Archive for the ‘Longhai Steel Inc. LGHS’ Category

Aggressive Leadership Drives Longhai Steel, Inc. (LGHS)

Friday, September 28th, 2012

Longhai Steel, a rapidly growing producer of steel wire in and for China, has experienced tremendous annual revenue growth over the last few years, from $373,660 in 2009 to over 608,038 in 2011, due in no small part to the company’s aggressive executive management team and board of directors.

Chaojun Wang (Chairman & CEO)
Mr. Wang has served as the Longhai’s Chairman and CEO since March 2010 and as CEO of the company’s variable interest entity Xingtai Longhai Wire Rod Co., Ltd. since its inception in 2008. He has also served as Chairman of Longhai Steel Group, the company’s related party, since 1999. Mr. Wang is also a member of the local parliament and holds a Bachelor’s Degree in Enterprise Management. He is currently also serving as Longhai’s Interim CFO.

Steven Ross (Executive VP & Director)
Mr. Ross has over 25 years of senior management experience, ranging from high growth private companies to multi-billion dollar divisions of public enterprises. He is currently Managing Director of MTN Capital Partners, a New York-based private equity firm. Prior to joining MTN, Mr. Ross was CEO of National Investment Managers from 2006 until its sale to a private equity firm in 2011. Under his leadership, the company became the largest independent retirement services company in the country, with over $11 billion in assets under administration and operations in 17 cities in the United States.

Dr. Michael Grieves (Director)
Dr. Grieves is a world-recognized expert in product lifecycle management, engineering, manufacturing, and information systems, and lectures worldwide on those topics. He has been the Managing Member of Michael W. Grieves, LLC since 2000 and was Research Professor of Oakland University between 2008 and 2009. Dr. Grieves has written extensively in both industry and academic periodicals and has served in executive, managerial, and entrepreneurial roles for over 40 years.

Jeff Cooke (Director)
Mr. Cooke has been a CEO at multiple early-stage companies, and has held executive positions at Hewlett Packard, Apple Computer, and NEC. Mr. Cooke is currently President and CEO at Global Digital Strategies, Inc., which offers strategic executive leadership and specializes in providing the bridge from strategy to execution, primarily for early-stage companies and those undergoing a significant change in direction.

Joseph ‘Josh’ Howell, III (Director)
Mr. Howell is currently Senior VP of Level 3 Communications, a global telecommunications company based in Colorado. Mr. Howell is part of the core team of executives who launched the communications company, listed it on NASDAQ, and helped build the company as it expanded to more than 45 countries. Prior to Level 3, he was Senior VP of MFS Communications, an international telecommunications company which he helped take public as part of the team of executives who built the company into the largest competitive local carrier in the U.S. and Europe.

For additional information, visit the company’s website at www.LonghaiSteelInc.com

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Longhai Steel, Inc. (LGHS) Finds Success with 3-Pronged Growth Strategy

Monday, September 24th, 2012

Longhai Steel, one of China’s leading producers of high-quality steel wire, has based its continuous revenue growth on a 3-pronged approach: Expanded Production, Acquisitions, Economy of Scale. It’s a strategy that has worked well for the rapidly growing company, with annual revenues increasing 60% from 2009 to 2011. Part of this is due to the company’s unbeatable location. Hebei province, which surrounds Beijing, is China’s biggest steel producing area, with all of the distributors and infrastructure in place for any size operation, and close to the nation’s construction activity. But Longhai’s multi-pronged growth plan has provided a secure diversity for expansion, avoiding growth that is too narrowly based.

Expanded Production – Longhai recently began production from a newly constructed wire plant adjacent to its original plant. The new factory provides a capacity of 600,000 metric tons, increasing annual production capacity by 67% to 1.5 million metric tons. The new wire plant is designed to produce a higher grade wire than Longhai’s current products, producing wire from carbon steel, cold heading steel, and welding rod steel in diameters from 5.5 to 18 millimeters. The company has also acquired land adjacent to the two existing plants for addition of a third production facility.

Acquisitions – Longhai intends to continue identifying modern, high-quality steel producers for acquisition at low valuations. The rapid growth of the industry in China has resulted in many small producers in the Hebei area that do not have the capital to expand. The government is actively supporting steel industry consolidation, and Longhai plans to expand its operations and sales by acquiring producers with production facilities near its current facilities.

Economy of Scale – By expanding through organic growth, acquisitions, and modernizations, Longhai expects to increase its operating leverage, production, and sales, as well as have a greater influence on pricing and costs.

For additional information, visit the company’s website at www.LonghaiSteelInc.com

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Longhai Steel, Inc. (LGHS) Capitalizes On Location

Monday, September 17th, 2012

Steel production has always been as much about knowing your market and associated logistics as it has been about production capacity. Although Longhai Steel’s advanced production technologies and associated efficiencies give the company a decided edge in the marketplace, the fact that the company is located in Hebei province, China’s biggest steel and steel wire producing area, has played a beneficial role. Nearly half of China’s steel consumption comes from construction, and Hebei province, surrounding Beijing, is located near the country’s eastern coast where construction and associated manufacturers and distributors are concentrated. With a solid in-place infrastructure and network of industry elements, logistics is optimized.

Hebei’s rich assortment of distributors minimizes transportation issues. Longhai’s high quality steel wire is sold through private distributors and trading companies to third-party processors, with fully 80% of it in Hebei. Close relationships with key distributors have meant economically beneficial terms for Longhai, where on-demand manufacturing payments are collected in advance, allowing the company to finance the purchase of raw materials and reduce accounts receivable. Over half of the company’s sales dollars come from its top 5 customers.

In addition, an advantage to Longhai being proximate to other steel producers is the increased potential for acquisition. China’s steel industry is highly fragmented, a product of the industry’s rapid development. There are numerous small-scale operators, lacking the capital to expand, resulting in industry-wide duplication and inefficiencies. A major consolidation move is now underway, a government effort to reduce obsolete capacity, drive cost reductions, and increase energy efficiency. Longhai continues to actively identify and acquire modern, high-quality producers at low valuations, and plans to expand its operations and sales by acquiring steel wire producers with production facilities near its current facilities, of which there are plenty.

For additional information, visit the company’s website at www.LonghaiSteelInc.com

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Longhai Steel, Inc. (LGHS) Differentiates Itself through Superior Manufacturing and Distribution

Tuesday, September 11th, 2012

Longhai, through its Chinese operating company, produces various sizes of high quality steel wire products in two wire production plants, with a total annual capacity of approximately 1.5 million metric tons. The company’s output is sold to several distributors who in turn send it to nearby wire processing companies, with the final product being screws, nails, and wire mesh used for reinforced concrete and fencing. A recently opened second production line also produces higher quality steel wire for use in steel wire rope, welding rods, and steel belted radial tires. Longhai has also acquired land next to the two existing plants for the future addition of a third production facility.

Longhai’s production operations are located in Xingtai, Hebei province, south of Beijing, and cover roughly 200,000 square meters. Production design is geared to yield high quality, high volume, and low cost per ton. The newest facility incorporates Sixth Generation technology with air cooling that enables the production of even higher quality and more specialized steel wire. Longhai is ISO9001-2000 and GB/700-88 certified.

Longhai manufactures on demand, with sales prices set daily at the market price, though the company occasionally offers discounted wholesale prices, with sales efforts aimed at establishing long-term relationships with large volume customers. Steel billet is purchased subsequent to receipt of customer orders, helping protect the company from commodity price volatility. All distribution is within China, with 80% of it within Hebei province. Hebei is China’s biggest single steel making province, but is also a major producer of textiles, coal, iron, and chemicals.

The combination of the latest production technologies, together with an excellent distribution location and customer relationships that allow for customer prepayment, give Longhai an exceptionally solid operational foundation.

For additional information, visit the company’s website at www.LonghaiSteelInc.com

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Longhai Steel, Inc. (LGHS) Sees Itself as Being in the Best Place at the Best Time

Tuesday, September 4th, 2012

If you’re a producer of steel wire and related products, there’s no better place in the world to be than China, the single biggest consumer of steel and steel wire in the world. And, in China, one of the best places to be is Hebei province, one of the largest steel manufacturing regions in China and close to Beijing. Hebei has all of the infrastructure in place, along with close proximity to distributors and end users.

The city of Xingtai, in Hebei, is the site of Longhai Steel, Inc., now one of China’s leading producers of high-quality steel wire, with an annual capacity of 1.5 million metric tons. Longhai’s wire goes directly to nearby manufacturers, where it is converted into an expanding list of products for the country’s construction, automotive, and infrastructure industries, with all its sales delivered in China:

• Screws
• Nails
• Wire mesh for fencing and reinforced concrete
• Wire rope
• Steel belted radial tires
• Welding rod

Longhai’s advanced production equipment, process technology, and its close proximity to distributors and end users provides it a clear competitive advantage. The company recently opened a second production line, upping overall capacity by 67% and expanding its product portfolio. Longhai has acquired land adjacent to the two existing plants for the future addition of a third production facility.

Longhai’s growth strategy is multi-faceted, including organic growth through careful capacity expansion, adding new products, improving operational efficiencies, and remaining a technological leader. The company also expects to capitalize on government actions that encourage industry consolidation by acquiring neighboring producers at attractive valuations. In addition, the ongoing economic development in Hebei province, and neighboring areas, along with the further buildout of tier 3-6 cities in China, represents a tremendous medium and long term opportunity for Longhai Steel.

To learn more about the company, visit www.longhaisteelinc.com

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Longhai Steel, Inc. (LGHS) to Reach Full Capacity at New Steel Wire Facility by Yearend

Wednesday, August 29th, 2012

Longhai Steel, a producer of high-quality steel wire products in the People’s Republic of China, announced this morning that the company has completed testing of its initial production of high quality steel wire. Management anticipates ramping up production to full capacity by the end of 2012.

“We are pleased with the testing results from the initial production at our second facility,” stated Steven Ross, Executive Vice President of Longhai Steel. “We have met or exceeded all of our internal performance metrics and look forward to expanding our customer base and broadening our end market footprint.”

Longhai Steel’s growth strategy includes capitalizing on government actions aimed at encouraging industry consolidation via the acquisition of neighboring producers at attractive valuations. The company also plans to grow organically through capacity expansion, broadening its product portfolio, improving operating efficiencies, and continued expansion of technical expertise.

To learn more about the company, visit www.longhaisteelinc.com

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Longhai Steel, Inc. (LGHS) Well Positioned to Execute Expansion Strategy

Monday, August 27th, 2012

Located in Hebei Province, where most of China’s steel is produced, Longhai Steel has captured a great deal of attention and considerable market presence for its ability to fulfill orders in rapid succession within a highly competitive price structure and at a better quality than other suppliers in the People’s Republic of China, or PRC.

Subsequent to a facility expansion, Longhai Steel increased its yearly production by 67 percent in the fourth quarter of 2011, going from 900,000 to 1.5 million metric tons of high quality steel wire, in diameters from 5.5 millimeters to 18 millimeters, with production taking place on technologically superior equipment.

This high-quality metal lends itself to being made into carbon structure steel, cold heading steel (cold pressing discrete configurations from a steel blank or slug), welding rod, and steel stranded wire as used in steel belted radial tires, suspension bridges, and engineered springs used in automotive or industrial-type machines. Longhai Steel also offers its products to third-party processors who turn out such useful things as nails, the wire mesh used in reinforced concrete, hardware cloth, and the linked mesh that makes up chain link fencing.

The company recently capitalized on its superb reputation for exceeding PRC quality standards in the 6.5mm to 10mm wire metric, so widely used in the construction industry, via an additional production facility in Xingtai. This ultra-modern, high-speed plant not only has increased capacity, but has a longer production line equipped with advanced heating and cooling systems that result in a more durable and reliable product. In addition, this new facility is geared to roll out the kind of higher margin, 5.5mm to 18mm steel wire needed for specialized products.

Thanks to increased production and higher quality processes, Longhai Steel looks to secure an increasing slice of the regional stranded steel wire marketplace as increasing demand – sparked by local infrastructure upgrades and improvements – spurs development of the tier 3-6 city construction initiative which offers a firm foundation for growth.

Longhai Steel’s production improvements and expanded capacity offer the company an opportunity to effect a consolidation strategy which, aligned with PRC policy initiatives, promises to bring together an industry which has grown up piecemeal. The consolidation, in turn, is an opportunity for Longhai Steel to vertically integrate its business in a fusion of strategic acquisitions that has (and will) prove valuable for LGHS shareholders.

These policies, which anticipate China’s emergence as a major player in the global steel marketplace (with an increase in steel production of four percent even as the rest of the world shows declines of 1.2 percent), are available to Longhai Steel through corporate practices which favor long-term customer relationships, superior quality, rapid turnaround, reliable delivery, and customer support – all driven by economies of scale and acquisition opportunities which will reduce obsolete production capacity, promote cost reduction strategies and increase energy efficiency in an industry which has been seriously fragmented by rapid buildout.

Even though China is experiencing some of the slowdown occupying Western construction markets, it continues to roll out infrastructure at a fever pace, driving a remarkable 45 percent of global steel production and 46 percent of global steel consumption in 2011. Hebei Province, the steel capital of China’s northeast, in 2011 accounted for 20 percent of total nationwide steel output.

An overview of market opportunities in China show the government instituting policies designed to divide 60 percent of domestic steel capacity among the top 10 producers by 2015, as opposed to a mere 44 percent in 2009.

This intense consolidation is one metric in those economies of scale that promises to leverage the inherent value of China’s huge stimulus package, which offers $586 billion to create significant steel demand via increased construction in housing, roads, highways, dams, irrigation projects, airports, and other infrastructure buildouts.

Longhai Steel’s new 200,000 square-meter location, which includes everything from production lines and warehousing to company office space, make it even easier for the company to provide rapid turnaround and delivery on orders across a wider product mix.

To learn more about the company, visit www.longhaisteelinc.com

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Longhai Steel, Inc. (LGHS) Video Chart for Monday, August 20, 2012

Monday, August 20th, 2012

LGHS made a strong move on Friday to again push above an important resistance level. A solid uptrend has been established over the past two months and there is little resistance in front to test old highs at $2.25.

To view the video chart, visit the following link: http://www.qualitystocks.net/videocharts

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Longhai Steel, Inc. (LGHS) Provides Investors with Q2 2012 Earnings Call Transcript; Reiterates TTM EPS of $1.23 and Strong Cash Position

Monday, August 20th, 2012

Longhai Steel, a leading producer of high-quality steel wire in eastern China with annual capacity of 1.5 million metric tons, today provided the transcript for its second quarter 2012 earnings conference call. The entire transcript is presented below.

Operator: Good day ladies and gentlemen. Thank you for standing by. Welcome to the Longhai Steel’s Second quarter 2012 Earnings call. Joining us today for Longhai Steel’s Second quarter 2012 Earnings conference call is the Company’s Executive Vice President, Mr. Steven Ross. Mr. Ross will review and comment on financial and operational results for the second quarter 2012.

I’d like to remind our listeners that on this call, prepared remarks may contain forward-looking statements which are subject to risks and uncertainties, and that management may make additional statements in response to your questions; therefore, the Company claims the protection from the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements related to the business of Longhai Steel and its subsidiaries can be identified by common use forward-looking terminology, and those statements involve unknown risks and uncertainties including all business-related risks that are more detailed in the Company’s filings on Form 10-K, 10-Q, and 8-K with the SEC.

A playback of the call will be available until 9:00 am ET on August 30, 2012. To listen, call 1-877-344-7529 within the United States or 1-412-317-0088 when calling internationally. Please use the replay pin number 10017460.

At this time, I’d like to turn the call over to Steven Ross, Executive Vice President of the Company, and he’ll provide opening remarks. Steve, the floor is yours.

Steven Ross: Good morning and thank you for joining us for Longhai Steel’s second quarter 2012 Earnings conference call. Before I discussed our results for the second quarter, I’d like to provide a brief overview of our company for investors who are new to the Longhai Steel story.

Headquartered in Xingtai, Hebei province in the People’s Republic of China, Longhai steel is a leading producer of high-quality steel wire, with annual capacity of 1.5 million metric tons. Longhai’s wires are manufactured into screws, nails, and wire mesh used for fencing and to reinforce concrete. We recently expanded our production facility to include specialized applications such as steel wire rope, steel strand, steel belted radial tires, and steel welding rod.

We are able to compete effectively against domestic steel wire manufacturers and exporters due to our advanced production equipment and process technology, high product quality, expedited production capabilities, and close proximity to distributors and end users. We recently opened a second production line, which increased our overall capacity by 67%. Equally important, the new state-of-the-art product line expands our product portfolio into higher quality steel wire for specialized applications such as steel wire rope, steel strand, steel belted radial tires, and steel welding rods.

Our growth strategy focuses on organic growth through capacity expansion, product diversification, operational efficiencies and expansion of our technical expertise. Additionally, we intend to capitalize on policies by the Chinese government to further consolidate the industry through accretive acquisitions of competitors in Hebei and surrounding provinces.

Now that you have a better understanding of our core competencies and growth strategies, I will go right into our second quarter results.

Our record second quarter results reflect strong demand for our products and continued benefits from our expanded capacity. We achieved record shipment volumes for a second consecutive quarter while our total sales volumes for the first six months of 2012 increased by approximately 13% to 538,011 MT.

Looking at the second quarter income statement items in greater detail, net revenues came in at $160.5 million, down 3% from $165.7 million a year ago. We sold 295,635 MT of steel compared to 267,938 MT in the second quarter of 2011. Higher sales volumes were offset by lower prices.

Gross profit increased 34% to $4.8 million, while gross margin increased by 90 basis points to 3.0%. We achieved higher gross margins due to an increase in the spread between still wire prices and steel billet prices. Steel billet accounts for over 95% of our cost of goods.

Selling, general and administrative expenses for the three months ended June 30, 2012 were $1.1 million, up from $0.3 million in the year-ago quarter. Operating income increased 13.3% to $3.7 million, with an operating margin of 2.3%.

We reported a net income attributable to common shareholders of $2.4 million, an increase of 32%. EPS was $0.22 compared to $0.18 in last year’s second quarter. Our weighted average shares outstanding were 10.7 million shares.

Our balance sheet was in great shape at the end of the second quarter. We had $18 million of cash and cash equivalents and $9.5 million of banker’s acceptance outstanding at June 30, 2012. We generated $4.6 million of cash flow from operations in the first six months of 2012 and raised $1.2 million of gross proceeds through an equity financing in the second quarter of this year. We have sufficient capital to fund our growth for the foreseeable future.

I’ll summarize the key financial highlights for the first half of 2012 before closing with a few business updates. Please note that all of the comparisons are year-over-year versus the first half of 2011.

— Sales increased 1.5% to $296.3 million
— Gross profit increased 37% to $10.3 million; gross margin was 3.5% vs. 2.6% in 1H 2011
— Net income and EPS were $5.1 million and $0.49, up 37% and 32%, respectively

We made further progress in our operations during the second quarter. Staring at the end of the second quarter, we commenced initial production of high quality steel wire in our second production facility. The state-of-the-art facility has a high-speed production line capable of producing a wide variety of conventional and higher value steel wire used in a variety of specialized applications. We have received positive feedback from customers in Hebei, selling all of our initial production. We expect to ramp production of high quality steel wire to full capacity by the end of 2012.

As I commented at the beginning of this call, we expect the additions of these new products to expand our product offering and generated higher margins. We are extremely pleased that we were able to get this line up and running on time and on budget.

That concludes my prepared remarks. On behalf of the entire Longhai Steel management team, we want to thank you for your interest and participation in this call. We have a lot of positive momentum, and we are confident that the long-term dynamics driving demand for steel wire products in China will provide a positive backdrop for our business.

For comprehensive investor relations material, including fact sheets, research reports, presentations and video, please visit: www.longhaisteelinc.com

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Longhai Steel, Inc. (LGHS) is “One to Watch”

Friday, August 17th, 2012

Longhai Steel is a leading producer of high-quality steel wire in eastern China, with annual capacity of 1.5 million metric tons. Longhai’s wire is manufactured into screws, nails, and wire mesh used for fencing and to reinforce concrete. Longhai recently expanded its production facility to include specialized applications such as steel wire rope, steel strand, steel belted radial tires, and steel welding rod. Longhai Steel is headquartered in Xingtai, Hebei province, the People’s Republic of China.

The company’s competitive advantages are its advanced production equipment and process technology, high product quality, expedited production, and close proximity to distributors and end users. Longhai Steel recently opened a second production line, which increases its overall capacity by 67% and expands its product portfolio into higher quality steel wire for specialized applications such as steel wire rope, steel strand, steel belted radial tires, and steel welding rod.

Longhai Steel’s growth strategy includes capitalizing on government actions aimed at encouraging industry consolidation via the acquisition of neighboring producers at attractive valuations. The company also plans to grow organically through capacity expansion, broadening its product portfolio, improving operating efficiencies, and continued expansion of technical expertise.

China is the world’s largest producer and consumer of steel and steel wires. Demand for steel products is primarily driven by spending in the construction, automotive, and infrastructure industries in China. Continued economic development in Hebei, one of the largest steel manufacturing regions in China, and neighboring provinces, and further buildout of tier 3-6 cities in China, provide tremendous medium and long term opportunities for Longhai Steel.

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