Scrolling through another batch of earnings reports from big board companies in the steel business once again showcases the out-of-sync valuation of Longhai Steel and its industry peers.
Olympic Steel (NASDAQ: ZEUS) reported Q4 2011 net sales totaled $319.9 million, the highest ever for its fourth quarter, an increase of 48.7% from the $215.2 million reported for the year-ago period. Fourth quarter 2011 net income totaled $0.6 million, or $0.05 per diluted share, compared to a net loss of $1.6 million, or $0.15 per diluted share, in last year’s fourth quarter. Net sales for the year totaled $1.26 billion in 2011, a new record, increasing 56.7% from $805 million in 2010. For 2011, net income increased by $22.9 million to $25.0 million, or $2.28 per diluted share, compared to net income of $2.1 million, or $0.20 per diluted share, for 2010. Shares are trading around $24 each with a market cap of approximately $260 million.
China Gerui Advanced Materials Group (NASDAQ:CHOP) reported 2011 Q3 revenue of $101.1 million as compared to $61.9 million in the same quarter of 2010. Gross profit for the quarter was reported at $32.1 million; up from $18.6 million in the 2011 quarter. Operating income increased to $28.7 million from $16.5 million. Notably, the company was recently upgraded to NASDAQ Global Select. China Gerui has no long-term debt, but more than $216 million in short-term debt. Shares are trading at $3.57 with a market cap of approximately $210 million.
Schnitzer Steel Industries (NASDAQ:SCHN) said that it expects fully diluted earnings per share for the second quarter to be approximately $0.28 – $0.35. The company will report its earnings next week. Shares are trading at around $40 with a market cap of approximately $1.1 billion.
For its third quarter ended Feb. 29, 2012, Worthington Industries (NYSE: WOR) reported a profit of $25.9 million, or 37 cents a share, down from $26.3 million, or 35 cents a share, a year earlier on a 7.3% gain in revenues. Revenue at Worthington’s steel processing business, its biggest by sales, rose 22% to $367.3 million. Shares are currently trading at $19.14 each with a market cap of approximately $1.33 billion.
The unsung hero in this business looks to be Longhai Steel (OTCBB: LGHS), a producer of high-quality steel wire products in the People’s Republic of China. Today, the company announced its financial results for the year ended December 31, 2011, which included steel wire sales revenue of $608 million compared with $475 million for 2010, an increase of $133 million, or 28 percent. 2011 gross profit rang-in at $18.7 million compared to gross profit of $18.6 million for 2010. 2011 net income was $11.2 million, or $1.12 per fully diluted share, compared with net income of $11.3 million for 2010.
As of December 31, 2011, shareholder’s equity equaled $57.5 million, or $5.72 per fully diluted share. Longhai has no long-term debt. Shares are trading at $1.60 each with a market cap of $14.8 million.
Shares have risen in value for LGHS recently, but this company still seems to have tremendous upside potential to get on par in valuation with others in the industry. The new plant getting fully online could potentially send annual sales near the $1 billion mark.
Mr. Steven Ross, Executive Vice President of Longhai, said in today’s release, “We are pleased to report record sales for 2011, largely driven by the opening of our new production facility in the fourth quarter of 2011. As the newly-opened steel wire facility continues to ramp output, we expect to see continued year-over-year improvements in operating results throughout 2012. During the first quarter of 2012 we also reconstituted our Board of Directors and transitioned to a new auditing firm, Marcum Bernstein & Pinchuk, LLP, both significant steps toward our goal of moving to a senior exchange.”
Ross continued, “Once fully ramped, the new facility will increase our overall capacity by approximately 60%, and have the capability to produce such high margin products as alloy steel, cold forging steel and welding rods. Over the next two quarters we expect to begin utilizing higher quality steel billets, which will enable us to produce higher quality and higher margin products for additional markets beyond construction and infrastructure.”
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