161% Increase in Gross Profit and 178% Increase in Operating Income
for the First Quarter of Fiscal 2009 NEW YORK and BEIJING, Nov. 17
/PRNewswire-FirstCall/ -- China Advanced Construction Materials
Group, Inc. ("China ACM") (OTC:CADC) (BULLETIN BOARD: CADC) , a
leading provider of ready-mix concrete in China, today announced
financial results for the three months ended September 30, 2008.
Mr. Xianfu Han, Chairman and Chief Executive Officer, stated, "We
are pleased to report a successful start to fiscal 2009. We
achieved a 161 percent increase in gross profit and a 178 percent
increase in operating income over the same period last year, which
illustrates the expanding scope of our services and the scalability
of our business model. The decline in revenue, which was more than
offset by the increase in gross profit, reflects a deliberate shift
in our product and services mix. Immediately leading up to, and
during the Olympics, construction work was banned within areas of
the city. In anticipation of these events, we undertook several
successful initiatives. First, we expanded into new geographic
areas, which included supplying concrete products to three railway
projects located outside of Beijing, utilizing both our technology
and management of the projects. Since the general contractors
supply us with raw materials under these agreements, we achieved
very high gross margins on these railway projects. Second, we
provided technical consulting services to several mixture stations.
These partnerships allow us to effectively leverage our strong
relationships with the general contractors, while at the same time
cost effectively expanding our geographic presence outside of
Beijing without the upfront investments. We see both our technical
services agreements and our marketing cooperation agreements as
highly profitable models we intend to emulate elsewhere. Moreover,
we expect our sales revenue within Beijing will resume its historic
rate of growth with the Olympics now behind us." Mr. Han continued,
"We look forward to beginning the projects recently awarded to us
such as the East Datong to Gudian railway and the Beijing to Shi
Jiazhuang high-speed railroad. As a result of these and other
projects underway, our current backlog stands at over 1.5 million
cubic meters of ready-mix concrete through June 30, 2009, securing
our ability to achieve a net income of at least $9 million for
fiscal 2009, after adjusting for certain transaction-related
charges and expenses. Our overall success in bidding and winning
new contracts can be attributed to our ability to produce
technically superior concrete at a low cost and our proven track
record with top construction companies, general contractors,
engineers, and the Chinese government." Mr. Han concluded, "Despite
an uncertain global economic environment, we see a very bright
future for China ACM. Specifically, over 80% of our revenue is
derived from government infrastructure investment in China which
has historically increased at a rate of 25% per year and is
expected to accelerate to over 30% annually. This is further
reinforced by the recent announcement by the People's Republic of
China that it plans to invest $586 billion to spur economic
growth-much of this earmarked for upgrading infrastructure,
including roads, railways, airports and the power grid. We are
well-positioned to benefit from projects such as these since we are
one of only a few concrete companies in China with the necessary
permits and experience to produce ready- mix concrete according to
the new government standards. There is also a major shift underway
in China from onsite concrete production to ready-mix concrete for
several reasons, including lower production costs, better quality
control, and environmental benefits such as a reduction in airborne
particulate matter. We believe China ACM stands to benefit from
these trends and we remain committed to our vision of building the
premier brand within the growing concrete industry in China."
Revenue for the three months ended September 30, 2008 was $5.1
million, as compared to $6.0 million for the three months ended
September 30, 2007. The decline in revenue reflects a deliberate
shift in the Company's product and services mix prompted by the ban
in construction projects surrounding the Olympics and the Company's
longer-term strategy to generate higher margin revenue from
technical and manufacturing services, as well as marketing
cooperation agreements. Gross profit was $2.7 million for the three
months ended September 30, 2008, as compared to $1.0 million for
the three months ended September 30, 2007, representing gross
margin of approximately 52.3% and 17.2%, respectively. Net income
for the three months ended September 30, 2008 increased to $1.1
million compared to net income of $1.0 million for the same quarter
last year. Net income for the first quarter of fiscal 2009 included
higher general and administrative expenses after the reverse
merger, as well as net interest expense of $611,749, compared to
$83,344 for the same period last year. The increase in net interest
expense is mainly due to dividend of $158,855 and amortization of
discount for $150,241 on redeemable preferred stock classified as
liability, as well as $75,313 in amortization of financing costs.
Net income for the three months ended September 30, 2008 also
included a 25% income tax that the company became subject to
starting January 1, 2008 and did not incur in 2007. As of September
30, 2008, the company had cash and cash equivalents of $5.1
million, restricted cash of $888,802 and working capital of $5.0
million. China ACM had 10,525,000 shares of common stock issued and
outstanding as of September 30, 2008. About China ACM China ACM,
founded in 2002 and based in Beijing, China, is a leading producer
of advanced construction materials for large scale commercial,
residential, and infrastructure developments. The company is
primarily focused on producing and supplying a wide range of
advanced ready-mix concrete materials for highly technical, large
scale, and environmental construction projects. The company also
aims to develop and produce new and innovative environmentally
conscious construction materials. China ACM provides materials and
services through its seven ready-mix concrete plant network
covering Beijing metropolitan area. China ACM owns one plant,
leases two plants and has technical services and preferred
procurement agreements with four other independently-owned plants.
China ACM is ISO 9001 (product quality), ISO 14001 (environmental
safety), and ISO 18001 (employment environment safety) certified.
Additional information about the company is available at
http://www.china-acm.com/. This press release contains
"forward-looking statements" within the meaning of the
"safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve known and unknown
risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results
expressed or implied by such statements, including changes from
anticipated levels of sales, future national or regional economic
and competitive and regulatory conditions, changes in relationships
with customers, access to capital, difficulties in developing and
marketing new products, marketing existing products, customer
acceptance of existing and new products, and other factors.
Additional Information regarding risks can be found in the
Company's Annual Report on Form 10K and in the Company's recent
report on Form 8K filed with the SEC. Accordingly, although the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to be correct. The
Company has no obligation to update the forward-looking information
contained in this press release. Contact: Crescendo Communications,
LLC David Waldman or Klea Theoharis Tel: (212) 671-1020 Email: Web:
http://www.china-acm.com/ (tables follow) CONSOLIDATED BALANCE
SHEETS AS OF SEPTEMBER 30 AND JUNE 30, 2008 ASSETS September 30,
2008 June 30, 2008 (Unaudited) CURRENT ASSETS: Cash $5,083,962
$1,910,495 Restricted cash 888,802 913,092 Marketable securities
48,604 61,767 Accounts receivable, net of allowance for doubtful
accounts of $254,037 and $224,924 as of September 30, 2008 and June
30, 2008, respectively 9,337,189 9,365,486 Inventories 671,604
237,836 Other receivables 206,535 505,968 Prepayment 3,981,480
3,240,394 Total current assets 20,218,176 16,235,038 PLANT AND
EQUIPMENT, net 16,262,344 16,730,220 OTHER ASSETS: Financing cost
511,506 586,818 Account receivable (non-current), net of allowance
for doubtful accounts of $471,783 and $411,061 as of September 30,
2008 and June 30, 2008, respectively 4,692,723 4,753,006 Total
other assets 5,204,229 5,339,824 Total assets $41,684,749
38,305,082 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Accounts payable $4,075,106 $6,293,553 Customer
deposits 138,618 165,434 Short term loans 7,811,689 4,271,222 Other
payables 214,163 254,259 Other payables - shareholder 794,152
880,302 Accrued liabilities 337,267 145,207 Taxes payable 1,655,565
1,073,237 Interest payable 158,795 - Total current liabilities
15,185,355 13,083,214 5,032,821 REDEEMABLE PREFERRED STOCK ($0.001
par value, 875,000 shares issued) net of discount of $1,018,306 and
$1,168,548 at September 30 and June 30, 2008, respectively
5,981,694 5,831,452 Total liabilities 21,167,049 18,914,666
COMMITMENTS AND CONTINGENCIES - - SHAREHOLDERS' EQUITY: Preferred
stock $0.001 par value, 1,000,000 shares authorized, 875,000
redeemable preferred shares issued and outstanding in 2008, and
reported in liability above - - Common Stock, $0.001 par value,
74,000,000 shares authorized, 10,525,000 shares issued and
outstanding, respectively 10,525 10,525 Paid-in-capital 13,469,168
13,494,105 Contribution receivable (1,210,000) (1,210,000) Retained
earnings 3,983,045 3,072,249 Statutory reserves 1,616,413 1,452,779
Accumulated other comprehensive income 2,648,549 2,598,466 Deferred
compensation - (27,708) Total shareholders' equity 20,517,700
19,390,416 Total liabilities and shareholders' equity $41,684,749
$38,305,082 CONSOLIDATED STATEMENTS OF INCOME AND OTHER
COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
AND 2007 (UNAUDITED) Three months ended September 30, 2008 2007
REVENUE: Sales of concrete $1,867,687 $5,981,669 Manufacturing
services 1,925,543 - Technical services 616,797 - Mixer rental
656,814 - Marketing cooperation 69,905 - Total revenue 5,136,746
5,981,669 COST OF REVENUE: Cost of sales 1,560,307 4,950,871
Manufacturing services 497,208 - Technical services 67,902 - Mixer
rental 292,045 - Marketing cooperation 30,870 - Total cost of
revenue 2,448,332 4,950,871 GROSS PROFIT 2,688,414 1,030,798
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 657,109 298,975 INCOME
FROM OPERATIONS 2,031,305 731,823 OTHER INCOME, NET Other subsidy
income 227,594 358,715 Non-operating income (expense), net 2,107
(14,709) Interest income 1,434 1,196 Interest expense (613,183)
(84,540) Total other income, net (382,048) 260,662 INCOME BEFORE
PROVISION FOR INCOME TAXES 1,649,257 992,485 PROVISION FOR INCOME
TAXES 574,827 - NET INCOME 1,074,430 992,485 OTHER COMPREHENSIVE
INCOME: Unrealized (loss) gain from marketable securities (13,341)
27,527 Foreign currency translation adjustment 63,424 172,815
COMPREHENSIVE INCOME $1,124,513 $1,192,827 EARNING PER SHARE Basic
Weighted average number of shares 10,525,000 8,809,583 Earning per
share $0.10 $0.11 Diluted Weighted average number of shares
10,621,413 8,809,583 Earning per share $0.10 $0.11 CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2008 AND 2007 (UNAUDITED) 2008 2007 CASH FLOWS FROM OPERATING
ACTIVITIES: Net income $1,074,430 $992,485 Adjustments to reconcile
net income to cash (used in) provided by operating activities:
Depreciation 533,125 282,942 Amortization of financing cost 75,312
- Amortization of discount on convertible preferred stock 150,242 -
Amortization of deferred compensation expense 2,771 - Bad debt
expense 88,144 - Change in operating assets and liabilities
Accounts receivable (4,797,624) (1,967,122) Inventories (433,383)
60,639 Other receivables 301,005 629,600 Prepayment 1,012,365
(43,248) Accounts payable 854,631 1,787,444 Other payables (40,636)
94,679 Other payables - shareholders (86,558) - Accrued liabilities
350,573 (39,163) Customer deposit (27,286) - Taxes payable 579,742
6,965 Net cash (used in) provided by operating activities (363,147)
1,805,221 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of
property, plant and equipment (19,067) (6,173) Net cash used in
investing activities (19,067) (6,173) CASH FLOWS FINANCING
ACTIVITIES: Payments of short term loan (3,821,544) (3,031,400)
Proceeds from short term loan 7,354,278 646,405 Restricted cash
24,290 - Net cash provided by (used in) financing activities
3,557,024 (2,384,995) EFFECTS OF EXCHANGE RATE CHANGE IN CASH
(1,343) 1,144 INCREASE (DECREASE) IN CASH 3,173,467 (584,803) CASH,
beginning of period 1,910,495 1,424,883 CASH, end of period
$5,083,962 $840,080 DATASOURCE: China Advanced Construction
Materials Group, Inc. CONTACT: David Waldman, or Klea Theoharis,
both of Crescendo Communications, LLC, +1-212-671-1020, Web site:
http://www.china-acm.com/
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