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China Precision Steel Inc. Reports Operating Results (10-Q)

November 15, 2010 | About:
10qk

10qk

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China Precision Steel Inc. (CPSL) filed Quarterly Report for the period ended 2010-09-30.

China Precision Steel Inc. has a market cap of $74.04 million; its shares were traded at around $1.59 with a P/E ratio of 13.25 and P/S ratio of 0.67. CPSL is in the portfolios of Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

During the three months ended September 30, 2010, we sold a total of 42,513 tons of products, an increase of 20,220 tons from 22,293 tons during the same period a year ago, due to an increase in demand in a gradually improving market as well as the addition of our 3rd mill which increases our total annual production capacity from 120,000 tons to 160,000 tons during its first year of operation and ultimately to 220,000 tons when it reaches its full design capacity in the next three to four years. We believe that such increase was mainly caused by increases in demand from construction materials and home appliance products due to PRC government subsidies to encourage consumer spending in these segments during the period ended September 30, 2010. Increased volume and sales have led to a gross profit of $2,384,085 and a net income of $644,511 for the three months ended September 30, 2010. Total company backlog as of September 30, 2010 was $33,772,326.

Sales Revenues. Sales volume increased by 20,220 tons, or 90.7%, period-on-period to 42,513 tons for the period ended September 30, 2010 from 22,293 tons for the period ended September 30, 2009 and, as a result, sales revenues increased by $16,854,466, or 98.9%, period-on-period, to $33,896,455 for the period ended September 30, 2010 from $17,041,989 for the period ended September 30, 2009. The increase in sales revenues is mainly attributable to an increase in demand for low-carbon cold-rolled products used in construction and home appliances production due to favorable government policies and subsidies to encourage consumer spending.

There were different trends of demand across various product categories during the three months ended September 30, 2010. High-carbon cold-rolled steel products accounted for 15% of the current sales mix at an average selling price of $939 per ton for the period ended September 30, 2010, compared to 25% of the sales mix at an average selling price per ton of $1,731 for the period ended September 30, 2009. The products in this category are mainly used in the automobile industry and the decrease in sales volume was due to demand volatilities period-on-period, however, we are generally optimistic about sales in this category for the remainder of the year due to the Chinese government s automobile stimulus policies which management expects to increase demand.

Low-carbon cold-rolled steel products accounted for 62% of the current sales mix at an average selling price of $897 per ton for the three months ended September 30, 2010, compared to 37% of the sales mix at an average selling price per ton of $598 for the three months ended September 30, 2009. The increase in demand in this category during the period was a result of increased orders of steel used in the production of construction and home appliances due to subsidies granted by the Chinese government to encourage consumer spending. Low-carbon hard-rolled steel products accounted for 8% of the current sales mix at an average selling price of $772 per ton for the three months ended September 30, 2010, compared to 18% of the sales mix at an average selling price per ton of $672 for the three months ended September 30, 2009, due to improved pricing but a decrease in demand in the international market period-on-period. Subcontracting income revenues accounted for $3,145,202, or 10% of the sales mix for the three months ended September 30, 2010, as compared to $1,648,876, or 10%, of the sales mix for the three months ended September 30, 2009.

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