Feb 2 2011
China GengSheng Minerals, Inc. ("GengSheng") (AMEX: CHGS), a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced that GengSheng has signed a full-service refractories supply contract with Fushun New Steel Corporation.
Shipments under the contract began in January 2011, and are expected to continue through December 2012. Revenue contribution from this new client is expected to begin in the first quarter of 2011.
Under the agreement, GengSheng will provide refractory materials, as well as installation and on site support services. Revenue will be recognized based on Fushun New Steel's production volume. Based on Fushun's current manufacturing capacity, GengSheng expects revenue of approximately $10 million over the two-year term of the contract.
GengSheng launched full-service programs for refractory customers in late 2003. These programs include refractory product installation, testing, maintenance, repair and replacement, in addition to traditional products sales. These full service programs, which are generally carried out under one- to- two-year contracts, generate stable and recurring revenue streams and have higher margins than product sales alone. GengSheng currently has nine full service clients. The full service programs contributed approximately 52% of GengSheng's refractories total sales in the first nine months of 2010.
"Our full service programs are an ideal solution for steel manufacturers who face an increasingly challenging market environment, as they are able to adjust purchasing and implementation based on output," said Shunqing Zhang, CEO of China GengSheng Minerals. "This offering has been well received by customers since its introduction, allowing GengSheng to build additional brand equity and grow our share of the refractories market. In addition, full service programs enable us to develop deeper relationships with customers, allowing us to better understand their needs and increase the value we bring to the industry."