- Sales of Fracture Proppants Soared 132.8% -
- Net Cash from Operations Turned Positive, Grew to $2.2 million -
- Successfully Collected $5.4 million in Trade & Bills Receivables -
- Teleconference to Be Held Wednesday, May 14, at 8:30 a.m. EDT -
(All figures are in U.S. dollars)
GONGYI, China, May 14 /Xinhua-PRNewswire/ -- China Gengsheng Minerals, Inc. (OTC Bulletin Board: CHGS) (“Gengsheng” or “the Company”), a leading manufacturer in China of industrial materials capable of withstanding high temperature, saving energy and boosting productivity in certain industries such as steel and oil, today reported its financial results for the first quarter of 2008 ended March 31, 2008.
Highlights
-- Total sales grew 12.8% from same period 2007 to $9.6 million;
-- Sales of fracture proppants increased 132.8% from fourth quarter 2007
to $610,000, or 35.6% more than the sales of same product in full year
2007;
-- Net cash provided by operating activities grew to $2.2 million,
compared with negative $1.0 million in same period 2007;
-- Gross margin declined slightly to 37.0% from 39.4% in same period 2007;
-- Net income decreased 5.5% to $1.2 million from same period 2007;
diluted earnings per share were $0.05, compared with $0.07 in same
period 2007.
Outlook
-- The Company reaffirmed its schedule for the new production line for
fine precision abrasive products, with trial production expected to
begin by the end of July and commercial production by October 2008.
“We are pleased with our performance in the first quarter, which is traditionally a slow production and sales period because of the Chinese holidays,” said Mr. Shunqing Zhang, Chairman, President and CEO of Gengsheng. “Specifically, our fracture proppant segment contributed about 56% of our top-line growth and we have achieved positive free cash flow this quarter, thanks to our ongoing receivables collection efforts. In addition, our strong focus on R&D and our increasingly diversified product mix continue to give us a competitive edge.”
Mr. Zhang continued, “As with all Chinese companies, we are facing higher raw material, fuel and utilities prices. To combat these unfavorable trends, we have diversified into premium products, such as pressed blocks, and are expecting to introduce fine precision abrasives sold into new industries in the second half of this year. And because most of our customers are large-scale steel producers, who are usually less prone to inflation pressure and better positioned to benefit from government policy and the structural tightness in global steel supply, we are confident this new phase of higher costs and slower growth will ultimately present more opportunities for us vis-à-vis our competitors. In the meantime, our fracture proppant business has exceeded our expectations and is on track to contribute stronger growth to our overall sales for the rest of the year.”
First Quarter 2008 Financial Results
For the first quarter of 2008, total sales rose 12.8% to $9.6 million from same period 2007.
Sales contribution from monolithic refractory products in first quarter 2008 was 90.2%, versus 96.6% in same period 2007; industrial ceramics, 3.5% versus 3.3% in same period 2007; and fracture proppants, 6.3% versus none in same period 2007, and versus 2.4% in fourth quarter 2007.
Gross profit rose 6.0% to $3.6 million, from $3.4 million in same period 2007. Gross margin was 37.0%, versus 39.4% in same period 2007. The decline in gross margin was primarily because of rising costs for raw materials, especially bauxite, and increasing shipping expenses as a result of high fuel prices.
Selling expenses increased 15.1% to $1.4 million from same period 2007, reflecting costs associated with rising sales, in particular shipping expenses. General and administrative expenses rose 7.3% to $635,000 from same period 2007, mainly because of fees related to meeting the requirements for a publicly traded Company.
The effective tax rate was 11.2%, compared with 12.7% in same period 2007.
Net income decreased 5.5% to $1.2 million from same period 2007. Diluted earnings per share were $0.05, compared with $0.07 in same period 2007.
Net cash provided by operating activities increased to $2.2 million, from negative $1.0 million in same period 2007, benefiting from collection of $5.4 million in trade and bills receivables.
As of March 31, 2008, the Company’s total cash and cash equivalents were $2.8 million compared to $2.0 million at December 31, 2007. Its net working capital was $27.0 million as of March 31, 2008, compared with $25.8 million at December 31, 2007.
Total shareholders’ equity increased to $39.6 million as of March 31, 2008 from $37.2 million at December 31, 2007.
The total shares outstanding on a fully diluted basis as of March 31, 2008 were 24.2 million.
Operating Highlights
On April 28, 2008, the Company announced the completion of an all-new production line for the pressed bricks, a type of “shaped” refractory, for steel production. The annual designed production capacity is 15,000 metric tons. The line has begun its commercial production and sales. The average price for Gengsheng’s specialty pressed bricks is estimated to be more than twice that of the monolithic products.
On April 21, 2008, the Company announced a five-year collaboration agreement with the Ceramics Research Institute of Zhengzhou University (“CRI” or “the Institute”) in Henan province of China, to research and develop innovative ways for improving the manufacturing process and functionality of an array of bauxite-based materials.
Specifically, the Company will work with CRI to optimize and reduce costs for the production of fine precision abrasives, which are bauxite-based, ultra-fine, grain-like materials used to polish the fine-metal or optical equipment surfaces, including solar panels. CRI will also help Gengsheng develop next-generation industrial ceramics that can reduce energy use and pollution. In addition, Gengsheng and CRI will jointly apply for government grants for bauxite-based materials research.
Update on Facilities for Fine Precision Abrasives
The Company is currently in the construction phase to build a production line for fine precision abrasives, with 50,000 metric tons in designed annual capacity. As of May 12, 2008, the Company was well on track to launch trial production by the end of July and commercial production by October 2008.
Conference Call
The Company will host a conference call, to be simultaneously Webcast, on Wednesday, May 14, 2008, at 8:30 a.m. Eastern Daylight Time / 8:30 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-8035 (North America) or +1-201-689-8035 (International) 10 minutes before the call start time. A live Webcast of the conference call will be available on the English version of the Gengsheng Website at http://www.gengsheng.com .
A replay of the call will be available through Wednesday, May 21, 2008 at 11:59 p.m. Eastern Daylight Time. An archived Webcast of the conference call will be available on the Gengsheng Web site at http://www.gengsheng.com . Interested parties may access the replay by dialing +1-877-660-6853 (North America) or + 1-201-612-7415 (International) and entering account number 286 and conference ID number 283208.
About China Gengsheng Minerals, Inc.
China Gengsheng Minerals, Inc. (“Gengsheng”) develops, manufactures and markets a broad range of mineral-based industrial material products, including monolithic refractories, industrial ceramics and fracture proppants. 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 200 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and in 11 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. and Henan Gengsheng High Temperature Materials Co., Ltd.
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” including statements regarding the Company’s ability to market its products and services internationally; the Company’s ability to meet its projected output for the term of the supply contracts; 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.
- FINANCIAL TABLES TO FOLLOW -
China Gengsheng Minerals, Inc.
Consolidated Balance Sheets
As of March 31, As of December 31,
2008 2007
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,821,232 $ 1,964,390
Restricted cash 285,600 274,200
Trade receivables 22,821,723 22,721,052
Bills receivable 1,677,900 6,065,681
Other receivables and prepayments 5,925,453 3,042,086
Advances to staff 1,220,531 728,822
Inventories 10,726,717 8,060,249
Deferred tax assets 5,761 50,554
Total current assets 45,484,917 42,907,034
Deposits for acquisition of property,
plant and equipment 1,746,410 1,073,684
Deposits for acquisition of intangible
asset-patented technology 556,920 534,690
Intangible asset-unpatented technology 357,000 342,750
Property, plant and equipment, net 9,132,266 8,733,367
Land use right 950,188 916,167
Total assets 58,227,701 54,507,692
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables 6,440,540 5,324,108
Bills payable 571,200 548,400
Other payables and accrued expenses 4,147,000 3,505,199
Income taxes payable 524,483 750,140
Non-interest-bearing loans 342,720 515,001
Secured short-term bank loans 6,426,000 6,484,830
Total current liabilities 18,451,943 17,127,678
Deferred tax liabilities -- 14,995
Total liabilities 18,451,943 17,142,673
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTERESTS 185,195 184,643
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value
50,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock - $0.001 par value
100,000,000 shares authorized,
24,038,183 shares issued and
outstanding 24,038 24,038
Additional paid-in capital 19,608,044 19,608,044
Statutory and other reserves 6,723,050 6,723,050
Accumulated other comprehensive income 3,539,505 2,318,600
Retained earnings 9,695,926 8,506,644
Total stockholders' equity 39,590,563 37,180,376
Total liabilities and stockholders'
equity 58,227,701 54,507,692
China Gengsheng Minerals, Inc.
Consolidated Income Statement
Three Months Ended March 31,
2008 2007
(unaudited) (unaudited)
Sales $ 9,614,152 $ 8,520,142
Cost of goods sold 6,055,595 5,163,458
Gross profit 3,558,557 3,356,684
Operating expenses
General and administrative expenses 634,904 591,722
Amortization and depreciation 104,002 52,072
Selling expenses 1,366,516 1,187,866
Total operating expenses 2,105,422 1,831,660
Net operating income 1,453,135 1,525,024
Other income (expenses)
Government grant income 58,998 71,214
Interest income 2,202 2,089
Other income 24,588 2,428
Finance costs (188,498) (143,246)
Total other expenses (102,710) (67,515)
Income before income taxes and minority
interests 1,350,425 1,457,509
Income taxes (150,790) (184,768)
Income before minority interests 1,199,635 1,272,741
Minority interests (10,353) (14,765)
Net income 1,189,282 1,257,976
Other comprehensive income
Foreign currency translation adjustment 1,220,905 200,399
Comprehensive income 2,410,187 1,458,375
Earnings per share-Basic 0.05 0.07
Earnings per share-Diluted 0.05 0.07
Weighted average number of shares -
Basic 24,038,183 16,887,815
Weighted average number of shares -
Diluted 24,180,946 16,887,815
China Gengsheng Minerals, Inc.
Consolidated Cash Flow Statement
Three Months Ended March 31,
2008 2007
(unaudited) (unaudited)
Cash flows from operating activities
Net income $ 1,189,282 $ 1,257,976
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 184,474 139,135
Amortization of land use right 3,982 4,256
Deferred taxes 30,612 57,810
Minority interest 10,353 14,765
Changes in operating assets and liabilities:
Restricted cash -- (3,676,785)
Trade receivables 826,060 (605,350)
Bills receivables 4,541,512 (1,306,009)
Other receivables and prepayments (2,634,491) (237,452)
Advances to staff (789,923) (498,578)
Inventories (2,281,299) (147,356)
Other payables and accrued expenses 642,900 (339,841)
Trade payables 876,088 487,719
Bills payables -- 3,676,785
Income tax payable (408,751) 125,756
Net cash flows (used in) provided by
operating activities 2,190,799 (1,047,169)
Cash flows from investing activities
Payments for acquisition of property,
plant and equipment (914,921) (149,915)
Net cash flows used in investing
activities (914,921) (149,915)
Cash flows from financing activities
Proceeds from bank loans -- 3,225,250
Repayment to bank loans (321,471) --
Repayment of non-interest-bearing loans (189,580) (369,856)
Net cash flows (used in) provided by
financing activities (511,051) 2,855,394
Effect of foreign currency translation
on cash and cash equivalents 92,015 10,514
Net increase in cash and cash
equivalents 856,842 1,668,824
Cash and cash equivalents -beginning of
period 1,964,390 426,099
Cash and cash equivalents - end of
period 2,821,232 2,094,923
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest $ 26,670 $ 88,021
Income taxes 373,371 1,202