SHANGHAI, May 11 /PRNewswire-Asia/ -- China Precision Steel, Inc. (Nasdaq: CPSL) ('China Precision Steel' or the 'Company'), a niche precision steel processing Company principally engaged in producing and selling high precision, cold-rolled steel products, announced today its fiscal 2009 third quarter results for the period ended March 31, 2009.

    Third Quarter Highlights
    -- Revenue was $7.6 million
    -- Gross loss was $2.0 million
    -- Net loss of $3.5 million for fully diluted loss per share of $0.08
    -- Exports represented 27.5% of total sales

'The steel industry has been severely hit by the credit crunch and global economic downturn during the past quarter. As a result, we experienced an uncommon decrease in customers' orders which negatively impacted our sales,' commented Dr. Wo Hing Li, China Precision Steel's Chairman and CEO. 'We remain optimistic as we have recently experienced some strengthening in the domestic market as the Chinese government's stimulus package works its way through the economy. In addition, we have taken strides in broadening our customer base, particularly by encouraging relationships with potential customers whose past orders we were previously unable to fulfill due to limited production capacity.'

Revenue for the third quarter of fiscal 2009 decreased to $7.6 million, down 59.4% from $18.8 million in the third quarter of fiscal 2008. The decline in revenue was mainly attributable to the decrease in sales volume across all product lines and lower average selling price, as a result of the global economic slowdown and the downturn of the steel industry. Sales volume and average selling price per ton in the third quarter decreased to 11,000 tons and $693, respectively, down 54.7% and 10.3%, respectively, as compared to the third quarter of fiscal 2008. High carbon and low carbon products accounted for 31.3% and 64.8% of sales, respectively, compared to 29.1% and 47.6%, respectively, from the prior year period. Exports contributed to 27.5% of total revenue compared to 19.0% in the third quarter of fiscal 2008.

Gross loss in the third quarter was $2.0 million, compared to gross profit of $5.4 million in the third quarter of fiscal 2008. Gross margin was (26.0)%, down from 28.6% in the same period a year ago. The decline in gross margin was mainly due to the higher raw material cost under weighted-average cost accounting and lower selling prices during the third quarter as compared to the same period a year ago, as well as the inability to pass on all of our labor and overhead costs to customers during the global economic downturn.

Selling expenses for the third quarter of fiscal 2009 were $298,492, or 3.9% of revenue, compared to $203,477, or 1.1% of revenue, in the third fiscal quarter of 2008. The increase in selling expenses was primarily attributable to the settlement of sales commission during the three months ended March 31, 2009 for goods shipped in the previous quarter. Administrative expenses were $541,251, or 7.1% of revenue, compared to $699,220, or 3.7% of revenue. The decline in administrative expenses was mainly due to the lower SEC compliance costs and professional fees as there was no financing activity during the quarter.

Operating loss for the third quarter was $2.9 million, compared to operating income of $4.4 million in the same period a year ago.

Net loss for the third quarter of fiscal 2009 was $3.5 million, compared to net income of $3.6 million in the prior year period. Fully diluted loss per share was $0.08 compared to fully diluted earnings per share of $0.08 in the comparable period a year ago.

Nine Months Financial Results

Revenues for the first nine months of fiscal 2009 were $50.5 million, down 14.6% from revenues of $59.2 million in the first nine months of fiscal 2008. Gross profit was $5.4 million, compared to gross profit of $17.0 million in the first nine months of fiscal 2008. Gross margin was 10.7%, compared to 28.7% for the comparable period a year ago. Operating loss was $1.7 million, compared to operating income of $13.8 million in the first nine months of fiscal 2008. Net loss was $2.6 million, compared to net income of $13.0 million in the same period a year ago. Fully diluted loss per share was $0.06, compared to fully diluted earnings per share of $0.30 in the first nine months of fiscal 2008. Diluted weighted average shares outstanding were 46.6 million, compared to 42.6 million in the first nine months of fiscal 2008.

Financial Condition

As of March 31, 2009, China Precision Steel had $5.6 million in cash and cash equivalents, no long-term debt, total liabilities of $39.3 million and working capital of $38.1 million. Shareholders' equity was $118.3 million, compared to $120.3 million as of June 30, 2008. For the first nine months of fiscal 2009, cash generated from operating activities was $12.2 million.

Business Outlook

China Precision Steel is currently constructing its third cold rolling mill and expects to have completed the construction in the first quarter of fiscal 2010. The new mill is designed to process steel with a width up to 1,450 mm and will be a tandem mill with best-in-class gauge control and shape performance capable of producing high quality steel for exposed and unexposed products.

'While near-term visibility for the steel industry remains limited, we believe that the implementation of several economic and industry stimulus packages are helping to restore stability and reaccelerate global growth. Moreover, China is still in the middle of a grand scale modernization and industrialization which we believe supports long-term demand for precision steel products,' Dr. Li commented. 'Precision steel remains the material of choice in many important and exacting applications and we have the right people, facilities and technology to deliver the steel solutions our customers need.