China’s first U.S. publicly traded company, General Steel Holdings Inc. (OTCBB: GSHO), announced today that it has received approval for its Joint Venture with Shaanxi Longmen Iron and Steel Group (“Longmen”) in the Shaanxi province.
General Steel CEO and chairman, Henry Yu, stated earlier in a release, “After further discussion with the government, we changed our strategy away from acquiring the company in favor of a 60 percent Joint Venture. This allowed us to gain quicker licensing approval from the government.”
The Joint Venture assumes existing operating units of Longmen, which include a rolling mill, iron and steel making facilities. The initial production expectations will be 3 million tons annually and focus on rebar and related products.
The buzz surrounding the announcement of the Joint Venture has helped General Steel’s stock price. As of 1:25 p.m. CDT, the companies share price rose 40 cents, or 7 percent, to $6.00. In the company’s first quarter of 2007, the company almost doubled its revenues year over year and increased its net income by a little more than 40 percent to 475,000.
Longmen is the largest steel producer in the Shaanxi province, and in 2006 it was ranked in the top 50 steel companies in all of China. The combined efforts of the two companies should help them achieve its long-term goals and realize growth in its current level of profitability.
John Chen, CFO of General Steel, stated, “The decision to pursue a Joint Venture structure also allowed us to be selective in the units included in the deal. We were able to eliminate less efficient assets and concentrate on core operations for rebar and related products. This places us in an even stronger position to take advantage of the growing infra-structure and building development going on in China’s western region.”
General Steel currently produces hot-rolled carbon and silicon steel sheets, rebar, and seamed and seamless pipes. Total production capacity is 3.5 million tons, and using distributors and sales offices the company is able to sell its products nation-wide.
Please share your thoughts: MN1 Message Board
