China Industrial Steel (PINK:CDNN)

First Quarter 2013 Financial Results

• Revenue of $188,363,697 for the three months ended March 31, 2013 an increase of $11,335,049, or 6% compared to $177,028,648 in the same period of 2012.
• Earnings Per Share - Basic and Diluted was $0.02 vs. last years $0.06.

Commenting on the results, Liu Shenghong, Chief Executive Officer and Chairman of the Company stated, "I am pleased to report China Industrial Steel's financial results for the first quarter of 2013. Company revenues were up as a result of the rebound in China's demand for steel, and we remain profitable despite the industry wide decline in selling prices resulting from inventory stockpiles over the past year."

Chairman Liu went on to say, "Demand for our steel plate and wire increased during the quarter reflecting China's continued economic growth and the government's investment in infrastructure projects, such as roads, railways and bridges. We anticipate market prices will return to prior levels as steel manufacturers work through their backlog to supply these large scale projects and the forecast growth in other steel dependent industries, including the automotive and construction sectors."

NEW YORK, April 3, 2013 /PRNewswire/ -- China Industrial Steel, Inc. (the "Company") today announced its earnings for the year ended December 31, 2012. The Company, whose shares trade in the U.S. OTC market under the stock symbol "CDNN", filed its Form 10-K with the Securities and Exchange Commission on April 1, 2013.

Commenting on the results, Liu Shenghong, Chief Executive Officer and Chairman of the Company stated, "I am pleased to report our earnings for 2012. I believe the fourth quarter of 2012 was pivotal for Chinese steel manufacturers in general and China Industrial Steel in particular. Although approximately one-third of steel manufacturers are still operating at a loss, it does seem that prices have bottomed out and demand for steel is trending up as the Government's efforts to spur economic growth take hold.

Chairman Liu went on to say, "Our ability to remain profitable through the recent global economic crisis is a testament to the expertise and determination of our team and the quality of our products. In 2011 we had the foresight to transition our steel bar production to steel wire production to adapt to changes in market demand. This adjustment helped offset the negative impact of market conditions in early 2012 and contributed to the jump in profitability in the fourth quarter."

Chairman Liu concluded, "The steel plate, wire and bar that we manufacture today are used primarily in the construction of buildings and in large scale infrastructure projects, such as roads and bridges, all of which are being cultivated by recently announced government stimulus programs. We will continue working to mitigate the effect of market pricing of both raw material and finished products on our financial results through the management of our production mix and systematic shift to specialty steel products. I am confident that these tactics will continue to facilitate our return to solid revenue growth and improved margins."

Financial Discussion

China Industrial Steel reported total revenues of $649,318,792 in 2012, a decrease of $173,788,250, or 21% compared to $823,107,042 in 2011. Of the decreased revenues, approximately $117 million, or 68% of the decrease was due to a decrease in the average sales price of steel products; $51 million, or 29% of the decrease was due to decrease in the quantity of steel products sold, and $5 million, or 3% was due to the decrease in the revenue of byproducts.

The Company reduced its production of steel plates in 2012 due to lower sales price and lack of market demand. The Company sold 658,425 tons of steel plates in 2012, a decrease of 109,949 tons or 14%, compared to 768,374 tons in 2011. Revenue from steel plates was $335,591,348 in 2012, a decrease of$139,354,856, or 29% compared to $474,946,204 in 2011. The average unit sales price of steel plates was approximately $510 per ton in 2012, a decrease of $108 per ton, or 17%, from $618 in 2011.

In 2011, the Company modified its steel bar production line to produce steel wires to adapt to the market demand which helped offset the negative market impact in 2012. In 2012, revenue from steel wires was$236,557,650, an increase of $115,686,667, or 96%, compared to $120,870,983 in 2011. The Company sold 453,595 metric tons of steel wires, an increase of 256,525 metric tons, or 130%, compared to 197,070 in 2011. However, the increase in sales of steel wires was offset by the decrease in the unit sales price. The average unit sales price of steel wires was approximately $522 per ton in 2012, a decrease of $91 per ton, or 15%, from $613per ton in 2011.

Summary of the Third Quarter 2012 Financials

• Revenues for the third quarter of 2012 decreased 25% to $170 million from $226 million in the third quarter of 2011.
• The Company reported a loss of $3.7 million for the quarter ended September 30, 2012 as compared to net income of $18.4 million for the same period in 2011.
• Earnings per share for the three months ended September 30, 2012 were a loss of $0.05 as compared to a gain of $0.25 for the same period in 2011.

Liu Shenghong, Chief Executive Officer and Chairman of the Company, commenting on the quarterly results stated, "Our management team was pleased that we remained profitable for the first nine months of this year, despite a general downturn of the Chinese economy. Our shift from the production of steel plate to steel wire proved beneficial, as our steel wire sales continued to increase throughout the year, enabling us to maintain the tonnage sales levels achieved during the same period in 2011. But, as was common to the steel producers worldwide, the decrease in raw material costs was not fully sufficient to offset the effect of the decrease in the selling prices of steel products on our margins, most notably during the third quarter."

Mr. Liu also stated, "The steel industry is subject to economic and industrial trends and the past two years have certainly been challenging, however consensus is that China's economy is improving and we believe that the recently announced stimulus measures to be taken by the new administration will prove beneficial for Chinese business in general and the steel industry in particular. These stimulus programs include infrastructure projects such as airports, millions of affordable housing units, as well as the construction of new subway and train lines, all of which we believe will have a very positive effect on China's demand for steel."

Mr. Liu went on to say, "Over the past months, China Industrial Steel has aggressively optimized our production capabilities. We also have focused on building and enhancing relationships with new and existing customers, and have begun to explore financing strategies to facilitate our five-year expansion plans. These steps will help ensure that China Industrial Steel is well positioned to benefit from China's economic recovery and future economic growth."

Second Quarter 2012 Results

• Sales for the three months ended June 30, 2012 were $145,572,369, a decrease of $71,226,932, or 33%, compared to $216,799,301 in the comparable period in 2011.
• Net income totaled $1,848,517 in the three months ended June 30, 2012, a decrease of $8,855,692, or 83%, compared to the net income of $10,704,209 in the comparable period of 2011.
• Earnings per share in the three months ended June 30, 2012, were $0.03 vs. $0.15 in prior year.

Liu Shenghong, Chief Executive Officer and Chairman of the Company commented on the Company's performance, "This has been a challenging year for China's steel industry, and our Company was not an exception. According to the Association of Chinese Steel Industry, 34% of steel manufacturers are experiencing losses, and while our results are off from last year, I am pleased to report that China Industrial Steel has remained profitable throughout this downturn."

Mr. Liu went on to say "Although economic recovery has been slower than expected worldwide, we expect that China's growth will be a significant driver in the turnaround, and we are working to ensure that China Industrial Steel will fully participate in that growth. In addition to shifting our existing production capabilities to the highest margin product mix, we are evaluating financing alternatives to increase our capacity for specialized steel products, the first of which will be a Galvalume production facility. Galvalume is a coated steel product, which is primarily used in the automotive and home appliance industries."

On September 29, 2011 Share holders registered stock to take company public. (Company was originally a private shell that became a non-public operating entity via a reverse merger, prior to registering its stock). In January 2011 the company completed a private placement where it sold an aggregate of 2,579,022 units at $1.50 per unit with each unit consisting of: (i) one share of our common stock, and (ii) a three-year warrant to purchase one share of our common stock at an exercise price of $4.50 per share.

Company Snapshot:

Produces and sells steel plate, bar and billet in ChinaIndustry Snapshot

Use Of proceeds: No money raised from this offering

Underwriter: Self

Completed offering price: $4.50

Post IPO Share Calculation:

• 73,542,058: Pre IPO outstanding shares
• 2,579,022: Registered shares of Common Stock by current shareholders (will not add to shares outstanding).
• 2,579,022: Shares from warrants associated with private placement

GeoTeam® best effort calculation of total post IPO shares assuming full conversions:  76,121,080

Financial Snapshot: December Year End