Steel processing company China Precision Steel, Inc. (CPSL) Tuesday reported a net loss for the first quarter of fiscal 2010, compared with a profit last year. The loss reflected lower sales volume and average selling prices combined with a one-time provision for bad and doubtful debts.
For the first quarter, the Shanghai-based company's net loss was $0.28 million or $0.01 per share compared with a profit of $2.88 million or $0.06 per share in the prior-year period.
Sales revenues for the period slumped 32.8% to $17.04 million from $25.35 million in the first quarter of fiscal 2009, negatively impacted by decline in sales volume combined with lower average selling prices due to the global economic slowdown.
Total sales volume fell to 22,293 tons from 24,216 tons in the same quarter last year. Average selling price per ton in the quarter decreased to $764 per ton from $1,047 per ton in the first quarter of prior year.
During the three-month period, China Precision had a one-time cost of $117,117 with regard to allowance for bad and doubtful debts. Total operating expenses incurred by the company rose to $771,362 from $699,601 a year earlier.
Gross margin for the first quarter was 4.1% compared to 15.6% in the corresponding period prior year, reflecting lower selling prices during the quarter as compared to the same period a year ago.
Commenting on the results, chairman and chief executive officer Wo Li said, "Overall demand for our precision steel products has improved from the lows we experienced in the third quarter of fiscal 2009--." However, China Precision is still experiencing pricing pressures from overcapacity in steel production which continues to put pressure on its margins, Li added.
In the preceding fourth quarter of 2009, the company had reported a net income of $2.21 million or $0.05 per share versus $5.62 million or $0.12 per share in the comparable period prior year. Sales revenues had declined 9.9% to $25.73 million from $28.55 million in the fourth quarter of fiscal 2008.
Looking ahead, China Precision expects market demand and average selling prices to gradually improve during the coming year.
The company anticipates to begin production at its new mill in the third quarter of fiscal 2010, and expects the mill to reach its full design capacity of 100,000 tons in about four years; increasing the company's total production design capacity by 33%. China Precision sees to incur an additional $900,000 in capital expenditure for the completion of the new mill and annealing furnaces.
In Monday's regular trading session, CPSL closed trading on the Nasdaq at $2.45 per share up $0.17 or 7.46% on a volume of 773,444 shares.
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