.jpg?lang=en-US&ext=.jpg)
China Industrial Steel Reports 2012 Results
04/05/2013 - China Industrial Steel, Inc. announced its earnings for the year ended 31 December 2012, noting that recent Chinese government efforts to spur economic growth should boost demand for the steel plate, wire and bar products it makes.
China Industrial Steel, Inc. announced its earnings for the year ended 31 December 2012. The company, whose shares trade in the U.S. OTC market under the stock symbol "CDNN", filed its Form 10-K with the Securities and Exchange Commission on 1 April 2013.
Commenting on the results, Liu Shenghong, chief executive officer and chairman of the company stated, "I am pleased to report our earnings for 2012. I believe the fourth quarter of 2012 was pivotal for Chinese steel manufacturers in general and China Industrial Steel in particular. Although approximately one-third of steel manufacturers are still operating at a loss, it does seem that prices have bottomed out and demand for steel is trending up as the Government's efforts to spur economic growth take hold.”
Chairman Liu went on to say, "Our ability to remain profitable through the recent global economic crisis is a testament to the expertise and determination of our team and the quality of our products. In 2011 we had the foresight to transition our steel bar production to steel wire production to adapt to changes in market demand. This adjustment helped offset the negative impact of market conditions in early 2012 and contributed to the jump in profitability in the fourth quarter."
Chairman Liu concluded, "The steel plate, wire and bar that we manufacture today are used primarily in the construction of buildings and in large scale infrastructure projects, such as roads and bridges, all of which are being cultivated by recently announced government stimulus programs. We will continue working to mitigate the effect of market pricing of both raw material and finished products on our financial results through the management of our production mix and systematic shift to specialty steel products. I am confident that these tactics will continue to facilitate our return to solid revenue growth and improved margins."
Financial Discussion
China Industrial Steel reported total revenues of $649,318,792 in 2012, a decrease of $173,788,250, or 21% compared to $823,107,042 in 2011. Of the decreased revenues, approximately $117 million, or 68% of the decrease was due to a decrease in the average sales price of steel products; $51 million, or 29% of the decrease was due to decrease in the quantity of steel products sold, and $5 million, or 3% was due to the decrease in the revenue of byproducts.
The company reduced its production of steel plates in 2012 due to lower sales price and lack of market demand. The Company sold 658,425 tons of steel plates in 2012, a decrease of 109,949 tons or 14%, compared to 768,374 tons in 2011. Revenue from steel plates was $335,591,348 in 2012, a decrease of $139,354,856, or 29% compared to $474,946,204 in 2011. The average unit sales price of steel plates was approximately $510 per ton in 2012, a decrease of $108 per ton, or 17%, from $618 in 2011.
In 2011, the company modified its steel bar production line to produce steel wires to adapt to the market demand which helped offset the negative market impact in 2012. In 2012, revenue from steel wires was $236,557,650, an increase of $115,686,667, or 96%, compared to $120,870,983 in 2011. The Company sold 453,595 tonnes of steel wires, an increase of 256,525 tonnes, or 130%, compared to 197,070 in 2011. However, the increase in sales of steel wires was offset by the decrease in the unit sales price. The average unit sales price of steel wires was approximately $522per ton in 2012, a decrease of $91 per ton, or 15%, from $613 per ton in 2011.
The company reported net income of $5,934,990 for the year ended December 31, 2012, $3,128,709 of that was earned in the fourth quarter, offsetting the loss reported in the third quarter. Net income was down considerably as compared to 2011, primarily as a result of the decrease in sales price of the Company's products as discussed above. The average sales price per ton decreased by 15%, 5 percentage points (150%) higher than the 10% decrease in average cost of sales per ton.
China Industrial Steel, Inc., through its wholly owned subsidiary, Handan Hongri Metallurgy Co., Ltd., produces and sells steel plate and steel bar for domestic and export customers. The company currently operates three production lines from its headquarters on approximately 1,000 acres in Handan City in the Hebei Province, China, where steel production is a significant component of the regional economy.
