Longhai Steel Inc (GREY:LGHS)

Second Quarter 2012 Results

• Consolidated net revenues for the three months ended June 30, 2012 was $160.5 million compared to $165.7 million in the corresponding period a year ago, a decrease of 3.1%.
• Net income attributable to Longhai common shareholders was $2.4 million, an increase of 31.9% compared to $1.8 million in the second quarter of 2011.
• Earnings per diluted share was $0.22, an increase of 22.2% compared to $0.18 in the second quarter of 2011, based on 10.7 million and 9.9 million weighted average shares outstanding, respectively.

"We experienced a very productive first six months of 2012," began Steven Ross, Executive Vice President of Longhai Steel. "We achieved record shipment volumes for the second consecutive quarter as the expanded production from our second facility continued to ramp. While revenue was impacted from lower steel prices, the Company sold 295,635 metric tons of steel in the second quarter, a sequential increase of 22% from the first quarter and an increase of 10% compared to the same quarter last year. As we ship more higher value steel wire to a more diversified customer base beginning in the third quarter, we expect further margin upside."

Fourth Quarter 2011 Results

• Fourth Quarter 2011 steel wire sales revenue of $197.3 million compared with revenues of $144.5 for the same period of 2010, an increase of 36.5%
• Fourth Quarter 2011 net income of $6.3 million compared with net income of $4.6 million for the same period of 2010, an increase of 36.4%

Mr. Steven Ross, Executive Vice President of Longhai, said, "We are pleased to report record sales for 2011, largely driven by the opening of our new production facility in the fourth quarter of 2011. As the newly-opened steel wire facility continues to ramp output, we expect to see continued year-over-year improvements in operating results throughout 2012. During the first quarter of 2012 we also reconstituted our Board of Directors and transitioned to a new auditing firm, Marcum Bernstein & Pinchuk, LLP, both significant steps toward our goal of moving to a senior exchange.

Once fully ramped, the new facility will increase our overall capacity by approximately 60%, and have the capability to produce such high margin products as alloy steel, cold forging steel and welding rods. Over the next two quarters we expect to begin utilizing higher quality steel billets, which will enable us to produce higher quality and higher margin products for additional markets beyond construction and infrastructure."

Financial highlights for Fourth Quarter 2011 include:

• Fourth Quarter 2011 steel wire sales revenue of $197.3 million compared with revenues of $144.5 for the same period of 2010, an increase of 36.5%;
• Fourth Quarter 2011 net income of $6.3 million compared with net income of $4.6 million for the same period of 2010, an increase of 36.4%
• All results are subject to any final audit adjustments, and will be filed in final form with our Annual Report on Form 10-K by March 30

Mr. Steven Ross, Executive Vice President of Longhai, said, "As the newly opened steel wire facility continues to ramp output, we expect to see continued year-over-year improvements in operating results throughout 2012. Although current production from our new facility utilizes the same raw material as our other production lines, over the next two quarters we expect to transition to higher quality steel wire to enable us to produce high quality and high margin products. We will continue to keep our shareholders updated on company developments."

Once fully ramped, the new facility will increase our overall capacity by approximately 60%, and have the capability to produce alloy steel, cold forging steel and welding rods. These higher margin products will allow Longhai to also address demand in additional markets beyond construction and infrastructure.

XINGTAI CITY, CHINA--(Marketwire - Jan 26, 2012) - Longhai Steel Inc. ("Longhai") (OTCBB: LGHS), a producer of high quality steel wire products in the People's Republic of China, today announced record Fourth Quarter 2011 output and sales volume of steel wire.

With additional capacity beginning to come on line from its newly-opened second production facility, Fourth Quarter 2011 steel wire output was 293,862 Metric Tons, up 23% from 238,912 Metric Tons in the same period of 2010. Fourth Quarter 2011 steel wire sales volume was also a record at 335,229 Metric Tons, up 30% from 257,871 Metric Tons in the same period of 2010.

Once fully ramped, Longhai's new production line will increase overall capacity by approximately 60%. The new line also has the capability to produce alloy steel, cold forging steel and welding rods. This new, higher margin product will allow Longhai to address demand in markets in addition to construction and infrastructure.

Mr. Steven Ross, Executive Vice President of Longhai, said, "This increase in capacity is part of our long term corporate growth strategy. The higher quality steel wire from this facility will diversify our product base, and give us the ability to maintain our growth trajectory in 2012."