- 3rd Quarter revenue reaches $63.4 million up 45% from 3rd Quarter of 2007

- 3rd Quarter net income increases to $5.9 million up 97% from 3rd Quarter of 2007

- Basic Non-GAAP EPS climbs to $0.28 and diluted Non-GAAP EPS increases to $0.26

- Basic GAAP EPS reaches $0.25 and diluted GAAP EPS reaches $0.23

- Company to discuss its business outlook for 2008 during today's 4:30 p.m. EST Conference Call.

DEERFIELD BEACH, Fla., Nov. 13 /PRNewswire-FirstCall/ -- China Direct, Inc. (Nasdaq: CDS), a U.S. company that owns controlling stakes in a diversified portfolio of Chinese entities and provides advisory services to Chinese businesses, announced today the Company's financial results for the third quarter of 2008.

Financial Highlights

Revenues for the third quarter ended September 30, 2008 increased to $63.4 million as compared to revenues of $43.6 million in the third quarter ended September 30, 2007. The increase in revenues was mainly attributable to increased sales from our magnesium segment as a result of acquisitions and our investment to expand production capacity.

Gross profit for the third quarter of 2008 was $10.6 million as compared to $4.6 million in the third quarter ended September 30, 2007. Total operating expenses for the third quarter of 2008 increased to $3.17 million as compared to $1.03 million in the third quarter of 2007. The increase in operating expenses reflects the costs associated with our expanded operations both in the U.S. and China associated with the financial management and integration of our expanding operations. The Company also experienced increases in professional fees, travel expenses, as well as non-cash option charges. Operating income was $7.4 million and $3.6 million for the third quarter of 2008 and 2007 respectively, yielding operating margins of 11.7% and 8.1% over the relevant periods. The increase in operating margins was largely a result of a shift in the company's business mix in its magnesium operations towards higher margin production sales as compared to largely distribution sales in the third quarter of 2007. Results were also strengthened by a strong performance from the consulting segment in the third quarter of 2008.

Net income for the third quarter of 2008 was $5.9 million as compared to $3.0 million in the third quarter of 2007. Non-GAAP earnings were $0.28 per basic share, excluding non-cash items, as compared to $0.21 per basic share in the third quarter of 2007. On a GAAP basis, earnings were $0.25 per basic share, as compared to $0.18 per basic share in the third quarter of 2007. On a diluted basis, excluding non-cash items, non-GAAP earnings for the third quarter of 2008 were $0.26 per share as compared to $0.18 per share in the third quarter of 2007.

For the first nine months of 2008 earnings on a non-GAAP basis were $0.83 per basic share, excluding certain non-cash items, as compared to $0.53 per basic share for the same period in 2007. On a GAAP basis, earnings were $0.52 per basic share, as compared to $0.49 per basic share in the first nine months of 2007. On a diluted basis, non-GAAP earnings for the first nine months of 2008 were $0.75 per share as compared to $0.48 per share for the same period in 2007. Non-cash items excluded in all non-GAAP calculations are set forth in the reconciliation of GAAP to non-GAAP net income set forth below.

Our results for the first nine months of 2008 were driven by a strong performance in our magnesium operations and advisory services. Both revenue and net income for the first nine months of 2008 have surpassed that of the full year of 2007. In the third quarter of 2008, we began to ramp production of our new magnesium facility in Baotou, launched our steel and wood distribution business in our Basic Materials segment and acted as an advisor to China Armco Metals, Inc., a metal ore distributor in China that raised over $7 million in capital in August 2008 to launch a scrap steel recycling facility in 2009.

Balance Sheet

At September 30, 2008, total assets were $131.0 million, an increase of 48.4% from $88.3 million at December 31, 2007. At September 30, 2008, shareholder equity was $69.4 million, an increase of 62.9% from $42.6 million at December 31, 2007. At September 30, 2008, cash and equivalents were $19.6 million and working capital was $68.1 million as compared to cash and equivalents of $19.0 million and working capital of $40.7 million at December 31, 2007, respectively.

2008 Financial Guidance

Our business outlook reflects a balance of risks and the likelihood of a continued economic slowdown. The trends seen late in the third quarter are now expected to continue in the fourth quarter. As we near the end of 2008, the Company now sees its expected net income ranging between $23 to $25 million on expected revenue ranging between $255 and $270 million. The Company will further discuss its outlook for the remainder of 2008 during its conference call today, November 13, 2008 at 4:30 PM EST.

Commenting on the quarter, Mr. Marc Siegel, President of China Direct, Inc. stated, 'We are pleased with our strong performance for the first nine months of 2008. In this economic environment, the Company is focused on three main initiatives: improving overall management efficiency, strengthening our resources in China as we continue our migration to an operating company, and acquiring substantially undervalued operations in China.'

Mr. Siegel concluded, 'We see China's $586 billion stimulus package as a catalyst for future expansion in 2009. We are confident that our business strategy, coupled with our strong balance sheet which is virtually debt free, has positioned us to continue to grow and thrive in a challenging worldwide economy. We believe now, more than ever before in our history, potential attractive targets in great need of our services exist. CDS is poised to emerge as a major force in the Chinese and US markets in the future.'

China Direct Conference Call to discuss the Company's financial results for the third quarter of 2008 as well as to discuss its business outlook for the remainder of 2008.

The conference call will take place at 4:30 p.m. EST on Thursday November 13th, 2008. Anyone interested in participating should call 1-866 394-7735 if calling within the United States or 1-706-758-1915 if calling internationally approximately 5 to 10 minutes prior to 4:30 p.m. Participants should ask for the China Direct 2008 Third Quarter Financial Results conference call/ Conference ID 72664979.

This call is being webcast by ViaVid Broadcasting and can be accessed at China Direct's website at http://www.chinadirectinc.com. The webcast may also be accessed at ViaVid's website at http://www.viavid.net or directly at http://viavid.net/dce.aspx?sid=00005919 .

Individuals unable to participate in the conference call may hear an audio webcast replay.