 | (67,722 | ) | ||||||
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Finance costs |
(1,949,938 | ) | (1,571,367 | ) | (3,700,130 | ) | (2,537,099 | ) | ||||
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Total other expenses |
(1,694,123 | ) | (841,130 | ) | (2,976,112 | ) | (1,460,899 | ) | ||||
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(Loss) income before income taxes and noncontrolling |
(3,603,791 | ) | (42,163 | ) | (6,541,724 | ) | 8,223 | |||||
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Income taxes |
(202,018 | ) | (226,139 | ) | (214,366 | ) | (362,310 | ) | ||||
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Net loss before noncontrolling interest |
(3,805,809 | ) | (268,302 | ) | (6,756,090 | ) | (354,087 | ) | ||||
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Net loss attributable to noncontrolling interest |
12,039 | 21,264 | 49,488 | 27,115 | ||||||||
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Net loss attributable to Company’s common |
$ | (3,793,770 | ) | $ | (247,038 | ) | $ | (6,706,602 | ) | $ | (326,972 | ) |
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Net loss before noncontrolling interest |
$ | (3,805,809 | ) | $ | (268,302 | ) | $ | (6,756,090 | ) | $ | (354,087 | ) |
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Other comprehensive income |
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Foreign currency translation adjustments |
20,630 | 786,396 | 260,442 | 991,240 | ||||||||
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Comprehensive (loss) income |
(3,785,179 | ) | 518,094 | (6,495,648 | ) | 637,153 | ||||||
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Comprehensive loss (income) attributable to interest |
12,055 | 21,264 | (7,950 | ) | 27,115 | |||||||
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Comprehensive (loss) income attributable to Company’s stockholders |
$ | (3,773,124 | ) | $ | 539,358 | $ | (6,503,598 | ) | $ | 664,268 | ||
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China GengSheng Minerals, Inc.
Condensed
Consolidated Statements of Operations and Comprehensive Loss (Cont’d)
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Three months ended | Six months ended | ||||||||||
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June 30, | June 30, | ||||||||||
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(Unaudited) | (Unaudited) | ||||||||||
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2012 | 2011 | 2012 | 2011 | ||||||||
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Loss per share - Basic and diluted attributable to Company’s common stockholders |
$ | (0.14 | ) | $ | (0.01 | ) | $ | (0.25 | ) | $ | (0.01 | ) |
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Weighted average number of shares - Basic and diluted |
26,803,044 | 26,794,386 | 26,803,044 | 26,711,513 | ||||||||
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China GengSheng Minerals, Inc.
Condensed
Consolidated Statements of Cash Flows
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Six months ended June 30, | |||||
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(Unaudited) | |||||
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2012 | 2011 | ||||
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Cash flows from operating activities |
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Net loss before noncontrolling interest |
$ | (6,756,090 | ) | $ | (354,087 | ) |
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Adjustments to reconcile net loss before noncontrolling interest to net cash flows used in operating activities: |
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Depreciation |
1,545,430 | 1,040,195 | ||||
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Amortization of land use rights |
38,380 | 10,481 | ||||
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Equity in net loss of a non-consolidated affiliate |
8,567 | - | ||||
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Amortization of intangible assets |
- | 38,180 | ||||
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Deferred taxes |
12,157 | 153,413 | ||||
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Loss on disposal of property, plant and equipment |
115,742 | 29,813 | ||||
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Guarantee expenses |
236,808 | - | ||||
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Guarantee income |
(301,286 | ) | - | |||
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Allowance for doubtful accounts |
573,147 | 432,040 | ||||
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Deferred revenue amortized |
- | (45,816 | ) | |||
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Change in fair value of warrant liabilities |
- | (910,000 | ) | |||
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Exchange gain |
(65,741 | ) | - | |||
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Changes in operating assets and liabilities: |
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Restricted cash |
9,833,472 | (4,859,443 | ) | |||
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Trade receivables |
(4,422,097 | ) | 215,589 | |||
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Bills receivable |
(5,921,005 | ) | (11,064,303 | ) | ||
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Other receivables and prepayments |
(965,360 | ) | (5,214,083 | ) | ||
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Advances to senior management |
362,450 | - | ||||
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Inventories |
(1,184,365 | ) | (5,821,702 | ) | ||
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Other payables and accrued expenses |
(1,965,058 | ) | 1,117,543 | |||
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Trade payables |
3,513,956 | 5,299,877 | ||||
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Bills payable |
(7,741,312 | ) | 18,440,940 | |||
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Provision for warranty |
(75,223 | ) | - | |||
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Income taxes payable |
(147,762 | ) | (54,322 | ) | ||
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Net cash flows used in operating activities |
(13,305,190 | ) | (1,545,685 | ) | ||
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Cash flows from investing activities |
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Payments for deposits of acquisition of land use right, property, plant and |
- | (3,984,119 | ) | |||
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Proceeds from disposal of property, plant and equipment |
- | 64,092 | ||||
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Payments for acquisition of property, plant and equipment |
(1,677,628 | ) | (4,397,877 | ) | ||
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Net cash flows used in investing activities |
(1,677,628 | ) | (8,317,904 | ) | ||
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Cash flows from financing activities |
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Net proceeds from issuance of shares |
- | 9,258,466 | ||||
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Restricted cash |
(27,070,560 | ) | (27,061,374 | ) | ||
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Proceeds from bank loans |
49,859,412 | 64,935,933 | ||||
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Repayment of bank loans |
(11,555,280 | ) | (28,558,640 | ) | ||
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Proceeds from non-interest-bearing loans |
576,646 | 305,440 | ||||
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China GengSheng Minerals, Inc.
Condensed Consolidated Statements of Cash Flows (Cont’d)
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Repayment of non-interest-bearing loans |
(379,822 | ) | (479,649 | ) | ||
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Loans from third parties |
4,752,000 | - | ||||
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Government grant received |
357,984 | - | ||||
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Net cash flows provided by financing activities |
16,540,380 | 18,400,176 | ||||
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Effect of foreign currency translation on cash and cash equivalents |
11,026 | 27,540 | ||||
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Net increase in cash and cash equivalents |
1,568,588 | 8,564,127 | ||||
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Cash and cash equivalents - beginning of period |
3,594,361 | 925,052 | ||||
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Cash and cash equivalents - end of period |
$ | 5,162,949 | $ | 9,489,179 | ||
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Supplemental disclosure of cash flow information:- |
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Cash paid for: |
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Interest |
$ | 1,559,143 | $ | 2,537,099 | ||
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Income taxes |
$ | 346,552 | $ | 262,133 | ||
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Non-cash operating, investing and financing activities:- |
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Proceeds from disposal of property, plant and equipment settled by offsetting trade payables |
$ | 88,707 | $ | - | ||
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Warrants issued to investors in connection with the private placement |
- | 970,000 | ||||
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Acquisition of Yili YiQiang Silicon Limited by offsetting deposit for acquisition of a non-consolidated affiliate |
$ | 1,098,979 | $ | - |
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