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China Advanced Construction Materials Group Reports 169% Increase in Gross Profit and 194% Increase in Operating Income for the Second Quarter of Fiscal 2009

Posted on: Friday, 13 February 2009, 06:00 CST

Generates Net Income of $2.6 Million or $0.19 per Diluted Share for the Fiscal Second Quarter of 2009

NEW YORK AND BEIJING, Feb. 13 /PRNewswire-FirstCall/ -- China Advanced Construction Materials Group, Inc. ("China ACM") (OTCBB: CADC), a leading provider of ready-mix concrete in China, today announced financial results for the three months ended December 31, 2008.

Mr. Xianfu Han, Chairman and Chief Executive Officer, stated, "We are pleased to report that China ACM continues to thrive despite a challenging global economic environment, as evidenced by the 169% increase in gross profit and 194% increase in operating income for the second quarter of fiscal 2009. We attribute these strong results to a combination of favorable macro infrastructure trends within China, company-specific initiatives and a high standard of excellence in our ready-mix concrete and related services. As expected, our revenue rebounded, increasing 53% over the same period last year, as the government lifted its construction bans related to the Olympics in and around Beijing. Additionally, we signed a number of new contracts during the second quarter and our sales pipeline is extremely robust."

"China ACM is 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 for major infrastructure projects. With China's recently announced $586 billion stimulus package primarily designated for infrastructure development, we believe that China ACM will be a major beneficiary of the government's initiatives as the country enhances its roads, railways, airports and other infrastructure. Approximately 75% of China ACM's revenue is derived from government infrastructure projects and we have recently begun expanding our operations outside of the Beijing area to better capitalize on our relationships with general contractors active in other provinces and inter-provincial infrastructure projects such as the Beijing to Shijiazhuang railway."

Mr. Han continued, "During the fiscal second quarter, our gross margin increased to 36.5% from 20.8%, and our operating margin increased to 30.9% from 16.1% for the same period last year. Our improved margins were a direct result of the deliberate increase in manufacturing services agreements, technical services agreements, and marketing cooperation agreements, which now comprise 38% of our revenue. Through these agreements, we provide mixed of equipments, oversight, transportation, and consulting services to third-party concrete manufacturers, who in turn supply our proprietary concrete to China ACM customers. This strategy allows us to cost effectively expand our geographic presence without the upfront capital expenditures. These services produce higher margins than our traditional ready-mix concrete business and our strategy is to have these services comprise a larger portion of our overall revenue, going forward."

Mr. Han continued, "We continued work on the East Datong to Gudian railway and the Beijing to Shanghai high-speed railroad, providing substantial quantities of ready-mix concrete this quarter for our manufacturing services. Based on our current financial results and expected future contract revenues, we are confident that we will achieve a net income of at least $9 million for fiscal 2009, after adjusting for certain transaction-related charges and expenses."

Mr. Han concluded, "We are proud of the reputation China ACM has built over the past six years among our customers, construction companies, general contractors, engineers and the Chinese government. We look forward to our continued participation in China's most important and prestigious infrastructure projects and providing ever-increasing value to our shareholders."

Revenue for the three months ended December 31, 2008 was $10.8 million, as compared to $7.1 million for the three months ended December 31, 2007. Gross profit was $4.0 million for the three months ended December 31, 2008, as compared to $1.5 million for the three months ended December 31, 2007, representing gross margin of approximately 36.5% and 20.8%, respectively. Net income for the three months ended December 31, 2008 increased to $2.6 million, or $0.19 per diluted share, compared to net income of $1.5 million, or $0.17 per diluted share, for the same quarter last year. Net income for the three months ended December 31, 2008 included a 25% income tax that the company became subject to starting January 1, 2008 and did not incur in 2007.

As of December 31, 2008, the company had cash and cash equivalents of $3.2 million, restricted cash of $881,484 and working capital of $6.7 million.

Conference Call

China ACM will also host a conference call at 8:00 a.m. Eastern Time on Friday, February 13, 2009. During the call, Mr. Xianfu Han, Chairman and Chief Executive Officer, Mr. Weili He, Vice Chairman and Chief Operating Officer, and Gene Hsiao, Chief Financial Officer, will discuss the Company's quarterly performance and financial results.

The telephone number for the conference call is (201) 689-8035. A live webcast of the call will also be available on the company's website, www.china-acm.com or the new China ACM IR HUB at: http://www.agoracom.com/IR/chinaacm. To listen to the live call online, please visit the site at least 10 minutes early to register, download and install any necessary audio software.

The webcast will be archived on the site as well as the China ACM IR Hub, and investors will be able to access an encore recording of the conference call for one month by calling (201) 612-7415 and entering account #286, ID #312978. The encore recording will be available two hours after the conference call has concluded.

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 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: ir@china-acm.com

Web: http://www.china-acm.com

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CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE SIXTH MONTHS AND THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007 (UNAUDITED) Six months ended Three months ended December 31, December 31, 2008 2007 2008 2007 REVENUE: Sales of concrete $9,837,565 $13,050,518 $7,969,878 $7,068,849 Manufacturing services 3,996,539 - 2,070,996 - Technical services 1,040,127 - 423,330 - Mixer rental 996,581 - 339,767 - Marketing cooperation 94,135 - 24,230 - Total revenue 15,964,947 13,050,518 10,828,201 7,068,849 COST OF REVENUE: Cost of concrete 7,554,204 10,550,302 5,993,897 5,599,431 Manufacturing services 1,293,088 - 795,880 - Technical services 97,683 - 29,781 - Mixer rental 337,043 - 44,998 - Marketing cooperation 38,707 - 7,837 - Total cost of revenue 9,320,725 10,550,302 6,872,393 5,599,431 GROSS PROFIT 6,644,222 2,500,216 3,955,808 1,469,418 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,269,480 629,266 612,371 330,291 INCOME FROM OPERATIONS 5,374,742 1,870,950 3,343,437 1,139,127 OTHER (EXPENSE) INCOME, NET Other subsidy income 830,021 782,725 602,427 424,010 Non-operating income (expense), net (83,188) (27,391) (85,295) (12,682) Interest income 3,840 - 2,406 (1,196) Interest expense (446,344) (147,569) (217,570) (63,029) Total other income, net 304,329 607,765 301,968 347,103 INCOME BEFORE PROVISION FOR INCOME TAXES 5,679,071 2,478,715 3,645,405 1,486,230 PROVISION FOR INCOME TAXES 1,575,230 - 1,000,403 - NET INCOME 4,103,841 2,478,715 2,645,002 1,486,230 Dividends and accretion on redeemable preferred stock 618,132 - 309,036 - Net income available to common shareholders 3,485,709 2,478,715 2,335,966 1,486,230 RECONCILIATION OF COMPREHENSIVE INCOME: Net income 4,103,841 2,478,715 2,645,002 1,486,230 Unrealized (loss) gain from marketable securities (19,217) 23,443 (5,876) (4,084) Foreign currency translation adjustment 138,179 559,325 74,755 386,510 COMPREHENSIVE INCOME $4,222,803 $3,061,483 $2,713,881 $1,868,656 EARNING PER SHARE Basic Weighted average number of shares 10,525,000 8,809,583 10,525,000 8,809,583 Earning per share $0.33 $0.28 $0.22 $0.17 Diluted Weighted average number of shares 14,220,410 8,809,583 14,220,410 8,809,583 Earning per share $0.29 $0.28 $0.19 $0.17

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007 (UNAUDITED) 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $4,103,841 $2,478,715 Adjustments to reconcile net income to cash (used in) provided by operating activities: Depreciation 1,071,362 544,359 Stock-based compensation expense 26,210 - Amortization of deferred compensation expense 2,771 - Bad debt expense 142,485 3,089 Changes in operating assets and liabilities Accounts receivable (8,111,508) 6,003,336 Inventories (861,184) 56,148 Other receivables (208,733) 962,577 Other receivables - related parties - (3,903,903) Prepayment 155,626 (4,564) Accounts payable 2,931,338 (4,788,317) Other payables 55,886 159,128 Accrued liabilities 166,881 (1,488) Customer deposits (2,232) - Taxes payable 1,590,669 (630) Net cash provided by operating activities 1,063,412 1,508,450 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (31,666) (11,385) Net cash used in investing activities (31,666) (11,385) CASH FLOWS FINANCING ACTIVITIES: Principal payments of short term loan (6,749,544) 3,031,400) Proceeds from short term loan 7,354,278 644,648 Other payables - shareholders (43,282) - Preferred dividends paid (317,648) - Restricted cash 31,608 - Net cash provided by (used in) financing activities 275,412 (2,386,752) EFFECTS OF EXCHANGE RATE CHANGE IN CASH 7,525 2,391 INCREASE (DECREASE) IN CASH 1,314,683 (887,296) CASH, beginning of period 1,910,495 1,424,883 CASH, end of period $3,225,178 $537,587

SOURCE China Advanced Construction Materials Group, Inc.

Source: PR Newswire

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