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China Precision Steel 4Q Profit Plunges 61 Percent

HARTFORD, Conn. (AP) ¿ China Precision Steel Inc. said Tuesday its fourth-quarter profit plunged 61 percent as margins were squeezed by rising raw material prices, but said the steel industry is showing signs of improvement.

Net income for the quarter ended June 30 was $2.2 million, or 5 cents per share, down from $5.6 million, or 12 cents per share, a year earlier.

Revenue decreased 10 percent to $25.7 million from $28.6 million in the year-ago quarter.

The company said margins declined due to the higher cost of raw materials related to an inventory build-up in the first half of 2008 with high demand and steel prices. Then selling prices declined sharply amid the industry downturn, resulting in tighter margins, the company said. Its gross margin fell to 9 percent, from 19.2 percent, in the year-ago period.

Revenue for the quarter benefited from a $3.2 million subcontracting order that represented 14.8 percent of sales.

For the full year, the Shanghai-based company posted a loss of $408,338, or 1 cent per share, compared with a profit of $18.6 million, or 43 cents per share, in the same quarter in 2008.

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