China Direct Reports Financial Results for the Third Quarter of 2008

-3rd Quarter revenue reaches $63.4 million up 45% from 3rd Quarter of 2007
-3rd Quarter net income increases to $5.9 million up 97% from 3rd Quarter of 2007
-Basic Non-GAAP EPS climbs to $0.28 and diluted Non-GAAP EPS increases to $0.26
-Basic GAAP EPS reaches $0.25 and diluted GAAP EPS reaches $0.23  
- Company to discuss its business outlook for 2008 during today’s 4:30 p.m. EDT Conference Call.

DEERFIELD BEACH, Fla., Nov. 13 /PRNewswire-FirstCall/ -- China Direct, Inc. (Nasdaq: CDS - News), a U.S. company that owns controlling stakes in a diversified portfolio of Chinese entities and provides advisory services to Chinese businesses, announced today the Company's financial results for the third quarter of 2008.

Financial Highlights

Revenues for the third quarter ended September 30, 2008 increased to $63.4 million as compared to revenues of $43.6 million in the third quarter ended September 30, 2007. The increase in revenues was mainly attributable to increased sales from our magnesium segment as a result of acquisitions and our investment to expand production capacity.

Gross profit for the third quarter of 2008 was $10.6 million as compared to $4.6 million in the third quarter ended September 30, 2007. Total operating expenses for the third quarter of 2008 increased to $3.17 million as compared to $1.03 million in the third quarter of 2007. The increase in operating expenses reflects the costs associated with our expanded operations both in the U.S. and China associated with the financial management and integration of our expanding operations. The Company also experienced increases in professional fees, travel expenses, as well as non-cash option charges. Operating income was $7.4 million and $3.6 million for the third quarter of 2008 and 2007 respectively, yielding operating margins of 11.7% and 8.1% over the relevant periods. The increase in operating margins was largely a result of a shift in the company's business mix in its magnesium operations towards higher margin production sales as compared to largely distribution sales in the third quarter of 2007. Results were also strengthened by a strong performance from the consulting segment in the third quarter of 2008.

Net income for the third quarter of 2008 was $5.9 million as compared to $3.0 million in the third quarter of 2007. Non-GAAP earnings were $0.28 per basic share, excluding non-cash items, as compared to $0.21 per basic share in the third quarter of 2007. On a GAAP basis, earnings were $0.25 per basic share, as compared to $0.18 per basic share in the third quarter of 2007. On a diluted basis, excluding non-cash items, non-GAAP earnings for the third quarter of 2008 were $0.26 per share as compared to $0.18 per share in the third quarter of 2007.

For the first nine months of 2008 earnings on a non-GAAP basis were $0.83 per basic share, excluding certain non-cash items, as compared to $0.53 per basic share for the same period in 2007. On a GAAP basis, earnings were $0.52 per basic share, as compared to $0.49 per basic share in the first nine months of 2007. On a diluted basis, non-GAAP earnings for the first nine months of 2008 were $0.75 per share as compared to $0.48 per share for the same period in 2007. Non-cash items excluded in all non-GAAP calculations are set forth in the reconciliation of GAAP to non-GAAP net income set forth below.

Our results for the first nine months of 2008 were driven by a strong performance in our magnesium operations and advisory services. Both revenue and net income for the first nine months of 2008 have surpassed that of the full year of 2007. In the third quarter of 2008, we began to ramp production of our new magnesium facility in Baotou, launched our steel and wood distribution business in our Basic Materials segment and acted as an advisor to China Armco Metals, Inc., a metal ore distributor in China that raised over $7 million in capital in August 2008 to launch a scrap steel recycling facility in 2009.

Balance Sheet

At September 30, 2008, total assets were $131.0 million, an increase of 48.4% from $88.3 million at December 31, 2007. At September 30, 2008, shareholder equity was $69.4 million, an increase of 62.9% from $42.6 million at December 31, 2007. At September 30, 2008, cash and equivalents were $19.6 million and working capital was $68.1 million as compared to cash and equivalents of $19.0 million and working capital of $40.7 million at December 31, 2007, respectively.

2008 Financial Guidance

Our business outlook reflects a balance of risks and the likelihood of a continued economic slowdown. The trends seen late in the third quarter are now expected to continue in the fourth quarter. As we near the end of 2008, the Company now sees its expected net income ranging between $23 to $25 million on expected revenue ranging between $255 and $270 million. The Company will further discuss its outlook for the remainder of 2008 during its conference call today, November 13, 2008 at 4:30 PM EST.

Commenting on the quarter, Mr. Marc Siegel, President of China Direct, Inc. stated, "We are pleased with our strong performance for the first nine months of 2008. In this economic environment, the Company is focused on three main initiatives: improving overall management efficiency, strengthening our resources in China as we continue our migration to an operating company, and acquiring substantially undervalued operations in China."

Mr. Siegel concluded, "We see China's $586 billion stimulus package as a catalyst for future expansion in 2009. We are confident that our business strategy, coupled with our strong balance sheet which is virtually debt free, has positioned us to continue to grow and thrive in a challenging worldwide economy. We believe now, more than ever before in our history, potential attractive targets in great need of our services exist. CDS is poised to emerge as a major force in the Chinese and US markets in the future."

China Direct Conference Call to discuss the Company's financial results for the third quarter of 2008 as well as to discuss its business outlook for the remainder of 2008.

The conference call will take place at 4:30 p.m. EST on Thursday November 13th, 2008. Anyone interested in participating should call                 1-866 394-7735          if calling within the United States or                 1-706-758-1915          if calling internationally approximately 5 to 10 minutes prior to 4:30 p.m. Participants should ask for the China Direct 2008 Third Quarter Financial Results conference call/ Conference ID 72664979.

This call is being webcast by ViaVid Broadcasting and can be accessed at China Direct's website at http://www.chinadirectinc.com. The webcast may also be accessed at ViaVid's website at http://www.viavid.net or directly at http://viavid.net/dce.aspx?sid=00005919 .

Individuals unable to participate in the conference call may hear an audio webcast replay. The audio webcast service is being provided by ViaVid Broadcasting and can be accessed at China Direct's website at http://www.chinadirectinc.com . The webcast may also be accessed at ViaVid's website at http://viavid.net/dce.aspx?sid=00005919 . The playback of the webcast can be accessed through November 13, 2009 on either site. To access the webcast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player, please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp .

About China Direct, Inc.

China Direct, Inc. (NASDAQ: CDS ) is a diversified management and advisory services organization headquartered in the U.S. Our management services division acquires a controlling interest in entities operating in China. Our ownership control enables China Direct to provide management advice, as well as financing to Chinese entities. This infrastructure creates a platform to expand business opportunities globally while accessing the U.S. capital markets. Our advisory services division provides comprehensive advisory and consulting services to Chinese entities. As a direct link to China, China Direct serves as a vehicle allowing investors to directly participate in the rapid growth of the Chinese economy in a diversified and balanced manner. For more information about China Direct, please visit http://www.chinadirectinc.com.

Safe Harbor Statement

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, China Direct, Inc., is hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements (as defined in such act). Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, indicated through the use of words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intends,” “plans,” “believes” and “projects”) may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. These statements include, but are not limited to, our guidance and expectations regarding revenues, net income and earnings. In addition, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations:

•  Continued global economic weakness is expected to reduce demand for our products in each of our segments.
•  Our ability to identify and close acquisitions of operating companies in China in a cost effective manner that enhance our financial condition.
•  Our need for additional financing which we may not be able to obtain on acceptable terms, the dilutive effect additional capital raising efforts in future periods may have on our current shareholders and the increased interest expense in future periods related to additional debt financing.
•  Our ability to effectively integrate our acquisitions and to manage our growth and our inability to fully realize any anticipated benefits of acquired business.
•  The value of the equity securities we accept as compensation is subject to adjustment which could result in losses to us in future periods.
•  The Investment Company Act of 1940 which limits the value of securities we can accept as payment for our business consulting services which may limit our future revenues.
•  Our acquisition efforts in future periods may be dilutive to our then current shareholders.
•  Our dependence on certain key personnel.
•  The lack various legal protections in certain agreements to which we are a party and which are material to our operations which are customarily contained in similar contracts prepared in the United States.
•  Our ability to assure that related party transactions are fair to our company.
•  Chang Magnesium’s chief executive officer is also chief executive officer of a group of companies which directly compete with Chang Magnesium.
•  The risks and hazards inherent in the mining industry on the operations of our basic materials segment.
•  The effect of changes resulting from the political and economic policies of the Chinese government on our assets and operations located in the PRC.
•  The influence of the Chinese government over the manner in which our Chinese subsidiaries must conduct our business activities.
•  The impact on future inflation in China on economic activity in China.
•  The impact of any recurrence of severe acute respiratory syndrome, or SAR’s, or another widespread public health problem.
•  The limitation on our ability to receive and use our revenues effectively as a result of restrictions on currency exchange in China.
•  Our ability to enforce our rights due to policies regarding the regulation of foreign investments in China.
•  Our ability to comply with the United States Foreign Corrupt Practices Act which could subject us to penalties and other adverse consequences.
•  Our ability to establish adequate management, legal and financial controls in the PRC.
•  The provisions of our articles of incorporation and bylaws which may delay or prevent a takeover which may not be in the best interests of our shareholders.

We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. This press release is qualified in its entirety by the cautionary statements and risk factor disclosure contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2007.

Contact:

China Direct, Inc.
Richard Galterio or Lillian Wong
Tel: 1-877-China-57
Email: This e-mail address is being protected from spambots. You need JavaScript enabled to view it