Exhibit 99.1
General Steel Announces Third Quarter 2009 Financial Results
Company achieves record total revenues, shipment volume and income from operations during the third quarter of 2009
Beijing, China, November 6, 2009 -- General Steel Holdings, Inc. (“General Steel” or “the Company”) (NYSE: GSI), one of China’s leading non-state-owned producers of steel products and aggregators of domestic steel companies, today announced its financial results for the third quarter ended September 30, 2009.
Third Quarter of 2009 Highlights
| l | Aggregate shipment volume increased 67.2% year-over-year to a record 1,036,076 metric tons |
| l | Total revenues increased 17.8% to a record $484.8 million from $411.5 million in the third quarter of 2008 |
| l | Gross margin was 8.2%, compared to 5.5% in the previous quarter and -1.5% in the third quarter of 2008 |
| l | Income from operations increased to a record $29.2 million |
| l | Net income was $10.4 million, or earnings per basic and diluted share of $0.23 and $0.22, respectively |
| l | Established a sales office in one of western China’s key economic development zones, Guanzhong-Tianshui Economic Zone |
“We achieved record total revenues, shipment volume and income from operations during the quarter,” said Mr. Henry Yu, General Steel's chairman and chief executive officer. “Our Longmen JV continues to benefit from a micro-trend in the domestic steel space, delivering construction-related steel to an increasing number of rural development and infrastructure projects. This helped gross margin at the subsidiary expand to more than 8% during the quarter, which is four consecutive quarters of improvement. Going forward, the accelerating momentum for significant industry consolidation combined with our unique platform and ability to create ‘win-win’ partnerships, has positioned us as one of the most sought out partners within the industry.”
Selected Financial Results for the Third Quarter and Nine Months Ended September 30, 2009
Total revenues for the third quarter of 2009 increased 17.8% year-over-year to $484.8 million from $411.5 million in the year-ago period. Total revenues for the nine months ended September 30, 2009 increased 11.6% year-over-year to $1.2 billion from $1.1 billion in the year-ago period.
The increase in total revenues was predominantly due to increased shipment volumes at the Company's Shaanxi Longmen Iron and Steel Co., Ltd. joint venture (“Longmen JV”), which in the nine months ended September 30, 2009, increased 61.0% year-over-year as well as the Company's Maoming Hengda Steel Group, Limited (“Maoming”) subsidiary, which in the nine months ended September 30, 2009, increased 617.7% year-over-year. The Company noted that the increase in shipment volumes helped to offset lower selling prices and declines at its Daqiuzhuang Metal subsidiary and Baotou Steel Pipe joint venture. The increase in total revenues was also attributable to the Company’s Maoming acquisition, which took place on June 25, 2008. Total revenues for the nine months ended September 30, 2009 reflect a full nine months of operations, whereas the subsidiary did not exist in the same period last year.
Cost of Sales
Total cost of sales for the third quarter of 2009 increased 6.5% year-over-year to $445.0 million from $417.9 million in the year-ago period. Total cost of sales for the nine months ended September 30, 2009 increased 7.6% year-over-year to $1.1 billion from $1.0 billion in the year-ago period. Cost of sales principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. The increase in cost of sales was mostly attributable to an increase in shipment volumes at the Company's Longmen JV and Maoming subsidiary in response to demand created by earthquake reconstruction and infrastructure-related stimulus projects.
Gross Profit
Gross profit for the third quarter of 2009 was $39.7 million compared to a gross loss of $6.3 million in the year-ago period. Gross profit for the nine months ended September 30, 2009 increased 154.7% year-over-year to $75.2 million from $29.5 million in the year-ago period. Gross margin for the third quarter of 2009 was 8.2%, compared to -1.5% in the year-ago period. Gross margin for the nine months ended September 30, 2009 was 6.2%, compared to 2.7% in the year-ago period.
Operating Expenses
Selling, general and administrative expenses for the third quarter of 2009 decreased 14.9% to $10.5 million, compared to $12.3 million in the year-ago period. Selling, general and administrative expenses for the nine months ended September 30, 2009 increased 3.0% to $29.2 million from $28.4 million in the year-ago period. Selling, general and administrative expenses were 2.2% and 3.0% of total revenues in the third quarter of 2009 and 2008, respectively, compared to 2.4% and 2.6% in the nine months ended September 30, 2009 and 2008, respectively. The Company noted that the year-over-year increase in selling, general and administrative expenses in the nine months ended September 30, 2009 was attributable to the addition of the Company’s Maoming subsidiary, which did not exist in the year-ago period as well as a 61% increase in shipment volume at the Company’s Longmen JV.
Finance and interest expenses for the third quarter of 2009 were $4.2 million, compared to $6.9 million in the year-ago period. Finance and interest expenses for the nine months ended September 30, 2009 were $18.4 million, compared to $19.1 million in the year-ago period. The reduction in finance and interest expense for the nine months ended September 30, 2009 was primarily due to interest paid on bank loans and the early redemption of notes receivables and various bank fees.
Net Income
Net income for the third quarter of 2009 was $10.4 million, compared to net income of $20.5 million in the year-ago period. Net loss for the nine months ended September 30, 2009 was $14.2 million, compared to net loss of $1.6 million in the year-ago period. The decrease in net income was due to a $29.9 million derivative instrument-related gain which occurred in the third quarter of 2008 and is a non-operating, non-cash gain related to a convertible bond and warrants issued in December of 2007.
Basic earnings per share was $0.23 in the third quarter of 2009 and $0.57 in the year-ago period.
Diluted earnings per share was $0.22 in the third quarter of 2009 and $0.57 in the year-ago period. Basic and diluted losses per share were $0.35 in the nine months ended September 30, 2009, compared to $0.05 in the year-ago period.
Balance Sheet
As of September 30, 2009, General Steel had cash and restricted cash of $251.9 million, compared to $145.6 million as of December 31, 2008. Accounts receivable was $12.2 million and accounts receivables - related parties was $2.8 million as of September 30, 2009, compared to accounts receivable of $8.3 million as of December 31, 2008. Convertible notes payable decreased to $912 thousand as of September 30, 2009, compared to $7.2 million as of December 31, 2008. Because $8.3 million notes were converted to 1,940,678 shares of common stock from June 30, 2009 to September 30, 2009, total outstanding shares increased to 45.8 million as of September 30, 2009.
Conference Call
General Steel management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on November 6, 2009 (9:00 p.m. Beijing/Hong Kong Time on November 6, 2009). On the call, management will discuss results and highlights from the quarter and answer questions.
The dial-in number and passcode for the conference call are as follows:
U.S. Toll-free: +1-800-860-2442
Passcode: General Steel Holdings
The conference call will be broadcast live over the Internet and can be accessed by clicking the following link: http://www.visualwebcaster.com/event.asp?id=63645. The Company has also posted a presentation on their corporate website which can be downloaded and used to follow along on the call.
Additionally, an archived webcast of this call will be available on General Steel's website athttp://www.gshi-steel.com.
About General Steel Holdings, Inc.
General Steel Holdings, Inc., (NYSE: GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 6.3 million metric tons aggregate production capacity, its companies serve various industries and produce a variety of steel products including rebar, hot-rolled carbon and silicon sheet, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit www.gshi-steel.com.
Information Regarding 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, and include: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether the Company is able to manage its planned growth efficiently and operate profitable operations, including whether its management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether the Company is able to generate sufficient revenues or obtain financing to sustain and grow its operations; (d) whether the Company is able to successfully fulfill our primary requirements for cash and (e) other risks. 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.
For investor and media inquiries, please contact:
In China:
Ms. Jing Ou-Yang
General Steel Holdings, Inc.
Tel: +86-10-5879-7346
Email: jing.ouyang@gshi-steel.com
Mr. Justin Knapp
Ogilvy Financial, Beijing
Tel: +86-10-8520-6556
Email: gsi@ogilvy.com
In the United States:
Ms. Jessica Barist Cohen
Ogilvy Financial, New York
Tel: +1-646-460-9989
Email: gsi@ogilvy.com
| GENERAL STEEL HOLDINGS INC. AND SUBSIDIARIES |
| | | | |
| CONSOLIDATED BALANCE SHEETS |
| AS OF SEMPTEMBER 30, 2009 AND DECEMBER 31, 2008 |
| (In thousands, except per share data) |
| | | | |
| ASSETS |
| | | September 30 | | | December 31, | |
| | | 2009 | | | 2008 | |
| | | (Unaudited) | | | | |
| CURRENT ASSETS: | | | | | | |
| Cash | | $ | 54,289 | | | $ | 14,895 | |
| Restricted cash | | | 197,584 | | | | 130,700 | |
| Notes receivable | | | 27,373 | | | | 38,207 | |
| Accounts receivable, net of allowance for doubtful accounts of $612 | | | | | |
| and $401 as of September 30, 2009 and December 31, 2008, respectively | | | 12,151 | | | | 8,329 | |
| Accounts receivable - related parties | | | 2,784 | | | | - | |
| Other receivables, net of allowance for doubtful accounts of $566 | | | | | |
| and $564 as of September 30, 2009 and December 31, 2008, respectively | | | 6,855 | | | | 5,099 | |
| Other receivables - related parties | | | 420 | | | | 523 | |
| Dividend receivable | | | 4,957 | | | | 630 | |
| Inventories | | | 221,502 | | | | 59,549 | |
| Advances on inventory purchases | | | 39,230 | | | | 47,154 | |
| Advances on inventory purchases - related parties | | | 17,853 | | | | 2,375 | |
| Prepaid expenses - current | | | 926 | | | | 494 | |
| Deferred tax assets | | | 2,191 | | | | 7,487 | |
| | | | 588,115 | | | | 315,444 | |
| | | | | | | | | |
| PLANT AND EQUIPMENT, net | | | 558,405 | | | | 491,705 | |
| | | | | | | | | |
| OTHER ASSETS: | | | | | | | | |
| Advances on equipment purchases | | | 7,069 | | | | 8,965 | |
| Investment in unconsolidated subsidiaries | | | 17,640 | | | | 13,959 | |
| Prepaid expenses - non current | | | 500 | | | | 1,195 | |
| Prepaid expenses related party - non current | | | 172 | | | | 211 | |
| Long term other receivable | | | 2,674 | | | | 4,873 | |
| Intangible assets, net of accumulated amortization | | | 24,020 | | | | 24,556 | |
| Note issuance cost | | | 964 | | | | 4,218 | |
| Plant and equipment to be disposed | | | 6,455 | | | | 587 | |
| Total other assets | | | 59,494 | | | | 58,564 | |
| | | | | | | | | |
| Total assets | | $ | 1,206,014 | | | $ | 865,713 | |
| | | | | | | | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Short term notes payable | | $ | 280,134 | | | $ | 206,040 | |
| Accounts payable | | | 175,309 | | | | 149,239 | |
| Accounts payable - related parties | | | 19,324 | | | | 15,327 | |
| Short term loans - bank | | | 151,050 | | | | 67,840 | |
| Short term loans - others | | | 110,171 | | | | 87,834 | |
| Short term loans - related parties | | | 8,362 | | | | 7,350 | |
| Other payables | | | 8,655 | | | | 3,183 | |
| Other payable - related parties | | | 2,074 | | | | 677 | |
| Accrued liabilities | | | 14,716 | | | | 7,779 | |
| Customer deposits | | | 199,909 | | | | 141,102 | |
| Customer deposits - related parties | | | - | | | | 7,216 | |
| Deposits due to sales representatives | | | 39,286 | | | | 8,149 | |
| Taxes payable | | | 13,317 | | | | 13,917 | |
| Distribution payable to former shareholders | | | 15,934 | | | | 18,765 | |
| Deferred tax liability | | | 103 | | | | - | |
| Total current liabilities | | | 1,038,344 | | | | 734,418 | |
| | | | | | | | | |
| CONVERTIBLE NOTES PAYABLE, net of debt discount of $2,388 and | | | | | |
| $26,095 as of September 30, 2009 and December 31, 2008, respectively | | | 912 | | | | 7,155 | |
| | | | | | | | | |
| DERIVATIVE LIABILITIES | | | 4,933 | | | | 9,903 | |
| | | | | | | | | |
| COMMITMENT AND CONTINGENCIES | | | | | | | | |
| | | | | | | | | |
| Total liabilities | | | 1,044,189 | | | | 751,476 | |
| | | | | | | | | |
| EQUITY: | | | | | | | | |
| Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares issued | |
| and outstanding as of September 30, 2009 and December 31, 2008, respectively | | | 3 | | | | 3 | |
| Common Stock, $0.001 par value, 200,000,000 shares authorized, 45,789,439 | | | | | |
| and 36,128,833 shares issued and outstanding as of September 30, 2009 | | | | | |
| December 31, 2008, respectively | | | 46 | | | | 36 | |
| Paid-in-capital | | | 79,924 | | | | 37,129 | |
| Statutory reserves | | | 6,827 | | | | 4,903 | |
| Retained (deficits) earnings | | | (5,992 | ) | | | 10,092 | |
| Contribution receivable | | | - | | | | (960 | ) |
| Accumulated other comprehensive income | | | 8,531 | | | | 8,706 | |
| Total equity | | | 89,339 | | | | 59,909 | |
| | | | | | | | | |
| NONCONTROLLING INTERESTS | | | 72,486 | | | | 54,329 | |
| | | | | | | | | |
| Total equity | | | 161,825 | | | | 114,237 | |
| | | | | | | | | |
| Total liabilities and equity | | $ | 1,206,014 | | | $ | 865,713 | |
The accompanying notes are an integral part of these consolidated financial statements.
| GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES |
| |
| CONSOLIDATED STATEMENTS OF OPERATION AND OTHER COMPREHENSIVE INCOME |
| (UNAUDITED) |
| (In thousands, except per share data) |
| | | | | | | | | | | | | |
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| REVENUES | | $ | 361,652 | | | $ | 325,911 | | | $ | 875,374 | | | $ | 781,918 | |
| | | | | | | | | | | | | | | | | |
| REVENUES - RELATED PARTIES | | | 123,099 | | | | 85,610 | | | | 341,118 | | | | 308,198 | |
| | | | | | | | | | | | | | | | | |
| TOTAL REVENUES | | | 484,751 | | | | 411,521 | | | | 1,216,492 | | | | 1,090,116 | |
| | | | | | | | | | | | | | | | | |
| COST OF SALES | | | 340,484 | | | | 335,944 | | | | 822,392 | | | | 762,395 | |
| | | | | | | | | | | | | | | | | |
| COST OF SALES - RELATED PARTIES | | | 104,534 | | | | 81,923 | | | | 318,946 | | | | 298,218 | |
| | | | | | | | | | | | | | | | | |
| TOTAL COST OF SALES | | | 445,018 | | | | 417,867 | | | | 1,141,338 | | | | 1,060,612 | |
| | | | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 39,733 | | | | (6,347 | ) | | | 75,154 | | | | 29,504 | |
| | | | | | | | | | | | | | | | | |
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | 10,487 | | | | 12,328 | | | | 29,219 | | | | 28,364 | |
| | | | | | | | | | | | | | | | | |
| INCOME(LOSS) FROM OPERATIONS | | | 29,246 | | | | (18,675 | ) | | | 45,935 | | | | 1,140 | |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME(EXPENSE), NET | | | | | | | | | | | | | | | | |
| Interest income | | | 826 | | | | 646 | | | | 2,468 | | | | 2,104 | |
| Finance/interest expense | | | (4,174 | ) | | | (6,872 | ) | | | (18,422 | ) | | | (19,149 | ) |
| Change in fair value of derivative liabilities | | | (617 | ) | | | 29,885 | | | | (23,228 | ) | | | 4,769 | |
| Gain from debt extinguishment | | | - | | | | 7,169 | | | | 2,932 | | | | 7,169 | |
| Government grant | | | - | | | | - | | | | 3,433 | | | | - | |
| Income from equity investments | | | 963 | | | | - | | | | 3,661 | | | | - | |
| Other non-operating income, net | | | (2,984 | ) | | | 899 | | | | (2,331 | ) | | | 1,919 | |
| Total other (expense)income, net | | | (5,986 | ) | | | 31,727 | | | | (31,487 | ) | | | (3,189 | ) |
| | | | | | | | | | | | | | | | | |
| INCOME(LOSS) BEFORE PROVISION FOR INCOME TAXES | | | | | | | | | | | | | |
| AND NONCONTROLLING INTEREST | | | 23,260 | | | | 13,051 | | | | 14,448 | | | | (2,049 | ) |
| | | | | | | | | | | | | | | | | |
| PROVISION FOR INCOME TAXES | | | | | | | | | | | | | | | | |
| Current | | | 6,717 | | | | (813 | ) | | | 12,451 | | | | 1,147 | |
| Deferred | | | (2,925 | ) | | | (1,271 | ) | | | (5,265 | ) | | | (1,694 | ) |
| Total provision(benefit) for income taxes | | | 3,792 | | | | (2,084 | ) | | | 7,186 | | | | (547 | ) |
| | | | | | | | | | | | | | | | | |
| NET INCOME(LOSS) BEFORE NONCONTROLLING INTEREST | | | 19,468 | | | | 15,135 | | | | 7,262 | | | | (1,502 | ) |
| | | | | | | | | | | | | | | | | |
| Less: Net income (Loss) attributable to noncontrolling interest | | | 9,088 | | | | (5,329 | ) | | | 21,421 | | | | 116 | |
| | | | | | | | | | | | | | | | | |
| NET INCOME(LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST | | | 10,380 | | | | 20,464 | | | | (14,159 | ) | | | (1,618 | ) |
| | | | | | | | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME (LOSS) : | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustments | | | (247 | ) | | | 96 | | | | (175 | ) | | | 6,554 | |
| Comprehensive (loss) income attributable to noncontrolling interest | | | 1,441 | | | | (295 | ) | | | 334 | | | | 3,911 | |
| | | | | | | | | | | | | | | | | |
| COMPREHENSIVE INCOME(LOSS) | | $ | 11,574 | | | $ | 20,266 | | | $ | (14,000 | ) | | $ | 8,846 | |
| | | | | | | | | | | | | | | | | |
| WEIGHTED AVERAGE NUMBER OF SHARES | | | | | | | | | | | | | | | | |
| Basic | | | 44,973,882 | | | | 35,687,891 | | | | 40,295,924 | | | | 35,157,579 | |
| Diluted | | | 45,040,143 | | | | 35,687,891 | | | | 40,295,924 | | | | 35,157,579 | |
| | | | | | | | | | | | | | | | | |
| EARNINGS PER SHARE | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.23 | | | $ | 0.57 | | | $ | (0.35 | ) | | $ | (0.05 | ) |
| Diluted | | $ | 0.22 | | | $ | 0.57 | | | $ | (0.35 | ) | | $ | (0.05 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
