China Precision Steel Announces First Quarter Fiscal 2014 Results

Net loss for the first quarter of fiscal year 2014 was $9.6 million, compared to net loss of $4.2 million for the first quarter of fiscal year 2013.  Fully diluted loss per share was $2.47, compared to fully diluted loss per share of $1.09 in the same period a year ago. 

Financial Condition

As of September 30, 2013, China Precision Steel had $66,496 in cash and cash equivalents and $72.0 million in total liabilities.  Stockholders' equity stood at $43.5 million, compared to $53.0 million as of June 30, 2013.  Cash generated from operating activities during the first three months of fiscal year 2014 was $55,331.

Business Outlook

China Precision Steel is focused on expanding its customer base in the domestic steel market, especially in the auto components segment.  The Company is working to recover its outstanding accounts receivables and has tightened its credit policy requiring customers to pay a 30% - 40% deposit with the balance to be paid on delivery.  As of September 30, 2013, China Precision Steel had a backlog of $8.2 million.

"We are working diligently to turnaround our operations by focusing our efforts on increasing sales of high carbon precision steel products and improving our gross margin.  As our sales volume increases, our average cost of sales decreases as a result of economies of scale, which we expect will contribute to an improvement in our gross margin. Additionally, we are working on strengthening our balance sheet by tightening credit offered to new customers and recovering outstanding accounts receivable," Mr. Chen continued.  "Even though China's economic growth is starting to show signs of rebounding and sales are strengthening, our outlook remains cautious as the steel industry continues to struggle with overcapacity combined with pressure on steel prices.  However, addressing these problems remains a top priority for the country's leaders who have stopped approving new production facilities, suspended unauthorized projects and are closing outdated steel mills."

Forward-Looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding The likelihood that the downturn in China's steel industry has halted and that the industry will experience a turnaround and increased demand; the significance of China's implementation of pro-growth measures and the likelihood that it will start benefitting the domestic steel industry in the fourth quarter; the Company's ability to reduce operating costs, improve working capital and increase profitability, and any other statements of non-historical information. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, such as business conditions in China, weather and natural disasters, changing interpretations of generally accepted accounting principles; outcomes of government reviews; inquiries and investigations and related litigation; continued compliance with government regulations; legislation or regulatory environments, requirements or changes adversely affecting the businesses in which China Precision Steel is engaged; cyclicality of steel consumption including overcapacity and decline in steel prices, limited availability of raw material and energy may constrain operating levels and reduce profit margins, environmental compliance and remediation could result in increased cost of capital as well as other relevant risks not included herein. The information set forth herein should be read in light of such risks. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations. 

Elite IR

Leslie J. Richardson, Partner
+852-3183 0283
Leslie.richardson@elite-ir.com

– Financial Tables Follow –

China Precision Steel, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
				September 30,		June 30,
				2013		2013
Assets
Current assets
	Cash and cash equivalents			$66,496		$75,243
	Accounts receivable
		Trade, net of allowances of $35,802,825 and $30,642,373
		at September 30 and June 30, 2013, respectively		24,264,027		29,480,738
	Bills receivable			-		94,089
	Other receivable			1,108,601		1,041,255
	Inventories, net			16,560,141		15,837,201
	Prepaid expenses			325,707		467,890
	Advances to suppliers, net of allowance of $19,803,917 and
		$19,689,609 at September 30 and June 30, 2013, respectively		11,560,317		9,304,847
Total current assets				53,885,289		56,301,263
Property, plant and equipment
	Property, plant and equipment, net			59,289,484		61,366,745
	Construction-in-progress			280,046		255,996
				59,569,530		61,622,741
Intangible assets, net				1,897,885		1,903,675
Goodwill				99,999		99,999
Total assets				$115,452,703		$119,927,678
Liabilities and Stockholders' Equity
Current liabilities
	Short-term loans			$28,111,165		$28,028,722
	Long-term loan - current portion			16,200,000		16,200,000
	Accounts payable and accrued liabilities			9,086,933		7,044,007
	Advances from customers			4,478,871		1,456,420
	Other taxes payables			8,085,729		8,295,220
	Current income taxes payable			6,011,203		5,993,574
Total current liabilities				71,973,901		67,017,943
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