China Direct Industries Reports Financial Results for the Second Quarter of Fiscal 2010 Ended March 31, 2010

-2nd Quarter revenue of $23.4 million up 13% from the Three Month Period Ended March 31, 2009

-2nd Quarter net income of $1.7 million up from a loss of ($1.5) million in the Three Month Period Ended March 31, 2009

-2nd Quarter Basic and Diluted EPS climbs to $0.06 compared to a loss ($0.06) in the Three Month Period Ended March 31, 20092nd Quarter of 2009

DEERFIELD BEACH, FL - (05/12/10) - China Direct Industries, Inc. ("China Direct Industries") (NASDAQ:CDII - News), a U.S. owned holding company operating in China in two core business segments, pure magnesium production and distribution of basic materials, announced today its financial results for the second quarter of  fiscal 2010 ended March 31, 2010.

Financial Highlights

For the second quarter of fiscal 2010 total revenues increased to $23.4 million as compared to total revenues of $20.7 million for the three month period ended March 31, 2009.  We recorded net income for our second quarter of fiscal 2010 of $1.7 million or $0.06 per diluted and basic earnings per share as compared to a net loss of ($1.5 million) or a loss of ($0.06) per diluted and basic share in the three month period ended March 31, 2009.

Overall revenue improved in each of our segments on a sequential basis and the improvement in net operating results in the second quarter of fiscal 2010 was driven by an improving global economy, rising equity markets, and our ongoing efforts to realign the cost structure for our two business segments in China with overall revenue. In our Magnesium segment, gross margins remained positive and overall shipments rose to 4,215 metric tons, a 52% increase from the 2,781 metric tons shipped in the three month period ended March 31, 2009.  Management sees continued improvement in demand for magnesium and has begun the process to re-initiate production at its Chang Magnesium and Baotou Changxin magnesium production facilities in the second half of fiscal 2010.   Consulting revenue increased to $1.2 million in the second quarter of fiscal 2010, up over 200% from the $358,000 recorded in the three month period ended March 31, 2009.  Additionally we recorded realized gains of approximately $2.0 million from the sale of securities received as compensation for services from several consulting clients. 

Balance Sheet

At March 31, 2010, our total assets were $83.1 million and shareholder equity was $51.9 million with 30.8 million shares outstanding. At September 30, 2009, total assets were $80.5 million and shareholder equity of $46.1 million with 27.2 million shares outstanding. At March 31, 2010 cash and cash equivalents were $15.1 million and working capital was $37.9 million. At September 30, 2009 cash and cash equivalents were $12.9 million and working capital was $31.0 million.

Financial Outlook

The overall environment in our various businesses improved in the second quarter as margins remained positive and volumes increased substantially at our magnesium and chemical operations, partially offset by a reduction in sales in our construction products distribution business.  We see inflationary pressures mounting in magnesium and anticipate that growing volume trends will lead to price appreciation in the coming quarters.  We are restarting facilities in response to improvements in demand and increased quoting activities.  Activity in our consulting operations has increased substantially and we anticipate an acceleration of growth in both the number of clients we service as well our overall revenue for the remainder of 2010.  Additionally, we see our CDII Trading operations reaching contractual terms on several purchase and sale agreements for various metal ores for delivery into China from South America and Mexico in the second half of fiscal 2010. We continue to see our net income ranging between $8 to $10 million on revenue ranging from between $130 and $150 million. We will further discuss our results as well as our outlook for the remainder of fiscal 2010 during the conference call today, May 12, 2010 at 4:30 PM EST.

Commenting on the second quarter, Dr. James Wang, Chairman and CEO of China Direct Industries, Inc., stated, "We are pleased to return to profitability in the second quarter as we see momentum building for the second half of fiscal 2010.  We are also pleased that all of our business segments showed improvements in the quarter.  We move into the remainder of fiscal 2010 poised to see a strong reacceleration of growth as our end-markets in our various business segments continue to strengthen.  We are confident that the restart of our magnesium facilities coupled with a strong performance in our consulting operations and CDII Trading will boost our performance significantly in the coming quarters as our company emerges from the challenging environment we have faced since the fall of 2008.”

China Direct Industries Conference Call to discuss the Company's financial results for the second quarter of fiscal 2010.

The conference call will take place at 4:30 p.m. EST on Wednesday May 12, 2010. Anyone interested in participating should call (877) 407-8035 if calling within the United States or (201) 689-8035 if calling internationally approximately 5 to 10 minutes prior to 4:30 p.m. Participants should ask for the China Direct Industries Second Quarter 2010 Financial Results conference call.

This call is being webcast and can be accessed at China Direct's website at http://www.cdii.net/calendar-of-events. The webcast may also be accessed at http://www.investorcalendar.com/IC/CEPage.asp?ID=158386. The playback of the webcast can be accessed through China Direct Industries website until May 12, 2011. 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 Industries, Inc.

China Direct Industries, Inc. (NASDAQ:CDII - News), is a U.S. owned holding company operating in China in two core business segments, pure magnesium production and distribution and distribution of basic materials in China. China Direct Industries also provides advisory services to China based companies in competing in the global economy. Headquartered in Deerfield Beach, Florida, China Direct Industries operates 8 subsidiaries throughout China. This infrastructure creates a platform to expand business opportunities globally while effectively and efficiently accessing the U.S. capital markets. For more information about China Direct Industries, please visit http://www.cdii.net.