(RTTNews) - Tuesday, before the bell, China Precision Steel, Inc. (CPSL: News ), a steel processing company, reported a sharp decline in profit for the fourth quarter, negatively impacted by lower revenues and tightening of gross margin.

Net income dropped to $2.21 million or $0.05 per share from $5.62 million or $0.12 per share a year earlier. Income from operations declined to $1.50 million from $4.59 million for the same period last year.

Quarterly sales revenues were $25.73 million, down 9.9% from $28.55 million a year-ago. Sales revenue benefited from a $3.2 million subcontracting order, the company said.

Gross profit was $2.3 million, down 57.9% from $5.5 million last year. Gross margin plunged to 9.0% from 19.2% in the same period a year ago, attributable to the higher cost of raw materials incurred in connection with the inventory build up during the first half of last year when demand and steel prices were both high. Subsequently, selling prices declined dramatically amid the worldwide industry downturn resulting in a tightening of gross margin, the company said.

"We are extremely pleased with the rebound in our business during the fourth quarter of fiscal year 2009 as the Chinese steel industry recovers from its lowest level since the global economic crisis began," Wo Hing Li, China Precision Steel's Chairman and Chief Executive Officer said.
The company's carbon business has started to benefit from stimulus for automobiles by the Chinese government which increased demand for steel clutch discs as manufacture of vehicles improved, Hing Li added.

For the full year, net loss was $408.34 thousand or $0.01 per share compared with a net income of $18.58 million or $0.43 per share a year earlier. Sales revenues dropped to $76.28 million from $87.74 million for the year-ago period. The company said that it has successfully added 123 new customers for the full year.

Looking forward Hing Li said, "We remain optimistic about our future growth as we have built a strong foundation with our state-of-the-art patented technology process and our experienced management team which has served us well in these difficult times." The company's back-order was $9.3 million, Hing Li added.

Monday, CPSL closed at 2.83 on Nasdaq.

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by RTT Staff Writer

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