China Direct Industries Reports Financial Results for 2011 Fiscal Year Ended September 30, 2011

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China Direct Industries, Inc. ("China Direct Industries") (NASDAQ: CDII - News), a U.S. based company that sources, produces and distributes industrial products in China and the Americas in two core business segments, announced today its financial results for the fiscal year ended September 30, 2011. Fiscal 2011 revenue reaches $187.8 million up 66.6% from fiscal 2010 Fiscal 2011 net income attributable to China Direct Industries rises to $9.3 million up from a loss of ($3.2 million) in fiscal 2010 Fiscal 2011 Diluted EPS climbs to $0.25 compared to a loss of ($0.11) in fiscal 2010

For the full year of fiscal 2011 total revenues increased to $187.8 million, an increase of 66.6% compared to total revenues of $112.7 million recorded in fiscal 2010. China Direct gross profit reached $19.5 million, up 171.1% compared to gross profit of $7.2 million recorded in the prior fiscal year. Gross profit margins improved to 10.4% in fiscal 2011, an increase of 63% compared to gross margins of 6.4% in fiscal 2010. For fiscal 2011, China Direct operations resulted in net income attributable to China Direct Industries of $9.3 million compared to a net loss of ($3.2 million) recorded in fiscal 2010. Earnings per basic share reached $0.26 in fiscal 2011 on 36.1 million weighted average shares outstanding. Earnings per diluted share were $0.25 in fiscal 2011 on 36.8 million weighted average shares. This compares to a net loss of ($0.11) per basic and diluted share in fiscal 2010 on 29.6 million weighted average shares outstanding.

China Direct experienced significant growth across all of our business segments reflecting stronger demand in the end markets we service as well as revenue contribution from our Ruiming Magnesium acquisition, China Direct consulting segment and our international commodities business. In China Direct magnesium segment, revenue reached $99.9 million, an increase of 95.3% from fiscal 2010 where revenue was $55.1 million. The increase in revenues is attributable to both an increase in shipment volume as well as an increase in the average sale price of our magnesium products. China Direct shipped 36,637 metric tons during fiscal 2011, up 68.2% from shipments of 21,786 metric tons of magnesium products in fiscal 2010. Average sale price of our magnesium products per ton increased to $2,703 in fiscal 2011, up 15.1% from $2,348 in fiscal 2010 as magnesium prices incrementally improved throughout fiscal 2011. The improvement in average sales price and volumes enabled China Direct magnesium segment to achieve net income attributable to China Direct Industries of approximately $243,000 in the fourth quarter of fiscal 2011. For fiscal 2011, gross profit for this segment was $3.2 million, inclusive of $2.5 million in depreciation expenses, an increase of 81.9% compared to gross profit of $1.8 million, inclusive of $1.3 million in depreciation, recorded in fiscal 2010. Our magnesium operations resulted in an operating loss of ($865,000), inclusive of $4.3 million in depreciation related expenses. This compares to fiscal 2010 operating loss of ($897,000), inclusive of $2.6 million in depreciation related expenses. In our basic materials segment overall revenue increased to $68.9 million, a 17.2% improvement from the $58.8 million recorded in fiscal 2010. Gross profit for this segment reached $3.8 million, an increase of 22.5% from fiscal 2010. The increase in revenues and gross profit was largely driven by sales of iron ore from China Direct U.S. based industrial commodities business. Operating income for our basic materials segment in fiscal 2011 was $129,000, compared to $174,000 recorded in the same period of prior year. Total revenues in China Direct consulting segment in fiscal 2011 rose to $19.0 million, up from $2.8 million in fiscal 2010. Gross profit for this segment totaled $12.5 million compared to $2.3 million recorded in the fiscal 2010. The increase in revenues and gross profit for this segment was mostly attributable to fees earned for consulting services provided to two new clients during fiscal 2011. Operating income for China Direct consulting segment improved to $7.3 million from an operating loss of ($3.5 million) recorded in fiscal 2010.

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Dore Perler
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