NASDAQ: CHOP
China Gerui Investor Presentation
May 2014
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
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
China Gerui is a leading niche and high-valueadded metal processing company that utilizesadvanced 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)
ManufacturersEnd
Applications
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
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
Leve
l of
Co
mp
lexi
ty
Finished Product
Input Factor
Value Creators
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
ChinaGerui
Commodity-type producers
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
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
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
Financial Performance
FYE 2014Guidance
Revenue
$175 MMto
$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
47.163.2
26.1
-14.1
18.6%
9.8%
(8.5%)
18.5%
76101.6
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 2013Gross Profit Gross Margin
29.9%29.7%
21.4%
2.5%
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
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
Challenges & Opportunities in the Next 5 Years
2012 Global Outlook on Steel Consumption and Capacity
Over CapacitySlower Industry Development
Increasing Industry
Consolidation
Out-dated Technology in
Small Steel MillsPollution Issues
Slow New Technology Adoption
• 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
50 50
250
200
0
50
100
150
200
250
300
2010 2011 2012T
on
s (
000)
250 250 250
150
250
0
100
200
300
400
500
600
2010 2011 2012
To
ns (
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
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
Company
Email: [email protected]
Website: www.geruigroup.com
Grayling
Vivian Chen, Managing Director
Phone: 1-646-284-9427
Email: [email protected]
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 asan 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 whichmanagement 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. Opinionsexpressed herein are those of management as of the date of publication and are subject to change without notice.
NASDAQ: CHOP
China Gerui Investor Presentation
May 2014
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