WEB NEWS Investor Alert
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing
The Notice provides that the Exchange is aware that the Company is in the process of voluntarily delisting and expects the Company to file the Form 25 with the SEC on May 27, 2014. Accordingly, on June 9, 2014, the Exchange expects to remove the Company from listing. However, in the event that the Company reverses course and seeks to maintain its listing, it will become subject to the procedures and requirements of Section 1009 of the Company Guide.
The Exchange halted trading in the Company’s common stock effective prior to market open on May 19, 2014.
On May 21, 2014, the Company issued a press release announcing the matters described in the above. A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 5.02 Departure of Directors or Certain officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On May 12, 2014, Mr. Jeffrey Friedland tendered his resignation as director of the Company, chairman of the Audit Committee and member of the Compensation Committee and the Nominating Committee. His resignation is not in connection with any disagreement with the Company on any matter relating to the Company’s operations, policies or practice. On May 21, 2014, the Board of Director of the Company resolved to accept Mr. Friedland’s resignation, effective May 12, 2014.
Investor Alert
GONGYI,
China ,
May 14, 2014 /
PRNewswire/ -- China GengSheng Minerals, Inc. (NYSE MKT: CHGS) (the "Company" or "GengSheng"), a leading
China -based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, had previously announced on
May 9, 2014 that it had given formal written notice to The NYSE MKT LLC ("MKT") of its intention to voluntarily delist its common stock from MKT. The Company was subsequently informed by MKT that in order for its formal written notice to be effective, it had to provide a certified copy of the Board of Directors resolutions approving the action. The Company is presently arranging for the said resolutions to be furnished and will make a subsequent announcement on when the Form 25 will be filed with the Securities and Exchange Commission ("SEC") and the official delisting of the Company's common stock will become effective.
Investor Alert
GONGYI, China, May 9, 2014 /PRNewswire / -- China GengSheng Minerals, Inc. (NYSE MKT: CHGS) (the "Company" or "GengSheng"), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced that it has given formal written notice to The NYSE MKT LLC ("MKT") of its intention to voluntarily delist its common stock from MKT.
The Company intends to file a Form 25 with the Securities and Exchange Commission ("SEC") on or about May 9, 2014 to effect the voluntary delisting of its common stock from MKT. The official delisting of the Company's common stock will become effective approximately ten days thereafter, on May 9, 2014. The Company will continue to file periodic reports with the SEC pursuant to the requirements of Section 12(g) of the Securities Exchange Act of 1934, as amended.
The Company anticipates that starting from the delisting from MKT on May 9, 2014, the Company's common stock will begin quotation on the over-the-counter ("OTC") market tier, OTCQB. Operated by OTC Markets Group Inc., the OTCQB is a market tier for OTC traded companies that are registered and reporting with the SEC. It is anticipated that the Company's common stock will continue to trade under the symbol CHGS on the computerized OTCQB system.
Investor Alert
GONGYI, China, April 18, 2014 /PRNewswire / -- China GengSheng Minerals, Inc. (NYSE MKT: CHGS) (the "Company" or "GengSheng"), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced that its audited consolidated financial statements for the fiscal year ended December 31, 2013, included in the Company's Annual Report on Form 10-K, which was filed on April 15, 2014 with the Securities and Exchange Commission, contains an audit opinion from its independent public accounting firm which includes explanatory language related to going concern resulting from the Company's working capital deficiency at December 31, 2013 and a net loss for the year ended December 31, 2013.
This announcement is made pursuant to NYSE MKT Company Guide Section 610(b), which requires separate disclosure of receipt of an audit opinion containing going concern explanatory language.
Comments & Business Outlook
China GengSheng Minerals, Inc.
Consolidated Statements of Operations and Other Comprehensive Income (Loss)
For the Year
For the Year
Ended
Ended
December 31, 2013
December 31, 2012
Net sales
$
60,881,377
$
73,534,827
Cost of goods sold
52,814,862
60,885,990
Gross margin
8,066,515
12,648,837
Operating expenses
Bad debt expense
6,946,970
1,730,835
Selling expenses
4,803,553
9,629,997
Research and development
1,394,331
923,403
General and administrative expenses
6,957,202
7,318,775
Impairment of fixed assets
-
287,247
Total operating expenses
20,102,056
19,890,257
Loss from operations
(12,035,541
)
(7,241,420
)
Other (income) expense
Interest income
(1,181,389
)
(813,049
)
Interest expense and banker's acceptance notes discount
7,743,649
7,300,886
Government grant
(1,162,913
)
(558,665
)
CHGS share of net loss from a non-consolidated entity
100,868
59,143
Loan guarantee income
(338,285
)
(562,847
)
Loan guarantee expense
256,785
461,578
Other (income) expense
496,875
(25,845
)
Other (income) expense, net
5,915,590
5,861,201
Loss before income tax provision
(17,951,131
)
(13,102,621
)
Income tax provision
291,340
492,289
Net loss
Net loss before non-controlling interest
(18,242,471
)
(13,594,910
)
Net loss attributable to non-controlling interest
(61,378
)
(55,456
)
Net loss attributable to CHGS stockholders
(18,181,093
)
(13,539,454
)
Other comprehensive loss
FX translation loss before non-controlling interest
727,659
292,439
FX translation loss attributable to non-controlling interest
11,809
11,422
Other comprehensive loss attributable to CHGS stockholders
715,850
281,017
Comprehensive loss
Comprehensive loss before non-controlling interest
(17,514,812
)
(13,302,471
)
Comprehensive loss attributable to non-controlling interest
(49,569
)
(44,034
)
Comprehensive loss attributable to CHGS stockholders
$
(17,465,243
)
$
(13,258,437
)
Net loss per common share - Basic and diluted:
Net loss per common share - basic and diluted
$
(0.65
)
$
(0.49
)
Weighted Average Common Shares Outstanding - basic and diluted
26,803,044
26,803,044
Management Discussion and Analysis
Net sales. Net sales decreased approximately $12.6 million, or 17.2%, to approximately $60.9 million in 2013 from approximately $73.5 million in 2012. Excluding foreign currency translation, the revenue decreased approximately $13.8 million, or 18.8% compared with 2012. The decrease was mainly attributable to the decreased sales from all of our segments.
In our refractory segment, we sold 74,281 metric tons of refractory products in 2013, a 5.0% decrease compared with 78,186 metric tons sold in 2012. The revenue from our refractory products decreased to approximately $33.1 million in 2013 from approximately $38.9 million in 2012. Excluding foreign currency translation, the revenue decreased approximately $6.4 million, or 16.4% compared with 2012. The average selling prices decreased to $446 per metric ton in 2013, representing a 10.3% decrease compared with $497 per metric ton in 2012. Excluding foreign currency translation, the average selling prices decreased to $437 per metric ton, or a decrease of 12.0% compared with 2012.
In our fracture proppant segment, we sold 88,388 metric tons of fracture proppant products in 2013, compared with 73,958 metric tons in 2012. The increase in sales volume was primarily driven by the increased sales in domestic market as the demand for our products from oil producers in China increased in 2013. Revenue from fracture proppant products was approximately $22.7 million in 2013, a decrease of approximately $1.8 million or 7.2% compared with approximately $24.5 million in 2012. Excluding foreign currency translation, the revenue decreased approximately $2.2 million, or 9.0% compared with 2012. Average selling price decreased to $257 per metric ton in 2013, compared with $331 per metric ton in 2012. Excluding foreign currency translation, the average selling prices decreased $79 per metric ton, or 23.9% compared with 2012. The decrease in average selling price was primarily attributable to the increased sales of low-grade products and generally lower market price for fracture proppant products in 2013.
In our industrial ceramics segment, revenue was approximately $1.1 million in 2013 compared with approximately $1.8 million in 2012. The decrease was primarily attributable to the lower demand for our industrial ceramics products in 2013.
In our fine precision abrasives segment, we realized sales of 1,702 metric tons in 2013, generating revenue of approximately $3.9 million. We sold 3,054 metric tons of fine precision abrasives products for approximately $8.3 million in 2012. The decrease in sales revenue was a result of weak demand for our fine precision abrasives products under current market condition and declined sales to a major customer.
Net loss attributable to shareholders. Our net loss attributable to shareholders was approximately $18.2 million in 2013, an increase of approximately $4.7 million from approximately $13.5 million in 2012. Excluding foreign currency translation, our net loss attributable to shareholders was approximately $17.8 million. The increase in net loss attributable to shareholders was attributable to the factors described above.
Comments & Business Outlook
China GengSheng Minerals, Inc. Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Three months ended
Nine months ended
September 30,
September 30,
2013
2012
2013
2012
Sales
$
14,599,946
$
23,626,721
$
41,009,314
$
56,957,599
Cost of goods sold
(11,721,181
)
(18,503,171
)
(33,513,372
)
(46,063,149
)
Gross profit
2,878,765
5,123,550
7,495,942
10,894,450
Operating expenses
General and administrative expenses
1,788,216
1,692,502
5,253,506
5,358,592
Research and development expenses
402,179
307,632
1,049,550
706,911
Selling expenses
2,091,967
3,598,525
5,801,084
8,869,668
Total operating expenses
4,282,362
5,598,659
12,104,140
14,935,171
Loss from operations
(1,403,597
)
(475,109
)
(4,608,198
)
(4,040,721
)
Other (expenses) income
Government grant income
57,276
163,597
131,382
548,911
Guarantee income
80,670
141,765
273,115
443,051
Guarantee expenses
(1,045
)
(136,940
)
(154,090
)
(373,748
)
CHGS’s share of net loss of a non-consolidated entity
(25,078
)
(24,293
)
(75,267
)
(32,860
)
Interest income
345,426
185,982
868,286
424,931
Other income (expenses)
(27,046
)
1,153
(81,801
)
44,997
Finance costs
(2,065,795
)
(1,989,431
)
(5,258,766
)
(5,689,561
)
Total other expenses
(1,635,592
)
(1,658,167
)
(4,297,141
)
(4,634,279
)
Loss before income taxes and noncontrolling interest
(3,039,189
)
(2,133,276
)
(8,905,339
)
(8,675,000
)
Income taxes
(37,499
)
(59,170
)
(516,633
)
(273,536
)
Net loss before noncontrolling interest
(3,076,688
)
(2,192,446
)
(9,421,972
)
(8,948,536
)
Net (income) loss attributable to noncontrolling interest
3,587
(8,047
)
34,510
41,441
Net loss attributable to Company’s common stockholders
$
(3,073,101
)
$
(2,200,493
)
$
(9,387,462
)
$
(8,907,095
)
Net loss before noncontrolling interest
$
(3,076,688
)
$
(2,192,446
)
$
(9,421,972
)
$
(8,948,536
)
Other comprehensive income
Foreign currency translation adjustments
223,244
(86,017
)
755,623
174,425
Comprehensive loss
(2,853,444
)
(2,278,463
)
(8,666,349
)
(8,774,111
)
Comprehensive loss attributable to noncontrolling Interest
(7,174
)
(7,964
)
(57,211
)
(15,914
)
Comprehensive loss attributable to Company’s
$
(2,860,618
)
$
(2,286,427
)
$
(8,723,560
)
$
(8,790,025
)
Net loss per share - Basic and diluted
$
(0.11
)
$
(0.08
)
$
(0.33
)
$
(0.33
)
Weighted average common shares outstanding -
26,803,044
26,803,044
26,803,044
26,803,044
Investor Alert
GONGYI, China , Oct. 4, 2013 /PRNewswire/ -- China GengSheng Minerals, Inc. (NYSE MKT: CHGS) (the "Company" or "GengSheng"), a leading China -based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced it received a public warning letter from NYSE MKT LLC (the "Exchange") onOctober 1, 2013 as a result of its failure to have its audit committee or a comparable body of its board of directors review and approve certain loan guarantees provided by the Company's chairman and CEO, Mr. Shunqing Zhang pursuant to Sections 120 and 1009 of the Exchange's Company Guide (the "Company Guide"). The Exchange has warned that any future failure to comply with Section 120 of the Company Guide may result in the prompt initiation of delisting procedures against the Company. Management of the Company has taken the warning letter under advisement and will implement internal procedures to prevent further breaches of Section 120 of the Company Guide.
Comments & Business Outlook
China GengSheng Minerals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
Three months ended
Six months ended
June 30,
June 30,
2013
2012
2013
2012
Sales revenue
$
15,975,951
$
19,620,215
$
26,409,368
$
33,330,878
Cost of goods sold
(12,240,442
)
(16,565,669
)
(21,792,191
)
(27,559,978
)
Gross profit
3,735,509
3,054,546
4,617,177
5,770,900
Operating expenses
General and administrative expenses
1,744,305
1,937,379
3,465,290
3,666,090
Research and development expenses
430,917
236,283
647,371
399,279
Selling expenses
2,101,448
2,790,552
3,709,117
5,271,143
Total operating expenses
4,276,670
4,964,214
7,821,778
9,336,512
Loss from operations
(541,161
)
(1,909,668
)
(3,204,601
)
(3,565,612
)
Other (expenses) income
Government grant income
58,186
-
74,106
385,314
Guarantee income
93,902
147,732
192,445
301,286
Guarantee expenses
(61,505
)
(107,630
(153,045
)
(236,808
)
Equity in net loss of a non-consolidated affiliate
(24,996
)
(8,567
)
(50,189
)
(8,567
)
Interest income
171,895
186,375
522,860
238,949
Other income (expenses)
(51,252
)
37,905
(54,755
)
43,844
Finance costs
(1,765,382
)
(1,949,938
)
(3,192,971
)
(3,700,130
)
Total other expenses
(1,579,152
)
(1,694,123
)
(2,661,549
)
(2,976,112
)
Loss before income taxes and noncontrolling interest
(2,120,313
)
(3,603,791
)
(5,866,150
)
(6,541,724
)
Income taxes
(399,153
)
(202,018
)
(479,134
)
(214,366
)
Net loss before noncontrolling interest
(2,519,466
)
(3,805,809
)
(6,345,284
)
(6,756,090
)
Net loss attributable to noncontrolling interest
13,733
12,039
30,923
49,488
Net loss attributable to Company’s common stockholders
$
(2,505,733
)
$
(3,793,770
)
$
(6,314,361
)
$
(6,706,602
)
Net loss before noncontrolling interest
$
(2,519,466
)
$
(3,805,809
)
$
(6,345,284
)
$
(6,756,090
)
Other comprehensive income
Foreign currency translation adjustments
393,652
20,630
532,379
260,442
Comprehensive loss
(2,125,814
)
(3,785,179
)
(5,812,905
)
(6,495,648
)
Comprehensive loss attributable to noncontrolling interest
(27,467
)
12,055
(50,037
)
(7,950
)
Comprehensive loss attributable to Company’s common stockholders
$
(2,153,281
)
$
(3,773,124
)
$
(5,862,942
)
$
(6,503,598
)
Loss per share - Basic and diluted attributable to Company’s common stockholders
$
(0.08
)
$
(0.14
)
$
(0.22
)
$
(0.25
)
Weighted average number of shares - Basic and diluted
26,803,044
26,803,044
26,803,044
26,803,044
Auditor trail
Item 4.01 Changes in Registrant’s Certifying Accountant
On July 19, 2013, the Audit Committee and the Board of Directors of China GengSheng Minerals, Inc. (the “Company”) appointed Li and Company, PC (“Li Co.”) as the new independent registered public accounting firm for the Company effective as of July 19, 2013. During the two most recent fiscal years and through the date of its engagement, the Company did not consult with Li Co. regarding (i) the application of accounting principles to a specific transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements, and none of the following was provided to the Company (a) a written report, or (b) oral advice that Li Co. concluded was an important factor considered by the Company in reaching a decision as to an accounting, auditing, or financial reporting issue; or (iii) any matter that was subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as described in Item 304(a)(1)(v) of Regulation S-K.
Auditor trail
Item 4.01
On June 28, 2013, China GengSheng Minerals, Inc. (the “Company”) received a letter from EFP Rotenberg, LLP (“EFP”) informing the Company that EFP resigned as the Company’s independent registered public accounting firm, effective immediately.
The report of EFP the Company’s financial statements for the year ended December 31, 2012 did not contain adverse opinions or disclaimers of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles. EFP did not issue any report on the Company’s financial statements for the year ended December 31, 2011.
For the years ended December 31, 2011 and 2012 and the subsequent interim period through June 28, 2013, there were no disagreements between the Company and EFP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to EFP’s satisfaction, would have caused them to make reference to the subject matter of the disagreements in connection with its report. For the years ended December 31, 2011 and 2012 and the subsequent interim period through June 28, 2013, there were no "reportable events" as that term is described in Item 304(a)(1)(v) of Regulation S-K.
The Company has provided EFP with a copy of this report and the Company has requested that the EFP furnish a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements above. A copy of this letter dated June 28, 2013 is filed as an exhibit to this report.
Resolution of Legal Issues
GONGYI, China, June 12, 2013 /PRNewswire -FirstCall/ -- China GengSheng Minerals, Inc. (NYSE MKT: CHGS) (the "Company" or "GengSheng"), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced it received a letter from NYSE MKT LLC on June 6, 2013 notifying the Company that the Company has resolved the continued listing deficiency with respect to Sections 134 and 1101 of the NYSE MKT Company Guide referenced in its letter to the Company dated May 21, 2013 in that it has filed its Form 10-Q for the period ended March 31, 2013.
Comments & Business Outlook
Three Months Ended March 31,
2013
2012
Sales revenue
$
10,433,417
$
13,710,663
Cost of goods sold
9,551,749
10,994,309
Gross profit
881,668
2,716,354
Operating expenses
General and administrative expenses
1,720,985
1,728,711
Research and development expenses
216,454
162,996
Selling expenses
1,607,669
2,480,591
Total operating expenses
3,545,108
4,372,298
Loss from operations
(2,663,440
)
(1,655,944
)
Other (expenses) income
Government grant income
15,920
385,314
Guarantee income
98,543
153,554
Guarantee expenses
(91,540
)
(129,178
)
Equity in net loss of a non-consolidated affiliate
(25,193
)
-
Interest income
350,965
52,574
Other income (expenses)
(3,503
)
5,939
Finance costs
(1,427,589
)
(1,750,192
)
Total other expenses
(1,082,397
)
(1,281,989
)
Loss before income taxes and noncontrolling interest
(3,745,837
)
(2,937,933
)
Income taxes
(79,981
)
(12,348
)
Net loss before noncontrolling interest
(3,825,818
)
(2,950,281
)
Net loss attributable to noncontrolling interest
17,190
37,449
Net loss attributable to Company’s common stockholders
$
(3,808,628
)
$
(2,912,832
)
Net loss before noncontrolling interest
$
(3,825,818
)
$
(2,950,281
)
Other comprehensive income
Foreign currency translation adjustment
138,727
239,812
Comprehensive loss
(3,687,091
)
(2,710,469
)
Comprehensive loss attributable to noncontrolling interest
(22,570
)
(20,005
)
Comprehensive loss attributable to Company’s common
$
)
$
)
Loss per share - Basic and diluted
$
)
$
)
Weighted average number of shares - Basic and diluted
26,803,044
26,803,044
Investor Alert
GONGYI, China, May 25, 2013 /PRNewswire / -- China GengSheng Minerals, Inc. (NYSE MKT: CHGS) (the "Company" or "GengSheng"), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced it received a letter from NYSE MKT LLC ("NYSE MKT" or the "Exchange") on May 21, 2013 notifying the Company that it is not in compliance with Section 134 and 1101 of the Exchange's Company Guide (the "Company Guide") because the Company has yet to file it Form 10-Q for the quarter ended March 31, 2013.
Receipt of the NYSE MKT's letter does not have any immediate effect upon the listing of the Company's common stock. Pursuant to the NYSE MKT's rules, the Company has until June 4, 2013 to submit a plan advising the NYSE MKT of actions it has taken, or will take, that will bring the Company into compliance with Sections 134 and 1101 of the Company Guide by no later than August 15, 2013.
As previously disclosed by the Company, the Company experienced delay in closing its books for the quarter endedMarch 31, 2013 because of turnover in some of its accounting staff in China. It nevertheless is working diligently to finalize its financial statements and aims to file its Form 10-Q no later than June 14, 2013.
The Company will submit to the NYSE MKT a compliance plan to this effect, as referred to in the previous paragraph.
Comments & Business Outlook
GONGYI, China, May 21, 2013 /PRNewswire / -- China GengSheng Minerals, Inc. (NYSE Amex: CHGS) (the "Company" or "GengSheng"), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced the delayed filing of its Quarterly Report on Form-Q for its first quarter ended March 31, 2013 because it is still finalizing the financial statements. There was a delay in closing the books because of turnover in some of the Company's accounting staff in China. We anticipate filing our Form 10-Q no later than June 14, 2013. Notwithstanding the delay in preparing our Form 10-Q, we estimate that our Net Loss, Total Assets, Total Liabilities and Total Equity for the first quarter of 2013 to be around $3.8 million, $158 million, $121 million and $37 million respectively.
Comments & Business Outlook
Second Quarter 2012 Financial Summary:
Revenue decreased 4.0% year-over-year to approximately $19.6 million .
Total operating expenses increased to approximately $5.0 million , compared with approximately $4.5 million in the second quarter of 2011.
Net loss attributable to the Company was approximately $3.8 million, or $0.14 per share, compared with net loss of approximately $247,000, or $0.01 per share in the second quarter of 2011.
As of June 30, 2012, the Company had cash and cash equivalents of approximately $5.2 million , total equity of approximately $47.3 million and working capital of approximately $5.3 million.
"Our sales recovered gradually from the disappointing first quarter as we stabilized refractory products sales and re-positioned our sales of fracture proppant products to the domestic market. In particular, our sales of fine precision abrasives products achieved significant increase year-over-year despite the challenging market conditions we are facing," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "While rising costs continued to put pressure on our bottom line number, we still have confidence in our ability and readiness to capture new market opportunities."
Comments & Business Outlook
First Quarter 2012 Financial Highlights:
Revenue decreased 15.3% year-over-year to approximately $13.7 million.
Refractories sales were approximately $9.9 million, compared with approximately $9.9 million in the first quarter of 2011.
Fine precision abrasives product sales were approximately $2.4 million, compared with approximately$819,000 in the first quarter of 2011.
Fracture proppant sales were approximately $998,000, compared with approximately $5.2 million in the first quarter of 2011.
Gross profit was approximately $2.7 million, or 19.8% of total sales, compared with approximately $4.3 million, or 26.5% of total sales in the same period a year ago.
Total operating expenses increased to approximately $4.4 million, compared with approximately $3.6 millionin the first quarter of 2011.
Net loss attributable to the Company was approximately $2.9 million, or $0.11 per share, compared with net loss of approximately $80,000, or $0.003 per share in the first quarter of 2011.
As of March 31, 2012, the Company had cash and cash equivalents of approximately $2.7 million, total equity of approximately $51.1 million and working capital of approximately $8.4 million.
"We experienced a disappointing quarter as a result of weak sales in fracture proppants segment. The continued slowdown in the steel industry also had an unfavorable impact on us," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "While financing costs and operating expenses weighed on our results for the first quarter of 2012, we continue to work towards increasing sales and improving profitability thus create sustainable value for our shareholders."
Comments & Business Outlook
Fourth Quarter 2011 Financial Highlights:
Quarterly revenue increased 1.4% year-over-year to approximately $18.9 million.
Fracture proppant sales were approximately $5.7 million , an increase of 13.8% year-over-year compared with approximately $5.0 million in the fourth quarter of 2010;
Refractories sales were approximately $10.7 million, compared with approximately $12.7 million in the fourth quarter of 2010.
Fine precision abrasives product sales were approximately $2.9 million, an increase of 327.3% year-over-year compared with approximately $0.7 million in the fourth quarter of 2010.
Gross profit was approximately $1.1 million, or 5.7% of total sales, compared with 20.7% of total sales in the same period a year ago.
Total operating expenses increased to approximately 7.1 million, compared with approximately $5.2 millionin the fourth quarter of 2010.
Net loss attributable to the Company was approximately $8.0 million, or $0.30 per share, compared with net loss of approximately $2.1 million, or $0.08 per share in the fourth quarter of 2010.
As of December 31, 2011, the Company had cash and cash equivalents of approximately $3.6 million, stockholders' equity of approximately $53.8 million and working capital of approximately $11.8 million.
"In 2011 we continued our efforts in products positioning and strategic progress for GengSheng. We committed resources to, and expanded production capacity of targeted areas, hence to improve our ability to address the overall unstable environment in our end markets," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "During the fourth quarter and throughout the year, our bottom line was impacted by increased material, energy and labor costs, operating expenses, financing costs and non-cash impairment charges. While these increased expenses weighed on our results for 2011, we adopted stringent approaches to eliminate impaired assets in our books."
Comments & Business Outlook
Third Quarter 2011 Financial Highlights:
Revenue increased 28.2% year-over-year to approximately $21.5 million .
Fracture proppant sales totaled approximately $5.7 million , an increase of 13.4% year-over-year, compared with approximately $5.0 million in the third quarter of 2010.
Refractories sales were approximately $13.4 million , an increase of 17.6% year-over-year, compared with approximately $11.4 million in the third quarter of 2010.
Sales of fine precision abrasives totaled approximately $2.2 million , compared with approximately $184,000 in the third quarter of 2010.
Gross profit increased 11.3% to approximately $5.5 million , or 25.6% of total sales, compared with approximately $4.9 million , or 29.5% of total sales in the same period a year ago.
Operating income was flat at approximately $1.4 million compared with the third quarter of 2010.
Net income attributable to the Company's common stockholders decreased slightly to approximately $853,000 , or $0.03 per fully diluted share , compared with approximately $905,000 million , or $0.04 per fully diluted share in the third quarter of 2010.
As of September 30, 2011 , the Company had cash and cash equivalents of approximately $7.9 million , stockholders' equity of approximately $61.3 million and working capital of approximately $19.2 million .
"We achieved record quarterly revenue of approximately $21.5 million , generating top-line growth from all three primary business segments in the third quarter. Importantly, we made significant improvements across key operating metrics and returning to profitability following three consecutive quarters of losses," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "We achieved meaningful improvements in our business despite challenges in the steel and solar industries, as well as tightening monetary policy in China and domestic and international macroeconomic uncertainties which have impacted customer demand. We are pleased by our team's ability to execute on the primary strategic growth initiatives for each of our business segments, contributing to our solid performance in the third quarter and positioning the Company well to address the opportunities and challenges lies in ahead of us."
"Overall, we are excited by the Company's improved performance in the third quarter, particularly given the macro-level challenges we faced. We have a clearly defined growth strategy for each of our primary business segments, and are confident that our continued successful execution of these initiatives, coupled with prudent operating expense controls, will position the Company to achieve continued growth and sustainable profitability."
Investor Presentations
In anticipation of the planned presentation by China Gengsheng Minerals, Inc. (the "Company") to a group of potential investors at the Rodman & Renshaw Annual Global Investment Conference (the “Conference”) on Monday, September 12, 2011 at 4:30 pm Eastern Time, the Company is filing this current report on Form 8-K to disclose its planned presentation materials.
Comments & Business Outlook
Second Quarter 2011 Results
Revenue increased 36.3% year-over-year to $20.4 million .
Net loss attributable to the Company's common stockholders was $(247,000) , or $(0.01) per fully diluted share, compared with net income of $1.0 million , or $0.04 per fully diluted share in the second quarter of 2010.
"We achieved top-line growth across each of our three primary business segments for the second quarter, sales of our refractory products increased on a year-over-year basis for the first time in several quarters, and we achieved record quarterly sales of $5.9 million in our fracture proppant business," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "Although our bottom line weighted by increased operating expenses and finance costs, incurred to support business expansion, we remain excited by the performance and prospects of all business lines. During the first half of the year, we launched several strategic growth initiatives to address the large and growing fracture proppant market, including capacity expansion, and a joint development agreement with a North American fracture proppant distributor to address the U.S. and Canadian markets. We believe these initiatives will position GengSheng to capture additional market share as we build brand recognition, both domestically and internationally and continue to leverage the strong, rapidly growing demand from oil and gas producers
Analyst Reports
Rodman and Renshaw on CHGS 8/15/2011
Maintaining Market Perform Rating after Mixed 2Q11 Results
Mixed 2Q11 Results
China Gengsheng Minerals (“Gengsheng”, Ticker: CHGS, Market Perform) reported its 2Q11 earnings results that beat our top-line expectation but missed our bottom-line estimate. Revenue in the quarter reached $20.4 million, up 36.3% YoY and beat our estimate of $18.0 million. Gross profit increased 8.5% YoY to $5.3 million, above our estimate of $4.8 million. Gross margin in the quarter was 26.1%, slightly below our estimate of 26.6%. Operating expenses in the quarter reached $4.5 million, above our estimate of $3.6 million. Operating income came in at $0.8 million, below our estimate of $1.2 million. The company also incurred larger than expected finance costs of $1.6 million in the quarter. As a result, Gengsheng had a net quarterly loss of $247,000, or $0.01 loss per diluted share, below our respective estimates of a net income gain of $0.7 million and $0.02 EPS.
Highlights and Discussions
Segment revenue breakdown Gengsheng delivered slightly stronger than expected 2Q11 sales performance across all of its business segments. Refractories sales reached $12.5 million, above our expectation of $11.1 million. Fracture proppant revenue came in at $5.9 million, better than our estimate of $5.4 million. Functional ceramics generated $0.5 million of revenue, a touch higher than our estimate of $0.4 million. The newest fine precision abrasives business finally delivered a stronger than expected quarterly performance, registering $1.5 million of sales in Q2, beating our expectation of $1.1 million. After a disappointing Q1, we had lowered our expectation for Gengsheng’s top-line performance in the upcoming quarters. We view the Q2 top-line results as more of a relief than a significant upside surprise. Looking forward to the rest of the year, we expect the company will deliver decent but unspectacular top-line results, with the growth of the fracture proppant and fine precision abrasives franchises being the most significant indicator for the company’s long term potential.
Watching the expenses In light of China’s increasingly inflationary environment, the company’s slightly below-expectation gross margin in Q2 did not strike us as a major surprise. The moderately higher than expected operating expenses were also not necessarily alarming, in our view. Our major concern resides in the significant increase of finance costs, and more specifically, increase in bills discounting charges, in the quarter. Based on our understanding, this bills discounting charge is effectively another form of interest expenses associated with bank acceptance that some Chinese corporate borrowers need to pay in order to receive funding. While we acknowledge Gengsheng’s capital need for its capacity expansion efforts, as illustrated by the company’s $8.3 million net cash outflow from investing activities during the quarter, the magnitude of these finance costs really was the difference between a profitable quarter and an unprofitable one. Thus we would certainly like to see the company better manage this expense item going forward.Notice Regarding Privacy and Confidentiality:
Notice Regarding Privacy and Confidentiality:
Investor Presentations
CFO Trail
GONGYI, China, July 7, 2011 /PRNewswire-Asia-FirstCall / -- China GengSheng Minerals, Inc. (AMEX:CHGS), a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced that Mr. Ningfang Liang has joined the company as Chief Financial Officer, effective immediately. Mr. Liang replaces Interim Chief Financial Officer, Mr. Hongfeng Jin, who has been appointed GengSheng's Financial Controller, effective immediately.
Mr. Liang has over 15 years of finance and accounting experience, including over six years at U.S. public companies, where he managed SEC reporting, internal control, GAAP compliance, as well as internal auditing, financial analysis and management reporting activities.
"We are delighted to have a seasoned financial professional such as Ningfang join our executive team, and believe that his vast experience in SEC reporting, GAAP regulations and the U.S. capital markets will prove invaluable as we continue to execute on our growth strategy and work toward the next level of success," said Mr. Shunqing Zhang, Chairman and CEO of China GengSheng Minerals. "On behalf of the entire GengSheng team, I would like to welcome Ningfang to the company and thank Hongfeng for his numerous contributions to our business during his tenure as Interim CFO. I am grateful that Hongfeng has elected to remain with the company and confident that he will thrive in his new role as Financial Controller. I believe that Ningfang and Hongfeng will be a dynamic team that will significantly bolster the capabilities of our finance department and the strength of our financial controls."
Prior to joining GengSheng, Mr. Liang worked as Finance Manager at White Mountains Re Ltd, the reinsurance subsidiary of White Mountains Insurance Group, Ltd. Additionally, he has held senior finance and accounting positions at American International Group, Inc., Celgene Corporation and China Construction Bank.
Mr. Liang is a licensed CPA in the states of New Jersey and Illinois and is a member of the American Institute of Certified Public Accountants. He holds a Bachelor's degree in finance from Shanghai University of Finance and Economics, and an MBA from the University of Illinois Urbana-Champaign.
Analyst Reports
Rodman and Renshaw on CHGS 7/7/2011
New CFO Hire to Strengthen Management Team
New CFO announced China Gengsheng Minerals, Inc. (“Gengsheng”, Ticker: CHGS, Market Perform) announced this morning the appointment of Mr. Ningfang Liang as its new Chief Financial Officer, effective immediately. The company’s interim CFO, Mr. Hongfeng Jin, has been appointed as Gengsheng’s Financial Controller. According to the company press release, Mr. Liang has over 15 years of finance and accounting experience, including over six years at U.S. public companies where he managed SEC reporting, internal control, GAAP compliance, internal auditing, financial analysis and management reporting activities. Before joining Gengsheng, Mr. Liang served as Finance Manager at White Mountains Re Ltd. He also previously held senior finance and accounting positions at AIG, Celgene, and China Construction Bank. Mr. Liang is a licensed CPA in the states of New Jersey and Illinois, and holds a bachelor’s degree in finance from Shanghai University of Finance and Economics, and an MBA from the University of Illinois Urbana-Champaign.
Our take We are certainly encouraged by this announcement as the company, which hasn’t had a permanent CFO for quite some time, really has an urgent need for an “official” CFO. Based on our knowledge, Mr. Jin, who served as the company’s interim CFO, is more of a controller in the first place and lacks English language skills. The appointment of Mr. Liang, who primarily resides in New Jersey and is commonly known as Frank, should strengthen Gengsheng’s management team and improve its corporate communication with the investment community. We are particularly hopeful that Mr. Liang will be able to better manage Street expectation with regard to the company’s financial performance. While residing in New Jersey will no doubt make it easier for Mr. Liang to communicate with U.S. investors, we encourage him to also spend considerable time in Gongyi, China, where Gengsheng is located, as we believe it will allow him to better understand and manage the company’s financial operations.
Maintaining rating We are maintaining our Market Perform rating on the shares of Gengsheng.
Risks Major risks to our rating include the company’s heavy dependence on the steel industry, refractory market demand risk, intense industry competition, capital raising uncertainty, business execution risk, fluctuation of raw material prices, environmental liability risk, as well as political and regulatory risks related to operating in China.
Notice Regarding Privacy and Confidentiality:
Contract Awards
GONGYI, China, June 13, 2011 /PRNewswire-Asia / -- China GengSheng Minerals, Inc. (AMEX:CHGS), a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced that it has been awarded a $4.2 million follow-on fracture proppants supply contract from AMSAT International, a Florida-based technology company specializing in advanced ceramics. The Company will begin shipping fracture proppants under this new contract in July 2011, and expects to supply approximately 1,500 metric tons per month through December 2011, with specific quantities determined on a monthly basis, subject to available capacity.
This award follows the fulfillment of a $5.4 million contract with AMSAT International, under which GengSheng supplied approximately12,000 metric tons of proppant materials between January and June 2011.
"This represents our fourth supply contract with AMSAT, and we are proud that they continue to recognize GengSheng as a long-term, value-added partner and supplier of high quality proppant materials to their North American customers," said Mr. Shunqing Zhang, Chairman and CEO of China GengSheng Minerals. "This latest order reinforces our belief in the sizeable growth opportunity for fracture proppants in the overseas markets, as we continue to build our brand, expand our sales channels, increase capacity and advance our products through continued technological development."
Mr. Zhang continued, "We remain excited about the international opportunities for our proppants business, as export sales typically carry more favorable payment terms than our domestic contracts. We believe that the continued expansion of our overseas business will help reduce receivables and DSOs, while improving cash flow from operations and supporting our overall working capital needs as we grow the Company."
Similar to the Company's December 2010 order from AMSAT, this contract is for the supply of customized 69 MPa-sized proppant materials, which AMSAT will distribute to its North American customers in the oil and gas industry.
The Company launched its fracture proppant products in late 2007, and achieved revenue of $14.3 million in 2010, representing a three-year compound annual growth rate of 217%. In order to address growing domestic and international demand, GengSheng expanded manufacturing capacity to 90,000 metric tons in the first quarter of 2011, through a combination of in-house and OEM capacity. Additionally, the Company has begun construction on its second 60,000 metric ton fracture proppant manufacturing facility, which is expected to begin production in the third quarter of 2011. In 2011 to date, GengSheng has signed fracture proppant supply contracts totaling $20.1 million.
Comments & Business Outlook
First Quarter Results :
Revenue increased 36.4% year-over-year to approximately $16.2 million .
Fracture proppant sales totaled approximately $5.2 million, an increase of 333% year-over-year, compared with approximately $1.2 million in the first quarter of 2010.
Refractories sales were approximately $9.9 million, compared with approximately $10.4 million in the first quarter of 2010.
Sales of the Company's fine precision abrasives products totaled approximately $0.8 million, compared with approximately $0.7 million in the fourth quarter of 2010, and approximately $0.2 million in the third quarter of 2010, when the product was commercially launched.
Gross profit increased 7.9% to approximately $4.3 million , or 26.5% of total sales, compared with $4.0 million, or 33.5% of total sales in the same period a year ago.
Total operating expenses increased to approximately $3.6 million, compared with approximately $3.1 million in the first quarter of 2010.
Net loss attributable to the Company was approximately $80,000, or break-even per fully diluted share, compared with net income of approximately $0.4 million, or $0.02 per fully diluted share in the first quarter of 2010.
"We achieved solid year-over-year revenue growth, driven by the continued success of our fracture proppant business. While the first quarter is generally seasonally slow as a result of the Chinese Spring Festival and a slowdown in the steel industry due to reduced domestic construction during the winter months, we expect to reduce some of this seasonality as we continue to diversify our revenue mix. Our loss for the quarter was related to increased expenses associated with investment in our fracture proppants and fine precision abrasives businesses, which are key growth drivers for our business, both now and over the longer-term ," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer.
"During the first quarter, we gained additional traction in the overseas markets through both supply orders and demand indications for fracture proppants as oil and gas producers increasingly recognized the quality and value of our proppant products. In addition to our capacity expansion efforts, we are expanding our international sales and marketing efforts to help build the GengSheng brand among potential proppant customers outside of China. In light of the sizeable market opportunity and our targeted growth initiatives, we expect to achieve continued strong performance from this segment going forward.
Comments & Business Outlook
GONGYI, China , May 5, 2011 /PRNewswire-Asia-FirstCall / -- China GengSheng Minerals, Inc. (AMEX: CHGS China -based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced plans to construct a new fracture proppant manufacturing facility in Gongyi, Henan Province , which will increase the Company's annual proppant manufacturing capacity by 60,000 metric tons, to 150,000 tons, including 30,000 tons produced by third parties under OEM agreements. Construction on this new facility began in the second quarter of 2011, with production expected to commence during the second half of the year.
"New technological developments and a global surge in oil and gas drilling is driving a sharp increase in demand for high-quality, cost-effective proppant materials such as ours, and we believe that the time is right to expand our production capacity in order to capture this sizeable market opportunity," said Mr. Shunqing Zhang, Chairman and CEO of China GengSheng Minerals. "Through our organic capacity expansion, we are able to easily scale manufacturing volume, while maintaining tight quality and cost controls. In addition, we are working to further diversify our marketing channels to build the GengSheng brand among overseas customers. In light of these favorable market trends, our renewed sales and marketing initiatives and this additional capacity, we expect to achieve continued strong growth from our fracture proppants business as we move forward and the markets continue to mature."
This new facility will be constructed on approximately 87,000 square meters of land, for which the Company has signed a 20-year lease, and will include 2 production lines capable of manufacturing proppant materials to customer specifications. Total cost of the new facility is expected to be approximately $8.6 million , which will be fully funded through operating cash flow and the proceeds of GengSheng's registered direct offering, completed in January 2011 .
Comments & Business Outlook
Fourth Quarter Results :
Revenue increased 21.8% year-over-year and 11.1% quarter-over-quarter to approximately $18.6 million .
Gross profit was flat at approximately $3.9 million, or 20.7% of total sales, compared with 25.3% of total sales in the same period a year ago.
Net loss attributable to the Company was approximately ($2.1) million, or ($0.08) per share, compared with net income of approximately $1.0 million, or $0.04 per share in the fourth quarter of 2009
"2010 was a year of positioning and strategic progress for GengSheng, as we extended our product portfolio, expanded production capacity, and committed resources to improving our ability to address the sizable growth opportunities in our end markets ," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "During the fourth quarter and through the majority of the year, our bottom line was impacted by increased operating expenses, financing costs and a non-cash charge related to doubtful accounts. While these increased expenses weighed on our results for 2010, we eliminated some of our riskier receivables and invested in initiatives that we believe will contribute to sales across each of our businesses, supporting the Company's profitable growth in 2011 and beyond ."
Liquidity Requirements
We have approximately $41.6 million of collateralized bank loans, which includes approximately $30.7 million of facility bank loans, maturing on January 10, January 31, March 31 , April 26, May 13, May 23, June 23, September 15 and September 27, December 16, December 16, 2011, respectively, and approximately $10.9 million of bank borrowing secured by approximately $13.2 million in bank deposits. We will repay each loan when it matures with our working capital and the collateralized bank deposits. We will also consider refinancing debt. However, we cannot provide assurances that we will be able to refinance any of our debt on terms favorable to us in a timely manner.
GeoTeam Question: Have the January 10, January 31, March 31 loans been settled?
All amounts, other than percentages, are in U.S. dollars
No
Type
Contracting Party
Valid Date
Duration
Amount
1
Facility Bank Loan
City Credit Cooperatives in Gongyi
2010-04-27 to 2011-04-26
1 year
758,500
2
Facility Bank Loan
China Development Bank
2010-02-01 to 2011-01-31 1 year
455,100
3
Facility Bank Loan
China Development Bank
2010-02-01 to 2011-01-31 1 year
303,400
4
Facility Bank Loan
Industrial and Commercial Bank of China
2010-03-01 to 2011-01-10
10 months
3,034,000
5
Facility Bank Loan
Luoyang Bank
2010-04-01 to 2011-03-31 1 year
3,034,000
6
Facility Bank Loan
China CITIC Bank
2010-05-14 to 2011-05-13
1 year
2,275,500
7
Facility Bank Loan
Agricultural Bank of China
2010-05-24 to 2011-05-23
1 year
6,068,000
8
Facility Bank Loan
Zhengzhou Bank
2010-12-17 to 2011-12-16
1 year
4,551,000
9
Facility Bank Loan
Zhengzhou Bank
2010-12-17 to 2011-12-16
1 year
3,034,000
10
Facility Bank Loan
China Merchants Bank
2010-06-24 to 2011-06-23
1 year
1,517,000
11
Facility Bank Loan
Shanghai Pudong Development Bank Village Bank
2010-09-16 to 2011-09-15
1 year
758,500
12
Facility Bank Loan
Shanghai Pudong Development Bank Village Bank
2010-09-16 to 2011-09-15
1 year
379,250
13
Facility Bank Loan
Kaifeng Commercial Bank
2010-09-28 to 2011-09-27
1 year
4,551,000
14
Bank borrowing
Luoyang Bank
2010-07-20 to 2011-01-20 6 months
3,034,000
15
Bank borrowing
Luoyang Bank
2010-09-06 to 2011-03-06 6 months
758,500
16
Bank borrowing
Luoyang Bank
2010-09-08 to 2011-03-08 6 months
1,213,600
17
Bank borrowing
Kaifeng Bank
2010-10-18 to 2011-04-17
6 months
1,365,300
18
Bank borrowing
Zhengzhou Bank
2010-12-20 to 2011-01-20 1 month
3,034,000
19
Bank borrowing
Guangdong Development Bank
2010-09-08 to 2011-03-08 6 months
1,213,600
20
Bank borrowing
Shanghai Pudong Development Bank
2010-07-22 to 2011-01-22 6 months
303,400
Comments & Business Outlook
GONGYI, China, March 29, 2011 /PRNewswire-Asia / -- China GengSheng Minerals, Inc. today announced that it has signed a definitive agreement with a local affiliate in Gongyi, Henan Province to manufacture 30,000 metric tons of its fracture proppants through the end of 2011. With this addition, China GengSheng has increased its total annual fracture proppant capacity by 20% to 90,000 metric tons.
In conjunction with this new agreement, the Company has decided to terminate its operating lease, entered in October 2010, and ceased production of fracture proppant products at its leased manufacturing facility in Gongyi, Henan Province.
Analyst Reports
Rodman and Renshaw on CHGS 3/25/2011
Revising Rating to Market Perform after Share Price Exceeded PT
We are downgrading the shares of China Gengsheng Minerals (“Gengsheng”, Ticker: CHGS) from our previous rating of Market Outperform to Market Perform after the share price exceeded our $2.80 price target. Since August 11, 2010, when we assigned a price target of $2.80, the share price of Gengsheng has appreciated by more than 130% and reached beyond our price target. At the current valuation, the company is trading at 9.6x our 2011 diluted EPS estimate of $0.33. While we continue to believe the company represents a long term growth story, in the near term we believe the shares are fully valued.
Rare Earth Hype Unrealistic
The share price of Gengsheng has had a volatile ride over the past half a year, largely because of hype related to China’s rare earth policy changes. In our opinion, Gengsheng’s current business operation possesses little relation to the rare earth industry, despite the word “Minerals” in the company’s corporate name. In this regard, we believe any current CHGS price appreciation based on the rare earth talk is unsustainable.
4Q10 Outlook
The company is scheduled to release its 4Q10 and full year 2010 results on Thursday, March 31, 2011. Management will also hold a conference call at 8:00am EST on March 31. To participate in the call, please dial (877) 407-9205 in the U.S. and Canada, or (201) 689-8054 internationally.
For 4Q10, we expect the company will generate $19.2 million of revenue, with the monolithic refractory segment contributing $11.9 million, fracture proppants contributing $5.2 million, and fine precision abrasives adding $1.8 million. We estimate non-GAAP net income will reach $1.2 million, or $0.05 per diluted share, during the quarter. For full year 2011, we expect revenue will reach $88.9 million, gross profit will be $28.6 million, and non-GAAP net income will be $8.1 million, or $0.33 diluted EPS. Considering China’s current inflationary environment and potential company year-end write-downs, we believe the risks are to the downside with regard to our estimates.
Risks
Major risks to our rating and price target include the company’s heavy dependence on the steel industry, refractory market demand risk, intense industry competition, capital raising uncertainty, business execution risk, fluctuation of raw material prices, environmental liability risk, as well as political and regulatory risks related to operating in China.Notice Regarding Privacy and Confidentiality: This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.
Comments & Business Outlook
GONGYI, China, Feb. 16, 2011 /PRNewswire-Asia-FirstCall / -- China GengSheng Minerals, Inc. today announced that it has been awarded $10.5 million a follow-on contract for its fracture proppants from a China-based distributor specializing in sales to overseas oil and gas companies. GengSheng will begin shipments to this customer in February 2011 and expects to supply approximately 27,000 tons of proppant products over a six-month period.
"During 2010, we achieved tremendous growth in our fracture proppant business, driven by robust demand from both domestic and international customers . Throughout the year, we worked to develop strong relationships with our customers and key distributors, and it is clear that these efforts are bearing fruit. We are pleased that this distributor has recognized the quality of our products and high level of customer service we provide by awarding us this significant follow-on order," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "We entered 2011 with our proppant manufacturing operations near full capacity. We expect drilling activity to remain high throughout the year, driving continued strong demand for proppant materials. In an effort to capture this anticipated demand, we are currently exploring opportunities to expand our fracture proppant manufacturing capacity later in the year."
GengSheng commercially launched its fracture proppant products in the second quarter of 2007, and reported full-year 2009 revenue from this product segment of $8 million , representing a 3-year CAGR of 323% . Fracture proppant sales in the third quarter of 2010 were a record $5 million . In order to meet the growing demand for its fracture proppant products, GengSheng signed a 3-year operating facility lease in the fourth quarter of 2010. This facility increased the Company's fracture proppant manufacturing capacity to 75,000 metric tons per year.
Comments & Business Outlook
GONGYI, China, Feb. 1, 2011 /PRNewswire-Asia / -- China GengSheng Minerals, Inc. today announced that GengSheng has signed a full-service refractories supply contract with Fushun New Steel Corporation. Shipments under the contract began in January 2011, and are expected to continue through December 2012. Revenue contribution from this new client is expected to begin in the first quarter of 2011.
Under the agreement, GengSheng will provide refractory materials, as well as installation and on site support services. Revenue will be recognized based on Fushun New Steel's production volume. Based on Fushun's current manufacturing capacity, GengSheng expects revenue of approximately $10 million over the two-year term of the contract.
Analyst Reports
Rodman and Renshaw on CHGS 2/01/2011
A $10 MM Full Service Contract
China Gengsheng Minerals (“Gengsheng”, Ticker: CHGS, Market Outperform) today announced that it has signed with Fushun New Steel Corporation (“Fushun”) a two-year full-service refractories supply contract worth of approximately $10 million . Shipments under the contract have begun since January 2011 and are expected to continue through December 2012. Under the contract, Gengsheng will provide refractory materials as well as installation and on-site support services including maintenance, repair, and replacement.
Gengsheng’s full service program is an important revenue contributor and margin driver for the company. Such a program typically lasts one to two years, and helps generate stable and recurring revenue streams and contributes to higher margins than simple product sales. Gengsheng’s full service programs contributed about 52% of the total refractory revenue in the first nine months of 2010. The company currently serves nine clients with full service programs. Relatively few refractory makers in China are capable of providing such full service programs to large steel plants. As steel producers become larger as a result of the ongoing industry consolidation, Gengsheng is in a more advantageous position than smaller competitors aiming to serve these clients, largely due its experience and reputation. We expect the company will continue to win full service contracts in 2011.
We are maintaining our Market Outperform rating and $2.80 price target on the shares of Gengsheng. The $2.80 price target is based on the shares trading at 8.5x our 2011 diluted EPS estimate of $0.33. Major risks to our rating and price target include the company’s heavy dependence on the steel industry, refractory market demand risk, intense industry competition, capital raising uncertainty, business execution risk, fluctuation of raw material prices, environmental liability risk, as well as political and regulatory risks related to operating in China.Notice Regarding Privacy and Confidentiality:
Deal Flow
GONGYI, China, Jan. 5, 2011 /PRNewswire-Asia-FirstCall / -- China GengSheng Minerals, Inc. today announced that it has entered into definitive agreements with several institutional investors for a registered direct placement of 2,500,000 shares of common stock at a price of $4.00 per share for gross proceeds of $10 million
Comments & Business Outlook
Third Quarter 2010 Financial Highlights:
Revenue increased 12.2% year-over-year and 11.6% quarter-over-quarter to approximately $16.7 million .
Fracture proppant sales were approximately $5.0 million , an increase of 91.4% year-over-year and 62.8% quarter-over-quarter.
Refractories sales were approximately $11.4 million , compared with approximately $12.2 million in the third quarter of 2009.
Newly introduced fine precision abrasive product sales were approximately $0.2 million .
Gross profit increased by 17.1% to approximately $4.9 million , or 29.5% of total sales, compared with approximately $4.2 million , or 28.3% of total sales in the same period a year ago.
Total operating expense increased to approximately $3.5 million , compared with approximately $2.6 million in the third quarter of 2009.
Net income was approximately $0.9 million , or $0.04 per share, compared with approximately $1.7 million in the third quarter of 2009.
Comprehensive income attributable to the Company's stockholders was approximately $1.7 million for the third quarters of 2010 and 2009.
Cash and cash equivalents of approximately $7.5 million , stockholders' equity of approximately $52.8 million and working capital of approximately $23.3 million , as of September 30, 2010 .
"Our strong sales for the period were led by our fracture proppant business with significant growth in demand driven by increased drilling activity," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "Additionally, the third quarter was notable for the launch and first commercial sales of our fine precision abrasives product line. In addition to the immediate contributions, the introduction of fine precision abrasives gives us access to the sizeable, fast-growing solar market and a number of large, high-profile potential customers.
"While we achieved record revenue for the period, our refractories business continued to be impacted by economic weakness in the Chinese steel industry . We continue to offset this by transitioning to a revenue mix of higher-end monolithic refractory products. During the quarter, we also made important investments in our research and development to expand our refractory and industrial ceramics offerings, and incurred higher costs associated with increased personnel and salaries for our fracture proppant and fine precision abrasives businesses as we met new proppant sales goals and increased staff to support the launch and sales efforts of fine precision abrasives. These investments drove an increase in operating expenses in the third quarter, which impacted our bottom line, but significantly improve the Company's overall position and, we believe, will help us achieve our longer-term growth objectives.
"Given our strong domestic foothold, we are working aggressively to expand our presence internationally in order to capitalize on the significant, untapped potential in the overseas markets. To better position the Company to pursue sales opportunities and demand in the domestic and international fracture proppant market, we recently increased our annual production capacity to 75,000 metric tons. As the near-term outlook for the Chinese steel industry remains uncertain, we continue to ramp our fracture proppant business and recently introduced fine precision abrasives products. Both business segments represent large and growing market opportunities where we can readily expand our business," Mr. Zhang concluded
GeoSpecial Notes
On May 17, 2010 we removed China Gengsheng from the GeoSpecial List.
Added to the GeoSpecial list on October 1, 2009 @ $1.58.
Catalyst : Expected new business line to dramatically impact EPS.
Peak performance : Reached a high of $4.35 on March 8, 2010
Current road block : Company has not been able to consistently generate above average EPS; Growth Still being effected by global recession due to weak export demand.
GeoBargain Notes
The GeoTeam™ is removing CHGS from the GeoBargain list as it no longer meets the 30% minimum EPS growth rate requirement. Analyst estimates show an EPS growth rate of 16.7% for 2009 . The GeoTeam will continue to track CHGS for indications that the earnings picture will improve. It is important to note that CHGS P/E is still significantly less than the estimated growth rate for 2009 . This may appeal to some investors.
GeoBargain Notes
The GeoTeam™ is attempting to verify data as it relates to insider ownership and institutional ownership.
