China Gengsheng Minerals (NYSE AMEX:CHGS)

First Quarter 2012 Financial Highlights:

• Revenue decreased 15.3% year-over-year to approximately $13.7 million.
  • Refractories sales were approximately $9.9 million, compared with approximately $9.9 million in the first quarter of 2011.
  • Fine precision abrasives product sales were approximately $2.4 million, compared with approximately$819,000 in the first quarter of 2011.
  • Fracture proppant sales were approximately $998,000, compared with approximately $5.2 million in the first quarter of 2011.
• Gross profit was approximately $2.7 million, or 19.8% of total sales, compared with approximately $4.3 million, or 26.5% of total sales in the same period a year ago.
• Total operating expenses increased to approximately $4.4 million, compared with approximately $3.6 millionin the first quarter of 2011.
• Net loss attributable to the Company was approximately $2.9 million, or $0.11 per share, compared with net loss of approximately $80,000, or $0.003 per share in the first quarter of 2011.
• As of March 31, 2012, the Company had cash and cash equivalents of approximately $2.7 million, total equity of approximately $51.1 million and working capital of approximately $8.4 million.

"We experienced a disappointing quarter as a result of weak sales in fracture proppants segment. The continued slowdown in the steel industry also had an unfavorable impact on us," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "While financing costs and operating expenses weighed on our results for the first quarter of 2012, we continue to work towards increasing sales and improving profitability thus create sustainable value for our shareholders."

Fourth Quarter 2011 Financial Highlights:

• Quarterly revenue increased 1.4% year-over-year to approximately $18.9 million.
  • Fracture proppant sales were approximately $5.7 million, an increase of 13.8% year-over-year compared with approximately $5.0 million in the fourth quarter of 2010;
  • Refractories sales were approximately $10.7 million, compared with approximately $12.7 million in the fourth quarter of 2010.
  • Fine precision abrasives product sales were approximately $2.9 million, an increase of 327.3% year-over-year compared with approximately $0.7 million in the fourth quarter of 2010.
• Gross profit was approximately $1.1 million, or 5.7% of total sales, compared with 20.7% of total sales in the same period a year ago.
• Total operating expenses increased to approximately 7.1 million, compared with approximately $5.2 millionin the fourth quarter of 2010.
• Net loss attributable to the Company was approximately $8.0 million, or $0.30 per share, compared with net loss of approximately $2.1 million, or $0.08 per share in the fourth quarter of 2010.
• As of December 31, 2011, the Company had cash and cash equivalents of approximately $3.6 million, stockholders' equity of approximately $53.8 million and working capital of approximately $11.8 million.

"In 2011 we continued our efforts in products positioning and strategic progress for GengSheng. We committed resources to, and expanded production capacity of targeted areas, hence to improve our ability to address the overall unstable environment in our end markets," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "During the fourth quarter and throughout the year, our bottom line was impacted by increased material, energy and labor costs, operating expenses, financing costs and non-cash impairment charges. While these increased expenses weighed on our results for 2011, we adopted stringent approaches to eliminate impaired assets in our books."

Third Quarter 2011 Financial Highlights:

• Revenue increased 28.2% year-over-year to approximately $21.5 million.
  • Fracture proppant sales totaled approximately $5.7 million, an increase of 13.4% year-over-year, compared with approximately $5.0 million in the third quarter of 2010.
  • Refractories sales were approximately $13.4 million, an increase of 17.6% year-over-year, compared with approximately $11.4 million in the third quarter of 2010.
  • Sales of fine precision abrasives totaled approximately $2.2 million, compared with approximately $184,000 in the third quarter of 2010.

• Gross profit increased 11.3% to approximately $5.5 million, or 25.6% of total sales, compared with approximately $4.9 million, or 29.5% of total sales in the same period a year ago.

• Operating income was flat at approximately $1.4 million compared with the third quarter of 2010.

• Net income attributable to the Company's common stockholders decreased slightly to approximately $853,000, or $0.03 per fully diluted share, compared with approximately $905,000 million, or $0.04 per fully diluted share in the third quarter of 2010.

• As of September 30, 2011, the Company had cash and cash equivalents of approximately $7.9 million, stockholders' equity of approximately $61.3 million and working capital of approximately $19.2 million.

"We achieved record quarterly revenue of approximately $21.5 million, generating top-line growth from all three primary business segments in the third quarter. Importantly, we made significant improvements across key operating metrics and returning to profitability following three consecutive quarters of losses," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "We achieved meaningful improvements in our business despite challenges in the steel and solar industries, as well as tightening monetary policy in China and domestic and international macroeconomic uncertainties which have impacted customer demand. We are pleased by our team's ability to execute on the primary strategic growth initiatives for each of our business segments, contributing to our solid performance in the third quarter and positioning the Company well to address the opportunities and challenges lies in ahead of us."

"Overall, we are excited by the Company's improved performance in the third quarter, particularly given the macro-level challenges we faced. We have a clearly defined growth strategy for each of our primary business segments, and are confident that our continued successful execution of these initiatives, coupled with prudent operating expense controls, will position the Company to achieve continued growth and sustainable profitability."

Second Quarter 2011 Results

• Revenue increased 36.3% year-over-year to $20.4 million.
• Net loss attributable to the Company's common stockholders was $(247,000), or $(0.01) per fully diluted share, compared with net income of $1.0 million, or $0.04 per fully diluted share in the second quarter of 2010.
   

"We achieved top-line growth across each of our three primary business segments for the second quarter, sales of our refractory products increased on a year-over-year basis for the first time in several quarters, and we achieved record quarterly sales of $5.9 million in our fracture proppant business," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "Although our bottom line weighted by increased operating expenses and finance costs, incurred to support business expansion, we remain excited by the performance and prospects of all business lines. During the first half of the year, we launched several strategic growth initiatives to address the large and growing fracture proppant market, including capacity expansion, and a joint development agreement with a North American fracture proppant distributor to address the U.S. and Canadian markets. We believe these initiatives will position GengSheng to capture additional market share as we build brand recognition, both domestically and internationally and continue to leverage the strong, rapidly growing demand from oil and gas producers

First Quarter Results:

• Revenue increased 36.4% year-over-year to approximately $16.2 million.
• Fracture proppant sales totaled approximately $5.2 million, an increase of 333% year-over-year, compared with approximately $1.2 million in the first quarter of 2010.
• Refractories sales were approximately $9.9 million, compared with approximately $10.4 million in the first quarter of 2010.
• Sales of the Company's fine precision abrasives products totaled approximately $0.8 million, compared with approximately $0.7 million in the fourth quarter of 2010, and approximately $0.2 million in the third quarter of 2010, when the product was commercially launched.
• Gross profit increased 7.9% to approximately $4.3 million, or 26.5% of total sales, compared with $4.0 million, or 33.5% of total sales in the same period a year ago.
• Total operating expenses increased to approximately $3.6 million, compared with approximately $3.1 million in the first quarter of 2010.
• Net loss attributable to the Company was approximately $80,000, or break-even per fully diluted share, compared with net income of approximately $0.4 million, or $0.02 per fully diluted share in the first quarter of 2010.

"We achieved solid year-over-year revenue growth, driven by the continued success of our fracture proppant business. While the first quarter is generally seasonally slow as a result of the Chinese Spring Festival and a slowdown in the steel industry due to reduced domestic construction during the winter months, we expect to reduce some of this seasonality as we continue to diversify our revenue mix. Our loss for the quarter was related to increased expenses associated with investment in our fracture proppants and fine precision abrasives businesses, which are key growth drivers for our business, both now and over the longer-term," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer.

"During the first quarter, we gained additional traction in the overseas markets through both supply orders and demand indications for fracture proppants as oil and gas producers increasingly recognized the quality and value of our proppant products. In addition to our capacity expansion efforts, we are expanding our international sales and marketing efforts to help build the GengSheng brand among potential proppant customers outside of China. In light of the sizeable market opportunity and our targeted growth initiatives, we expect to achieve continued strong performance from this segment going forward.

GONGYI, China, May 5, 2011 /PRNewswire-Asia-FirstCall/ -- China GengSheng Minerals, Inc. (AMEX: CHGS), a leading China-based high-tech industrial materials manufacturer producing heat-resistant, energy-efficient materials for a variety of industrial applications, today announced plans to construct a new fracture proppant manufacturing facility in Gongyi, Henan Province, which will increase the Company's annual proppant manufacturing capacity by 60,000 metric tons, to 150,000 tons, including 30,000 tons produced by third parties under OEM agreements. Construction on this new facility began in the second quarter of 2011, with production expected to commence during the second half of the year.

"New technological developments and a global surge in oil and gas drilling is driving a sharp increase in demand for high-quality, cost-effective proppant materials such as ours, and we believe that the time is right to expand our production capacity in order to capture this sizeable market opportunity," said Mr. Shunqing Zhang, Chairman and CEO of China GengSheng Minerals. "Through our organic capacity expansion, we are able to easily scale manufacturing volume, while maintaining tight quality and cost controls. In addition, we are working to further diversify our marketing channels to build the GengSheng brand among overseas customers. In light of these favorable market trends, our renewed sales and marketing initiatives and this additional capacity, we expect to achieve continued strong growth from our fracture proppants business as we move forward and the markets continue to mature."

This new facility will be constructed on approximately 87,000 square meters of land, for which the Company has signed a 20-year lease, and will include 2 production lines capable of manufacturing proppant materials to customer specifications. Total cost of the new facility is expected to be approximately $8.6 million, which will be fully funded through operating cash flow and the proceeds of GengSheng's registered direct offering, completed in January 2011.

Fourth Quarter Results:

• Revenue increased 21.8% year-over-year and 11.1% quarter-over-quarter to approximately $18.6 million.
• Gross profit was flat at approximately $3.9 million, or 20.7% of total sales, compared with 25.3% of total sales in the same period a year ago.
• Net loss attributable to the Company was approximately ($2.1) million, or ($0.08) per share, compared with net income of approximately $1.0 million, or $0.04 per share in the fourth quarter of 2009

"2010 was a year of positioning and strategic progress for GengSheng, as we extended our product portfolio, expanded production capacity, and committed resources to improving our ability to address the sizable growth opportunities in our end markets," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "During the fourth quarter and through the majority of the year, our bottom line was impacted by increased operating expenses, financing costs and a non-cash charge related to doubtful accounts. While these increased expenses weighed on our results for 2010, we eliminated some of our riskier receivables and invested in initiatives that we believe will contribute to sales across each of our businesses, supporting the Company's profitable growth in 2011 and beyond."

GONGYI, China, March 29, 2011 /PRNewswire-Asia/ -- China GengSheng Minerals, Inc. today announced that it has signed a definitive agreement with a local affiliate in Gongyi, Henan Province to manufacture 30,000 metric tons of its fracture proppants through the end of 2011. With this addition, China GengSheng has increased its total annual fracture proppant capacity by 20% to 90,000 metric tons.

In conjunction with this new agreement, the Company has decided to terminate its operating lease, entered in October 2010, and ceased production of fracture proppant products at its leased manufacturing facility in Gongyi, Henan Province.

GONGYI, China, Feb. 16, 2011 /PRNewswire-Asia-FirstCall/ -- China GengSheng Minerals, Inc. today announced that it has been awarded $10.5 million a follow-on contract for its fracture proppants from a China-based distributor specializing in sales to overseas oil and gas companies. GengSheng will begin shipments to this customer in February 2011 and expects to supply approximately 27,000 tons of proppant products over a six-month period.

"During 2010, we achieved tremendous growth in our fracture proppant business, driven by robust demand from both domestic and international customers. Throughout the year, we worked to develop strong relationships with our customers and key distributors, and it is clear that these efforts are bearing fruit. We are pleased that this distributor has recognized the quality of our products and high level of customer service we provide by awarding us this significant follow-on order," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "We entered 2011 with our proppant manufacturing operations near full capacity. We expect drilling activity to remain high throughout the year, driving continued strong demand for proppant materials. In an effort to capture this anticipated demand, we are currently exploring opportunities to expand our fracture proppant manufacturing capacity later in the year."

GengSheng commercially launched its fracture proppant products in the second quarter of 2007, and reported full-year 2009 revenue from this product segment of $8 million, representing a 3-year CAGR of 323%. Fracture proppant sales in the third quarter of 2010 were a record $5 million. In order to meet the growing demand for its fracture proppant products, GengSheng signed a 3-year operating facility lease in the fourth quarter of 2010. This facility increased the Company's fracture proppant manufacturing capacity to 75,000 metric tons per year.

GONGYI, China, Feb. 1, 2011 /PRNewswire-Asia/ -- China GengSheng Minerals, Inc. today announced that GengSheng has signed a full-service refractories supply contract with Fushun New Steel Corporation. Shipments under the contract began in January 2011, and are expected to continue through December 2012. Revenue contribution from this new client is expected to begin in the first quarter of 2011.

Under the agreement, GengSheng will provide refractory materials, as well as installation and on site support services. Revenue will be recognized based on Fushun New Steel's production volume. Based on Fushun's current manufacturing capacity, GengSheng expects revenue of approximately $10 million over the two-year term of the contract.

Third Quarter 2010 Financial Highlights:

• Revenue increased 12.2% year-over-year and 11.6% quarter-over-quarter to approximately $16.7 million.
  • Fracture proppant sales were approximately $5.0 million, an increase of 91.4% year-over-year and 62.8% quarter-over-quarter.
  • Refractories sales were approximately $11.4 million, compared with approximately $12.2 million in the third quarter of 2009.
  • Newly introduced fine precision abrasive product sales were approximately $0.2 million.
• Gross profit increased by 17.1% to approximately $4.9 million, or 29.5% of total sales, compared with approximately $4.2 million, or 28.3% of total sales in the same period a year ago.
• Total operating expense increased to approximately $3.5 million, compared with approximately $2.6 million in the third quarter of 2009.
• Net income was approximately $0.9 million, or $0.04 per share, compared with approximately $1.7 million in the third quarter of 2009.
• Comprehensive income attributable to the Company's stockholders was approximately $1.7 million for the third quarters of 2010 and 2009.
• Cash and cash equivalents of approximately $7.5 million, stockholders' equity of approximately $52.8 million and working capital of approximately $23.3 million, as of September 30, 2010.

"Our strong sales for the period were led by our fracture proppant business with significant growth in demand driven by increased drilling activity," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "Additionally, the third quarter was notable for the launch and first commercial sales of our fine precision abrasives product line. In addition to the immediate contributions, the introduction of fine precision abrasives gives us access to the sizeable, fast-growing solar market and a number of large, high-profile potential customers.

"While we achieved record revenue for the period, our refractories business continued to be impacted by economic weakness in the Chinese steel industry. We continue to offset this by transitioning to a revenue mix of higher-end monolithic refractory products. During the quarter, we also made important investments in our research and development to expand our refractory and industrial ceramics offerings, and incurred higher costs associated with increased personnel and salaries for our fracture proppant and fine precision abrasives businesses as we met new proppant sales goals and increased staff to support the launch and sales efforts of fine precision abrasives.  These investments drove an increase in operating expenses in the third quarter, which impacted our bottom line, but significantly improve the Company's overall position and, we believe, will help us achieve our longer-term growth objectives.

"Given our strong domestic foothold, we are working aggressively to expand our presence internationally in order to capitalize on the significant, untapped potential in the overseas markets. To better position the Company to pursue sales opportunities and demand in the domestic and international fracture proppant market, we recently increased our annual production capacity to 75,000 metric tons. As the near-term outlook for the Chinese steel industry remains uncertain, we continue to ramp our fracture proppant business and recently introduced fine precision abrasives products. Both business segments represent large and growing market opportunities where we can readily expand our business," Mr. Zhang concluded