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

November 16, 2009 | About:
10qk

10qk

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China Precision Steel Inc. (CPSL) filed Quarterly Report for the period ended 2009-09-30.

CHINA PRECISION STEEL is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel produces high precision ultra-thin, high strength (7.5 mm to 0.05 mm) cold- rolled steel products primarily for automotive components, food packaging materials, saw blades and textile needle manufacturing companies in the People's Republic of China. China Precision Steel Inc. has a market cap of $106.16 million; its shares were traded at around $2.28 with a P/E ratio of 45.6 and P/S ratio of 1.39.

Highlight of Business Operations:

Except as otherwise indicated by the context, all references in this Quarterly Report to (i) the “Group,” the “Company,” “we,” “us” or “our” are to China Precision Steel, Inc., a Delaware corporation, and its direct and indirect subsidiaries; (ii) “PSHL” are to our subsidiary Partner Success Holdings Limited, a BVI company; (iii) “Blessford International” are to PSHL s subsidiary Blessford International Limited, a BVI company; (iv) “Shanghai Blessford” are to Blessford International s subsidiary Shanghai Blessford Alloy Company Limited, a PRC company; (v) “Chengtong” are to PSHL s subsidiary Shanghai Chengtong Precision Strip Company Limited, a PRC company; (vi) “Tuorong” are to PSHL s subsidiary Shanghai Tuorong Precision Strip Company Limited, a PRC company; (vii) “SEC” are to the United States Securities and Exchange Commission; (viii) “Securities Act” are to the Securities Act of 1933, as amended; (ix) “Exchange Act” are to the Securities Exchange Act of 1934, as amended; (x) “RMB” are to Renminbi, the legal currency of China; (xi) “U.S. dollar,” “USD,” “US$” and “$” are to the legal currency of the United States; (xii) “China,” “Chinese” and “PRC” are to the People s Republic of China; and (xiii) “BVI” are to the British Virgin Islands.

During the period ended September 30, 2009, we sold a total of 22,293 tons of products, a decrease of 1,923 tons from 24,216 tons during the same period a year ago, due to slower demand and reduced orders on hand. We believe that such decrease was mainly caused by decreases in product orders from auto components manufacturers and from the Chinese auto industry that experienced weak demand and excess capacity during the period ended September 30, 2009. Lower sales and high raw material costs have led to a gross profit of $703,359 and a net loss of $275,191 for the period ended September 30, 2009.

Sales volume decreased by 1,923 tons, or 7.9%, period-on-period to 22,293 tons for the period ended September 30, 2009 from 24,216 tons for the period ended September 30, 2008 and, as a result, sales revenues decreased by $8,308,430, or 32.8%, period-on-period to $17,041,989 for the period ended September 30, 2009 from $25,350,419 for the period ended September 30, 2008. The decrease in sales revenues is mainly attributable to a decrease in demand for high-carbon cold-rolled products used in automobile components production due to the slowdown of the automobile industry, as well as lower average sale prices during the period ended September 30, 2009.

There were different trends of demand across various product categories during the period ended September 30, 2009. High-carbon cold-rolled steel products accounted for 25% of the current sales mix at an average selling price of $1,731 per ton for the period ended September 30, 2009, compared to 14% of the sales mix at an average selling price per ton of $1,326 for the period ended September 30, 2008. The products in this category are mainly used in the automobile industry and the decrease in sales volume period-on-period was less compared to most other product categories as the Chinese government s automobile stimulus policies rolled out, which increased demand. Low-carbon cold-rolled steel products accounted for 37% of the current sales mix at an average selling price of $598 per ton for the period ended September 30, 2009, compared to 43% of the sales mix at an average selling price per ton of $1,016 for the period ended September 30, 2008. Low-carbon hard-rolled steel products accounted for 18% of the current sales mix at an average selling price of $672 per ton for the period ended September 30, 2009, compared to 16% of the sales mix at an average selling price per ton of $1,147 for the period ended September 30, 2008. Subcontracting income revenues decreased to $1,648,876, or 10%, of the sales mix for the period ended September 30, 2009 as compared to $4,678,819, or 18%, of the sales mix for the period ended September 30, 2008.

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