Choppir may 2014 ppt_final

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Choppir may 2014 ppt_final

  1. 1. NASDAQ: CHOP China Gerui Investor Presentation May 2014
  2. 2. This presentation includes or incorporates by reference statements that constitute "forward-looking statements" within the meaning and protections of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, capital, ownership or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward- looking statements through our use of words such as "may," "will," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "project," "could," "intend," "target" and other similar words and expressions of the future. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our annual report on Form 20-F for the year ended December 31, 2013 and otherwise in our SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at http://www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward- looking statements after the date hereof, or after the respective dates on which any such statements otherwise are made. Safe Harbor
  3. 3. Capital Markets Summary LTM = last twelve months Price (5/29/14) 0.90 2013 Revenues 165.83 MM 2013 Net Income/(Loss)(LTM) (14.14) MM2013 Diluted EPS/(LPS) (LTM) (0.24) Market Capitalization 53.75 MM Price/Book Value 0.19 Book Value Per Share 4.81 Net Cash Per Share 1.14
  4. 4. China Gerui is a leading niche and high-value added metal processing company that utilizes advanced technology to produce specialty, cold-rolled steel products  Headquartered in Zhengzhou, Henan Province, China.  Approximately 1,100 employees as of December 2013.  Annual capacity of 500K tons including 50% chromium plating capacity and 30K tons laminating capabilities.  Serves over 200 customers in China in consumer spending and construction industries.  Began export of products to customers in Turkey and India in 2012 with additional customers expected in the U.S. and other emerging markets. Company Overview Raw Materials Hot Rolled Steel Cold Rolled Steel Processing (Narrow + Wide Strip) Manufacturers End Applications
  5. 5. Investment Highlights 1 Focus on customized, high value-added, high-margin steel production 2 Leading position in robust niche market in China 3 Unique business model with defendable barriers to entry 4 Positive cash flow despite challenging macroeconomic conditions 5 Defined long-term growth strategy 7 Seasoned management with local market knowledge Diversification of revenue stream via new technologies and exports 6
  6. 6. In-House Value Chain Hot Rolled Coil Initial Cutting Acid Pickling Cold Rolling Annealing Temper Rolling/ Stretching Cold Rolled Steel Strips (Narrow + Wide) Chromium Plated and Laminated Steel Production Process LevelofComplexity Finished Product Input Factor Value Creators
  7. 7.  China Gerui specializes in ultra-thin, high- precision products with thicknesses mostly from 0.05mm to 0.5mm, widths up to 1200mm, tolerance +/- 0.003mm.  For CRS products, the thickness can range between 0.05mm up to 7.5mm.  Typical thickness of China Gerui raw material HRC: 3mm.  Five series and over twenty types of high- precision strip steel products. Defining Our Market 0.05mm 0.5mm 7.5 mm China Gerui Commodity-type producers
  8. 8. Food and Industrial Packaging 53% Construction and Household Decoration 40% Electrical Appliances 4% Telecom Wire & Cable 3% 2013 Revenue by Industry Application China Gerui produces high-precision steel products tailored to meet exact customer specifications Food and Industrial Packaging 51% Construction and Household Decoration 23% Electrical Appliances 17% Telecom Wire & Cable 9% 2012
  9. 9.  Not a commodity business: focus on customized high-margin steel production.  Products meet stringent performance and specification requirements.  Supplier of choice when our existing customers develop new products. Economics of China Gerui’s Business Model Made-to-Order Production High Inventory Turnover Low A/R No Long-Term Debt Customer Survey/Order Secure Raw Material Receive 30% Down Payment Processing 70% Balance Collected Upon Delivery
  10. 10. China Gerui International Companies Domestic Companies Strategic Focus First Mover Advantage Brand Recognition Nationwide Distribution Local Market Knowledge High Product Quality Financial Resources  Limited domestic supply because PRC manufacturers lack the equipment and expertise to produce high-end specialty cold rolled steel.  Steel industry is highly capital intensive: Capital requirements prevent newcomers or smaller players without sufficient funds from entering the market. Strategic Advantages
  11. 11. Financial Performance FYE 2014 Guidance Revenue $175 MM to $180 MM USD million Total Revenue Net Profit/Loss Adjusted EBITDA USD million USD million USD million Gross Profit Note: EBITDA is adjusted for one-time warrant expenses of $570,000 in 2011 and, stock-based compensation expense of $3.7mm in 2012, stock-based compensation expense of $32,891 in 2013 253.9 341.8 265.5 165.8 0 50 100 150 200 250 300 350 400 2010 2011 2012 2013 -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% -20 -10 0 10 20 30 40 50 60 70 2010 2011 2012 2013 Net Profit Net Margin 70.6 98.2 57.6 7.0 0 20 40 60 80 100 120 2010 2011 2012 2013 47.1 63.2 26.1 -14.1 18.6% 9.8% (8.5%) 18.5% 76 101.6 56.9 4.1 -8.0% -3.0% 2.0% 7.0% 12.0% 17.0% 22.0% 27.0% 32.0% 0 20 40 60 80 100 120 2010 2011 2012 2013 Gross Profit Gross Margin 29.9% 29.7% 21.4% 2.5%
  12. 12. Healthy Balance Sheet Condensed Balance Sheet (USD 000’s) Dec.30, 2013 Dec.31, 2012 Cash 237,060 228,861 Certificates of Deposit 24,200 16,372 Restricted cash 114,804 145,414 Accounts receivable 2,694 2,276 Inventories 17,497 22,763 Current assets 454,062 495,040 Total assets 626,558 673,370 Notes Payable 225,812 259,546 Term Loans 50,300 57,463 Current liabilities 314,404 343,302 Total liabilities 327,430 343,302 Total stockholders’ equity 299,129 330,067 Working capital 139,658 151,738 Inventory turnover per year 9.25 9.16 Days sales in inventory 39.46 39.84
  13. 13. China Cold Rolled Steel Industry  From January to November 2013, China’s total cold-rolled sheet production was 26.942 million tons, an increase of 12.8% compared with 2012.  Cold-rolled products suffered low pricing.  Most demand for China cold-rolled products are from the automobile and appliance industries.  Since early 2013 , steel mills have put more resources to the end of supply chain, causing the middle parts’ demand being digested, resulting in demand for cold rolled steel being squeezed. Source: IBIS World
  14. 14. Challenges & Opportunities in the Next 5 Years 2012 Global Outlook on Steel Consumption and Capacity Over Capacity Slower Industry Development Increasing Industry Consolidation Out-dated Technology in Small Steel Mills Pollution Issues Slow New Technology Adoption
  15. 15. • Develop disciplined acquisition strategy and pursue strategic partnership with industry leaders. • Expand sales channels and product offerings to replace imported steel products. • Expand technical expertise and control cost. • Broaden product portfolio and mix by expanding into plated and laminated steel production. • Double capacity to 500K tons with 50% chromium plating capabilities and added 30K tons laminating capacity. Disciplined Growth Strategy  Pursue Acquisitions & Strategic Partnership  Expand Market Share  Improve Efficiency  Broaden Product Portfolio  Double Capacity
  16. 16. 50 50 250 200 0 50 100 150 200 250 300 2010 2011 2012Tons(000) 250 250 250 150 250 0 100 200 300 400 500 600 2010 2011 2012 Tons(000) • Added 30K tons of laminated production capacity in 2013 Production Capacity Doubled in 2012 250 100% Utilization 400 500 Wide Strip Narrow Strip 250 250 Chromium Plating Capacity 50
  17. 17.  Mingwang Lu Chairman of the Board and Chief Executive Officer  Over 20 years of steel industry experience.  CEO of the Company since 2000.  Held various management positions at Zhengzhou No.2 Steel Plant from 1995 to 2000.  Elected as a member of the 9th, 10th and 11th National People’s Congress in Henan Province.  Awarded Excellent Director/Manager in Henan Province, National Excellent Township Entrepreneur and Expert in Steel Industry of Henan Province.  Edward Meng Chief Financial Officer  Joined China Gerui in April 2009, residing in Zhengzhou, China.  Former CFO/Director of the Board of a number of U.S.-listed companies.  Former CFO of MNCs in China (Shell/Koch/Terex).  Georgetown University MBA, U.S. CPA, experienced in PRC & U.S. GAAP. Seasoned Management Team
  18. 18. Company  Email: investors@geruigroup.com  Website: www.geruigroup.com Grayling  Vivian Chen, Managing Director  Phone: 1-646-284-9427  Email: vivian.chen@grayling.com Contact This Presentation of China Gerui Advanced Materials Group Limited was developed by the Company and Grayling and is intended solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy the Company’s stock. This presentation is based upon information available to the public, as well as other information from sources which management believes to be reliable, but is not represented by China Gerui Advanced Materials Group Limited or Grayling as being fully accurate nor does it purport to be complete. Opinions expressed herein are those of management as of the date of publication and are subject to change without notice.
  19. 19. NASDAQ: CHOP China Gerui Investor Presentation May 2014

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