GSIH General Steel Holdings Inc (CE)

BEIJING, Nov. 14, 2014 /PRNewswire/ -- General Steel Holdings, Inc. ("General Steel" or the "Company") (NYSE: GSI), a leading non-state-controlled steel producer in China, today announced its financial results for the third quarter ended September 30, 2014. The Company will file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 with the United States Securities and Exchange Commission following market close on Friday, November 14, 2014.

Henry Yu, Chairman and Chief Executive Officer of General Steel commented, "We continued to witness improving demand for our products in Western China, as our sale volume grew more than 15% year-over-year to 1.45 million metric tons, the highest ever quarterly volume for General Steel. This quarter, a number of smaller and unqualified steel mills were forced to exit the market, in light of which, we strategically offered attractive discounts in neighboring markets to expand our geographic footprint."

Mr. Yu continued, "We anticipate the price of iron ore will continue on its downward trend, and with our better market position, improved industry fundamentals, and higher production efficiency, we are solidly positioned to earn greater profits in 2015. We expect to harvest the fruits of our continuous cost cutting measures and equipment upgrades and optimization over the past couple of years, and we look forward to a broadening geographic footprint, improving efficiency, expanding operating leverage, and ultimately rising profitability," Mr. Yu concluded.

John Chen, Chief Financial Officer of General Steel, commented, "As we strategically discounted our products in order to establish a foothold into neighboring markets, our average selling price declined by 20.7% year-over-year in the third quarter. However, as the cost of iron ore decreased by 25.3% year-over-year, we were able to achieve leverage from the increased sales volume and expanded our quarterly gross margin by 40 basis points and gross profits by 16.8% year-over-year."

Mr. Chen then stated, "This December, we will complete an upgrade to an existing 450 cubic-meter blast furnace with a much larger and more efficient 1,800 cubic-meter blast furnace. This new equipment and expanded volume will enable a higher utilization of raw materials, better conversion rate, and lower energy consumption during iron smelting, and ultimately generating further savings in our unit production cost. As we complete our investment and upgrade plans in 2014, we enter 2015 with genuine optimism."

Third Quarter 2014 Financial Information

• Sales volume increased by 15.1% year-over-year to approximately 1.45 million metric tons, compared with 1.26 million metric tons in the third quarter of 2013.
• Sales totaled $562.8 million, compared with $610.1 million in the third quarter of 2013.
• Gross profit was $9.6 million on gross margin of 1.7%, compared with $8.2 million in the third quarter of 2013.
• Income from operations totaled $7.9 million, compared with $27.7 million in the third quarter of 2013.
• Net loss attributable to the Company was $(3.5) million, or $(0.06) per diluted share, compared with a net income of $3.8 million, or $0.07 per diluted share in the third quarter of 2013.
• As of September 30, 2014, the Company had cash and restricted cash of $405.4 million.

First Nine Months 2014 Financial Information

• Sales volume increased by 3.2% year-over-year to approximately 4.07 million metric tons, compared with 3.95 million metric tons in the first nine months of 2013.
• Sales were $1.7 billion, compared with $1.9 billion in the first nine months of 2013.
• Gross profit was $15.1 million on gross margin of 0.9%, compared with a gross loss of $(23.2) million in the first nine months of 2013.
• Loss from operations was $(29.4) million, compared with income from operations of $12.7 million in the first nine months of 2013.
• Net loss attributable to the Company was $(58.1) million, or $(1.04) per diluted share, compared with a net loss of $(32.9) million, or $(0.60) per diluted share in the first nine months of 2013.

Third Quarter 2014 Financial and Operating Results

Total Sales

Total sales for the third quarter of 2014 decreased by 7.7% year-over-year to $562.8 million, compared with $610.1 million in the third quarter of 2013. The year-over-year sales decrease was primarily due to a decrease in average selling price of rebar.

• Total sales volume in the third quarter of 2014 was 1.45 million metric tons, an increase of 15.1% compared with 1.26 million metric tons in the third quarter of 2013.
• The average selling price of rebar at Longmen Joint Venture in the third quarter of 2014 decreased to approximately $388.1 per metric ton, down by 20.7% from $489.6 per metric ton in the third quarter of 2013.

Gross Profit

Gross profit for the third quarter of 2014 was $9.6 million, or 1.7% of total sales, as compared with $8.2 million, or 1.3% of total sales in the third quarter of 2013. The improvement in gross margin during the quarter was mainly attributable to the decreased unit cost of manufactured rebar.

Operating Expenses and Income from Operations

Selling, general and administrative expenses for the third quarter of 2014 were $16.4 million, a decrease of 16.4% from $19.7 million in the third quarter of 2013. Driven by effective headcount expense control, general and administrative expenses decreased to $9.7 million in the third quarter of 2014, compared with $12.4 million in the third quarter of 2013. Selling expenses were $6.7 million in the third quarter of 2014, compared with from $7.3 million in the same period of 2013.

Other operating income from a change in the fair value of profit sharing liability during the third quarter of 2014 was $14.7 million, compared with $39.2 million recognized in the same period of last year.

Correspondingly, income from operations for the third quarter of 2014 was $7.9 million, compared with $27.7 million for the third quarter of 2013.

Finance Expense

Finance and interest expense in the third quarter of 2014 was $19.4 million, of which, $5.2 million was the non-cash interest expense on capital lease, as compared with $5.1 million in the same period of 2013, and $14.2 million was the interest expense on bank loans and discounted note receivables, as compared with $17.7 million in the same period of 2013. The decrease in finance and interest expenses was mainly a result of reduced finance charges from banks and fewer early redemptions on note receivables.

Net Loss/Income and Net Loss/Income per Share

Net loss attributable to General Steel for the third quarter of 2014 was $(3.5) million, or $(0.06) per diluted share, based on 55.9 million weighted average shares outstanding. This compares to a net income attributable to General Steel of $3.8 million, or $0.07 per diluted share, based on 55.1 million weighted average shares outstanding in the third quarter of 2013.

First Nine Months 2014 Financial and Operating Results

Total Sales

Total sales for the first nine months of 2014 decreased by 8.9% year-over-year to $1.7 billion, compared with $1.9 billion in the first nine months of 2013. The year-over-year sales decreases were due to decreases in average selling price of rebar.

• Total sales volume in the first nine months of 2014 was 4.07 million metric tons, an increase of 3.2% compared with 3.95 million metric tons in the first nine months of 2013.
• The average selling price of rebar at Longmen Joint Venture in the first nine months of 2014 decreased to approximately $428.3 per metric ton, down by 13.6% from $495.6 per metric ton in the first nine months of 2013.

Gross Profit/Loss

Gross profit for the first nine months of 2014 was $15.1 million, or 0.9% of total sales, as compared with a gross loss of $(23.2) million, or (1.2%) of total sales in the first nine months of 2013. The improvement in gross margin was mainly attributable to decreased unit costs of rebar manufactured.

Operating Expenses and Loss/Income from Operations

Selling, general and administrative expenses for the first nine months of 2014 were $56.3 million, slightly increased from $59.5 million in the first nine months of 2013. General and administrative expenses were $31.6 million, compared with $34.9 million in the same period of 2013. Selling expenses increased slightly to $24.7 million, compared to $24.6 million in the same period of 2013.

Other operating income from a change in the fair value of profit sharing liability during the first nine months of 2014 was $11.8 million, compared with $95.4 million in the same period of last year.

Correspondingly, loss from operations for the first nine months of 2014 was $(29.4) million, compared with income from operations of $12.7 million for the first nine months of 2013.

Finance Expense

Finance and interest expense in the first nine months of 2014 was $74.7 million, of which, $16.0 million was the non-cash interest expense on capital lease, as compared with $15.3 million in the same period of 2013, and $58.7 million was the interest expense on bank loans and discounted note receivables, as compared with $53.6 million in the first nine months of 2013.

Net Loss and Net Loss per Share

Net loss attributable to General Steel for the first nine months of 2014 was $(58.1) million, or $(1.04) per diluted share, based on 55.8 million weighted average shares outstanding. This compares to a net loss of $(32.9) million, or $(0.60) per diluted share, based on 54.9 million weighted average shares outstanding in the first nine months of 2013.

Balance Sheet

As of September 30, 2014, the Company had cash and restricted cash of approximately $405.4 million, compared to $431.3 million as of December 31, 2013. The Company had an inventory balance of $250.0 million as of September 30, 2014, compared to $212.9 million as of December 31, 2013.

Closing of Private Placement Offering of $7.5 Million

The Company closed its previously announced private placement (the "Private Placement") with Mr. Yu in October 2014, following the satisfaction of certain closing conditions. In the Private Placement, Mr. Yu purchased 5 million shares of the Company's common stock at a purchase price of $1.50 per share, for total proceeds of $7.5 million. The shares of the Company's common stock purchased and issued in the Private Placement are subject to the six-month holding period provisions of Rule 144 of the Securities Act of 1933, as amended, beginning as of October 24, 2014.

The Company intends to use such proceeds from the Private Placement mainly to fund its expansion into high-growth bulk commodity e-commerce.

Conference Call and Webcast:

General Steel will hold a corresponding conference call and live webcast at 8:00 a.m. EST on Friday, November 14, 2014 (which corresponds to 9:00 p.m. Beijing/Hong Kong Time on Friday, November 14, 2014) to discuss the results and answer questions from investors. Listeners may access the call by dialing:

The call will also be available as a live, listen-only Webcast under the "Events and Presentations" page on the "Investor Relations" section of the Company's Website at http://www.corpasia.net/us/GSI/irwebsite/index.php?mod=event. Following the live Webcast, an online archive of the Webcast will be available for 90 days.

A replay of the conference call may be accessed through November 21, 2014 by dialing:

About General Steel Holdings, Inc.

General Steel Holdings, Inc., headquartered in Beijing, China, produces a variety of steel products including rebar, high-speed wire and spiral-weld pipe. The Company has operations in China's Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality, with seven million metric tons of crude steel production capacity under management. For more information, please visit www.gshi-steel.com.

To be added to the General Steel email list to receive Company news, or to request a hard copy of the Company's Annual Report on Form 10-K, please send your request to generalsteel@asiabridgegroup.com.

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, including those disclosed in the Company's Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission.  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.

Contact Us

General Steel Holdings, Inc.

Joyce Sung
Tel: +1-347-534-1435
Email: joyce.sung@gshi-steel.com

Asia Bridge Capital Limited

Carene Toh
Tel: +1-888-957-3362
Email: generalsteel@asiabridgegroup.com

SOURCE General Steel Holdings, Inc.