Total Sales increased 16% to $14.9 Million from 3Q08
Net Income increased 40% to $1.7 Million from 3Q08
Teleconference to be held Monday, November 16, 2009, at 8:00 a.m. EST
GONGYI, China, Nov. 14 /PRNewswire-Asia/ -- 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, today reported its unaudited financial results for the third quarter ended September 30, 2009.
Third Quarter 2009 Highlights:
-- Sales revenue grew 16.0% to $14.9 million from the same period in 2008
-- Net income attributable to Company's stockholders grew 39.5% to $1.67
million from the same period 2008
-- Diluted EPS was $0.07 vs. $0.05 in 3Q08
-- Cash on hand was $1.9 million at September 30, 2009
"Our third quarter results benefited from solid sales growth in fracture proppants," said Mr. Shunqing Zhang, Chairman, President and CEO of Gengsheng. "Our fracture proppant sales made a new record sale of $2.63 million for the third quarter, thanks to strong domestic demand. In addition, we continued to bring new refractory products into trial use for our steel customers, with eyes on entering whole new market segments that show significant growth potential. Lastly, we maintained our cost control, slashing operating expenses by 5% from last year, which contributed to our net profit outgrowing the top-line in the last quarter."
Mr. Zhang continued, "Going forward, we keep a positive outlook on demand from the steel and oil sectors in China thanks to the continuing strong growth in the macro economy. And we are pleased that our new products, the fine precision abrasives, have already been currently in trial use by intentional customers. We look forward to receiving orders for our abrasives from these potential customers."
Third Quarter 2009 Results
For the third quarter of 2009, sales revenue was $14.9 million, an increase of 16.0% from the same period of 2008. China Gengsheng is organized into four business segments: Monolithic refractory, Industrial ceramics, Fracture proppant and Fine precision abrasives. The revenue increase this quarter came mainly from the increased demand of the company's fracture proppant products, which contributed 17.6% of sales in 3Q09 compared to 7.5% in 3Q08. Proppant sales growth was 174.2% year-over-year, and 74.6% quarter-over-quarter. Monolithic refractory products contributed 81.6% of sales in 3Q09 compared to 90.5% in 3Q08. Industrial ceramics contributed 0.7% of sales in 3Q09 compared to 2.1% in 3Q08.
Cost of sales for the quarter increased 21.7% to $10.7 million from $8.8 million in the third quarter of 2008, mainly due to the increase in raw material prices.
Gross profit was $4.2 million, an increase of 3.6% from the same period of 2008. Gross margin was 28.3%, compared with 31.7% in the same period of 2008. The decrease in gross margin was mainly due to the increase in raw material prices and the gross margin decrease from the Company's refractory segment.
Selling expenses in the third quarter of 2009 were $1.5 million, flat from the same period of 2008. As a percentage of revenues, the Company's selling expenses decreased to 9.8% for the three months period ended September 30, 2009, as compared with 11.8% for the same period in 2008. The decrease in selling expenses as a percentage of revenues was primarily because of the reduction in market development expenses for fracture proppants as the Company gained scale in selling the new proppant products. General and administrative expenses ("G&A") were $1.1 million, also flat from the same period of 2008. Operating expenses declined 5.0% to $2.6 million from the same period of 2008.
In the third quarter of 2009, income before income taxes and non-controlling interest was approximately $1.71 million for the three months period ended September 30, 2009, an increase of 33.8% from $1.28 million for the same period in 2008. The increase was primarily attributable to an increase in sales and other income. The Company recognized income of $0.27 million, from writeback of unsecured interest-bearing loan and government grant income of $44,082.
Net income attributable to the Company's stockholders was $1.7 million, an increase of 40.0% from the same period of 2008. Net income margin for the quarter was 11.2% compared to 9.3% in the third quarter of 2008.
Diluted EPS was $0.07, compared with $0.05 in the same period of 2008.
Nine Months 2009 Results
For the first nine months of 2009, sales revenue was $41.7 million, an increase of 13.2% from the same period of 2008. Monolithic refractory products contributed 82.3% of sales in the first nine months of 2009, vs. 88.5% in the same period of 2008. Industrial ceramics contributed 1.9% of sales, vs. 3.3% in the same period of 2008. Fracture proppants contributed 15.8% of sales, vs. 8.3% in the same period of 2008.
Cost of sales for the first nine months increased 23.5% to $29.3 million from $23.7 million in the first nine months of 2008 primarily due to the increase in raw material prices.
Gross profit was $12.4 million, a decrease of 5.5% from the same period of 2008. Gross margin was 30.0%, compared with 35.5% in the same period of 2008.
Selling expenses were $4.4 million, a decrease of 2.1% from the same period of 2008. General and administrative expenses were $3.3 million, an increase of 11% from the same period of 2008. As a percentage of total sales, operating expenses were 18.5%, compared with 20.3% in the same period of 2008.
Net income attributable to the Company's stockholders was $4.7 million, a slightly decrease of 0.7% from the same period of 2008. Diluted EPS was $0.19, vs. $0.19 in the same period of 2008.
As of September 30, 2009, the Company had total cash and cash equivalents of $1.9 million, compared with $2.0 million at June 30, 2009. Total shareholders' equity increased to $48.2 million at September 30, 2009, from $46.2 million at June 30, 2009. Total shares outstanding on a fully diluted basis as of September 30, 2009 were 24.0 million.
Recent Developments
On October 1, 2009, the Company announced a major breakthrough in industrial material technology with the invention of a new type of castable. The new castable product, called Si-Enhanced Anti-Creep High-Aluminum Castable (SEAC HAC), is created by adding silicon and other minerals to the traditional raw materials such as bauxite so that the finished product has the characteristic of much lower probability of creep, which is a gradual change of shape under stress during high-temperature industrial processes, for heating furnaces at steel mills and other industrial plants.
On September 22, 2009, the Company announced the introduction of a new refractory product for its steel company customers to cut energy costs and increase efficiency during steel-making. The Company held a teach-in on the new, high-performance, thermo-insulating and light castables at China's largest steel and iron conglomerate, Shanghai Baosteel, where the Company's CEO, Vice President of Product Development and technology adviser shared product specifications and testing results with Shanghai Baosteel's directors of the procurement department, the technology department and various other managers and in-house experts.
On September 14, 2009, the Company announced the receipt of $337,000 (RMB 2.3 million) from the Henan Provincial Government in subsidy for the development and commercialization of the Company's new product line, the fine precision abrasives.
On September 1, 2009, the Company announced the establishment of a new government-supported R&D center, housed on the premise of the Company's subsidiary, Henan Gengsheng Refractories Co., Ltd., in Gongyi City, Henan Province, for the purpose of integrated R&D and speedy commercialization of mineral-based industrial materials. The new center, named Henan Monolithic Refractory Materials Technology Research Center, is one of the 64 key industrial engineering and technology centers designated by the Henan Provincial Government this year. The government is expected to provide grants and low-interest loans for the said institutes to develop new products and key innovations.
Targeting the high-growth fine precision abrasives market, the Company announced in July that its new production line to process fine abrasives was complete and in trial production. Fine precision abrasives are for producing a super-fine, super-consistent finish applicable in a broader range of areas including machine manufacturing, electronics, optical glass, architecture, semiconductors, silicon chips, plastics and lenses. The facilities have an annual production capacity of 20,000 metric tons, and the initial product should be delivered in the end of 2009. The Company has also announced its first abrasives sales contract with a Taiwan-based customer. The term of the contract is five years, with 300 to 1,000 tons of the product delivered each month. Currently, the company has produced standard products, which is being trialed by intentional customers.
Conference Call
The Company will host a conference call on Monday, November 16, 2009, at 8:00 a.m. Eastern Standard Time / 9:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-9205 (North America) or +1-201-689-8054 (International) 10 minutes before the call start time.
A replay of the call will be available through Monday, November 23, 2009, at 11:59 p.m. EST. 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 337318.
About China Gengsheng Minerals, Inc.
China Gengsheng Minerals, Inc. ("Gengsheng") develops, manufactures and markets a broad range of high-tech 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 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" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company's ability to meet its projected output for the term of the supply contract; 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.
China Gengsheng Minerals, Inc.
Condensed Consolidated Balance Sheets
As of September As of December
30, 2009 31, 2008
(Stated in US Dollars) (Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $1,858,655 $955,732
Restricted cash 7,921,800 1,760,400
Trade receivables 35,332,790 30,026,675
Bills receivable 1,515,654 631,560
Other receivables and prepayments 5,611,674 3,608,247
Inventories 12,022,902 12,170,193
Deferred tax assets 31,729 54,869
Total current assets 64,295,204 49,207,676
Deposits for acquisition of property,
plant and equipment 28,062 6,297,205
Deposits for acquisition of land use
right 216,960 --
Goodwill 441,089 441,089
Intangible asset 953,550 953,550
Property, plant and equipment, net 21,299,180 10,654,692
Land use right 940,922 956,916
TOTAL ASSETS $88,174,967 $68,511,128
LIABILITIES AND EQUITY
Current liabilities:
Trade payables $10,645,831 $9,548,854
Bills payable - Note 5 9,975,600 3,520,800
Other payables and accrued expenses 4,856,178 6,010,364
Advances from a director 73,004 2,460,820
Income taxes payable 402,754 349,293
Non-interest-bearing loans 216,750 290,100
Collateralized bank loans 13,789,800 2,640,600
Unsecured interest-bearing loan -- 220,050
Deferred tax liabilities 21,486 21,486
TOTAL LIABILITIES 39,981,403 25,062,367
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 - Note 12 24,038 24,038
Additional paid-in capital 19,608,044 19,608,044
Statutory and other reserves 7,207,206 7,207,206
Accumulated other comprehensive
income 4,359,162 4,355,605
Retained earnings 16,742,897 12,078,137
Total China Gengsheng Minerals, Inc.
stockholders' equity 47,941,347 43,273,030
NONCONTROLLING INTEREST 252,217 175,731
TOTAL EQUITY 48,193,564 43,448,761
Total liabilities and equity $88,174,967 $68,511,128
China Gengsheng Minerals, Inc.
Condensed Consolidated Statements of Income and Comprehensive Income
Nine months ended Three months ended
September 30, September 30,
2009 2008 2009 2008
(Stated in US Dollars) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue
Sales $41,684,358 $36,816,119 $14,916,423 $12,862,425
Cost of goods sold (29,321,083) (23,735,421) (10,694,531) (8,785,806)
Gross profit 12,363,275 13,080,698 4,221,892 4,076,619
Operating expenses
General and
administrative
expenses 3,323,180 2,982,198 1,086,686 1,172,772
Selling expenses 4,378,227 4,474,375 1,464,701 1,511,888
Total operating
expenses 7,701,407 7,456,573 2,551,387 2,684,660
Net operating income 4,661,868 5,624,125 1,670,505 1,391,959
Other income
(expenses)
Government grant
income 813,838 61,586 44,082 --
Interest income 38,971 9,151 18,762 6,205
Other income 328,598 111,764 266,854 75,998
Finance costs - Note
13 (735,816) (623,983) (293,423) (198,548)
Total other income
(expenses) 445,591 (441,482) 36,275 (116,345)
Income before income
taxes and
noncontrolling
interest 5,107,459 5,182,643 1,706,780 1,275,614
Income taxes - Note 14 (366,214) (474,738) (38,024) (102,919)
Net income 4,741,245 4,707,905 1,668,756 1,172,695
Net income
attributable to
noncontrolling
interest (76,485) (9,416) (1,220) 22,614
Net income
attributable to
Company’s
stockholders $4,664,760 $4,698,489 $1,667,536 $1,195,309
Net income $4,741,245 4,707,905 1,668,756 1,172,695
Other comprehensive
income
Foreign currency
translation
adjustment (3,557) 1,975,554 54,020 (103,328)
Comprehensive income $4,737,688 $6,683,459 $1,722,776 $1,069,367
Comprehensive income
attributable to
noncontrolling
interest (76,486) (9,416) (981) 22,614
Comprehensive income
attributable to
Company’s
stockholders $4,661,202 $6,674,043 $1,721,795 $1,091,981
Earnings per share-
Basic - Note 15 $0.19 $0.20 $0.07 $0.05
Earnings per share-
Diluted - Note 15 $0.19 $0.19 $0.07 $0.05
Weighted average
number of shares -
Basic 24,038,183 24,038,183 24,038,183 24,038,183
Weighted average
number of shares -
Diluted 24,038,183 24,157,176 24,038,183 24,157,176
China Gengsheng Minerals, Inc.
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30,
2009 2008
(Stated in US Dollars) (Unaudited) (Unaudited)
Cash flows from operating activities
Net income attributable to the
Company’s stockholders $4,664,760 $4,698,489
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation 689,917 654,461
Amortization of land use right 15,982 16,282
Deferred taxes 23,123 2,443
Noncontrolling interest 76,486 9,416
Government grant income (813,838) --
Loss on disposal of property plant
and equipment 1,062 --
Write back of unsecured interest-
bearing loan (219,885) --
Changes in operating assets and
liabilities:
Restricted cash (6,156,780) (1,720,440)
Trade receivables (5,302,136) (4,444,439)
Bills receivables (883,432) 5,816,915
Other receivables and prepayments (2,001,926) (1,108,402)
Inventories 147,181 (3,660,509)
Other payables and accrued expenses (1,153,321) 2,705,555
Trade payables 1,096,155 2,371,340
Bills payables 6,449,960 3,440,880
Income tax payable 53,422 (290,439)
Net cash flows (used in) provided by
operating activities (3,313,270) 8,491,552
Cash flows from investing activities
Payments for deposits of acquisition
of land use right (216,798) --
Payments for acquisition of property,
plant and equipment (5,179,541) (4,494,284)
Proceeds from disposal of property,
plant and equipment 116,498 --
Net cash paid to acquire an
subsidiary -- (875,294)
Net cash flows used in investing
activities (5,279,841) (5,369,578)
Cash flows from financing activities
Proceeds from bank loans 14,805,590 --
Repayment of bank loans (3,738,045) (4,917,591)
Repayment to a director (2,386,025) --
Repayment of non-interest-bearing
loans -- (208,802)
Government grant received 813,838 645,165
Net cash flows provided by (used in)
financing activities 9,495,358 (4,481,228)
Effect of foreign currency
translation on cash and cash
equivalents 676 (38,795)
Net increase (decrease) in cash and
cash equivalents 902,923 (1,398,049)
Cash and cash equivalents - beginning
of period 955,732 1,964,390
Cash and cash equivalents - end of
period $1,858,655 $566,341
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest $648,622 $637,130
Income taxes $310,978 $768,911
