Longhai Steel Inc., producer of high-quality steel wire products in the People’s Republic of China, today announced that financial results for the three months ended March 31, 2012.
Q1 2012 Financial Highlights:
Net revenues increased 7.5% year-over-year to $135.8 million
Net Income increased 41.9% year-over-year to $2.7 million
Gross profit margins increased by 100 basis points to 4.1%
$0.26 earnings per share compared to $0.19 in Q1 2011
TTM EPS of $1.19 vs. $1.00 in the comparable period a year ago
$4.7 million cash and cash equivalents at March 31, 2012, equal to $0.47 per share
Steven Ross, Executive Vice President of Longhai Steel, began, “We are pleased with the solid start to 2012. Q1 typically represents the slowest quarter of the year as many businesses in China are closed for an extended time to celebrate the Spring Festival. Nevertheless, we sold almost 15% more tonnage in the first quarter compared to a year ago. For a second consecutive quarter, we achieved meaningful margin expansion through positive operating leverage and higher sales contribution from higher margin products. Especially as our second production facility ramps toward full capacity, we expect to deliver strong growth in our sales and margins for the remainder of 2012.”
Financial Summary
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million USD Q1 2012 Q1 2011 % Chg.
(except for EPS)
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Net Sales $135.8 $126.3 +7.5%
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Gross Profit $5.6 $3.9 +40.5%
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Gross Margin 4.1% 3.1% +32.4%
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Operating Income $4.2 $3.2 +34.3%
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Net Income $2.7 $1.9 +41.9%
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EPS (Fully Diluted) $0.26 $0.19 +36.8%
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Three Months ended March 31, 2012
Consolidated net revenues for the three months ended March 31, 2012 was $135.8 million, an increase of approximately $9.5 million from $126.3 million in the corresponding period a year ago. Longhai sold 242,377 metric tons (“MT”) of steel in the first quarter of 2012 compared to 210,880 MT in the same period in 2011.
Gross profits was $5.6 million in the first quarter of 2012, representing a gross margin of 4.1% compared to $3.9 million and 3.1%, respectively, in the first quarter of 2011. The primary reason for the increase in gross profit dollars and margins was a higher spread between steel wire prices and steel billet prices, which represent more than 95% of the Company’s cost of goods sold.
Selling, general and administrative expenses were $0.6 million, 30.6% lower than $0.8 million in the first quarter of 2011. Operating income for the three months ended March 31, 2012 increased 34.3% to $4.2 million.
Net income attributable to Longhai common shareholders was $2.7 million compared to $1.9 million in the first quarter of 2011. Earnings per diluted share was $0.26 based on 10.3 million weighted average shares outstanding.
Longhai Steel had approximately $4.7 million of cash and cash equivalents at March 31, 2012 compared to $2.8 million at December 31, 2011. Cash flows from operations were $2.1 million for the first three months of 2012 as higher net income was offset by high inventories and advances to suppliers related to higher sales activity.
The Company had $8.3 million of short-term bank loans outstanding at March 31, 2012 compared to $3.6 million at December 31, 2011. Total shareholders equity increased to $60.7 million at March 31, 2012 from $57.5 million at December 31, 2011.
Business Updates
Longhai commenced production from its second facility in Xingtai, Hebei province, China in the fourth quarter of 2011. The new state-of-the art steel production facility is capable of producing higher-grade wire products used in various end markets, including steel-belted radial tires. Production in the first quarter of 2012 was limited due to factory closures related to the Chinese New Year and the availability of higher quality steel billet. Longhai Group, a related party controlled by Longhai’s Chairman, is currently expanding its steel billet capacity at a mill adjacent to Longhai’s second production facility. Once this steel billet capacity expansion is complete by early-mid third quarter of 2012, Longhai will have access to sufficient steel billet supply to reach full operating capacity at its second facility.
To learn more about the company, visit www.longhaisteelinc.com
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