China Precision Steel has announced its results for the second quarter of fiscal 2008 ended December 31, 2007.
Revenues for the second quarter of 2008 were US$11.9 million, down 20.6% from US$15.0 million in the second quarter of fiscal 2007. The decrease in sales revenue is attributed to changes in sales mix to high quality and high margin products.
"During the quarter, our margins improved significantly as our sales mix included higher margin high-carbon cold-rolled products. Because of the complexity and longer production times involved with these products, our overall sales volume declined, resulting in lower revenues from the year ago period. Our revenues were also adversely impacted by a US$2 million VAT and sales tax adjustment," commented Dr. Wo Hing Li, China Precision Steel's chairman and CEO. "Production capacity of our second cold-rolled mill reached 50% at quarter end. The increased capacity will enable us to expand production of high quality and value-added precision steel products, which will enhance profitability in the future."
China Precision Steel is a niche precision steel processing company principally engaged in the production and sale of high precision cold-rolled steel products and provides value added services such as heat treatment and cutting medium and high carbon hot-rolled steel strips. China Precision Steel produces high precision ultra-thin, high strength cold- rolled steel products primarily for automotive components, food packaging materials, saw blades and textile needle manufacturing companies in China. However, China Precision Steel is expanding into overseas markets such as Nigeria, Thailand, Indonesia and the Philippines, and intends to expand into Japan, the European Union and the United States in the future.
Gross profit for the quarter was US$3.4 million, unchanged from the same period a year ago. Gross margin increased to 28.4% from 22.7% in the second quarter of fiscal 2007. The improved gross profit margin is attributed to the increased sales of higher margin, higher quality products.
As of December 31, 2007, China Precision Steel had US$40.2 million in cash and cash equivalents, total liabilities of US$40.4 million and working capital of US$56.8 million. Shareholders' equity stood at US$100.2 million compared to US$51.1 million as of June 30, 2007.
China Precision Steel's new 1400 mm cold-roll mill with 150,000 metric tons of design capacity became operational at the beginning of October 2006 and is currently operating at 50% utilization. The cold-roll mill is expected to take two to three years to realize its maximum production capacity. The company has installed a continuous annealing line used for production of precision stainless steel. The annealing line is in trial production and is expected to begin contributing to revenues in third quarter fiscal 2008.