China Gerui Advanced Materials Group Limited, a leading high precision, cold-rolled strip steel producer in China, announced that a strategic update as to its recent export activities and that it will be revising its fiscal 2012 revenue and earnings per share guidance.

2012 Strategic Update
As noted in the company’s first quarter earnings release, China Gerui experienced a contraction in its average selling price relative to previous quarters attributable to the slowing growth of the Chinese economy. Among several strategies that the company intends to deploy to address the current market environment is to diversify its customer base and revenue on a global basis and pursue opportunities to penetrate the high-end cold-rolled steel sector worldwide. As a step in this direction, the company recently announced that it began to export its high end specialized steel products to customers located in Turkey and India in the second quarter.

In today’s further announcement, China Gerui recently received a purchase order from a leading U.S. packaging company for its high precision cold-rolled steel strip products. The order stipulates that the finished wide-strip steel will have a width up to 915 mm and thickness of approximately 0.155 mm which is intended to be used as cable wrap after further value-added processing by the U.S. customer. We note that the purchase order is for testing and trial purposes by the customer, which is a fairly standard buying procedure, and the company believes that the purchase order, while not immediately having a material impact on operating results, will lead to regular and continuous orders going forward.

"The leading industry position of this U.S. company is testimony to China Gerui’s growing reputation in terms of both our product quality and enhanced specialization capabilities," Chairman and CEO Mingwang Lu Lu stated. "Our adoption by a wider customer base fits our strategy of being a global specialized steel producer with the objective to reach new markets and fully optimize our new capacity and technologies."

2012 Guidance Revision
For the fiscal year 2012, China Gerui has lowered its revenue guidance to be in the $290 million to $305 million range, below its previously announced revenue guidance range of $395 million to $410 million. The company has also lowered its earnings per share guidance for 2012 to be in the $0.75 to $0.85 range, below its previously announced earnings per share guidance range of $1.32 to $1.37.

Lu commented, "Our lowered guidance reflects the industry wide reduction in steel prices which has led to a decrease in the company’s average selling price primarily due to slowing macroeconomic conditions in China. Although the company’s sales volume, a key indicator of demand, has been sustainable so far in 2012, our cost-plus pricing methodology was unable to offset raw material cost declines which has caused our average selling price to decline significantly."

"Despite the currently challenging market environment, we are confident that our value-added capabilities in the high-end specialized steel segment will enable us to succeed in our segment in the long-term as we leverage our new production capabilities to develop new market opportunities over time," Lu concluded.