Metalnewsnet 13 May ：

General Steel Holdings Inc one of China leading non state owned producers of steel products and aggregators of domestic steel companies announced its financial results for the first quarter ended March 31st 2010.

Highlights from the First Quarter of 2010:

1. Total revenues increased 40.3% to USD 453.0 million from USD 322.8 million in the first quarter of 2009

2. Aggregate shipment volume increased 44.2% to 1.03 million tonnes from 0.72 million tonnes in the first quarter of 2009

3. The Company subsidiary General Steel Co Ltd entered into a lease agreement with Tianjin Daqiuzhuang Steel Plates Co Ltd to reduce the Company overhead costs while providing a recurring monthly revenue stream of approximately USD 0.2 million resulting from payments due there under

4. The Company subsidiary Maoming Hengda Steel Group Ltd entered into a strategic alliance agreement with Zhuhai Yueyufeng Iron and Steel Co Ltd whereby Yueyufeng will invest approximately USD 4.4 million to fund construction of a new 400,000 tonnes capacity rebar production line

5. Cash and restricted cash remain strong at USD 317.7 million

Mr Henry Yu chairman & CEO of General Steel said "We continue to achieve robust top-line growth and greater shipment volume driven by massive, multi-year infrastructure investment in rural China. It was a challenging quarter as the price for raw materials increased while average selling prices remained relatively flat from January to the middle of March. By the end of March, the market began to improve as average selling prices increased at a rapid rate and we were able to pass our costs onto our customers and achieve a positive gross margin. Going forward, we expect average selling prices to remain at healthier levels and anticipate that the release of the government newly crafted steel industry consolidation guidelines in the coming months will bring about new growth opportunities."

Selected Financial Results for the First Quarter of 2010

1. Revenues

Total revenues in the first quarter of 2010 increased 40.3% to USD 453.0 million from USD 322.8 million in the first quarter of 2009.

The YoY increase in total revenues was due to a 40.1% increase in shipment volumes at the Company Longmen Joint Venture. Revenues at Longmen JV comprised approximately 95.9% of total revenues in the first quarter of 2010.

2. Cost of Revenues

Total cost of revenues for the first quarter of 2010 increased 44.3% to USD 447.3 million from USD 309.9 million in the first quarter of 2009.

Cost of revenues principally consists of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing-related depreciation and other fixed costs. Cost of iron ore and coke accounted for approximately 80.0% of the Company's total cost of revenues in the first quarter of 2010.

3. Gross Profit

Gross profit for the first quarter of 2010 decreased 55.6%YoY to USD 5.7 million from USD 12.9 million in the first quarter of 2009. Gross margin for the first quarter of 2010 was 1.3%, compared to 4.0% in the first quarter of 2009 and 3.0% in the fourth quarter of 2009.

The Company noted that gross profit was adversely affected as the cost of iron ore and coke increased while average selling prices of rebar remained relatively flat from January to the middle of March 2010. In addition, General Steel noted that depreciation costs of its two new blast furnaces at its Longmen JV which were capitalized in the first quarter of 2009 were not capitalized in the first quarter of 2010.

4. Operating Expenses

Selling, general and administrative expenses for the first quarter of 2010 increased 32.4% to USD 12.1 million from USD 9.2 million in the first quarter of 2009. Selling, general and administrative expenses were 2.7% of total revenues in the first quarter of 2010 compared to 2.8% of total revenues in the first quarter of 2009.

A large portion of the increase in selling, general and administrative expenses for the first quarter of 2010 was attributable to increased production volume at the Longmen JV.

Finance and interest expenses for the first quarter of 2010 increased 273.0% to USD 11.0 million from USD 2.9 million in the first quarter of 2009. The increase was primarily due to an increase in short term loans and discounting notes borrowed by the Longmen JV.

5. Net Income

Net loss for the first quarter of 2010 was USD 5.5 million compared to net income of USD 7.3 million in the first quarter of 2009. Basic and diluted losses per share for the first quarter of 2010 were USD 0.11 compared to basic and diluted earnings per share of USD 0.20 in the first quarter of 2009.

As noted above, increasing raw material costs and relatively stable average selling prices combined with other expenses were the primary reason for the decrease in net income during the first quarter of 2010.

6. Balance Sheet

As of March 31st 2010, General Steel had cash and restricted cash of USD 317.7 million compared to USD 274.2 million as of December 31st 2009. Accounts receivable was USD 26.9 million as of March 31st 2010 compared to USD 8.5 million as of December 31st 2009.

The Company had an inventory balance of USD 237.7 million as of March 31st 2010 compared to USD 208.1 million on December 31st 2009. This balance is comprised of raw material and finished products.

(from steelguru)