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China Precision Steel, Inc. (CPSL) Reports 231% Increase in Third Quarter Net Income

China Precision Steel, Inc. (CPSL), a precision cold-rolled steel processing company in the People’s Republic of China listed on the Nasdaq, reports net income of $4.6 million or 10 cents per share for the third quarter of 2008, an increase of 231% from the prior year. Revenues rose 61% year over year to $18.7 million.

”Our strong sales growth in exports of low-carbon, hard-rolled products and subcontracting work significantly increased our total revenue to a record level. We maintained our gross margin and saw a significant improvement in operating margin during the quarter, which flowed through to our bottom line,” commented Dr. Wo Hing Li, China Precision Steel’s Chairman and CEO. ”As our new 1400 cm cold rolled mill ramps up capacity, we are actively developing new products for new markets.”

China Precision Steel intends to spend $20 million worth of capital expenditures in the coming months to install a new continuous annealing line for producing high quality stainless steel. It also plans to install a 1700mm new cold roll mill at its facilities in Shanghai. The company’s existing 1400mm cold roll mill currently operates at 50% capacity utilization, so production on this line can easily ramp up with demand.

‘We continue our strive to find an appropriate sales mix that provides us with improved profitability and stability of cash flows, along with the higher margin provided by high precision and individually customized cold-rolled steel products,” commented Dr. Li. ”With the addition of the continuous annealing line, we will be able to expand our product line to include higher margin, cold-rolled stainless steel. Our strong R&D capabilities and ability to develop precision products provide us with competitive advantages to continue to strengthen our position in the market and improve profitability in the long term.”

Shares of CPSL closed at $4.34 on May 15 and have traded in a range of $2.58 – $12.65 during the past year. With 46 million shares outstanding, CPSL has a market cap of $199 million. Shareholders’ equity as of March 31, 2008 was $111.1 million or $2.56 per share.

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