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

February 21, 2012 | About:
10qk

10qk

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China Precision Steel Inc. (CPSL) filed Quarterly Report for the period ended 2011-12-31.

China Precision has a market cap of $21.4 million; its shares were traded at around $0.46 with and P/S ratio of 0.1.

Highlight of Business Operations:

There were different trends of demand across various product categories during the three months ended December 31, 2011. High-carbon cold-rolled steel products accounted for 18% of the current sales mix at an average selling price of $1,104 per ton for the period ended December 31, 2011, compared to 16% of the sales mix at an average selling price per ton of $899 for the period ended December 31, 2010. The products in this category are mainly used in the automobile industry. Although sales percentages increased, absolute sales volume decreased period-on-period as a result of the slow down of the auto sector during the period. Low-carbon cold-rolled steel products accounted for 63% of the current sales mix at an average selling price of $796 per ton for the three months ended December 31, 2011, compared to 68% of the sales mix at an average selling price per ton of $908 for the three months ended December 31, 2010. The decrease in demand in this category during the period was a result of decreased orders of steel used in the production of home appliances and new home construction. Low-carbon hard-rolled steel products accounted for 14% of the current sales mix at an average selling price of $734 per ton for the three months ended December 31, 2011, compared to 2% of the sales mix at an average selling price per ton of $872 for the three months ended December 31, 2010, due to an increased tonnage sold in the international market period-on-period as we saw an improvement of purchasing activity in the global space at the current price level and the return of old customers who had been holding off orders in the prior periods. Subcontracting income revenues accounted for $33,694, or less than 1% of the sales mix for the three months ended December 31, 2011, as compared to $644,566, or 2%, of the sales mix for the three months ended December 31, 2010.

Cost of Goods Sold. Cost of sales decreased by $2,398,613, or 6.3%, period-on-period, to $35,461,052 for the period ended December 31, 2011, from $37,859,665 for the period ended December 31, 2010. Cost of sales represented 105.3% of sales revenues for the period ended December 31, 2011, compared to 95.2% for the period ended December 31, 2010. Average cost of production per ton increased to $889 for the period ended December 31, 2011, compared to an average cost of production per ton of $802 for the period ended December 31, 2010, representing an increase of $87 per ton, or 10.8%, period-on-period.

There were different trends of demand across various product categories during the six months ended December 31, 2011. High-carbon cold-rolled steel products accounted for 13.7% of the current sales mix at an average selling price of $1,056 per ton for the period ended December 31, 2011, compared to 15.9% of the sales mix at an average selling price per ton of $916 for the period ended December 31, 2010. The products in this category are mainly used in the automobile industry. Low-carbon cold-rolled steel products accounted for 71.9% of the current sales mix at an average selling price of $855 per ton for the six months ended December 31, 2011, compared to 65.5% of the sales mix at an average selling price per ton of $903 for the six months ended December 31, 2010. The increase in demand in this category during the period was a result of increased orders of steel used in the production of home appliances due to government subsidies to encourage consumer spending in the prior period. Low-carbon hard-rolled steel products accounted for 6.6% of the current sales mix at an average selling price of $742 per ton for the six months ended December 31, 2011, compared to 4.8% of the sales mix at an average selling price per ton of $791 for the six months ended December 31, 2010, due to an improvement in demand at the current price level in the international market period-on-period. Subcontracting income revenues accounted for $6,243,005, or 8.5%, of the sales mix for the six months ended December 31, 2010, as compared to $1,066,015, or 1.4%, of the sales mix for the six months ended December 31, 2011.

Cost of Goods Sold. Cost of sales increased by $8,194,090, or 11.8%, period-on-period, to $77,566,125 for the period ended December 31, 2011, from $69,372,035 for the period ended December 31, 2010. Cost of sales represented 102.3% of sales revenues for the period ended December 31, 2011, compared to 94.2% for the period ended December 31, 2010. Average cost per ton sold increased to $908 for the period ended December 31, 2011, compared to $773 for the period ended December 31, 2010, representing an increase of $135 per ton, or 17.5%, period-on-period.

Selling Expenses. Selling expenses slightly increased by $107, or 0.1%, period-on-period, to $108,489 for the period ended December 31, 2011, compared to the corresponding period in 2010 of $108,382. This reflects our control of selling expenses as revenue increased 2.9% period-on-period.

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