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[December 2009]
Gengsheng Minerals Renews Major Combined Contracts to Tune of $9 Million
China Gengsheng Minerals Inc (Gongyi, Henan Province, China) has renewed a full-service refractory contract and regenerative bricks contract with Shandong Iron and Steel Group, Rizhao Subsidiary. The combined total value of the two contracts is approximately $9 million based on the company’s current estimation.
The term of the full-service contract is one year, effective from 1 December 2009 to 10 November 2010. Payments will be made on a monthly basis in accordance with the production schedules. The term of the regenerative bricks contract is 18 months, with a unit price of RMB 8,000 per ton. Shandong Iron and Steel Group, Rizhao Subsidiary is the company's top customer, accounting for $6 million in sales, or 17.5% of total sales in the refractory segment, in the first nine months of 2009.
"I am encouraged by the two contracts with Shandong Iron and Steel Group, Rizhao Subsidiary," said Shunqing Zhang, Chairman and CEO of the company. "As our biggest customer and strategic partner, Shandong Iron and Steel Group, Rizhao Subsidiary has generated solid revenue growth and stable revenue streams for us. Meanwhile, the high value-added products such as the full-service programs and regenerative bricks typically enjoy higher gross margins."
The company provides ‘full services’ to China's steel mills in the form of refractory product installation, testing, maintenance, repair and replacement. Full-service customers contributed approximately 49.1% of the company's total sales of refractory segment in the first nine months of 2009. Steel mills typically replace the refractory parts in their furnaces on an annual basis. In addition, the company recently renewed its full-service contracts for refractory products with three other Chinese steel customers for another year. The combined total value of the three renewal contracts is estimated to be approximately $7.3 million.
ENDS