China Gerui Advanced Materials Group's CEO Discusses Q2 2012 Results - Earnings Call Transcript

China Gerui Advanced Materials Group Limited (CHOP)

Q2 2012 Earnings Call

August 15, 2012 10:00 am ET

Executives

David Rudnick – CCG Investor Relations

Mingwang Lu – Chairman and Chief Executive Officer

Edward Meng – Chief Financial Officer

Analysts

Echo He – Maxim Group

Presentation

Operator

Good morning. My name is Melia, and I will be your conference operator for today. At this time I would like to welcome everyone to the China Gerui Materials Group Second Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)

Thank you. David Rudnick, you may begin your conference.

David Rudnick

Thank you, Melia. Good morning, ladies and gentleman, and good evening to those of you joining from China. I'm David Rudnick from CCG Investor Relations. I would like to welcome all of you to the China Gerui Advanced Materials conference call to discuss second quarter 2012 results. With me today, I have China Gerui's Chairman and Chief Executive Officer, Mr. Mingwang Lu; and Chief Financial Officer, Mr. Edward Meng.

I'd like to remind our listeners in this call, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the Company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today due to various risks including, but not limited to, the availability of funds and working capital to finance its activities; the actions and initiatives of current and potential competitors; the Company's ability to win new customers, merchants and vendors for its products; the development of new steel products, marketing and promotional activities, pricing policies of suppliers and competitors, increased competition in the steel market; and other risks detailed in the Company's filings with the Securities and Exchange Commission.

Accordingly, although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

In addition, any projections as to the Company's future performance represents management's estimates as of today August 15, 2012. China Gerui assumes no obligation to update these projections in the future as market conditions change.

I will now turn the call over to China Gerui's Chairman and CEO, Mr. Mingwang Lu for some brief openings remarks. CCG’s (inaudible) will be translating for Mr. Lu. Mr. Lu, please.

Mingwang Lu

[Foreign Language]

Dear gentlemen and ladies, thanks for joining us today to the earnings conference call.

[Foreign Language]

We achieved a reasonable level of revenue and cash flow generation in the second quarter of the year, despite a very weak pricing environment, and challenging domestic and international market condition. Our second quarter saw further utilization of our 2200 tons of chromium plating capacity and the steady ramp up of production from our added specialized cold-rolled wide-strip steel capacity.

[Foreign Language]

While the current market environment has been challenging, we believe that our competitive advantages enable us to uniquely meet our customers' needs, which will enable us to generate continued solid results. We will closely monitor the market economic conditions in China, and seek to diversify our customer base by exploring new export markets, as well as enrich our product mix, by expanding the range of our end-use product and materials.

[Foreign Language]

We believe that our adoption of a wider customer base fits our strategy of being a high-end global steel producer will enable us to fully optimize our new capacity and specialized value-added capacity.

[Foreign Language]

Although the rest of the year 2012 continues to look challenging, we are confident that our strategies already in place will enable us to weather current market condition, and to testing our specialized steel segment in the long term. We are intent on executing upon our initial so as to leverage our new capacities and technologies already in place as well as those currently being developed.

[Foreign Language]

I thank you again for joining us, and we'll now turn the call over to Edward, our CFO. Edward?

Edward Meng

Thank you, Mr. Lu, and thanks to all online attending this earnings call. Looking at the queue of listeners, I do appreciate people from the West Coast getting up early, and also people from Europe and China.

To begin, a summary of the second quarter’s financials. For more details, please refer to our earnings press release earlier today.

Our revenue decreased 10.8% to $76.8 million in the second quarter of 2012 from $86.1 million in the second quarter of 2011. The decrease in revenue was primarily due to an 18.2% decrease in the Company’s average selling price or ASP to $820 per ton for the second quarter of 2012 as compared to an average selling price of $1004 for the same period of last year. This was partially offset by a 9.2% increase in sales volume to approximately 93,500 tons for the second quarter of 2012 from approximately 85,600 tons for the same period of 2011.

Gross profit decreased 16% to $19.8 million in the second quarter of this year from $23.6 million in the same period of last year. Gross margin was 25.8% compared to 27.4% in the first quarter of 2011. The decrease in gross margin was due to a weak domestic price environment as China’s economic growth has continued to slow in 2012, and in addition there was an impact from the testing associated with continued ramp up of the added 100,000 tons specialized steel production line.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

3 Must Reads on the Market From TheStreet's Top Columnists

3 Must Reads on the Market From TheStreet's Top Columnists

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

This Should Be Your Retirement Savings Plan When the Stock Market Crashes